Full text of Press Releases of the United States Department of the Treasury : Volume 139

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

I ~€ctC

Hr~'

,J~\'3'C/
V,I ~9

L18~,l\

'10()W1 , ..)~

F£.B 28 1964

iREASURY OEPARTMENT

L1BRARY
p()OM 5030

JUN 1 51972.
TREASURY OEPAR1MENl

Uni ted States Savings Bonds Issued and Redeemed 1Wa~k gep~" ~, 1963
(Dollar amounts in millions _ ro~,ded and will not necessarily add to totnlG)
AmOW1t

Issued
!tATUiEQ

Amount.
Amount
Redeelted II Outstand in,;
13

. ~ OutstCU"ld1
V or Amt. ISGY

5,003
28,512

4,990
28,383

Series H (1952 - Jan. 1951) ?( •••
H (Feb. 1951 - 1963) •••••

1,827
8,073
12,998
15,132
1l,844
5,324
5,015
5,166
5,082
4,432
3,838
4,018
4,569
4,6ll
4,773
4,584
4,305
4,161
3,888
3,867
3,876
3,729
2,308
514
127,931
3,670
5,665

1,541
6,834
10,992
l2,661
9,707
4,139
3,717
3,722
3,572
3,029
2,606
2,665
2,835
2,726
2,786
2,684
2,438
2,192
2,001
1,828
1,614
1,318
366
526
88.,00
1,315
611

1,867
1,,969
1,887
2,039
2,262
2,410
1,942
- 12
39,431
2,295
4,995

Total Series H ••••••••••••••••

9.336

2.046

7.290

18.08

Total Series E and H ••••••••••

137,267

90,546

46,721

.34.Ob

Series F and G (1951 - 1952) •••••

1,008

615

192

19.OS

K (1952 - 1957) ••••

3,702

2.018

1.684

45.49

Series F, G, J and K ••••

4,7lD

2,833

1,876

39.83

iTotal matured •••••••
All Series Total unmatured •••••
Grand Total •••••••••

33,51,
141,977
175,492

33,313
93,319
126,752

142
46,597
46,739

34.23
27 .7'L

Series A-1935 - D-1941 ••••••••••
Series F & G-1941 - 1950

.........

lIX\~TURED

Ser1e8 E:

1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963

·....................

••••••••••••••••••••
·• ••••••••••••••••••••
, ...................
•

• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••

·• .......
............
••••••••••••••••••••
~

• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••

Unolassified ••••••••••••••••••
Total Series E ••••••••••••••••

Series J
To~al

and

129

286
1,239
2,006
2,471
2,137
1,185
1,298
1,L45
1,510
1,403
1,229
1,352
1,734
1,885
1,988
1,900

II Includes

accru~d discount.
Current redemption value.
~ At option of ovmer bonds may be held and
will earn interest for additional periods
atter original maturitl datea.
J,/ Inoludes matured bonds which have not, been
preaentecl tor reclempt1oD.

BUREAU OF THE PUBLIC DEBT

.4S

15.65
15.35
lS.h3
16.33
18.04
22.26
25.88
27.97

29.71

31.66
32.02
33.65
31.95
40.88
41.65
41.45
43.37
47.32
48.53
52.73
58.36
64.63
84.ll!

30.82
62.53
88.17

.42

Un1t04 ~6:tes Savings Bonds Issued and Redeemed Through september 30, 1963
(Dollar amounts in millions - rounded and will not necessarily add to totals)
Amount
lunount.
-: % OutGtanding
lunount
Issued 1I Redeemed 11 Outstandin~ 2/ or ~~t.I6Gued
'URED

ries A-1935 - D-194l ••••••••••
ries F & 0-1941 - 1950 .~ ••••••

5,003
28,512

4,990
28,383

13
129

1,827
8,073
12,998
15,132
1l,844
5,324
5,015
5,166
5,082
4,432
3,838
4,018
4,569
4,6U
4,773
4,584
4,305
4,161
3,888
3,867
3,876
3,729
2,308
5lh
127,931
3,670
5,665

1,541
6,834
10,992
12,661
9,707
4,139
3,717
3,722
3,572
3,029
2,608
2,665
2,835
2,726
2,786
2,684
2,438
2,192
2,001
1,828
1,614
1,318
366
526
88,500
1,375
671

286
1,239
2,006
2,471
2,137
1,185
1,298
1,445
1,510
1,403
1,229
1,352
1,734
1,885
1,988
1,900
1,867
1,969
1,887
2,039
2,262
2,410
1,942
- 12
39,431
2,295
4,995

;ATtIRED

riea E: :JJ
1941 • ••••••••••••••••••••
1942 •••••••••••••••••••••
1943 ., •••••••••••••••••••
1944 • ••••••••••••••••••••
1945 • ••••••••••••••••••••
1946 • ••••••••••••••••••••
1947 • ••••••••••••••••••••
1948 • ••••••••••••••••••••
1949 • ••••••••••••••••••••
1950 • ••••••••••••••••••••
1951 • ••••••••••••••••••••
1952 • ••••••••••••••••••••
1953 • ••••••••••••••••••••
1954 •••••••••••••••••••••
1955 • ••••••••••••••••••••
1956 • ••••••••••••••••••••
1957 • ••••••••••••••••••••
1958 • ••••••••••••••••••••
1959 • ••••••••••••••••••••
1960 • ••••••••••••••••••••
1961 •••••••••••••••••••••
1962 •••••••••••••••••••••
1963 •••••••••••••••••••••
Unclassified ••••••••••••••••••
total Series E ••••••••••••••••

ries H (1952 - Jan. 1957) }j
•••••
H (Feb. 1951 - 1963) •••••

I
,

.26%
.45

15.65
15.35
15.43
16.33
18.04
22.26
25.88
27.97
29.71
31.66
32.02
33.65
37.95
40.88
41.65
41.45
43.37
47.32
48.53
52.73
58.36
64.63
84.14

-30.82
62.53
88.17

Total Series H ••••••••••••••••
rotal Series E and H ••••••••••

911336

211 046

7,290

78.08

137,267

90,546

46,721

34.04

ries F and G (1951 - 1952) •••••

1,008

815

192

19.05

ries J and K (1952 - 1957) ••••

3,702

2,018

1,684

45.49

Series F, G, J and K ••••

4,710

2,833

1,876

39.83

iTotal matured •••••••
Total unmatured •••••
Grand Total •••••••••

33,515
141,977
175,492

33,373
93,379
126,752

142
48,597
48,739

.42
34.23
27.77

Xo~al

1 Series

Includes accrued discount.
Current redemption value.
At option of owner bonds may be held and
will earn interest for additional periods
after original maturity dates.
Includes matured bonds which have not been
presented tor l'edeJ1ll)tion.

BUREAU OF THE PUBLIC DEBT

I'QI 1IUt...."i! A. H... gWSr'AV:~:~,
1."1. ~~~r 1. 1)6).
~~1]11;

0' ,!a£A$':.u's

fJl~4Ll

BILL J" t1EiUJ6J

the fre,eury lApartaent announced lallt. e'Yel'nDg tbat t.be tenien tor WO aer1e • ,t
In.suri uilla, one •• rie. to ce an add1t1ooa1, tatu.e of the! bUb dat.ed Juljr , 196~,
.Dd t~ other 9vhl to oe dated .:otober J, 1,~3, vtAteb were oftered OD "eptembel" 2"
.... o .... aed lit t.be >edeNlieHrYe "iilUr8 O~ .Jeptet.ber)O. IttIXiera we" 1.Jwited lot'
11,)00,000,000, or tn.re4twut.8, ot Yl-dl'll bUla aDd ,for~ul,,)O,OOO,(X)(), or tb,n..about.l,
01 182-da,. Dille. 1,',. dahUa of the livo aeriee are aa followl.
RUll'. Oli' ACCEI,'UD
n-JGj' ire,!mrr bUls
1.,:2-<lal l're•• \lI7 bUlJ
<X»lP~Ill.r: liilL.
.aLurillt,i Januarl 2, 1964
maturi,ng Apry. 2, 1 ,

Awl'OX. Zqt.d'Ye
A.nnual ;tate

rf16h
Low

n.1t.o

J.371k

1:1.136
Yi.13'

).u0C,~;

'.lila

ilLcepi1Qi one tender of ,;)OO.VJO

13 oeroent of the
55 peront of the

UOWlt

of 91-day

JlltOUIlt

1:;2-j~./

AppNa.

frio.

98.2)4
Jti.2l8
J8.2?)

qlilt

AnDal aat..
l.~9l'

).S2SS

).5151

\tid for ,'It tre low price vas acoepted
t;ills bid for ;;.t the low price was accepW

blll~

.,mAL ThDP.:1tS APPLIW JIOi AID ACOKPrltO !It J?:DIiUL U.5UVI DIstlUClS.
Dutl"1ot

Bo.\orl
lev Iorte

PbUacllllpau
Cle'YWDd
~1e""
Atlanta
Ch1oa.ro
,;;t.. lA>u1a
MlDnMpoU.
lauu Cit.1
Oallaa

SaD ~r8Dohco
'IJ'IAL;)

!I
j/
11

~\l?pli.d For

2~.61),OOO
1,5u2,4)),OOO

25,712.000
40,11),000
1).072,000
2l,61),OJ'J
t02,,70,(),')J
1;. ,laB ,00:)

2~,!.b".)JV
27,14o,UUO
22,.312,iJOO
10),)16,000
~~.0b6,J97.ooo

iocept.ed
.• 15,c1),000
-XJ),4J9,OC1.)

!\ppl1ed For
r

10,792,000
40,149,000
12,872,000:
11-;,699,000 r
118.260,000
2U ,6vo ,eX)

if·

ACC!R'-d_

4,241,000

• ",lk7,000

946,612,000

6O',U2,OOO

1,4.3',000
11,846,000
2,124,000
),180,000
101,476,000
21,817 ,000

20.610,0.)0

5,$42,<x>o

27 .148,000
14,452,000
10,1,1,000

15,4l.7,000
9,272,000

;1,)Ol,lbS,OOO!:/

$1,205,437,000

12,40'.000

.,4)9,000

U,8~,ooo
2,l24.ooo
),180,C»)

48,676,(Xk)
20,177,001
~,SJ.2,OOO

15,U7,000

8,82i,001
6S,66j,CX30
3800,W,7,OOO

Ioeludee .J221.2d7,VOO noncompetitive tendara aoOltpted at the averaie pri. of ".~
lACludes iOO,2i;9,OOO DODCOIIpet.1t.lve tenders accepted at. the &'t'fJrage price 01 ,6.21
In • OOuPOn h.~ of tile .... length and for the . . . amount invested, the ",UIII~
t.beee bUll would ~rovid. i1elda or 3.49', for the 9l-day bUla, and ).~, tort
102-0..1 bUb. Interest. rate! OIl btlb are ~ llOud in t.el'll8 of bank 11. ._ villi
t.be N"t.JrD related \0 the hce amount of the DWB payable at . . turitl' ratlllr \ill
\~ QOunt.'.Dv••ted liB:! the1l' lengtb in actual D~r 01 dqa r.alated to a J604
IUr. In eoatrest, 11elde on cert.Ulcate., DOtte. and boods an COItput.ed 1a ~_
of interest. OIl tbe UIOunt. 1nv~HJtadJ ~nd relate the nua();Jr of days retn.a.in.1Dc in II
1nt.et'ut period to the ..;ctual m....er of d~ys in the pl)rloc1, rib ...unnWll.
oa.poand1ns it aore 1. han one coupOn r::e rio..! i5 mol v.d.

TREASURY DEPARTMENT

FOR RELEASE A. M. NEHSPAPERS,
Tuesday, October 1, 1963.

September 30,

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced last evening that the tenders for two series of
reasury bills~ one series to be an additional issue of the bills dated July 5, 1963,
nd the other series to be dated October 3, 1963, which were offered on September 25,
ere opened at the Federal Reserve Banks on September 30. Tenders were invited for
1,300~OOO,OOO~ or thereabouts, of 91-day bills and for $800,000,000~ or thereabouts,
f 182-day bills. The details of the two series are as follows:
ru~GE OF ACCEPTED
91-day Treasury bills
182-day Treasury bills
Ol'1PETrrI VE BIDS:
maturing January 2, 1964
maturing April 2 I 1964
Approx. Equiv.
Approx. Equiv.
Price
Almual Rate
Price
Annual Rate
High
99.148
3.371%
:
98.234 ~
3.493%
Low
99.136
3.418~
98.218
3.525%
Average
99.139
3.408% !/
98.223
3.51~)~t Y
a/ Excepting one tender of $300,000
- ·13 percent of the amount of 9l-day bills bid for at tm low price was accepted
55 percent of the amount of Ul2-day bills bid for at the low price was accepted
TOIl'AL TENDERS APPLIED FOR AND ACCEPTED BY FtJ)ERAL RESERVE DISTRICTS:
District
Accepted
AcceEted
AE,e1ied For
AEElied For
Boston
$ 25,813,000 $ 15,813,000
$
$ 4,247,000
4,247,000
New York
609,112,000
946,612,000
1,502,439,000
903,439,000
Philadelphia
1~,439,000
25,792,000
10,792,000
9,439,000
Cleveland
11,846,000
11,846,000
40,1h9,000
40,149,000
Richmond
2,124,000
2,124,000
12,872,000
13,872,000
Atlanta
5,180,000
5,180,000
21,613,000
18,699,000
Chicaeo
48,676,000
U8 ,260,000 :
101,476,000
202,570,000
st. Louis
28,600,000 :
20,377 ,000
35,148,000
21~877 ~OOO
Minneapolis
5,542,000
4,542,000
20~810,000
25~615,00o
Kansas City
15,417,000
27,148,000
15,417~000
27~148,OOO
Dallas
8,822,000
9,272 ,000
22,322,000
14,452~000 ••
San Francisco
72 z405,OOO
65~665,OOO
103 z916,OOO _....2S),151 ,000 :
TOTAIS
$2,Oh6,397,OOO
$1,301,185,000 £/ $1,205,437,000
$800,h47,000 Y
Includes $221,287,000 noncompetitive tenders accepted at the average price of 99.139
Includes $60,289,000 noncompetitive tt3nders accepted at the average price of 98.223
On a coupon issue of the same length and for the same amount invested, the return on
these bills would provide yields of 3.49%, for the 91-day bills, and 3.64%, for the
182-day bills. Interest rates on ]:)5.11s 8.re quoted in terms of bank discount with
the return related to the face amo"W1t of the bills payable at maturity rather 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 in tenns
of interest on the amount invested, and relate the number of days remaining in an
interest period to the actual number of days in the period, with semiannUal
compounding if more than one coupon J.:eriod is involved.

-989

- 18 ...
But I-~dequ:-:t. liquh~t ty vi 11 not uke our macbinery of
adJu.t~nt
~)ut

work

~utONatic~111t

of! until e~.r~encles .1rlee.

,equire 6uvernments ¥f
order to

nor

w~)rk

a:i~usting.

deicloe -- in
r1Iidit1.e~

~ll

C~D

d.v.loi~t

its

be .afe1,

Instead, it' effective u •• will

nntioae vith

A st~ke

in a liberal

t~"~

together continuously ill many !lre38: 11' developt. .

trAde ?\Jlici., -- ill sh.!ri.ng the burdens of aid .md
~rov1d1ng

loog-term

c~p1t81

<tud inefficienci •• la tbe1.r

d15t\,')rt the :1:djustaaent procers.

~nd

econOlBl~u.

ellm1D~tlaa

th,.,t lmved. aa4

That wi.llingnet,. I believe, 1.

now being. demon~tr4ted l1lore fully than Jlt any time in the ~ •• t.

Tbia 18 the le,,1

§,01.1'rCe .:)t

United Statelt wU. t

rest~)re

·:eb:....t&;-.

,~Dy

e~n

hit in

be restored within

gr~th.

trf c.vnfid.ence .. -

Dot

bal&ac:. ia itl! own :.lccOtmts,:

event ... but tll.a thr'lt
;:j

tXlly thfl!t the .

~.£~

-(w.....

true equillbr1_

fr:!-awrwark of expAnd1.ng tr~d., flouriahJ.aa

~nd mon.t~r1 5t~bilit/.

- 17 th~t

t~k. ~l~c..

the •••dja.t..wta auat

tatern.tionP1
to rua

.~.t~ry

.,et.. will

for

~11ov ~

workable
c~i...

ft8tion to

deficit -- or. for tb"t ~.. tter " 8ur"lu. -

fft

iad.fiftlte neriod.
The critical ~ •• ttOll i. ha.v the adJU.~t8 are to be .....

a"lnce em "

aDd too ofte 111 tbe paft M8 be_ -

..-eare. tllllt -"mler d. . . ,tlc
gTowiq trade.

.t.~t 1 Ity

fore.l . ,

or tta. prospect. for

Tho. . . 1teTII~tt". are .ot 0,,.. to ue . . .q

It eM

brtsht promise of .11 that hal - . - ecco.pl1eb4tt'l .iBee are«toa

Wood! 1s to be fulfilled.

"or can the 11ldueC'r'181ised .QUatrl . .

aff tn"d to -.del'lli". the def • • • "f freedOil or to vlthdraw eMir
•• pport of the d . . .l~lll& Gati....

Th. oa1, rewlletie .01_1CJ1ft is t., ft.ad .ffeott". ...,. fOW'
reeoaetlta. th.
b8sed OIl

fbr~

~tr. . .t.

of " c ..." . . etbl. curr_q

excb""S- 1"at:•• wi.th the freed_ of _ _ .fltl• • •

DUrN. d . . . ~{c gTowtb md _tability.

No method. will work

ID.taDtMleoualy • .md OIle prerequisite to tbef r

is the

Av.11~billt1

adequ~te

~r()l).r

fuaet10111. .

liquidity -- 1n the fora of

lateraat10DAl reaerve. ~r ready ~cc.@s to credit.
DOW

.yec.

belDg l.wached ~;;t'ovide f1'esh

"SIUTanee

The atudie.

that th••• liquidity

. .ada will be set effectively in the more dist_t future. j u t
a, they are

be~ ~t

.!fectively

tod~y.

lut

~equ.t.

- it fre.dom of flllJrkete tow~rd "t· feb we hilt"• • 11 worked I'D the p08tw4'r

ci1:c...t~nce~.

i'!omestle object1.ve. will 'fJDletin•• licrit the

;)rs.ctieAble rr.nge of fluctu1lti,on in iaterest r .. te. thee e.aa be

_dert.ken for L1eilit q t1ng b.,.l"nce of OftymaDC. -'.juat_t.

fthoTt-t~r~ fun<l~ i !

interest of Boee4'!tng

likely to h. reV'tively

restor~t tOR

\UIrr'OW,

"e,

it ..I l l _.al1J

of intern:1t1.orull .qui.l toriUCI

\-IJtr..Jut rll.!tturbing the ';O!llest1c ecOl'lOllly.

tbat the ••

- l~ The

im~tlletltl

to the

d"'.lo~t

of lIOre act...... '&tKo,..

are curT_tly vader olo•• aDd • •t1au1A& acu.l,.

C-i'pi tal 1al'!Tketl

vi thin the Org.1I1~l"tton for Ecoac..ic Co-oper"Cla. . .4 Dn.lo~t,
IJftd ~ros"t.!8 i"

begiaaiag t~ be ,i.U.1a.

[uro?em C.l~ttltt r.I!lyketl

COIle

AI!! _'for.tl to i.prove

to tru1tiOll aacI eke w...1aiDg

cont"toll ad rgetr' etion. ~r• • lilli.ated -- .aDd. as our

dome.tie c!..,.nd .. for capitel l'Ut incr..."

owa

.:Jr•••ur •• upoll our

su??11 of saving8 -- there 1 • ..,ary rea.OD to believe that the Deed
to'(' U'trao-rdfDIl!'y Actioa of the kind we are DOW

t.ki~

wll1 be

e1 iIltft!!ted.
When

1IMPP'und

that !adden wnd
become
~f

w~s

•• Ubltshed, there wsa gr•• t appreh.aloa

~~siv.

dts't"U!'ttve lufIGe1lc.

the 1)1I)t l •

G'Cilt1.fylng

~turdy d~fenses .g~1D8t

as.1ft

abort-teTm capitel mov....t. a1&bC
~tt

the, b.r-:d in the disturNd clilut.

p~ogT•••

haa been aad. 18 developiaa

such thre_tg to our convertible

curr...,

11,tem through the concerted cooperati" effort. of the tnqltrill:
eountl!'! es •

A d2aln of

ftew

fact liti.. for .0p181 with I'UChpc•••url

ill) otwW i.n ;llMee get tested, ",ad there aTe grouacis for conf14 •••

the

?rOee8~.5

~dju!tmeDt e~

be .hte14ed fro. perverse

.,...u~

flo,..!! In the future.
\lith the reatcrrllttion of COllVeTttbl1ity t however. it .... ~OII
t\i'l.·utretlt th3t

stuble volu.e of capltsl if! read, to . . .e

countTy to cQuntry in
interEU t r'1t.es.

r.8Qon~e

to relatlyely

~11

troca

8b1ft. in

Thus f the et.!bi 1 i ty of uchaqe rae:. eI\Cl

- 14 -

The par,)o •• 11 quite Ihaple -

to .~ecl the eea.ttal w-edlC'MtiOll

of •• pitlll f1uv5 1D .. IM,noar cgmparable £0

aD ttqu1~.leBC.

pr •••tly tat.cact1ubi., ri.e 1fl our _tire structure of btt• •at

rat •••

W. v i . tbi.4aolaly (IS • Dec•• Ury -- bat t_porary -- .aped!.

to . . .t

a.,eclfic 81tuet1.oa that 'bI1 ari • • Ut larse part oIt of

Ionower. fr . }. defi.it and

~UT~lll.

the II. . York aaltrket, not ooly
lon~-tera

tIM

tater.at

_1, .oure. far

r~te.

eoatrles alike aODvera • . , .

b.c~ua.

-- @ince

t.ten"'ttOll~l

OUl:

lower structure of

.quiv~leDt

or lower rAte . . . .

capital in vhlftever elz. . . .

for. de.fred, fr •• l, .v.tl~.l. to ~1 borrower _bl. to . . .t
ftOl'Wtl

the

awar1tet t ••t of cretlitworthill.... , _ . offert_, hlahly

.tftatent dtatTibutloa facilitie • • t~ low { ...ins coats.
eontr&st. vot.ettal

~lternattye

markets

~re

to officiRl ceatrol. er have difficulty in
fUftd. 1. the vol... required.
c:hsYI'cte-ri-.d by high .md rigid

1• .oat •••••
.u~plyial

ID
~j'"

the ......

ADd, Yith few eueptioae, the, ....
r~te

structur...

Ia the faee af

•

8_.r~te

1] ..

large aavings. cvnti.nue to sup.;;l, r ....... l.

of capital to 'lid the develtheent of other natiQllI.

a_a.

a.&.

f. oerfectiy cle."r th~t saainteoane. ut outtl~. at ebe rec_t pac"

tar from beiDg a cOD.tructive force iD world 9ay.eat8, v081.
looa

~uti

nt-.) 1 er,"'ble att'.'} irw un the

intern~tiiJl&Al !8Qnet~r1

SYft_" • • "" ..hole.
~ro&ram

AI our

of tax reductioo take. hold &ad there are

ItrOQ&er incentives to . .ploy s lars,er port.ion of our ..v1Ba1 at

bOBe, nQrmsl

m~rk.t fo~ce. ~il1 ~ork

.trODIly ia the directioa .f

thb.. outf 10l<; of longatera CB";it.-31 to aoxe tole,a.ie levell.

r.ch.lc~

But the experience of the ~:·8.t yeer ..."8S ~lear tb;tt w. . . .aMe rel,
CD

the •• lon&er-term f;Jrce. of sdjustroeut to maet our iCFediaCe
!lor is it fe3aibie tu e,)eec1 the pracea, of

problem.

artificial

iIltarest

~ttempts

r~t.s

to fora. our entire structure of

shflrply ADd suddenly higher.

108l-'.~

If t>osaibla at all

ill the face ot the huge suP?ly of ttavinga flawina iDto our urket ••

tbia course of activD would require 80 dr •• tic A
credit

I!!

tl~.aiaa

tu ••• iou.ly j.op~·rdi%. the pro.~ect. fot:

th~s !ltU~ttOll,

we h,.. v~

GoaeRLa

rK~ecl ~e

of •

~•

.p'"
.,.1f1

Interest Equ~ll?;'tton T~i' which will have the effot of r.1.t. .
the

C;)st!:

'''If ')ortrot10 Cf1:-)ltpl in our w.rket by rt for heft""• •

the "eve 1or'.'· cuuntr1e~ ~bro~c.

Thi.s will bring th. . . co.te

a rough

t.to

- 11 Coma1~tl

.0UIe

are fully reflected in actual di.bur .....~.t oaly

101 ot the "id

wi.ll be provided

fr~

the

1.0

our vArioua foreip .... i.tltftCte pro&rqq
fUn!

belteve tbat we muat guard

of dollars.

.g~lft.t

At the . _ tt.ae, 1

~eacy

mmy

~ke ~

of aid mto a lubtl. aew form of .. rot_~iOll for home

"t1'1na"

tnduatrles.

lather, the loiie of

multil~teral

trade

promote

OUT

efforts to 8X?snd

iDternatioa~l

afflcl ..., throu,b

coapetit1on alllOl\l the noducerl of all natioa. d.-.ds th.-t it be
used

fli

a temporary dev1ce,

~eserved

for period. of bal.l!'llCe

of pa,..nt • • trainl.
Wi th force. of adj •• a.-t anderw.y in both our G098naaeat ad

oar commercial trade accounts, the most
of our bq Ince of

p~,...t.

~r •• 8iGg ~rObl . .

hal been tbe ,("8Cnt "ceeleratlon tB the

",*flGlf of Ions-term c('lpit81.

!he "et

oa~flow

.urtBg the firet half of this ye.r re3ebed an
.3.8 "1l1too.

1ft term.

of such capital
~u21

rate of

"Ibis .... fully $1.3 bi.llion higher thm the alr. .dy

.... ta.tl.1 figure_ for 1962, aDd Dearly double the rate . . tat.i.over the y.ar. 19,59-1961.
fTOIIl

WIll1. . . . . of this THat iacT."'• •t~

direct i .... ~. • flooc.l of ..... fore1p

""_iDa_

... ~lf '1 billioa ia O8ly 81x .ootb. ",alii the major f".Cor.
f!fllt.t_i/~ iJ.~ .. ; ~
\~R5?

t_!, ti• •

tot.liaS

tail i.

the volUlle. we have beeD. accueta.ed to.

It 1& . .tirel, coo. latent with r •• t.~at1.. of full ...11~.
in int.rnati~l ?Ryment! thBt the United St~t.'t with itfi c8paclC1

- 11 -

ClCIDten, i .... i ....capalll. part 6f tbe kine! of woxld we 11.,. iD.

lat we

l.aruiag th.tt _tbod6 of hm<Jl1q tbe •• GovernsBt

8r • • 1.0

out-~a,..at •• aud .are n~propriste di.tribution of

p.,...t.

~~ct, C8D

cbetr aalane.

a180 cODtr1baCe to tba adjuec.eat proc•••

wltboat subvertlag their •••ential purpose.
~ort3Dt

.aving. hey. already.e_ . .d. 1a this ar •• , reduoilc

Det outtlowl aeiu _r Clef . . . aacl aid t')roarmu frOta
~

19bU to $3.u .111ion La 1962.

A large portiOD of tbi •

....rov. . .t c:una be trac.d to the 1:"ecopit1011 by
8GUDtri.. of their

foretaa excbaQ&.

~rowing

COSC.

cappcity to

.aDd

flexibility of

<NIl

oouatrl...

nus

-eo

.qui ......t wldch t

ou:[?:a~~-:'tiJ ladU8try'

th•••

.i_1 ~. . .ou.1J atragtlleed til. fr. .

tbair parch••• of ailiaary

be producecl more rapidly ..ad more ecoaoa1enll, ill eM
t84ta 18 tlMir

share of

result. tM

A. a

..... ip...t aD. suppli •• from the Vaited Stat••
81 ••

801M Earo~

8S8u.e ~ gre~t.r

o.f the ca.aca clef_sa.

Itsl, 1. DOW virtu.il, full, off ••t

"-au•• of the

.l.' .Ull.

Arr _ _t.

~orld t I

t(/

call

Datt_ I .....
Ilave

al1i.tary . . . . .- - .

d.f •••••

In addittaa. we hav. adopted. policy of provid1aa tb. peat

_lk ~t out' ecQllc:.1c aid to developia& cOUDCr1.. ia
6\,)00£ aDd sKvlce.. 10 tlut it

caD

cae

fora of

be iJrOUikt withi. the 11a1'• •

our oa)tacit1 without u.patl'iaa ita effectiv.......

WIlen C1In'ea&

.. 1.'1 -

&liiJuataent ..>i our _ti ...... b~LAonce oj: 1)ayment8.
but nwethal •• a _coura~ tilt!"

signe of

li1ahly tataaive.

iaprov_t 1n our

iateruatiUDsl cUBl?etitive p;.>aitioo are developins.

cleAr that tbe cootributiou
~alaDc. ~ill

·.:>th . n

th~t .xport~

~ it I.

efta .ake to . .er-all

be b.~vi11 depeDdeat upon the adjustment poliei •• of

ll~tiOI\"

Ha well.

that ¥urplUI nati.m.

ay th1.

h~v. It

respoa.,lb111ty to inflate, .ay

IIO~.

toen it wuuld be cQUslateat witt uux lateraal need, to force

Nor, 10 vur pnrticular 81tu.t1OD, would it be

deflat10n.

reasOD.,ble

tlJ

look ..mly -- "r pr1aar11y -- to berea ••• ill our

tl,.

cVlllNrcial trade QAl.1lCe .Ill
But

v~~.t.:l,·tUllit1.~

:>..;)th ;,)f thair
r.duci~

txv~

do •• iet for aurplut naticml. La ia.taMe_

inflativaarl pres.ure. are .videat. to .«rYe tRe fnCer.at.

~er.

lolutioa for Qur peyeeDts protal_.

to.

>JWIl

d0&8sti$ stability aad of exteraal it.laue

.1iaiDati~

United Stat...

wl'X'iera t\J

"ind 01 £ctilJll. it ..... to _. CaD

~arA ~ubstltute
~.t

all do
bli6i~

burden wa

tor

cOD.V.rt~l.

currency syat_. tid.

beeoaae, for .vrplu8 c:owa&r1ea.

th~ iQfl~tiODaX7 ~rice ~CJUltments

.verytbiA6~t~

that

4vo1c.

factor in uur 0'4 deficit pOllt.ioa hAl bee

ca~xy fQX ~e

tbo..

the ...rch for effecti •• a4ju.t. . . .

. .~ani.rA. withw the CUIltct of •

1aport~1DelucU.D&

heavy

deten•• of the fr .. vOTld aDd for •••1at'-l

tbe ae"elop. .at oi les. ia"lor~ ntttiona.

Thi. but"dea. 111 • vider

oa.tat:, i .

.. 9 the t_>:

"}r01jY.II!o

~ucce!sful1y t:.

,yat".
1,t~!t

Ne~nvhtl.t

takep. bl,ld.

ftftRnCe

?U~

Are _ _

1auilla

~t.1de

oudgetpry deficit

tn~t~nc., in the year tbet eedtld Aupu:t

PO:'

~ich figur~8

d"te fer

Are

~vaiLabl.t

the 8aakia&
31, tb.

the co.btaee Aoldloal

of Govarnaent debt in the haads of our Federal ...arv. aDd
e~ret~l

~rogr.!l8

....,t!e furthet'
msrket~ble

~ven!g.

~eclined

bAnks

result of our lAt.st

h fa of tl\Pt t.'l.bt
~".

!'line. lfl56.

t~l~rd

~erh~~~ ~5t

?'riee't

OUT

W. have al.o

11111on.

e~ce.ded

~dyanc.

refuad1ag, the

5-1/4 ,..<11:"8 tor the ii..rsC t i .

litre not fneed, tberefore. with the kiD6 of

llquicH.ty th.,.t could tuel

economy move,

mo~e tb~ $l~

in improving tM lMturity 8tructUI'. of our

~8.

debt.

infl-'~ttOft.1'1

fuller

uce81i~

d.".lopm8ltl aa our

em~loymeat.

.ignif1csnt of All in

manuf.eturing ll'bor coate

te~

of the outlook for

~er UIl1t

of output have

declined over the papt three yer-r! -- the ff.rat tiBae since world

tl3r It that elle b"'ei.e
tm?roved fo~

[l'l.8~ure

of our corapetitive atr8lt&ch h ••

long ~ :"et'iod. or duriag a

tu.

of 8ubataJItul

reeoveTY.Ilnc. the rate of "'~ge incre~tee 1.n our I8IIIK1factur1D&
inductT'1 ! s h~ldin~ ~.J.i thin the !"::1nge of. ·:)~.t ;Uld anticUpsted

productivity

IDcr.ftSe~.

In this Y~YJ ~e ,re encour~glag bR.lic corrective forc •• 1D
terms o~

CO!ts

a-ntl 1l"l:'iee~ th"'t should r,trovide a fir.. IMs. for

ioaprl")v1Dg ~ tr"din~ ;:,oflition, thus eontriMit1a& 1:0 tile order11

adju. t

_.,

.. B -

rec_t 1/,1 increase in the Federlll &efCarve d1ac.,.t rate.
alr ..dy •• e i.ndication. thJ't the deterioration

W._

ta our aeeouata

.ariDl the f irBt balf 1,)£ the year i . beiJtR arre.ted.
The.8 new :~ctionR will cOIDplemeat ~ad reinforce the loaser-11I
"Jtsure., we have been t ... king to ~chleve both ertenl81 balance aDd
more repid domestic growth.

B~lic to our strAtegy for achleviDi

theee twin SL,)~ls is ~ bread progr8m \If individual 8ftd corpOrate
tf!~

reduction totpling $11 bi..lH.on,

~ilieh,

after passage 1ty our

Houl. (Jf Re;>reaent8tiveli .llll.t week, 16 DOW before our Sen.te.
It vl11 pro"ide
COIlll.tllllt

.ell)

wi.th our

flulb111.ty to our
,:::.~yment.

the

lmpetu8 to the domestic eeonOlllJ in
intern~tlonal
ftlon.t~ry

requt.r ...~nte.
wi.)

The

"osition.

mIIftIMJ:

.E!

It "'ill give iacr....

IlUthorltles In meeting D:tlqnce of
atide~i

incentives for

U88

of capital 11

1 enhance the relative ... ttractivene.s Gf inv.lJtaeat

here for Ameri eMU

~nr.

foretgneT$ .. 1 ike.

At the

t1m8. the

f.Dcr •• ~ed productivity ~85oelRted with risblg i1l¥ •• baent, tocethet

wf.th

gr.~ter

incentives to

d.v~lo')

lind. .."rket Dew products aM to

1t1'ply tIKlre r,,:,')1dly the fruits of our VII~t reaea.reb e"~~bl11ti.'t

will reinforce the efforts. we ·ire Mking to inere'!.e

OUT

expot't ••

Our ~bl1 tty to eYr,lRn,.;-,t"oduc: t i on -- '\;Vb ich is implicit in our

cunent UDem"loyment, in oor raoidly growing l~bor fOl."ce, .IttId 1.
our I&H:gin of underuti 1 ized lndu!lltr1.~l eap",ct ty .. - provides
prot.etion 88-cf'lin9t ur;\4'~rd !:lrtee f're!sure ••• the .tt.-lus fra.a
til. tas

- "I -

lIav. . .r. uaea;>lO,..eDt i9 .ti 11 excesaive.

AIa4 we are

DOC

fully

utllizing our _v.liable s~vln~. ~r oar .xi.tias prodact1. . p1aat
cao_city.

~A; im.·•• ttuDt J'tctiv1ty ha. ri. • • 1D r •• pOlls. to

incre •••• 1.n deIUIDd aad to .e.ur•• introduced .. ,ear

iibeTftl1r:e the

tliX

treatmel\t of depreciatl_ aIId proviAl. -

tax credit.

lDV.!IItMnt

-.0

But new lavest.-Dt Itill r8811na M1_

the level. reqa! red to nf)port • full .."lo,~ eeODOD1 . . . to

a.lur. the positiaa of our industry ..aa& the
teebnolog1cpl

l.~er.

~rogre.!.

At th. . .me t1.. , our over-.ll bal.DCe of p.,meDte ...
r •• ponded slowly to tbe aeri•• of .....ur•• wa

aince 1901.

Th. aver-.ll deficit

19b2. fram $3.9 billion in 19&0.

UDdert"''''-

reduced to $2.1 .1111. . iA

VB.
~

h~••

a.t

$2.4 billlOD 18 1961.

d.ficit jr.w markedly larger duria& the f1rat half of 1963.
When tbi8 aitutltion fir.t bec:.aae
gCling

~ev taw

of our entire

calm1D4ted in

July lii.

ba~4IIC. of

.?,,~n.·_t.

wa _fie a

th~

;»a,...ats proaraa. vb!oll

aerie. of deci.s1oa.a anacuaeed by the Pr•• ideal •

Result1Dg program.

DO'Iio1

undarv.y vill, by the aDd. of

DIIe

year, oriDg & reduction of $1 b111ioa in the aaauAl rate of . .ltd
e~~eaditur••

abroad for defens., 8id ~od otber Govaraa.nt ?C0IJ.-

S,..,iqf 01 .t.ilar at":1!&Ditude are aleo upected OIl hi>1t.1.

ace--

••• reault of the prvpoaed Interest E::juali.a.at1aa Tax .-ad ~
fi~r .tructuxe 0f .hoTt-tera inter.at

rate.

ac~yiD& ~

...... 1/'-'4

- 6 -

AM we

.. net r1,,1dlt1e. tbltt 1ntiblt the procell of 1I.j••c - t .

are le.raiDS that

techaiqu.. caD be developed fow ••• l.t~ the

proa••• 01 .dj •• t . . .t tbftt ~re cOD.ist.nt with do.eetle IOft1. aad
coapetitive ..rket ••
Nucla of thi. co be illu8tr8t_ by . .aly."

of Che UDltect Stat. . , faced ••

acbl-*tac mow.

rapl~ &r~

the tToable.o.e

la~

w. ar.

of ct.e pGalt1.0Il

vida the tvt. ta._ ef

at ha.e while . i. .lt~...ly ol•• t.a

la Oft N1 . . . of

,.,..at..

And...,. of tM

le ••oa8 of thi. apeoriau:e f 1 belleve, will prove 800Der or later

austn... aotivity t. the Dalt.. SC8t •• has coatinued to ..~
OVft

the p.st year at • fairl,. .tead, peee.

rucbed a rate of OVe'r
thaD

13~

,sa,

btll1... 8 ,..r -

Tot~l eutfJU~

bal

1a ret'll terw.

1lOW

.or.

.Dove the level of .arl, 1961.

H. . eared _,_talt other pM. .i . . up._lao. of the p••c

,.•• r., this perforlllJlICe bits ..... _eouragllll.

for~

All but . . of tit...

recGYery ileTt"', Mve now baeD equalled or exeeeded ill tera• •f

perc_cas.

lDCl'.... 18 output. MId that • baSl.

nee,.i_

p1_

0111,. .ftar the at.., deel1aea ill prociuetlon dart... the early 1".•••
Pric•• of lMDUfactured loed. have r..,.1aed virtually . .a. ._
dari~ the curTet UJ).tlD.tQl\, ~edll11 the period of

.ca'-11fty

tue

be. esiated .tllCe 1958.

Bowner, __ pl~

- , ..
.,1 tboat d ... gag cOIlsequenc., for .1 ther do-.st1c: arowth 81Ml
stabtlity or the ir.e flow of tt'~d •.mong utloa8.

Tbat 1 • ...,.

•• p.-rt of the ... d 1ustment process! II couatry experleac:lq elaftct"

" " " r ••erve. to dr~

That 1.

~L.o vby ~

U'}01\,

or creatt th~t it

C'lD

rely ut;>Oft.

country recelvtag the counterpsrt 1• .-rpl....

Deecla s ••eCs of ~.sured value, in 4taOUDt. 9nci .forras that vl11
.ot dtsnaflt it"

ocooo.y.

0Wft

effecti•• adJultmentl
DO

b~th

But In the ta.t snalysta without

d.ficit

~nd

surplu. couotri •••

.-.ount of liquidity will enable _ t o I.tchleve the . .tual

of • clo•• 1,
arowt:b

1Dt~rAted

.c:eom;"~nieo

world ecODa.y within ,. framework of

~fitl

a'.Id,

hy l:Jonet .-:ry st::ibi U ty.

!be cballeage implicIt in this 81tWltion is clear.
.ttl. with our atucle6 of po!s1bl. liquidity neads.

A_.claus 1y .eek QUt

YReMiS

Siele '"

w. _at

of iallJroviog thp. proc... Qf at.raee!.

adJutttamt itself, wile ?reserving our separ*te ..tbilities to
••• t

OUT

Thi.

respective do.eatic needs.
1~

aruu:lti...

"."ra.

" 18rge order, but
Mw:h

b~1t

ODe

that 18 well within our

been learned frOID the exper1eace of ree_t

W. have coate t~) recognize th."t in .haping d0lM8tic ~ll.ieI

nd chOO81118 frosa the various tool. s",,11.bl. for

vsryl 86 lcapact uoon ou-r extenv 1
tr:tdta.~ pltTtDers t must

4CCOUl'ltS,

be t~k_ full, taco

gre.. ter . .ar. . . , of the nEter, :.:.)

tlee. their

'lad upoo th•• e of our
aOCOUDt.

i(~entiiy ~

naar.

ill

.1iai.aate tbose

market rla141ti ••

- 4 the LDternatl00ai l8Oft.tary aYlten 1MY prove to ... d •• lrable.

'lb. United St1llt •• finds itself in s.erAl a.r.~t with all ef
th ••• tbOU&!ltE.
But in discusaing th1! tJUttter, 1 t'ould like to atka . .

001lt

cryltal clear: 'fhe UGited States does not view po•• ibl. illprOV_t
1a the . .thod. of supplying Intern.tlon-l liquidity ~. rel1ev1A&
it 3f the COll4'.1.11og and bued1~te t.l'!sk of reduciag it.

p.,..ata deficit.

Indeed, it 1. largely the

elilliutiOil Jf the United States

l.l3.,..,..tS

pro.~t

CJWII

of tk.

d.ficdt that _kes it

...ce!t •• ry and advi ••ltl. to uadertak. the •• studt •••
lor CIll\ the provision of ~f)?ropri"te f.r.ci U.tle$ for iDt.T1l.t~

liquidity relieve n3tions of their jolat responsibilities

aacl P41JIBMlts as may aria. in the future.
• lfch.... rat ••
~~.

troa

SIlC

In" world of fis. .

convertible curreftclea, defi.cita nad .urplu•••

wide vari.ety of

CAUS.S,

both dvm.eetic: and intenaatiOil

The nee.,51ty to make cnah outL1ya fo...- defense 8ft" 81d, eblftl ill

the basic

p~tt.ra

d~nd

for

intern~tiOftAl1y

the develo:Jeet\t of new ;)roduets, resources
AM d8V.lo~ts in c.'1pJ t'-'l rr.8rket~

~nd

traded

IOod~

f>rodueti01l teeblll..

ClItn be just ". illFJOTt_t ••

cbRng•• in Itver~g. i"-,rice levels ~nd 3ggregate de.md withia CfMltrl

The I'dja~tl8e!1t5 necessary t·) correct the•• deficil:. ~

.arol•••• take time if they Are to pr oCHd ttl a. or• •l,. f . . . iOll.

witkeat damagill

- ~

1963 1 • •0

.]I:..l>t1oa.

111 ('lttTticul n

1.t .... 1. a' . . . l_th

..,ith tbe .d....cy 3f ni.e1. . .~l'reaa-'S .for twnt41q
lat.mllltt . .1 liquidity (luriq the coaillg Y8I'-r..
i~vtDt oat thllt

of offictal

tbe prolr •••

The ... thor.

liqtliciit1 1. DOt .1.. p1y a uttar {Ji tbe

holcl~.

~d. la

of lold

rae_t

en'

.ur:......

ioreip pcb.__ a. aJMl &bey r . .l_

1aa~,

~I't

.- ill coe.lclerat.le

the 8uapic.. of cae 'uad ik •• if -- 1. auppl...a&1aa tbe ••
_lell 1.t. . . .tloaal 4redit.
da. . ._, of .,.tloaa for
pa~t.
~.~.t.

Gad.
I' • • our.~

lut tha a.epOrt .1'0 r"-calz•• tbst

B . . .red

_ . . . of f1aaacina ... 1. . . . of

deficltl -- either ." dr_in,

UpoD • • cock.

or ., _ani .t bOlTovin& .- ceo be expected

ft.

of liquid.
ti)

1llcr....

the 4etlcit 1& tit. DIIl.aace ef

o.er ti_.

At tbe .... t1 . . .

p",.-,.

the Ulatted Statal ia nanuwee aaO 0101 • • that d.ef1eit

will

;)f

lClDlft' coatrlbata to the liq1l1dJ..ty of OCher 'Utioea 1. W

_ e r .ad ... pltad. of the La et f_ ,...x t

•

The rund·. Ile[>ort bA-a ROW . . . . suppler:g •• ted by the , ...., ...,&1
lied t..Ports-pt .tAc.-nc of i.ta . . KaD"&1a& J)lr~.
1IMi lClited taa~ the

rua.

t6c. 5oM1t11

apec.¢11 to lltud., the probl_ of iIlc..naa' tOlll

liquidit, a1Wi k.$ta upr.sa_ ~he Ftmci'" reed1aea6 to cooperaCe wiP

ot.her. 11l 1IUCb

.. t1ilCly.

t:te poloCs out that aCadi•• of tlU.. proitUl

are tia.iy ..... tb>JUgh t.bel"e 1, at

1n interaat1aa.l tiqa14ity.

l)X'. . . .c. 80

aip of -T .b«UI'

has also ,1vea ua hie

~iew ~C

the PwId mould be ... t the eater o{ wbatevex str ...Chai. of

the 1.unat1oul

.. 2 -

tIu:~

it. rqulal' couultati. . . aDd b, pr.w1(!1a& U.l,

f1uac:1al Bupp_t £e" well caece1veQ acMll1uUeD pr. . . .
1a adc1tiMl. tM new coupe... ' . ' Lipauloa facl11tie •••

1._, March mark &11

imp~ &:allt

agj coutlucUv. aadoce 18 dla

.ervice. available to iMIIbu. b.•• v1l,

.f priaal'1

1'Il...

are.

0.1

~.adeat

up_

c~it1e ••

ac t1 vl~1.. La auppNt of N
eGlllpl_aU~

c""" •••

lre~tOD ~(:.

laQC.~.

dJUm1c l&'owUa

parti~ulacll

._'.I&~

b, tb... ot tile hacl' 8

iaatltutioo. the World leok and LU .1:£111.a&.•••

DOW UDder the abl. ('luectioo ot '-01''' Woods.

at tbi.

,..~'.

JAv.lop. .llt Aaeoc1ac.1oa.

One ~owttr1.....

1 abould . . .tiOll

m•• t1D& tke woek .f

_0. . . . tlv1&1••

18 .. abort . . . . .f

tt.. Gffer 80 mach pCOD1. . fe.c tile future.

Action by the 'art

the peop... l. tor incr._1Qa it. " •• ou,... trill

.cather . i l••toae LA the work to

it 1a

~dlcat..

ill wbich we are all j o1ne4 toaether.

l'he aucc: ••• lve Annual

~p01't. 0.(

t.be late.caatioaal

~~Qet4c1 ~~~

n.ve expertl, tcacec tba avGlutioD 01 eux

int~u:nat10Aal

l1lQIleuc'y ",tem sine ~

haw .180

fIII_C.

mai~e

clur that

O8w

Wocl~

war 11.

the,

pcobl • • haM • _ , 01

. .r,ina a. el,,: • .r one, are .olv__

l2le I.tIpert f_

1961 1s

ae4

IIM4US

or till

hOM.lRABt..E OOUGLAS DILIA'W

SiClU.--rA1t1 or THI TRlASUR.f
BtFORr nsE ANNUAL MElTING OF THE
INTElUIAtlC*AI.. l4OMET~,{ FUND. <-OCTOBER. 1 J 1963
~~II ,'tf"..:

/1/11. ERr:;
At the out •• , of .y remarks, I ask you to jaia "ittl _
paytng tribute to our
Per Jltcob •• oo.

greAt coll.a,ue aad IOod

f%~,

Firaly d.dicated tbroupotlt bi. 10118 . . .
c~r •• r

di'tlDluiebed

l~t ••

tG the cau •• of fla.e01al

.t.~tl1ty.

ptded the lDterutioul MoD.Cary Flmd witb . . . ., ..........s..,
. . the ••ed,
o~

~ad

realities of his tLDes.

MJlD"al", D1 -rector bave

Pierre-Paul Sohweitzer.

DOlI pe ••eel

Tb. reapoa.ibl11tle.

iDto the capable haM. of

818 williftlDe.1 to ...... the. .

~,••

i.-rovide. u. with fr••h •••uraDCe th"c ttl. Ftad. 1MIl1Al1aa _
C,"1!'dC Itr_th end ilaflueace at tb. center of the

1&.

la~--*,_.l

OIOileCary ".ta, wll1 ••cee •• fully . . .t the treah ...11-._ .....
1.1e ..b ••d.
It 1. a lao a pl . . . .r. t4.) ".lcOlU to Che luIld f ••ily AD

unuauall, lAr,_ DUmber of . . . . . . .T s, br1aa1q our
t .... lJO.

ar-p

&e . . .

The _l_clOD of s aiDeteeatb EJrecutlve DireeCor • • will

Iymbolic of the lacre.,1ua useful.ee. of ell. r.d to CIae ....,t..I

Datlas.

1 ... sure tut e4ch of thai. aft . . . .r. v111 profit

th.

~ort.Dt

1n the

Are~~

8s.iatance the Fund C3D reader to tbelr turtbec

centr~l b~nktng ~nd

f!!C81 practlo. . . . .

po11o~

FOR RELEASE:

UPON DELIVERY

REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY OF THE UNITED STATES
AND
UNITED STATES GOVERNOR OF THE INTERNATIONAL MONETARY FUND
BEFORE THE
ANNUAL MEETING OF THE INTERNATIONAL MONETARY FUND
APPROXIMATELY 11:45 A.M., EDT
TUESDAY, OCTOBER 1, 1963

At the outset of my remarks, I ask you to join with me in
paying tribute to our late, great colleague and good friend,
Per Jacobsson.
Firmly dedicated throughout his long and distinguished
career to the cause of financial stability, he guided the
International Monetary Fund with a deep understanding of the needs
and realities of his times. The responsibilities of Managing Director
have now passed into the capable hands of Pierre-Paul Schweitzer.
His willingness to assume these duties provides us with fresh
assurance that the Fund, building on its current strength and
influence at the center of the international monetary system, will
successfully meet the fresh challenges that lie ahead.
It is also a pleasure to welcome to the Fund family an unusually
large number of new members, bringing our group to more than 100.
The election of a nineteenth Executive Director who will cast the
votes of a group of the many new African members is symbolic of the
increasing usefulness 'of the Fund to the emerging nations.
I am sure that each of these new membprs will profit from the
important assistance the Fund can render to their further
development through its expanding program of technical assistance
in the are$ of central banking and fiscal practices and policies,
through its regular consultations, and by providing timely financial
support for well conceived stabilization programs.
In addition,
the new compensatory financing facilities announced last March mark
an important and constructive advance in the services available to
merriliers heavily dependent upon exports of primary commodities.
These activities in support of balanced, dynamic growth are,
of course, complemented by those of the Fund's companion
Bretton Woods institution, the World Bank and its affiliates, now
under the able direction of George Woods.
I should mention
particularly at this year's meeting the work of the International
Development Association, whose activities in so short a span of
time offer so much promise for the future.
Action by the Part One
countries on the proposals for increasing its resources will mark
another milestone in the work to which it is dedicated and in which
~e are all joined together.
D_9~0

- 2 -

The successive Annual Reports of the International Monetary Fund
have expertly traced the evolution of our international monetary
system since World War II. They have also made clear that new
problems have a way of emerging as older ones are solved. The
Report for 1963 is no exception.
In particular, it deals at some
length with the adequacy of existing arrangements for providing
international liquidity during the coming years. The authors point
out that liquidity is not simply a matter of the aggregate of official
holdings of gold or foreign exchange, and they review the progress
made in recent years -- in considerable part under the auspices of
the Fund itself -- in supplementing these resources with international
credit.
But the Report also recognizes that the needs of nations
for assured means of financing balance of payments deficits
either by drawing upon a stock of liquid assets or by weans of
borrowing -- can be expected to increase over time. At the same time,
as the deficit in the balance of payments of the United States is
narrowed and closed, that deficit will no longer contribute to the
liquidity of other nations in the manner and magnitude of the last
few years.
The Funds's Report has now been supplemented by the thoughtful
and important statement of its new Managing Director. Mr. Schweitzer
indicated that the Fund expects to study the problem of international
liquidity and has expressed the Fund's readiness to cooperate with
others in such a study. He points out that studies of this problem
are timely even though there is at present no sign of any shortage
in international liquidity. He has also given us his view that
the Fund should be at the center of whatever strengthening of the
international monetary system may prove to be desirable. The
United States finds itself in general agreement with all of these
thoughts.
But in discussing this matter, I would like to make one point
:rystal clear:
The United States does not view possible improvements
in the methods of supplying international liquidity as relieving
it of the compelling and immediate task of reducing its own payments
jeficit.
Indeed, it is largely the prospect of the elimination of
:he United States payments deficit that makes it necessary and
ldvisable to undertake these studies.
Nor can the provision of appropriate facilities for international
Liquidity relieve nations of their joint responsibilities for
~ffective and timely action to eliminate such imbalances in trade
lnd payments as may arise in the future.
In a world of fixed
~xchange rates and convertible currencies, deficits and surpluses

- 3 -

emerge from a wide variety of causes, both domestic and international.
The necessity to make cash outlays for defense and aid, shifts in
the basic pattern of demand for internationally traded goods,
the development of new products, resources and production techniques,
and developments in capital markets can be just as important as
changes in average price levels and aggregate demand within countries.
The adjustments necessary to correct these deficits and
surpluses take time if they are to proceed in an orderly fashion, without damaging consequences for either domestic growth and stability
or the free flow of trade among nations. That is why, as part of
the adjustment process, a country experiencing deficits needs
reserves to draw upon, or credit that it can rely upon.
That is
also why a country receiving the counterpart in surpluses needs
assets of assured value, in amounts and forms that will not disrupt
its own economy. But in the last analysis without effective adjustments by both deficit and surplus countries, no amount of liquidity
will enable us to achieve the mutual benefits of a closely integrated
world economy within a framework of steady growth accompanied by
monetary stability.
The challenge implicit in this situation is clear. Side by
side with our studies of possible liquidity needs, we must
consciously seek out means of improving the process of international
adjustment itself, while preserving our separate abilities to meet
~ur respective domestic needs.
This is a large order, but one that is well within our
::apacities. Much has been learned from the experience of recent
rears. We have come to recognize that in shaping domestic policies
Ind choosing from the various tools available for use, their varying
~mpact upon our external accounts, and upon those of our trading
>artners, must be taken fully into account. There is greater
~areness of the need to identify and eliminate those market
°igidities that inhibit the process of adjustment. And we are
earning that new techniques can be developed for assisting the
rocess of adjustment that are consistent with domestic goals and
ompetitive markets.
Much of this can be illustrated by analysis of the position
f the United States, faced as we are with the twin tasks of
chieving more rapid growth at home while simultaneously closing
he troublesome gap in our balance of payments. And many of the
=s~ons of this experience, I believe, will prove sooner or later
) ~e more generally applicable to the problems of international
:ljus tment. .'

- 4 Business activity in the United States has continued to expand
over the past year at a fairly steady pace. Total output has now
reached a rate of over $585 billion a year -- in real terms more
than 13% above the level of early 1961.
Measured against other peacetime expansions of the past forty
years, this performance has been encouraging. All but one of these
recovery periods have now been equalled or exceeded in terms of
percentage increase in output, and that single exception took place
only after the steep declines in production during the early 1930's.
Prices of manufactured goods have remained virtually unchanged,
during the current expansion, extending the period of stability that
has existed since 1958. However, unemployment is still excessive.
And we are not fully utilizing our available savings of our existing
productive plant capacity. True, investment activity has risen in
response to increases in demand and to measures introduced a year
ago to liberalize the tax treatment of depreciation and provide an
investment tax credit. But new investment still remains below the
levels required to support a full employment economy and to assure
the position of our industry among the leaders in technological
progress.
At the same time, our over-all balance of payments has
responded slowly to the series of measures we have undertaken since
1961. The over-all deficit was reduced to $2.2 billion in 1962,
from $3.9 billion in 1960, and $2.4 billion in 1961. But the deficit
grew markedly larger during the first half of 1963.
When this situation first became apparent, we made a thoroughgoing review of our entire balance of payments program, which
culminated in a series of decisions announced by the President on
July 18. Resulting programs now underway will, by the end of next
year, bring a reduction of $1 billion in the annual rate of dollar
expenditures abroad for defense, aid and other Government programs.
Savings of similar magnitude are also expected on capital account
as a result of the proposed Interest Equalization Tax and the
firmer structure of short-term interest rates accompanying the
recent 1/2% increase in the Federal Reserve discount rate. We can
already see indications that the deterioration in our accounts during
the first half of the year is being arrested.
These new actions will complement and reinforce the longer-run
neasures we have been taking to achieve both external balance and
Gore rapid domestic growth. Basic to our strategy for achieving

- 5 -

these twin goals is a broad program of individual and corporate
tax reduction totaling $11 billion, which, after passage by our
House of Representatives last week, is now before our Senate.
It
will provide an impetus to the domestic economy in a manner
consistent with our international position.
It will give increased
flexibility to our monetary authorities in meeting balance of
payments requirements. The added incentives for use of capital in
the U. S. will enhance the relative attractiveness of investment
here for Americans and foreigners alike. At the same time, the
increased productivity associated with rising investment, together
with greater incentives to develop and market new products and to
apply more rapidly the fruits of our vast research capabilities,
will reinforce the efforts we are making to increase our exports.
Our ability to expand production -- which is implicit in our
current unemployment, in our rapidly growing labor force, and in
our margin of underuti1ized industrial capacity -- provides
protection against upward price pressures as the stimulus from the
tax program takes hold. Meanwhile, we are continuing successfully
to finance our budgetary deficit outside the banking system. For
instance, in the year that ended August 31, the latest date for
which figures are available, the combined holdings of Government
debt in the hands of our Federal Reserve and commercial banks
declined by more than $1-1/2 billion. We have also made further
progress in improving the maturity structure of our marketable debt.
As a result of our latest advance refunding, the average life of
that debt exceeded 5-1/4 years for the first time since 1956.
We are not faced, therefore, with the kind of excessive liquidity
that could fuel inflationary developments as our economy moves
toward fuller employment.
Perhaps most significant of all in terms of the outlook for
prices, our manufacturing labor costs per unit of output have
declined over the past three years -- the first time since World War II
that this basic measure of our competitive strength has improved
for so long a period, or during a time of substantial recovery.
And the rate of wage increases in our manufacturing industry is
holding within the range of past and anticipated productivity
increases.
In this way, we are encouraging basic corrective forces in
terms of costs and prices that should provide a firm base for
Lmproving our trading position, thus contributing to the orderly
Idjustment of our entire balance of payments. Highly tentative,

- 6 but nonetheless encouraging, signs of an improvement in our
international competitive position are developing.
But it is clear
that the contribution that exports can make to over-all balance will
be heavily dependent upon the adjustment policies of other nations
as well.
By this I do not, of course, mean to suggest that
surplus nations have a responsibility to inflate, any more than
it would be consistent with our internal needs to force deflation.
Nor, in our particular situation, would it be reasonable to look
only -- or primarily -- to increases in our commercial trade balance
as the solution for our payments problem.
But opportunities do exist for surplus nations, in instances
where inflationary pressures are E~vident, to serve the interests
both of their own domestic stability and of external balance by
reducing or eliminating barriers to imports, including those from
the United States.
In the search for effective adjustment
mechanisms within the contExt of a convertible currency system,
this kind of action, it seems to me, can become, for surplus countries,
a modern substitute for the inflationary price adjustments that
we must all do everything we can to avoid.
A basic factor in our own deficit position has been the heavy
burden we carry for the defense of the free world and for assisting
the development of less favored nations. This burden, in a wider
context, is an inescapable part of the kind of world we live in.
But we are also learning that methods of handling these Government
out-payments, and more appropriate distribution of their balance
of payments impact, can also contribute to the adjustment process
without subverting their essential purpose.
Important savings have already been made in this area, reducing
net outflows under our defense and aid programs from $3.8 billion
in 1960 to $3.0 billion in 1962. A large portion of this improvement
can be traced to the recognition by some European countries of their
growing capacity to assume a greater share of the foreign exchange
costs of the common defense. As a result, the drain on our payments
from maintaining our troops in Germany and Italy is now virtually
fully offset by their purchase of military equipment and supplies
from the United States -- equipment which, because of the size
~nd flexibility of our defense industry, can be produced more
rapidly and more economically in the United States than in their own
:!ountries. Thus these arrangements have simultaneously strengthened
the free world's military and economic defenses.

- 7 -

In addition, we have adopted a policy of providing the great
bulk of our economic aid to developing countries in the form of
goods and services, so that it can be brought within the limits of
our capacity without impairing its effectiveness. When current
commitments are fully reflected in actual disbursements, only
some 10% of the aid from our various foreign assistance programs
will be provided in the form of dollars. At the same time, I
believe that we must guard against any tendency to make the
"tying" of aid into a subtle new form of protection for home
industries. Rather, the logic of our efforts to expand multilateral
trade and promote international efficiency through competition among
the producers of all nations demands that it be used as a temporary
device, reserved for periods of balance of payments strains.
With forces of adjustment underway in both our Government and
our commercial trade accounts, the most pressing problem in terms
of our balance of payments has been the recent acceleration in the
outflow of long-term capital. The net outflow of such capital
during the first half of this year reached an annual rate of
$3.8 billion. This was fully $1.3 billion higher than the already
substantial figures for 1962, and nearly double the rate maintained
over the years 1959-1961. While some of this recent increase
stemmed from direct investment, a flood of new foreign borrowings
totaling nearly $1 billion in only six months was the major factor.
This is considerably more than three times the volume we have
been accustomed to.
It is entirely consistent with restoration of full equilibrium
in international payments that the United States, with its capacity
to generate large savings, continues to supply reasonable amounts
of ~apital to aid the development of other nations.
But, it is
perEe::tly clear that maintenance of outflows at the recent pace,
far from being a constructive force in world payments, would soon
put intolerable strains on the international monetary systems as
a whole.
As our program of tax reduction takes hold and there are
3tronger incentives to employ a larger portion of our savings at
lome, normal market forces will work strongly in the direction of
reducing this outflow of long-term capital to more tolerable levels.
~ut the experience of the past year makes clear that we cannot rely
)n these longer-term forces of adjustment to meet our immediate
)roblem. Nor is it feasible to speed the process of adjustment by
lrtificial attempts to force our entire structure of long-term
Lnterest rates sharply and suddenly higher.
If possible at all

3u
- 8 in the face of the huge supply of savings flowing into our markets,
this course of action would require so drastic a tightening of
credit as to seriously jeopardize the prospects for domestic
expansion.
In this situation, we have recommended enactment of a temporary
Interest Equalization Tax which will have the effect of raising
the costs of portfolio capital in our market by l% for borrowers in
the developed countries abroad. This will bring these costs into
a rough alignment with those in most other industrialized countries.
The purpose is quite simple -- to speed the essential redirection
of capital flows in a manner comparable to an equivalent, but
presently impracticable, rise in our entire structure of interest
rates.
We view this tax solely as a necessary -- but temporary -expedient to meet a specific situation that has arisen in large
part out of a structural imbalance in the capital markets of the free
world. Borrowers from deficit and surplus countries alike converge
upon the New York market, not only because of our lower structure of
long-term interest rates -- since equivalent or lower rates can be
found in at least two other countries -- but because it is still
the only source for international capital in whatever size and form
desired, freely available to any borrower able to meet the normal
market test of creditworthiness, and offering highly efficient
distribution facilities with low issuing costs. In contrast,
potential alternative markets are in most cases subject to official
controls or have difficulty in supplying the needed funds in the
volume required. And, with few exceptions, they are characterized
by high and rigid rate structures. In the face of this situation,
we must temporarily help to redirect the demands pressing on our
market through a tax that will increase the costs of long-term
borrowing hereby foreigners.
The impediments to the development of more adequate European
capital markets are currently under close and continuing study
within the Organization for Economic Co-operation and Development,
and progress is beginning to be visible. As efforts to improve
European capital markets come to fruition and the remaining
controls and restrictions are eliminated -- and as our own domestic
demands for capital put increased pressures upon our supply of
savings -- there is every reason to believe that the need for
extraordinary action of the kind we are now taking will be
eliminated.

- 9 When the Fund was established, there was great apprehension
that sudden and massive short-term capital movements might again
become a disruptive influence as they had in the disturbed climate
of the 1930's. Gratifying progress has been made in developing
sturdy defenses against such threats to our convertible currency
system through the concerted cooperative efforts of the industrialized
countries. A chain of new facilities for coping with such pressures
is now in place and tested, and there are grounds for confidence that
the processes of adjustment can be shielded from perverse speculative
flows in the future.
With the restoration of convertibility, however, it has become
apparent that a sizable volume of capital is ready to move from
country to country in response to relatively small shifts in
interest rates. Thus, the stability of exchange rates and freedom
of markets toward which we have all worked in the postwar period
carries with it the implication that short-term interest rates
in the major trading countries must inevitably be kept reasonably
well in line with each other.
Both problems and opportunities are implicit in these
circumstances. Domestic objectives will sometimes limit the
practicable range of fluctuation in interest rates that can be
undertaken for facilitating balance of payments adjustment. But,
since the margin between rate relationships that attract or repel
short-term funds is likely to be relatively narrow, it will usually
be feasible to encourage small changes in short-term rates in the
interest of speeding restoration of international equilibrium
without disturbing the domestic economy.
Most promising of all in terms of facilitating the adjustment
process is the increasingly close and continuous consultation on
these matters that has developed in the forums provided by this
institution, by the Organization for Economic Co-operation and
Development, and by the Bank for International Settlements. This
has been particularly evident in the area of short-term capital
flows and interest rates.
But we are also coming to understand
that this same kind of consultation and cooperation is essential
in other areas as well. We know that any adjustment demands
offsetting changes in the position of deficit and surplus nations.
We also know, in the last: analysis, that these adjustments must
take place, for no workable international monetary system will allow
a nation to continue to run a deficit -- or for that matter a surplus
for an indefinite period.

- 10 The critical question is how the adjustments are to be made.
Balance can be -- and too often in the past has been -- forced by
measures that endanger domestic stability or the prospects for
growing trade. Those alternatives are not open to us today if the
bright promise of all that has been accomplished since Bretton Woods
is to be fulfilled.
Nor can the industrialized countries afford to
undermine the defenses of freedom or to withdraw their support of
the developing nations.
The only realistic solution is to find effective ways for
reconciling the requirements of a convertible currency system
based on fixed exchange rates with the freedom of each nation to
pursue domestic growth and stability. No methods will work
instantaneously, and one prerequisite to their proper functioning
is the availability of adequate liquidity -- in the form of
international reserves or ready access to credit. The studies
now being launched provide fresh assurance that these liquidity
needs will be met effectively in the more distant future, just as
they are being met effectively today.
But adequate liquidity will not make our machinery of
adjustment work automatically, nor can its development be safely
put off until emergencies arise.
Instead, its effective use will
require governments of all nations with a stake in a liberal trading
order to work together continuously in many areas:
in developing
a mix of domestic policies appropriate to external circumstances
in adjusting trade policies -- in sharing the burdens of aid and
defense -- in providing long-term capital -- and in eliminating
rigidities and inefficiencies in their economies that impede and
distort the adjustment process. That willingness, I believe, is
now being demonstrated more fully than at any time in the past.
This is the real source of my confidence -- not only that the
United States will restore balance in its own accounts, we intend
to carry out that responsibility in any event -- but also that a
true equilibrium can be restored within a framework of expanding
trade, flourishing growth, and monetary stability.

000

- 4 the course of the coming year.

They requested the Deputies

in carrying out these studies to maintain close working
relations with the International Monetary Fund and with
other international bodies concerned with monetary matters.
Any specific suggestions resulting from the studies by the
Deputies will be submitted to the Ministers and Governors for
consideration.

I) 6.

The Ministers and GQv~rnors believe that ~\1~h iP

examination of the international monetary system will further
strengthen international financial cooperation, which is the
essential basis for the continued successful functioning of
the system.

.(!S _ilID~~!tmL:~
~'

- 3 -

fow~dation

for

present

~}uture

arrangements.

It appeared

to them, however) to be useful to undertake a thorough ex~ination
n~tio~al

of the outlook for the

fw~ctioning

of the inter-

monetary system and of its probable future needs for

liquidity.

This examination should be made with particular

emphasis on the possible magnitude ar. .d nature of the future
needs for reserves and for su?plementary credit facilities
~vhicb ~~y

arise within the framework of national economic

policies effectively aiming at the objectives mentioned in
paragraph 2.

Tne studies

and evaluate

various possibilities for covering such needs.
The Ministers and

C~verno~s

have noted with approval

the statement by the Managing Director that the International
~~'-~ a ...J:i, -v~-~...~~ ~t.,~.-i:'-t_ -, t~
}l..anetary Funci. will eeatlo ue to exarn±.. these long .. rUn questions.
They, for their part, have now instructed their Deputies to
examine these questions, and to report to them on the progress
of their studies and discussions over

- 2 -

actions by a number of countries designed to reduce or remove
surpluses, as evidence of progress toward a better basic international equilibrium.

The Ministers and Governors reaffirmed the

objective of reaching such balance at high levels of economic
activity with a sustainable rate of economic growth and in a
climate of price stability.
fl

In examining the functioning of the international

monetary system, the }:inisters and Governors noted that the
present national reserves of member countries, supplemented
as they are by

t~~ r~S0~~ces

of the IMF, as well as by a net-

work of bilater.;:l facilities, seemed fully adequate in present
circill.1.stances to cO,pe with possible threats to the stability of
the international payments system.

In this connection, the

Hinisters reviewed the ,Jeneral Arrangements to

Borr~J

in the

International Monetary Fund and reiterated their determination
that these resources would be available for decisive and prompt
action.
In reviewing the longer-run prospects, the Ministers
and Governors agreed that the underlying structure of the
present monetary system -- based on fixed exchange rates and
"the established,. pri~~~_~f gold -- has p~oven its value as the

S 1/'1 CL~
~~

v~h'
_

i>ROPOSED·I>AAFI OF
CO~ OF 'IRE GRQHP;;1:)F "fEN

II 1.

In the course of the annual meeting of the Inter-

national Monetary FUnd, the Ministers.and Central Bank
Governors of the 10 countries(Belgium, Canada, France,
Germany, Italy, Japan, the Netherlands, Sweden, the United
Kingdom and the United States) participating in the agreement
of December 1961 to supplement the resources of the
International Monetary Fund met in Washington, together
with Mr. Pierre-Paul Schweitzer, Managing Director of the
Fund.

In this meeting, they discussed the international

payments situation and reviewed the functioning of the
international monetary system now and in the future in the
light of their common aims as reflected in the Fund's
Charter.
I ,

They agreed that the removal of the imbalances still

existing in the external accounts of some major countries
was the most important objective to be pursued over the
near future.
e ff orts of

For this reason they welcomed the recent

Lt/\.,b::"""""",,
~

oeficit countries to improve their balances

of payments, as well as

FOR RELEASE AT
00 P .M. ~ Di
WEDNESDAY, OCTOBER 2, 1963

following statement was issued today on behalf of the "Group of
10" members of the International Monetary Fund by Douglas Dillon,
Secretary of the Treasury of the United States~

FOR RELEASE AT 6: 00 P. M., EDT
WEDNESDAY, OCTOBER 2, 1963
The following statement was issued today on behalf of the
Group of 10" members of the International Monetary Fund by Douglas
lillon, Secretary of the Treasury of the United States:

"1. In the course of the annual meeting of the
International Monetary Fund, the Ministers and Central Bank
Governors of the 10 countries (Belgium, Canada, France,
Germany, Italy, Japan, the Netherlands, Sweden, the
United Kingdom and the United States) participating in the
agreement of December 1961 to supplement the resources of
the International Monetary Fund met in Washington, together
with Mr. Pierre-Paul Schweitzer, Managing Director of the
Fund. In this meeting, they discussed the international
payments situation and reviewed the functioning of the
international monetary system now and in the future in the
light of their common aims as reflected in the Fund's
Charter.
"2. They agreed that the removal of the imbalances
still existing in the external accounts of some major
countries was the most important objective to be pursued
over the near future. For this reason they welcomed the
recent efforts of certain deficit countries to improve
their balances of payments, as well as actions by a
number of countries designed to reduce or'remove surpluses,
as evidence of progress toward a better basic international
equilibrium. The Ministers and Governors reaffirmed the
objective of reaching such balance at high levels of
economic activity with a sustainable rate of economic growth
and in a climate of price stability.

"3. In examining the functioning of the international
monetary system, the Ministers and Governors noted that the
present national reserves of member countries, supplemented
as they are by the resources of the IMF, as well as by a
network of bilateral facilities, seemed fully adequate in
present circumstances to cope with possible threats to the
stability of the international payments system. In this
connection, the Ministers reviewed the 'General Arrangements
to Borrow' in the International Monetary Fund and reiterated
their determination that these resources would be available
for decisive and prompt action.
D-99l

- 2 -

"4. In reviewing the longer-run prospects, the
Ministers and Governors agreed that the underlying structure
of the present monetary system -- based on fixed exchange
rates and the established price of gold -- has proven its
value as the foundation for present and future arrangements.
It appeared to them, however, to be useful to undertake a
thorough examination of the outlook for the functioning of
the international monetary system and of its probable
future needs for liquidity. This examination should be
made with particular emphasis on the possible magnitude and
nature of the future needs for reserves and for supplementary
credit facilities which may arise within the framework of
national economic policies effectively aiming at the
objectives mentioned in paragraph 2. The studies should also
appraise and evaluate various possibilities for covering
such needs.
"5. The Ministers and Governors have noted with
approval the statement by the Managing Director that the
International Monetary Fund will develop and intensify its
studies of these long-run questions. They, for their
part, have now instructed their Deputies to examine these
questions, and to report to them on the progress of their
studies and discussions over the course of the coming year.
They requested the Deputies in carrying out these studies
to maintain close working relations with the International
Monetary Fund and with other international bodies concerned
with monetary matters. Any specific suggestions resulting
from the studies by the Deputies will be submitted to the
Ministers and Governors for consideration.
"6. The Ministers and Governors believe that such an
examination of the international monetary system will
further strengthen international financial cooperation,
which is the essential basis for the continued successful
functioning of the system."

000

- 3 -

and exchange tenders viII receive equal treatment.

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 gain tram the aale

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 Buch, under the Internal Revenue Code of 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 herearter 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

19~

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 actuallJ
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 -

decimals, e. g., 99.925.

Fractions

41
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
Others than

provided the names of the customers are set forth in such tenders.

banking institutions will not be pennitted 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 must be accompanied by payment of 2 percent of

the face amount of Treasury bills applied for, unless the tenders are

accampanl~

by an express gu.a.ra.nty of payment by an incorporated bank or trust company.
Dmnediately 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 Department 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, in whole or in part, and his action in My such respect shall be
final.

Subject to these reserv.ations, noncompetitive tenders for

less for the additional bills dated
ing until maturity date on

$ 1.000 or less for the

.n.a;q 1l.tJt6S

J!II!!!!7~~

$2~

days remain-

xtfiijX
) and noncompetitive tenders for

182 -day bills Without stated price from anyone

ti4

bidder will be accepted in full at the average price (in three decimals) of accepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Resern
Banks on

October

1963

, in cash or other immediately available funds or

in a like face amount of Treasury bills maturing _.;.Oct;;..;.;O;.;:tber;.;;.;;.ftifr:ilO~:.....;;;;l9I!;.;;...;;.;;.-._.

cash

~'TREASURY DEPARTMENT

Washington

FOR IMMEDIATE RELEASE,

October 2, 1963

_oom
'mEASURY I S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders for two seriel
of Trea.sury bills to the aggregate amount of $ 2,100,000,000 , or therea.bouts, tor

5¢)OC

October 10, 196! , in the amount

cash and in exchange for Treasury bills maturing

, mx ' ,

of $ 2 101 612 000

as follows:

OctoberlO,l9IS

91 -day bills (to maturity date) to be issued

:(iijXX

in the amount of $ 1, 300
s G'OOO, or thereabouts, representing an additional amount of bills dated
and to mature

Jemary~19M

amount of $ 800

000

Jug ~l96S

, originally issued in the

, the additional and original bills

to be freely interchangeable.
-day bills, for

aoo,r '

October.~

or thereabouts, to be dated

and to mature

April

The bills of both series will be issued on a discount basis under competit1ft
and noncompetitive bidding as hereinafter provided, and at maturity their face
amount will be payable without interest.

They will be issued in bearer form onlJ,

and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 ~

$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
~1isht

closing hour, one-thirty p.m., Easten{ • •

Sav1JIc

a,*"

time,

*""'." Oc:to1Mtr'l, 118_
J(mst)

Tenders will not be received at the Treasury Department, Washington.

Each tendS

must be for an even multiple of $1,000, and in the case of competitive tenders till
price offered must be expressed on the basis of 100, with not more than three

TREASURY DEPARTMENT

October 2, 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
~,100,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing October 10,1963, in the amount of
$ 2,101,672,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of $1,300,000,000, or thereabouts,
additional amount of bills dated July 11,1963,
mature January 9,1964, originally issued in the
$ 800,351,000, the additional and original bills
interchangeable.

October 10, 1963,
representing an
and to
amount of
to be freely

182 -day bills, for $ 800, 000,000,
or thereabouts, to be dated
October 10, 1963, and to mature April 9, 1964.
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
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 closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, October 7, 1963.
.
Tenders will not be
received at the Treasury De~al'tment, 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 tenciers 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
re&ponsible and recognized dealers in investment securities. Tenders
frqm others must be accompanied by payment of 2 percent of the face
amdunt of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
~r trust company.
D-992

- 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, 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
July 11, 1963,
~1- days remaining until maturit¥ date on
January 9, 1964)
and noncompetitive tenders for ~100,000
or les8 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 October 10, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing October 10, 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, 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
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 conflider'ed to accrue until such bills are
sold, redeemed or otherwise dispoBed 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 (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 f~.
any Federal Reserve Bank or Branch.
000

- 0 -

t.hc r,a lc or other dlspodtion of Treasury bills does not have any special treatment, 81
f,uch, undcr the Intcrnal Rcvcnue Code of 1954.

The bills are subject to estate, inher.

ttoncc, e;ift or other excise taxes, whether Federal or State, but are exempt fl'om all
tnxnt.ion now or hereafter imposed on the principal or interest thereof by any State,li
My

of the possessions of the United States, or by any local taxing authority.

pUI'POGC:j

For

of taxation the amount of d:i.Gcount at which Treasury bills are originally

by the United States is considered to be interest.

so~

Under Sections 454 (b) and 1221 (51

of the Internal Revenue Code of 1954 the amount of discount at whiCh bills

issuedhe~

under nre sold :Is not considercd to accrue until such bills are sold, redeemed or otw
wise disponed of, and such bills are excluded from consideration as capital assets.
J\.ccordinely, the elmer of Treasury bills (other than life insurance companies) issued
hcrcW1der need include in his income tax return only the difference between the price
paid for such bills, 'Whether on original issue or on subsequent pruchase, and the

amcq

actually received either upon sale or redemption at maturity during the taxable year
for \.,rhich the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescrib
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies of

- 2 -

BIll11dnc institutions Generally may submt t tenders for account of customers prothe names of the customers arc set forth in such tenders.

Others than

bnnkin~

tutions will not be permitted to submit tenders except for their own e.ccount.
r8 will be receJved lv.t thout dcpooit, from incorporated banks and trust companies
'rom responsible and recognized denIers in investment securities.

Tenders from

s must be accompanIed by payment of 2 percent of the fa.ce amount of Treasury bills
ed for, unless the tenders are accompanied by an express guaranty of payment by an
:porated bank or trust company.

)@X){
TIWirediately after the closing hour, tenders will be opened at the Federal Reserve
and Branches, following which public announcement will be made by the Treasury
tment of the amount and price range of accepted bids.
be advised of the acceptance or rejection thereof.

Those submitting tenders

The Secretary of the Treasury

ssly reserves the right to accept or reject any or all tenders, in Whole or in part,

1s action in any such respect shall be final.
titive tenders for $ 400~

Subject to these reservations, non-

or less without stated price from anyone

r 'l-Till be accepted in full at the average price (in three decimals) of accepted
titive bids. Ifttl.-t tor ~ to...... in acc:or4aaae W1th the 'btlta

_ t "-

~ .. the :releral ....rw Banks _ Ocrtober 1$ A 1965, in cash or other

Ltel1' available funds or in a like face amount o/W-easury bills matur1:ag on October
»3.

,..... -h

v.ct

and exchange tenders Will receive equal treatment.

Cash adJustments will

for cl1fferences betwen the JI&J" ..alae fit -'tv111S D.1lla accept'" ba . . . . . . . . .

- JII'l- ., 'Uae _

1t1lls.
lid • • ' III

•

income derived rromTreasury bills, vmether interest or gain from the sale

ler dispos:t tion of the bills, does not have any exemption, as such, and loss from

.....

for cash ~ in ~JMh~ :for Treasur.,.
bills maturing October 15, 19631 ill :~
amount of $2,500,103,000.

TREJ\SUF.Y DEPAro'MENT

HashiIlGton
October 2, 1963
TREASURY OFFERS $2 BILLION IN ~CH TAX BILLS
FOn Ii ITIEDIATE RELEASE,

The Trcasu~r Departmcnt, by this public,.notice, invites tenders for :I> 2,000,000,[1
The bills will
or thcrcnbouts, of
160 -day Treasury biJ.lS)r ~ be issued on a discount basis under

Xbi -

Xiii

·competitive and noncompetitive biddiIlG as hereinafter provided.

'llle bills of thiG Se-

\-ril1 bc dcsj.Gnated To..."C Antidpation Series, thcy 1·1111 be dated __Oc
.......t....o_ib_e~r~15~1:-=:1:;:;.;963==-_
and they '-rill r.m.ture

March

liix

ffiX

1964

payment of income and prof! ts taxes due on

They 1-rill be accepted at face value in
March blx1964

, and to the extent ~

are not presented for this purpose the face amount of these bills will be payable
out interest at maturity.
15, 1964

incom~

llit~·

Taxpayers desiring to apply these bills in payment of Marcl

Itt

D.11d prof! ts taxes have the privilege of surrendering them to any

Fcderv,l Reserve Ban1< or Brench or to the Office of the Treasurer of the United sta.tes:
lTashil1Gton, not more th8n fiftecn days before

March 15, 1964, nnd receivIng receiptr

Xffi

therefor shouing the face snount of the bills so surrendered.
Gubr.ri.tted in lieu of the bills on

01'

belore

March 15, 1964

ffi

These receipts

, to the District

oi Internal Revenue for the DiGtrict in 1lhich such taxes are payable.

D1rec~

The bills will

issued in bearer fOl~ on~, end in denominations of $1,000, $5,000, $10,000,

$50,000,

:;;100,000, :;;SOO,OOO ond $1,000,000 (maturity valu.e).
Tenders lTill be rccei ved at I!'etl.eral Reserve Banlcs and Bra.nches up to the closi!l£
D3.ylight Saving
hour, one-thirty p.m., EasterIY'~ time, WedneSda~ctober 9, 1963. Tenders-l
not be received at the TreaGury Department, Hashington.

Each tender r.ru.st be for'8De'i1

nrultiple of :~1,000, and in the case of competitive tenclers the price offered must be
c~~rez3cd on 'the bo,sis of 100,

Fro.ctions

m~y not be used.

'\on th

not more than three deCimals, e. g., 99.925,

It is urged that tenders be mude on the printed forms eli

:loruarded in the special envelopes uhich lrill be supplied by Federal Reserve Banks O~
Uranches on application therefor.
/) -

yc':/
"/

,-.J

TREASURY DEPARTMENT

October 2, 1963
FOR IMMEDIATE RELEASE
TREASURY OFFERS $2 BILLION IN MARCH TAX BILLS
The Treasury Department, by this public notice, invites tenders
or $2,000,000,000, or thereabouts, of l60-day Treasury bills, for
ash and in exchange fur Treasury bills maturing October 15, 1963,
n the amount of $2,500,103,000. The bills will be issued on a
iscount basis under competitive and noncompetitive bidding as
ereinafter provided. The bills of this series will be designated
ax Anticipation Series, they will be dated October 15, 1963, and
hey will mature March 23, 1964. They will be accepted at face value
n payment of income and profits taxes due on March 15, 1964, and to
he extent they are not presented for this purpose the face amount of
hese bills will be payable without interest at maturity. Taxpayers
esiring to apply these bills in payment of March 15, 1964, income
nd profits taxes have the privilege of surrendering them to any
ederal Reserve Bank or Branch or to the Office of the Treasurer of
he United States, Washington, not more than fifteen days before
:arch 15, 1964, and receiving receipts therefor showing the face
nount of the bills so surrendered. These receipts may be submitted
1 lieu of the bills on or before March 15, 1964, to the District
irector of Internal Revenue for the District in which such taxes
~e payable.
The bills will be issued in bearer form only, and in
~nominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000
ld $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches
) to the closing hour, one-thirty p.m., Eastern Daylight Saving
me, Wednesday, October 9, 1963. Tenders will not be received at
le Treasury Department, Washington. Each tender must be for an even
ltiple of $1,000, and in the case of competitive tenders the price
fered must be expressed on the basis of 100, with not more than
ree decimals, e. g., 99.925. Fractions may not be used. It is
ged that tenders be made on the printed forms and forwarded in the
ecial envelopes which will be supplied by Federal Reserve Banks or
anches on application therefor.
Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
nders. Others than banking institutions will not be permitted to
)mit tenders except for their own account. Tenders will be
~eived without deposit from incorporated banks and trust companies
)93

- 2 -

3,1d [rom res pons ib Ie and recogn ized dealers in inves tment securities.
Tenders from others must be accompanied by payment of 2 percent of
the fa~e amount of Treasury bills applied for, unless the tenders a~
accompanied by an express guaranty of payment by an incorporated
bank or trust company.
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcellle.
will be made by the Treasury Department 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,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
$400,000 or less without stated price from anyone bidder will be
accepted in full at the average price (in three decimals) of accepted
competitive bids. Settlement for accepted tenders in accordance
wi th the bids mus t be made or completed at the Federal Reserve Banks
on Oc tober 15, 1963, in cash or other immediately available funds or
in a like face amount of Treasury bills maturing on October 15, 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 pb
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 tIM
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 possess~ru
of the United States, or by any local taxing authority. For purposes
of taxation the amount of discount at which Treasury bills are ori~~
sold by the United States is considered to be interest. Under
Sections 454 (b) and 1221 (5) of the Internal R~venue Code of 1954~
amount of discount at wh ich bills issued hereunder are sold is not
considered to accrue until such bills are sold, redeemd 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 iri his im~
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 M
loss.
Treasury Department Circular No. 418 (current revis ion) and tbiJ
notice, prescribe the terms of the Treasury bills and govern t~
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT
October 2, 1963

NOTE TO CORRESPONDENTS:
The following material is being made available in
connection with the White House announcement today of
a special Task Force on International Investment.

The

material includes an excerpt from President Kennedy's
July 18 message on Balance of Payments and an information
paper on the organization plan and working program for
the Task Force.

000

EXCE:ti>T FROM THE PRESIDENT'S SPECIAL MESSAGE ON BALANCE OF PAYMENTS

July 18, 1963

6. Investment by foreign savers in the securities of
United States private companies has fallen rapidly to less
than $150 million in 1962. The better climate for investment that will flow from enactment of the program for tax
reduction and reform now before the Congress will do much
to improve this situation but a direct action program is
also needed to promote overseas sales of securities of
U. S. companies. Such a program should also be designed
to increase foreign participation in the financing of new
or expanded operations on the part of U. S. companies
operating abroad.
To meet these two facets of a single problem, a new
and positive ~rogram should be directed to the following areas
of effort:

(a) The identification and critical appraisal of the
legal, administrative and institutional restrictions remaining in the capital markets of other industrial nations of
the Free World which prevent the purchase of American securities and hamper U. S. companies in financing their operations abroad from non-U. S. sources;
(b) A review of U. S. Government and private activities
which adversely affect foreign purchase of the securities of
U. S. private companies; and
(c) A broad and intensive effort by the U. S. financial
community to market securities of U. S. private companies to
foreign investors, and to increase the availability of foreign
financing for U. S. business 'operating abroad.
Such a program will necessarily involve a pooling of
the know-how and efforts of the Government and the financial
community. I have asked the Treasury Department, in consultation with the State Department, to develop an organization
plan and program.

- 2 The increased freedom of capital movement and increased
participation by foreign citizens and financial institutions
in the ownership and financing of American business, towards
which these efforts are directed, will serve to strengthen
the economic and political ties of the Free World as well as
its monetary system. Securities of U. S. private firms
could be and should be one of our best selling exports. An
increasing foreign investment in these securities will
encourage a more balanced two-way capital traffic between
the United States and other capital markets and minLmize
the impact of net long-term capital outflows from the
United States on our balance of payments.

September 21, 1963

Ol\Gll.NIZATIOU PLAN AND WOUKING PROOIUM FOR PHO~IOTING
INCill~,'LSU> JlOUE IGN INVl~Sfr;Jl:;N'r IN Sl:CWUT II:;S 01~ UN IT.b:D
STATLB COMPANIES AND SUKVll;YDIG 'l'liE AVAILABILITY OF
FOREIGN l-~INANC1NG TO U. S. BUSnmSS Ol)l;ItATING ABHOAD
ES1'ABLIS!;)D:':NT OF PltW3IDBNTIALLY APPOINrI'~D TASK lfOltCE
FOrt CO:JDINliD GOVEILlIffi:Wrf-PltIVATE ACTIOll ON INT:BiUlATIONAL
INVE5T11£1~T CAPITli.L ASPl~~CTS OF Tlill BALANCE OF PAYIJLNTS.

Areas of opvortunity for combined government-private action
to deal affi~nativcly with tho U. S. balance of payments problem
include tho l)rOmotion of a.n increased flow of long-term prl va to
investment from abroad into socuri ties of U. S. private COtl11>anies
and surveying the availability of foreign finanCing to U. s.
business operating abroad.

Incroasing froedom of capital movement and partic1pation by
citizons and financial institutious of free countries in the
financin/J and ownership of Amorican business will serve to
st1 engthcn tho economic and pol! tica.l tics ot. the Froo World as
well as its monetary system. Securities of U. S. priVate firms
.
could and sbould bo ouo of our bost selling eXpol'tS. An inoreasing
foreign invesblOut in those secul·i ties will encouraao a. 1I10rc
balancod two-way capitnl traffic botween the United States and
other cap! tal marl{ots and miui(Jllzc the impact of net long-torm
ca.pi tal outfloY,s from the Un! ted St~l. tea on our balance of payments.
1

The la.rgost single eloMcnt of imba.lance in the U. S. CU1"rent
bala.Ilce of p.t:'lJ;!.()uts is the investl:1C:lt of Amorican loncr-term capi t;l.l
aUl·oad. ,Ils the l1;.tltW ir.lplloa, this is a movemont of our permanent
savings; it is not an expense. It adds to the income-producing
asscts we own in other countries. N0vcrthelcss, siooe thef;fJ(~
funds muut be CO.llvc!'tcd to other cUl'rcncics when sent abrot'td, they
CI!)l'lsti tute dollar claims with a. potential call upon our "old

rtu'.1ervca.

- 2 -

Last year the ~ long.. term capital outflow from the United
States .- u. S. direct and lons-term portfolio investments abroad
minus foreign direct and long-term portfolio investment. in the
u. s. -- was approximately $2.5 billion; allowing for unrecorded
items it may have been around $3 billion. Since 1946 our net
long-term outflow of private capital has totaled $26 billion.
More than two-thirds of this money went into "direot investment"
by American firms doing business abroad -- that ie, into bricka,
mortar and m:lchinery. The remainder .... approximately one-third -.
went into "portfolio investr,(l€nt" by U. S. investor .... that ii,
into securities of foreign corporations and governmental bodie ••
All this is good for our lon~-run balance of payments.
It brought to the United States in 1962 earning. of $3.8 billi~, ..
a stream of earnings which laat year increased at the annual
rate of $400 million.
But current traffic in capital. as well as in goode, Ihould
move on a t'olo·\",ay basil, to the United States 88 well as away
from it, in volumes that add to and support balance rather than
create imbalance.
Foreitn Iml~-tcrm investment in the U. S. tn 1962, lnclud~
direct and portfolio, amounted to $246 million. repreaenting a
drop from $466 million in 1961. A special program hal been
mowlted in the Department of Commeroe to encourage long-term
direct investment by foreigners in physical plant. ~.hinery and
real estate in the United States for operation under their
control or in j oint ventures, as distinct from portfolio inv•• trMnt,
This is an important but relatively minor percentage of the
potential arc.:l for foreign investment.. For exaqlle, according
to a recent an..'11yais by the EJuropean Economic Conm.mity of 'WeIUR
European and Dritish investment in the U., S •• only 35 percent WI.
direct, the remainder being portfolio investment.
These facts point clearly to the conclusion that, rather tbU
the inposition of controls to limit the freedom of U. S. oitiz.nI
and institutions to make long-term investments abroad. the belt
opportunity to move toward a two-way balance in long-term capital
flows 18 the promotion of an increased flow of foreign portfol~
investment in securities of U. S. private companl.l.
But promotion of this increased flow of long-term foreign
portfolio investment in U. S. securitle. requires our beat eflottll

5u
- 3 -

publio and private, to make possible and encourage this outside
pa.rticipa.tion in, a.nd o'wnership of, American enterprise; iudeed.
it requires s~~cthing more -- the cooperation ot other developed
countries with sources of capital.
Mobility in some Old World capital markets is limited. The
best evidence is that employers of money otten como to the broader,
more flexible American capital mal'ltet for their souroes of supply.
Sa.vings of many individuals and institutions in tho Froe World
pile up in short-term investments or foreign exchance, while thoso
seeldng to hire long-term capital como to the United States. For
those and othor rea.sons, there is the paradox of countries with
balauce of pay~cnta surpluses importing capital fr~Q the outside.
I

As American industry is modernized, rc-equipped, and expanded,
profitablo U. S. investment opportunities will be provided, not
only tor d~ue6tic savors but for savors in other countries as well.
FOl'eign borrowers will continuo to be aCCOUll'llodatcd in the American
capi tal 1I1n.rl;ct on retlJiu>uabla al1d equitable terms. '110 would,
however, lUte to have the OPPol"tuni ty to wclcO'.:ne and acconullodate
fOl'oign savors as frof;}ly. But beforo these funds can flow
easily to tho United Statos, as a matt~r of freo cboice of tbe
owners of cap! tal, othor countries must modernize theil" capt tal
markets, easing those remaining restrictions which otill impede
two-way traffic in the productivo use of savings.

Wo should now begin a(mresai vely to encourage the investmont

of foroign sa.vlu[;s in Amcr:J,c::an sccuri ties. Ji:qui ty ownership
in shares in Americau buai.nesa should be among our bost Golling
eXl)Orts. Hore 15 an area rich in OP1)Ortuni ty for combined

government and privato action, for many obstaclos stand in the
wa.y of this potentia.l flow of foreiun invostment funds to the
stroughold of fl.'eo enterprlso in the Uni tad States.

i'1.rst, thel."o are a. number of direct controls in SOl1le countri••
which might othorwisE> be substantial sourCtiS for capita.l inflows
to the U. S., including currency exchango controls and laws
govornlng capi t.A.l markets.

Second, duo in part to such iJn~dimonts, much less than &
full effort h..l.s boen oxerted by the U. S. private sector to
ma.rkat it:J secul·ltios in WE~etern Europa or to malta finaucial
arrW,~~mellts ovors~as to supvort its foreign o~era.tions"
Yet tho
private advantages, pa.rticularly for American interna.tional firma
opera.ting outside the United States, extend even beyond the
balance of paYhleuts area.

- 4 The walcome which United Sta.tes firms meet abroa.d ia extreael,
important to thoir foreign operations and growth. They would
receive far morc cooperation, however, it an evon larger number
of ci tlzons and financial insti tutlous io tbe host countries Owned
shares in U. 8. companies. In our highly competitive world, a
sharing of OWllCl'ship a.nd profits, a.s well as of technology. may
be the most effectivo answer to the political reaction to wbleb
American onterprise abroad may be exposed.
On this analysis U. S. international business bas a real
stake in the opon1n~ up ot foreign capital markets, and the aal.
of securi tics in U. S. canpa.nies to individual and institutional
investors in countrios now dynamically geooratiDI savings, 8ucb
&11 those ill \/ostorn Europe.
Third, the recoptivity of foreign investors toward U. 8.
private securities has diminished in recent )l'oarll becausc, WIlODi
othor thiIl~S, West~rn ~~ropo soemed to be the more promising
placQ for investulont. Rc,!cut trends and current developments
lnJ:LY work a chanGO in tbis paint of view. Thero 1s an inlproviJlI
outlook for profits in the United States -- profits both bofort
and particularly after taxes. This in turn could combine with
the c.onfidunce of "'estern Europeans in the strengtb and safety
of the United Statos to mako portfolio investment in American
private securities highly attractive.
A groat doa1 can be done 011 the "overnmcot-to-Goverwnent
level, as a matter of law and regula.tion_, 1n improving the
opportunities for citizens and financial institutions in Western
Europe to invest in securiticB of U. S. private business. Mucb
also c~n be done in the pr1vate sector.
Need for Spocific

Organizatlo~

Plan and

Wq~king

ProGram

Against this bacltground it scehlS desirable to formulate
a specific organization plan and working program to promote &0
increased flow of loaa-te~ investment into securities of United
States privu.te companies. This plan and program should be
directed to:
(1) The identification of the legal, admlnlatrative and institutional rest~iQtlons remaining 1n
tho capital markets of the d~vcloped nations of
the Free World which unduly inhibit the flow of
private savings into securities of privato companies
ot other countries, and alternative plans tor their
elimination or reduction.

- 5 -

(2) A review of U. S. Government and private
activities which,affeot adversely foreign
participation in our capital markets througb the
purchase of securities of U. S. private companies.

(3) A broad and intensive effort by the U. S.
private sector to market securities ot U. 8. private
companies to foreign savers And increase tbe availability of foreign financing of U. S. businoss
operating abroad.
Establishment of Presidentially Appointed Task Force for Combined
Action

GOvernmcn~)riv~to

The directions of the plan or program outlined above
necessarily involve ~ pooling of the knowhow and efforts ot both
the Government and ~e U. S. pr1vate, financial and business
community. In view of the importance and significance ot thi.
initiative and the national publiC interest tberein. the
President has established a l3-man task force CODll)Osed of
representatives of appropriate executive departments, the Federal
Reserve System, and informed persons engaged in U. S. private
business to prepare a progranl for the promotion ot foreign
investment in U. S. enterprise. The findings and recommendations
of this joint task force are to be submitted to tbe Presidont
and to tho Secretaries of State and Treasury and the Chairman of
the Federal Resorve Board in approximately three months. The
task :force is constituted as follows:

Reprosenting the Department of the Treasury: IloDrY H. Fowler,
Under Socretu·y.

Representing the Dcpartmemt of State: Robert U. McKinnel.
retiring U. S. ambass;adol· to Swi tzerland.

Represonting the FedEJral Reserve System1 Ralph A. YOUJ1K.
advisor to the Board of Gov'crnors of the Federal itisoive
System.

Representing the Federal Reserve Bank of New Yorka £barlea A.
Coombs, vice president for foreign operations.
Two members from U. 8. compaAies baving .izable operation.,
employees and capital io Western Europe.

Arthur K. Watson, president, IBM World Trade Corporation.

Andre

Meye~~'

senior partner, Lazard Freres & Company, N. Y.

- 6 -

G001"gO

l'. James, sonior vi,co president for planning and

fInance,

~ocony

Mobil Oil

C~npany,

Inc.

A member fronl a bu.n:k with interna. tiona.l comuwrcia.l opera.tion.
and with a trust department activo in placing foreign capital
in U. S. s~curities: Walter D. Wriston, executive vice
president, First Na;tional CIty Bank of 'N. Y.

Representing

a major U. S. stock exchange: O. Keith Funston,

president, N. Y. Stoclt Exchangti ~
10.

A member from a soc:urity d·ualer active in foroign markets:
Geor{,:o J. Lencss t president, Merrill, Lynch. Pierce, Fenner

and

~mith.

11. A merllber from an iD'/estmont ba..nltinK tirm active io tOl~ign
mark-ate: John Jd. Yllung. partnor, Horgan Stanley and Company,
12.

A mOlnbor from the mutual fund and investment trust 1ndustrYI
Dorsoy IUchu.rd90n, president. Invostment Company Institute.

13. A membor f~uuil1u.r with tho legal a.spocts of internat10nal
finance a.nd invcstmeJltl l!'rcderick M. Eaton, partner,
Sho~rroan & Sterling.
.
Under Secretary Fowlor will serve as chairman and Ambassador
McKinney will serve a.s CJu#cutive officer. The task force will
have offices at the Federa.l ltosorve Ilanlt of New York aDd a
staff on loan frOl.n the Depl1rtments of Treasury and State, the
Federa.l l{aservo System and th.~ Federal lwserve Bank of New lork,
~r~_

Pror;ram

Tho work progl"1.UI1 to be d~veloped breaks down into two
somewhat soparatu pro;jects;
(A) Ways and means of onlarg'inrr the net flow of genoral

fOl'clr:n ront~-tcrI1l 1UVE~St\;lCllt into

U. S. e.0curI tics.

This project

should focus priority attexltloll on ~/ustcrn Europe", Canada. and Jap~

becauso tho prospects there :arc more promising and cap! tal

resour~

1n the lesser developod or lloujludustrial countries aro sorely neo~
loca.lly. Thero is some qucutiml about tho desirabil1ty of drainUi
these funds IJ.Wd.Y fl'OIIl loca.l U:E.tJ. nut a two-way cap1 ta.l flow of

long-term investMent in and out of tho United States fram
industrialized or developed countries with more balance than that
whioh chara.cterizes tho current situation will strcugtnen both tb.
'reo World monetary system and draw the peoples in private
eoonomies of these countries closer together.

- 1 -

(B) Ways and mC~tns of enlarg1ng th,e availa.bili tl. of torei{;l!
01 A~ilC!icd.n business 0 )~ratln·:t abro:.!.d. AmerIcan private
companIes havo diroctly IlVOStCl upwal« S 0 ~jij billion in tho'
manufacture nnd sale of goods and services, mining and smelting,
petroleum, trading and miscollaneous onterprises outside the
United States. Each year existing operations are modified or
expanded or now operations are undertakon requiring substantial
capital outlays. Doth the prlva.te interest of the oompanles
concerned a.nd the public interest would be served by prov1ding
an appropriate mousure of financial support and participation
in these exp~ldiug op~rations locally or from sources external
to the United Statos. Cortainly, increased availability ot
foreign finwlciug would diminish the outflow of current long-term
capl tal frolll tho Un! ted Sta tea and thereby bring tbe not capt tal
outflow more into balance.
financ1n~

It is difficult to forecast in advance with precision just
how those two scp~rate projects will develop. It does seem
clear, however, tbat tho :first pbase of tho work ot tbe Task
Force should ba a quiet, intensivo analysts of the present
situation -- what cf!o.rts huve been uudcrtl\ken and what measure
of success haG attended thelu -- what obstacles, public and
private, stand in tho way. Followiug th1s phaso of careful
examinat101l and analysis, the TaEl~ Force will be in a. position
to devolop a. pl'ogralU of specific recommendations, including the
stops by tho U. S. Govormnont and foreign goverUIdcnts and the
various privata institutions, which would achieve the desired
result.

Without attempting to be dofinitive, there is sot forth
below an outline of a work progrrun along the described lines
for the two specific projects.

(A) Increasiuf~ the flow.. of lontj-tcrnl investmont in
S. corpora to a;cti vi tics. 'hlis project should illclude:

1. A Uevlew of the Present Situa.tion: a) A detailed
exam1nation of the efforts thu.t have ooen mado uy the
U. 8. financial cO~lra.unity to attract Europoan funds into
illvestment in U. S. cOrpOrLl.te securitiea. This would cover
tbe methods, ol'ganizational pitttorns and activitica of
firms and institutions in tho various sectors of tho U. S.
financial COilt:;lUlli ty (Ulldorwri ting, sales and distribution,
etc.), as thoy relate to new U. S. corporate issues. as
well as outstrulding socurities. It would also provide a
back~l'oUlld in qualitative and quantitative torms for the
launching of an intellsified ~ffort in this flo1d~

- 8 -

b) The idoutiflcatlon and al>pralsal ot obstacles
encountored to forei~n investment in U. B. corporate
securities, particularly by individuals and institutions
in Western ~urope. This would include an examination of
specific problema in selling, trading and investing in
U. s. securities, particularly logal, adn,inistratlve,
ro(!Ulutol'Y, insti tutional and orga.nizational barriers
encountered in each country or groups of countries, This
ex.amination should a.lso bo on a. comparativo basis and ind1c&tt
pro~rcGs in eaGing or removing specific barriers. e.g.,
reduction of high listing taxes I eaSing ot listing requirements, casiu~ of foreign currency transfer rostrictions
on U. S. securities, study of existing tax structures
(possibly including tax treaties) J etc. This examination
of barl'iel's would bo made with a view tow6l1"d detel';nining
those practical problema which are susceptible of being
dealt with and OVOrC01!lC or llmeliorated in pa.rticular
instances throu~h appropria.te diploma;tic 01· :financial channoll

Infonnation and a.nalyses of tbe present situation,
country by country. would bo collected through State,
Trea.sury and the ll'cdoral Hosorve system and Illude available
in sui table form to the Task Force. At lea.st four subgroups
ot tho 'l'i.tsk Force would bo const! tuted to consult wi til and
ascertain tho views and exporienco of tho various private
tinanci~.l insti tutiOllS l)articularly concerned -- (1) security
dealers, (2) security trading mechanisms, (3) underwritor.
and investmGnt banlccrs t (4) mutual funds and investment
truuts and, (5) intel-national commercial banks, particularly
those with trust dcvartmcnts a.ctlvo in placing foreign
capital in U S. socurltio~. Each aubgroup would be chal~d
by tho roprescnt;:"tivc on the Task Force from the priva.te
soctor 1nvol vcd, and would Illcet when necessary with
repI'e~cnta.tivou of the Troasury and State departments, and
the Fedoral Hoeorve systom and such other agencies a&
circumstancos iudicate.
2. Proposed i~ction Pro;rranlB. The second phase ot the
work of the 'l'Glsk li'orce would LO the preparation of
reconunolldud voluutal'Y action programs for U. B. investment
compa.ni(!s, associations and institutions, These programs
would be desi~ned to pr~lote and encourage tho sale to
and ownership by citi~en9 and financial institutions in
Western Europe of U. S. corporate securities with a view
toward enlarging the flow ot net forei~l investmeut into
the United Stutes.

- 9 -

5Jq,?

The pro:;rl.111iS should be clcGit;uod to cnha.nce investment
in new and outstanding U. S. corporate securities by tho
general investiut; public ill Europe and by foreign ,
institutional iUVOlJtOl~B. Scp~\'l'ate COllsidoration sh()uld

also be given to a Pl'O~~l'Wll to enhanco Dales of subst;lntial
blocs of securitios for invoBtmont by fOl'oi~n corporations
and illdividuals. ('the so programs will oot cml.>race direct
investment by forei[!ll industrial cOlupallica in the Uuited
Statos or transfers of controlling il1teroots in U. S.
cOl1lpanies which are cUl"l~ently being puruuod by tho Commol'ce
Depal·tmont. )

Tho progra.ms should cover spocific promotional steps
that can be taken to Dleet the objoctives and, to tho extont
feasible, t~oy should apply to SlJCcific sectors of tho
U. S. financia.l a.ud business commuuity as follows:
(1) By tho major U. S. st()ck exchanges through
their momber firms· offices, both at hom.::t and
oversoas. (One example might be the extension
a.la·ond gonora.lly a "monthly investment progl'amft
dcsll;ncd Ol)cciilcu.lly to tho needs and l)rcfel'cuclSS
ot small investors abroad.)

(2) Sccul'l tics doalol's.
(Should thOl'C be. for
example, a wider issua.nce of American dO~08ito.t:Y
recclpts for tl'udlng on foreign exch .... nges.)

(3) Mutual fuuds and investment trust8~ (Ca.o.
prcoent t>:.:1.clt:agcs nnd 1I1othoda of distl'ibution bo
lUore specifica.lly adaptod to tho needs at small
foroign investors, etc?)
(4) Investment banks and securitios underwrlterH.
(5) Other .finanoial and nonfinancial instltutloull.
(B)
IncreaslnJt tho ava~ln.bili ty ot foreiGn fl11:<' llCi!l!l...2 f
American businoss operu.tillf>; ~bro..ld. '1'his project mit:::ht ~0.rwrally
follow tho so.m.~ vatt.ol'U as'tho otllor. It would include:

1. Prenent Situation. a) An exalainatlou of the
extont to which U. D. iirhls operating abroad avail
themselves of finallcinu a.broi;ld, tho considerations
involved in doterminations to employ sucb fina.ncing,
and methods or pl'ocodul'cS followod.

- 10 -

b) TIle specific obstacles encountered and the
trends in c~sin~ or removing specific barriers
exxmined. country by country, or by groups of countries.
2.
,Pl:o'Jo.scd }.ctio_n Pro~r&l\. A voluntary action program
for the e-:p.:.mdcd use ot forci0n capital and financial

markets by U. S. firms operating outside the U. S. designed
to minimize the transfer of U. S. dollars abroad, to maximize
the transfer to the U. S. of dollars earned abroad, and
to promote forei~n investment in U. S. enterprise.

A Bubt;roup of the Task Force will deal with this aspect
It might calIon others outside the Taslt Force
to cooperate and assist in the project.

of the work.

The determination uf the disposition of thG Task Force
report will, of course, be made by the President.
nle members of the Task Force will draw on government
sources for non-claosified inforn~tion needed for their activities
thrOUGh the govcrlunent departments r~)rescnted on the Task Force.
Staff assistance will also be supplied through the government
and Federal Re!lcrve representatives to assist the Task Force and
subgroups in the preparation of materials.

J&l r(~Lr ABE A.. Ii.

"e..-sPAPEdS.

0._'" 1, 1")

hII!daJ, October 8. 126).

RESULTS !)P' tif.ASaay's "£ILl IILL O'mIIO
Tne TI"M81II7 Depa1"\llen\ ....UDGed laat eftl'l1Dl \bat tblt \.&In tor t.wo •• ri.. at
·!,....11I"1 b1111, OM . .ri•• to be an addlt.loaal 1.... of tne h1l.la dated July ll, 196),
ADd toe o\bu' Mrl..M to be dat.ct OGtobtr 10. 196), 1Ih1cb ve... oftered on 1ctobel' 2.
wre opened at t.be ,tdaral :\t. ." " Banke on october 7. 'endel'll wre lnvU.etJ for
n,JOQ,uoo,OOO, or thereabout., ot 9l-dal bUl.a aD4 tor .aOO.OOO,OOO, or thereabou\l,
182-dai bill.. The det&U. or the to., ..de. aN •• toU•••
RAJofl'l

He ACCEf'T~D

Jl-day Treaaury bill.
• :aturing Januarj 9, 196!k
Approx.
v.
?rice
Annual (\ate

CCltPF.TI'l'hT 31~1

99.129
9~.124

J.L46l

).Q65'

•

aatur1!& lEll 9. U6~
_
Aoprox. :,qu1Y.
Price

).459" }/

9).126

182-day" Tn••ury bUle

96.20&

96.190

96.196

Amhialtate

3.55)1

).jbO~

J. j69t !I

~ i<:xoeptiDtl; 2 tenders totaling '050,000
)0 percent of tne . .ount of 91--1 b111e bld tor at the low pri.. . .1 acolpt..d
3) pe~ of t.he uolJllt or 182-481 bUlB bid for at. \he low prl. . A • • ~pt.td

TOriL TEtel&nS lPPLIED
~U1.'"

.tOn

Mew York
Ph Uadelph1a

alav.land
:U.clIIond
AU.nt.a

:h1 ca go
St.. Lcu1s
:l1n.ueapol1s

AID AccurED ax ,gDER1L iUiRn OISTRtetfh

Applied lor

•

57,760,000

1,549,198,000

Ago§!ed

)l;,SlS,oOO

•
I

31.41S,OOO

753,(4),000:
17,6S8,OOO I

)0,866,000
1S,280,000
29,827,000

)0,61.8,000 I
12,910,000 I
2;), ~7,000:

)],4,66,,000
42,567,000

2)0,261,000:

24,3~3,OOO

35,227,000 I
16,)13,000.
25,426,000 I
:c3,4?6,ooo I

!p,plle4 For
.l 20,5~~,OOO
941,769,000
10,l44,000

17,68$,000
1,290,000
19,5l8,ooo
136,780,000
11,186,000
6,976,000
18,915,000
11,822,000

'J;SSS,\xx>
!!f.t.ecl
)66,019,000
8,144,000
7,68S,eXJ()

),251,00>
19,518,l))I

92,440,000

U,S16,00l

5,007 ,(0)

)1,376,000
18,935.000
1Allu
29,926,000
8,152,000
San inncieco
115,$0),000
1~,&lO,OOO I
S2,SS8,ooo. &,?4~,OOO
'IOO'ALS
12,274, 7oo,OOIJ 11,)O1,394,OOO!l $1,260,2)8,000 t8OO,2~,())),
~ Include. ~26J,947 ,000 nonco,tipetlt1ve tender. aocepted at t.he average price 01 j/,J
!I include. i71,784,000 ooncoapet1.tlve tenden aaeapted at tne average pri.ce of 981~
II In a coupon 118ue of the same leDQth and tor the 8ame aount iln'..te4. the r~uJll
t~88 uUle vo",ld provide ,iie1da or 3.55:&, tor the n-4a¥ bUll, md J.69~. tot W
182-day oWe. lntereat rat.8 on hUla are quoted in term. of bank d1aco\Jllt I1tal
1"Wturn related to tr..e face aoullt or t..>w bUla payable at .-tur1.ty rat.her tbll ~
acoUllt inveetecl and their len,{th in actual 1".beI' of days relat.ed to • )6O.daJ fA
In com.ra.t., ;;1elda on certificate., note., and bor.aa are coaput.d in t~u'M of iJ'
"rea" on t..be UlOunt inYened, and rttlate the DWlD4Ir of d&lI rMainil!£ in aD ~
pa.r-nt period to the actual nUliOer or ~ ill t.be ~r1od, with ..u.an:,ual ,.t4
if lION tnan one 00"1>00 period 1. lDvolytd.
!(&nu.

City

,oa

TREASURY DEPARTMENT

iELEASE A. M. NEWSPAPERS,
~y,

October 8, 1963.

October 1, 1963

RESULTS OF TREASURY'S WEEKLY BIll. OFFERING
The Treasury Department announced last evening that the tenders tor two series at
ury bills, one series to be an additional issue of the bills dated July 11, 1963,
he other series to be dated October 10, 1963, which were offered on October 2,
opened at the Federal Reserve Banks on October 1. Tenders were invited for
0,000,000, or thereabouts, of 9l-day bills and for $800,000,000, or thereabouts, of
ay bills. The details of the two series are as follows:
9l-day Treasury bills
182-day Treasury bills
maturing January 9, 1964
maturing April 9, 1964
:
Approx. EqUiv.
Approx. Equiv •
Price
Annual Rate
Price
Annual Rate
High
99.129 !1
3.L46%
98.204
3.553%
[,ow
99.124
3.465%
98.190
3.580%
Werage
99.126
3.L.59% !I
:
98.196
3.569% Y
I Excepting 2 tenders totaling $350,000
percent of the amount of 9l-day bills bid for at the low price was accepted
3 percent of the amount of l82-day bills bid for at the low price was accepted
OF ACCEPTED
rrTIVE BIDS:

TENDERS APPUED FOR AND ACCEPI'ED BY FEDERAL RESERVE DISTRICTS!
rict

Applied For
Acce)ied
: Applied For
Accepted
$ 51,760,000 i
,535,000: $ 20,555,000 I 5;555,000
York
1,549,198,000
753,043,000:
941,789,000
566,039,000
~delphia
33,415,000
17,858,000:
10,144,000
8,144,000
eland
30,868,000
30,618,000
17,685,000
7,685,000
nond
15,280,000
12,910,000
3,290,000
3,257,000
Qta
29,821,000
25,961,000
19,518,000
19,518,000
~go
314,665,000
250,261,000
136,780,000
92,440,000
.ouis
42,567,000
35,227,000 t
13,186,000
11,516,000
apolis
24,313,000
16,313,000
6,976,000
5,001,000
5 City
31,316,000
25,4.26,000
18,935,000
18,935,000
s
29,926,000
23,426,000:
11,822,000
8,152,000
rancisco
1151 505,000 _...'U.z§l<?"LOOO:
59,558,000
54,048,000
TOTALS
$2,274,700,000 $1,301,391~,000 £/ $1,260,238,000 $800,296,000 sf
udes $263,941,000 noncompetitive ten<iHrs accepted at the average price of 99.126
udes $71,784,000 noncompetitive tenders: accepted at the average price of 98.196
coupon issue of the same length and for the same amount invested, the return on
~ bills would provide yields of 3.55%, for the 9l-day bills, and 3.69%, for the
~ay bills.
Interest rates on bills are quoted in terms of bank discount with the
~n related to the face amount of the bills payable at maturity rather than the
~t invested and their length in actual number of days related to a 360-day year.
Intrast, yields on certificates, notes, and bonds are computed in terms of int on the amount invested, and relate the number of days remaining in an interest
nt period to the actual number of days in the period, with -semiannual compounding
re than one coupon period is involved.
~n

- 24 and n.~tened incentive. that wll1 enable ua to capltaliae -

. .,

potential and achi_ the atill greater gain. in output: aM pndue tivi ty tha t

wtt

can

only "ith its eDaetmelt. can we look forwrd with c01lflcSeae. te

sotving our problema of UDemplo)'lllellt, \Dlutil1&ed capacity .....
budietary and balanee of payments deficita.

57
- 23 only capital rl~ are capable of such rapid .h1fta.

Despite this short-run impaevement, it 1• • till clear that
eventual success in achieving a 8teady balance in our tnterDatlonal
payments must rest upon our ability to achieve greater induatr1al
efficiency, to utilize more of our savinp at home. and to ma1ntah

price stability.

Our price performance over the past five year., ear

progress in bringing costa und4ar effective control, and our fira
resolve to maintain responaible monetary and debt management poUd"

offer Assurance

a~inst

any resurgence of inflationary pro.urea.

We cannot, therefore, let anything restrain us from
the tax reduction bill this year.

adopt~

We cannot burden down with r .. ttU

tiona the! very measure that will free our economy from the b\ax'MDl i
a re8trictive tax system ... - we cannot dally until it 18 too late
over a measure that we ur;)~!:r:ly need now.
i l Wlparalleled.

Our productive poteaCUl

The tax bi.ll will give us the expanding _~

- 21 by Aruericans ~roL ioreigners.

reluctance.

We took this step with the

But the situation was grave.

this year the volume vf new

mr.i~

ar-teat

During the f:1ret balf of

security issues prucbaaed by

An1ericaos reached unprecedented levels.

At an annual rate of $2

billion, that volume was well over three times the annual avera••
from 1959 to 1961, and was almost double the 1962 figures.

accowlted (or substantially all the deterioration in our balance
of paymentJ during the first nalf of this year.

And, at the time of

our aIUlouncement, the volume oi new issues in prospect. the

urp I

majotity for borrowers in countries with strong balance of paJIIIDU

positions, was just as forbidding.
'nle advantage 01: the proposed tax is that it can achieve tbI
required temporary lessening of foreign tfarlAnda upon our capital"
kee. while leaving the market mechanism intac:t.

Under the taX, it

1s the impersonal operation oi price -- not any artificial or ~

6u
- 20 Rut theae long-term efforts to acbt..ve balance 10 our inter.

national payments are not enough.

We IllU8t alIa .tap-up our efforta

to keep current deficit8 to a minimum.

0v8r the past 8eVeJ,-al ,..,.,

aa you koow, Treasury debt management policies have played. • ...,.

role in bringing upward pres.urea to bear upon our short-tel'll tltle l
while still maintaining a ready availability of lOllg-tam fuDda,

In .July of this year, the Federal Iea.rve reinforced thi. polley
by raising the diacount rate from 3 to 3\ percent.

At the 88M die.

regulation Q va. revised to permit banb to compete more eff_tlm,

ior time deposita of 90 day. or longer.

Thea. actlona baft ,rowed

decidMly beoef1e:l.al in improving the relationship Mtv rIn our riel
and thoae abroad, thus helping to reduce the outflow of aboI."t-~

capital.
In the area of lDng-tenl capital outflows, we haft

propM_.

temporary !nt.rut Equalization Tax on purcbaaea of foreip

,...nat

61
- 19 Your atateaent clearly UDdencore. tile - ...., of tbe taa ftt

aDd belp expud oar exports. as . .11

.In¥estment.

&8 •

_aAre CO _ _ . .

Ot equally ~t ~taDCe. tba tax/will . . . eM

hea1deDt ItateG laat week before the lDternatloaal

HoDa~J

,..

of payments requir..eo.ta.

tour "laDce

payments

.tatwMP~ 4180

to reduce! (;O~t up.acUt._ abroad.

aq.b&ata.4 tM ....

0111,. few - , . after &i

tile Pr•• 1deD.t. 10 hi. &a1aac. of ,.,.

P''' to reduce our dollar expenciiture. overaea. by $1 billion •

euG ot ilext ),ear.

- 18 our def1cita in a maDDer caloulatM

noid future lnflatS...,

troubl...
We thWl haw every ground for pushing ahead rapidly w1t1a tbI

hOIIe and our balance of payme.nta.

That expanding ~t.e

actl.tc,

and productivity at home 1. the key to .olYing our balaace ef ,.,..
D*lt.

probl_ -- and that the tax cut 18 tlle key to both _. . .

copntly recopiaecl in the balance of payments atatement of your
Aaaociation earlier thla year.

It recouiiiended -- and I fIUOtet

..... the eDaCblent, in th1a .... ion of

acro•• -~ raduct10DtD personal and

Conar... ,

eo~porate t o

rata. .al8Jl8d to improve the elimate for direct buaiMI.
inve.tment in this country, strengthen the pro.pacta for

cost-priee .tability, and reatra1.n the larp outflew of
private long-term capital. It

- 11 ..
public l\u 1ncrea.aed by only $2.7 "111108,

01'

about 1 ...........

January 1961, while the economy has grOlm b1 1if perc_e.
same

to.

At tIM

"
the growth in total liquid . . . .t bol'i-. . .- iaeW'. . .

RatiA:mal Pr. . .t. as it propftly abou14 M ta liDe witll tM

..... of the

ee~.

ably largtrr thea tb4t total 1Dcr.... 1a ear . .rketaa.1e Mbt.

1ncr...ed

rr. fCMa yean

aDd aix --tb8 in J

AM ..

...., 1961 1» 1111

a1d-19S6. 1hia record cleuly sbows that we have aucceeded in

fill

64
- 16 -

manufacturing industries have actually declinecl during the curr.t

period 0': business expansion.

But i f the abort-run lIfO-pact 18 OIl

we can view with sober confiMnce. thia can in no way excUH UI fhl

COllcern over the

l~e1" .. last1ng

monetary and financial effect. of

our deficits -- and from pur8uing with increaaing vigor and viaU ..

policies to assut'e that we are not today Ilowini the seeds for fublft
trouble.

Ar&C1 th.a t depends

Ian how we finance the deficit.

Let_

cite briefly from our record.
Since January of 1961, the Federal Reaerve bas not aupp11ed.
sin~le

adAitional dollar of . . . .rves to the banking system for tbe

purpose of facilitating Treasury finance.

Coumerc1al bank hold1Dl

of Government securities have actually declined by almoat $2 bil1il
frQID January 1961 throu&h Auguat 1961.

Over that period the _tid

deficit has been financed outside the conmerc1al banks.
The total of under one year Trea8ury debt in the hands of cIIt

- 1.5 The only . ., to a.sure true control of expeDd1turea 1a for

ltl

the Pre.ident and the CODp"u. to join 10 • coot1nu1Da aDd c--.l..

Il*ltary effort.
Sec t

ion I

that joint and cont1Du1n& effort

u.actlJ

--t

f the tax bill pl.eclpa.

We mus t, however. live with

when the tax aut 18

takin& bold.

While thea. deficit. are cectaial1

no CAuse for complacency, neither .hould we take ttl. . .a ca\IM for

alara.
I think it U DOV well uncleratood by informed ob. .rwrl M.

bome and abroad that def1clt. neecl not be inflationary
peraiJtent

unempla~nt

aDd uceaa capacity.

our experience owr the paat six yean.

_ell

eben

That bu, 1a fait, ..

l'be rapid rue 1D

u. ••tri

production coata that cRaracter1aed the firlt ~twar deca. bU
to

an eDd.

Year-eo-year 1Dcreu.. in _ p rat.. are

DOW

_thJ.D dI

ranp of productivity 1Dcrea... , and overall UIl1t labor coate

Sa-

- 14 Z.~penditure

control 1., of couc . . , the j oiat r •• paaeibl11ty of

the i'r •• id.81lt ana the Coogreaa.
?1:0posing hi.

pro~_

The Fres1l1_t alat uerc1ae it la

and his budget, •• well a. in carr,.ia& aut lid

administering llroiraru authorized by Congress.

He doe. not, however,

have. -- as aome have 1aplled. -- the lati.tude to whittle ........ltur..
at will to meet short-nm aud arbitrary expenditure c.el1iD&a.

first glaDe., for example, it

.iabt

seem feasible to realize

tlal .avings tht'ough the Coamodity Credit Corporation.

But

At
aub.~·

cee

salt.

m.d pUrcb&8.a ciepencl upoa farmers I deciaion., the weatbar, the cropa,

and other UQpredlctable or uacontrollable factor..

ADA, to taka

another ax.ampl.e, it ~ld be th.. jarat form of fals • .canaDY to

c.-I

eT <lelay neecieci DeiClse or other prog.rams which iIlvolve, •• 1. . .111
the case,

co~itaenta

ancl .,.ll underway.

and contracta already authorizaci, obltpted,

- 13 -

COtlIilittee on Appropriations, that this year' a appropriations will be
held below last year s total (or the first time 8inee the end of the
I

Korean ,'ar •

action.

This is certainly effective expenditure control in

For if new

expenditure,

must so<m follow suit.

Ii any given year some forty percent of expenditures flow fro.
/--1'f . " .~.
i\
',.:;,,, ./f "
~!'..( .. ~

:.v

funds appropriated in preceding flsC4l1 years •. Laat year, fu~ar 1961)
we spent $92.6 billion but new appropriations amounted to $101.6 bUli

or $9 billion more than we spent.

That ia why expenditures are 11l-

creasing thia y.ar to some $98 billion and Why a moderate further

increase is likely in fiscal 1965 even if current appropriatloa, an

held below Last year's $101.6 billion level.

.. 12 In addition, the President has said that. 1ft the aba.c. of .)'
unforeaeen economic downturn or international criaia over the Dext fll
months, he expects to submit a fiscal 1965 budget with . . .ficit . .~
than the $9.2 billion originally forecast for this year without. til

cut.

In other words, despite the fact that fiscal 1965 tax revenu..

will reflect a major part of the tax cut -- over $7 billion -- the PfII

jected fiscal 1965 budget will atill involve a lower deficit than

originally estimated for fiscal 1964 before any allowance for tax
reduction.

That.uch.

'nlat aaJch, at least should be heartening to anyone -- whether or

not

he agrees with every policy or program reco. .en ••d by the

trat1on.

And whether or not one agrees with every cut or every

appropriation the Congress hal made f

'We

can also take note of

the'"

prediction by the Honorable Clarence Cannon. Chairman of the Houl'

- 11 -

Budget .. 8Ubm1tted by the Pr. . 1cleftt, aD4 befora ay r. ... atl. . . . . .
. .y occur aa a r •• ult of Caagresaional acticc, t:ta.a ..... _put ,....
def.....e

apace. aDd inter.at on the debt _. the total

ill aU

other expend 1 turea ct.urin& the firat three ,.ara of dd.. AdlltaiaD.....
will be $_ _billlon. one be 1f b1l1ion 1...

thaD tha i.DcT. . . . til

theae .... it. . duria& the pracediDg three year. fraD 19S. to 1161 •
• period clul'ins which the gov.x .....t . . DOt

it. . . .~ of atft'ft!

._ee.
1D the l1&ht of that record. we can alia take encourag_t fnI
the i3prov. . . . t iD our i ...cti.ate bu4getary outlook.

fucal 1963 defi.cit cb'opped tto.
f6.2 billu..

utiatecl

M.8 billt. c. _ ...

laclucliq the effect of the tax cut • • •ppr.... by'"

ilouaa of llepre. . .tativea,we

1M'

all

Aa you . ., •

DOW

expect the curr. .c 1964 .eflclt

thea the $9.2 billiOll foreeaat laat January befor8 all.,. . . "

the tax cut -- and !!! less than the $11.9 billion origtnally f~

after allowing for the

Lax

cut.

- 10 g,overnrue~ .peoCl~

.a the prime factor in our economic growth.

The cresident has emphatically conaitted the AdDIini.tratloa to
cour.e of intensive expenditure control t not cely
pled~~8

'of his

repeated

over the pa.at niDe months. but by hia recorci of efficlnt

acbiniatrat1.v~ ma'D&~t.
Certainly the budget hu increa.ed over the past three

yean.

aut the great bulk ot that: iIlcreas. ia accounted for by the sbarf
step-up in our deiense and space needs -- and by increasing iDtereat
co*ts that are in large piirt the reflection of re.ponsible clebt ....,

alent policies and of our effort. to Item the outflow of abort-een

OUtside

01:

the heavy apact of thes. three lte.s upon

OUI" wqet

expenditure. over the lut three yearl have grOWll only IICMlaTaeel,.
judged against the nead. oi our expancilD5.& population.

should make that point abundantly clear:

0.• •.,11"

tAla you 1Ilcluc1e tN

1964

72
- 9 aut 1{ we are to take full advatage of riai.na Federal

1'. . . . . .

in a more rapidly expandiDS ecoaomy. thea both the A1111lIlutratl_ ..
the Congress must exert a cOIltinu1D&. careful. aDd judieioue • •Chi
ewer expfll\diturea.

M1 iDtenaiflad program of expad.iture coaCl'Ol 11

an integral part ot the tax bill, which states, in Section 1, that
both COIlIrea. ancl tha Prea1d8nt auet jo1D ill l'taklnc 811 reae. .lt1e
-..na to restrain Goverwlent

.peadinl," 1f we are to obta1ft rabalaeM

buGgata in the Dear iuture.
Th. :t'reaid_t. Cbairaaan Mill. of tbe Jiouae

~ay.

... .....

eo.-

mittee -- and the Hou •• of Repr. . .tativea in _dorailll tbeiJo viM·
have all made it unmistakably clear that, by adopting the tax bill.
the nat 1cm will be chOOSing nux reduction luteacl of deliberate

deficit. a. the priDcipal means of boostiDg our ec~" -- that dII1

eoulder tbNe coun•• 18Utually exclusive and ,,111 laOt foll . . MIIathe . . . time -- that t 1ft ahort. the tax bill repre • •u

a _jor

deci.ion to rely upon greater 1?riv!ce apendinl rather than ~reaur

F'i.r~l.

• 8 may I eDlphasize the fact that. by

~;;-.t1Di

greater

e.;:onOinic Licti",ity J the tax cut. -,,111 tncr.... goval_t re7'~

,-,.,

ooly beyond the pre-tax ..::.ut levela, but beyond the levels they ~

other-vise
~tere

ha·,,~

1 ani sure you rememberl/ery well h()lll tax••

rea.-:hed.

sharp 1y ::ut in

tax cut levels.

19~~

and Nithin two year. revenues exe••ded pre-

Nct c:mly

'.4&8

that no i.olAted instance. but it rt-

fleeced the '.:alnSistent experience 1.« this cOUDtry baa bad with . .jar
ta~

cuts throughout ehis century.

__ ""perience of :i;"~~

'(fM 0 (;"Tel. S~'

"- J,ia AIUIUlIl Report

' •••
th~

0;'

0t.. th..

Trea,s'!.-ry ADdre" Mellon, ....0 .aW s.. j(J
Sf,.4TfWlf1/1 1:, f. i=f' F 71ft: fMd SE"W

.~f .- and

i~pite

~·ates than

1 quote:

ff N.!J

ill 01"'5

CoMIA~

of the very sweeping reductions carrle4 by

1924 act ••• we. .ill

lower

It reflected. for e'xample. the

';:ollec~

we collected in

(11. ,,/I'!)
i

lZIOre 18OI\8y at

1
/ / .." -=

tl'U1..;1) at higher rate• ."
;1

In short,

dit~r

a briet transitional period, cuttLRg taxe."-

greater revenue -- not less.
1954.

And it will be

after

It was
~e

1n the 1920's.

a....,.Qopt this

,..r',

It va. ,ob

tax bill.

- 7 IDurturin 6 , in short, the \fery element. that
tlon of our

~xport

t~in

••rve •• the fOUQda.

erfort.

And. as we move toward
under the

ful1~

employment, with iDV•• c.eat

stimuli of greater demand and greater

call on our capitil.l markets

~ill

.~~

profitabll1tJ.~

become heavi.er. longer tenD inter•• t

rates can be expected to rise. and "vings that have been f1owial"
~ill

once more find ample iOl.J'eatment outlets here at horae.

Only within such a framework of • prosperous and rapi4ly
Americal,

can~e

find a sound and permanent solution to our balaac. tf

payments problema.

OIle

is more aware of that fact tbaa you bert

today.
You are, however, deeply and rightly concerned by the fact that
the initial impact of tax reduction wlll come at a time when we are

experiencing large budget deficits.
with this question at scae length.

I would like, therefore, to ...1

75
- 6 cc('rnomic measure tn iifteen years.

Your awn Aa.oclat1on baa

ead~

the tax cut as one of the prime prerequisites (or reachLng belenoe b
our international payments by increasing bua1neu incent!'"•• and 11.

Tax reduction this year has the enthu.ustlc .upport of

vestment.

lio

R... [ ( /":'SKJ I2.E rHA~

business communi.ty, of labor. and of our leading ecoaOUlut."

'-1\
-we. revisi
our
,\
and

/ A.I G--

IN (,-

gro~Mth,

Oaly

..../ "

outmoded tax structure and re1a/~it. grip upon lacact.

can we move dec1sively toward both internal and ext.rul

strengthening of our economy.

To speak only of our balance of payments difficulty, there it II

question but that the added investment th.1:t will flow fToaa the pt''''
tax pr0.sraru

together #lith ~he heightened investment already

ereattl

.s a result of last year's tax measures -- would further advance ~
productivp efficiency

An~rielln

expanding American industry

~ill

industry.

Only an efficient.

be capable of rapidly

tneorpor.t~

new technology into ne!A plant and equipment and of taaintaining

our

traditional leadership in the introduction of new product. -- of

76
• sFrom the

~ery

start of this AdmiDistratl_, the c:eDtTal ... IIIIW

t!l>lemant in our approach to the payments problem baa beetl our

PPIr-

to provide iresh incentives for American buaine •• throuah tax r ....
tiona.

Preei.dent Kennedy made the reductiOft of bua1D. . . tau. a

and urgent step shortly after he took office.

This program w..

fine
bt~

mented lsst year with the seven percent tnv•• tnMmt tax c:r.alt ... De
1iberalilted tax treatment of depreciation.

'!'he•• two . . . .UT• •

toIItbI
~

reduced busin.ss tax liabilities last year by an estimated $2/ blll~

The tax program

before the Con&r ••• would br1n& the total bUliIII
A( Nl~ . ..i t ~

'DOW

tax I'eduetion to

~- full( $5 bl1110a • year.

That. tog.ther with Wit!

dual tax reduction. of almost $9 billlOl\ a JUt.wUL·dq .ob to .par
~conoary

forward and will greatl,. incru ... both the profii..aDility"

the volume of business

tnve.~t.

1 Caftftot etIIphaaize too strongly bow essential the tax ,rOP'- II
~e Presidea.t haa called hi. tax proposals the lIOat iaportallt ....d

.. 1+ our

forei..~n

trade, a

si~ahh:

e:<port surplus.

It is a;3ainst thflt unusual background that we have had to cleve10r
~J.

new approaches to reduce and eventually eliminate our balance of

menta deficits while at the same time promoting dome.tie axpanaiaa.
In

doing, we ha....,e been GUided by two principal convictions:

First, that we

DUllt

achieve our iO.ls by working within the

framework of a free market economy. with market disciplines and
tives providin3 the hasic motive force.

la.-.

Only in this way can " ••rrl~

at solutions consistent with our own traditions, with

fr.w~~rad.

bet'ween nations. and with the central role of the dollar

a world

currency.

" that a proper mix of fiscal, mooetary,'
Second, we are canviced
debt management policiel will make it beth possible and practical f_
the United 'States to achieve our domestic and international goall

simultaneously.

Indeed, we are convinced that thea. goal. call, ...

must be mutually reiniorcing •

wherever you may travel, in the great tradition ot ABA president.

througb0Ut the yearl.

(PRESENT

~ERTIFlCAtE)

,oje are meeting here at a time when our nation 1. _kia, critlul

KODomic decisions em both the intenuational ad. domestic frOlltl. At
home, we face the task of clo.ing the deficits in aplo-,.-t, output,

in the Federal buclgat.

Abroad, we face the problem of eDdina the

trouble.ome deficits ill our international accOUDta.
problema 18 isolated.

Each imping•• upon the other.

NOlle of theM

It 1. thu ilter

relationah1p that 1 would like to consider with you today.
The most striking characteristic of OUr balance of paymenu

.t~

IN W./fICi'I

is that i t does Qot fit into the clanie

inflatioo and over-consumption at

hUDi

1I01~ ~~.

_if;:

briD~Jwltb it a

patten of I

arOflill

'\
axce •• of importa over export..

lDstead t we have \1D8Iployment 18 '"

po_r, plalt. and _chines, .l~ with .table pr1ce levels, ad, it

- 2 . 'The Treasury Department gratefully ackDowled,e. the out.tadba
leader,hip and public service support of the American Banker.

Aa.oot..

tion and ita member. on behalf of the United Stat•• Saving. 80nclt pro/

grarut.... and offers its congratualtions upon the obaervance of the 011'
hundredth anniver8ary ot the dual b-anUs1a .Yltem ••• Given UDder 1IJ haM

and seal t.hi. ei6hth day of October, 1961." ••• Mr. Kimbrel, 1 ••It JOU
to accept thi. token of our thank' on behalf of the Assoei.tlOD and

all of it. member ••
(fR£~ENT

CITArION)

And now I have an equally plea.ant task -- this ODe cODc.mul
your Dewly-electe4 fr •• Went. M:r.

t~1111_

F. Kelly.

Each year it baI

been our cUltom to invite the incomini President of the Amerlcea
Banker. As.ociation to serve as • ,peeial HAmba••a4or of Good 'wll11"

for the Savina- Bonds program.
Accordingly. Mr. Kelly J I am plused to appoiDt you our .,ecUl
Ambassador - in the hope that you will wi.h to carry on our .1 ••t-

80
REMARKS OF THE HONORABLE OOUGLAS DILLON
SECRETARY OF TIlE TREASURY
AI Tllli AMERICAN BANKERS AS30ClATION
OONSTITV'lJION HALL. WASHINGTON, D. C.
TUESDAY, ocTOBER 8, 19ft~, 10: ~O A.M., EDT

It is an honor and

privilege to be with you today • • s Jou r_

the clili.WlX ot this centennial year oi. the dual baDkina ayat_.

It it

certainly uaueceasary tor me to relate the '-at contributlou which
banl-:in~

leadera and their tn.titutions have made to the growth of our

nation.

.;)uiiice it to liay that the American economy could MveX' .....

uchieved the amaaing results of the past century, had it not been f«
the tore.tiht
~ankiD&

courage, and sheer competence that has characterizH.

leaders.

;:;ervice to the nation has alway. been hip aIIOII

your objective., and, today) 1 waQt to pay particular tribute to

••rvlce '''1ch bankers tbruughout the nation render their ~itUl
and tneir CQuotry in support Lng the United .;it.tes Savu.gs

Bon" prOil

UD the occasion 01 thi_ centennie:.l ;:elebl:"ation it seems particul.rl1
ap~ropri.At. to preaent y~ ,.Jith

formal expr. . . loa of our .pPt"~

It 18 • citatioa which read.a •• .£0110-... :

-- -, C; c;; .: )-

TREASURY DEPARTMENT
Washington
FOR RELEASE: P.M. NEWSPAPERS
TUESDAY, OCTOBER 8, 1963

REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE
THE AMERICAN BANKERS ASSOCIATION
CONSTITUTION HALL, WASHINGTON, D. C.
TUESDAY, OCTOBER 8, 1963, 11:15 A. M., EDT
It is an honor and a privilege to be with you today, as you reach
he climax of this centennial year of the dual banking system. It is
ertainly unnecessary for me to relate the vast contributions which
anking leaders and their institutions have made to the growth of our
ation. Suffice it to say that the American economy could never have
chieved the amazing results of the past century, had it not been for
he foresight, courage, and sheer competence that has characterized
~r banking leaders.
Service to the nation has always been high
mong your objectives, and, today, I want to pay particular tribute
o the service which bankers throughout the nation render their
ommunities and their country in supporting the United States Savings
:mds program. On the occasion of this centennial celebration it seems
3.rticularly appropriate to present you with a formal expression of
1r appreciation. It is a citation which reads as follows:
"The Treasury Department gratefully acknowledges the
outstanding leadership and public service support of the
American Bankers Association and its members on behalf
of th~ United States Savings Bonds program .... and
offers its congratulations upon the observance of the
one-hundredth annive"csary of the dual banking
system ..... Given under my hand and seal this
eighth day of October, 1963." .....
Kimbrel, I ask you to accept this token of our thanks on behalf
the Association and all of its members.

'-.995

- 2 -

And now I have an equally pleasant task -- this one concerning
your newly-elected President, Mr. William F. Kelly. Each year it has
been our custom to invite the incoming President of the American
Bankers Association to serve as a special "Ambassador of Good Will"
for the Savings Bonds program.
Accordingly, Mr. Kelly, I am pleased to appoint you our special
Ambassador -- in the hope that you will wish to carryon our mission
wherever you may travel, in the great tradition of ABA presidents
throughout the years.
We are meeting here at a time when our nation is making critical
economic decisions on both the international and domestic fronts.
At
home, we face the task of closing the deficits in employment, output,
and in the Federal budget. Abroad, we face the problem of ending the
troublesome deficits in our international accounts. None of these
problems is isolated. Each impinges upon the other.
It is this
interrelationship that I would like to consider with you today.
The most striking characteristic of our balance of payments
deficit is that it does not fit into the classic mold, in which
a pattern of inflation and over-consumption at home brings with it
a growing excess of imports over exports.
Instead, we have
unemployment in manpower, plant, and machines, along with stable
price levels, and, in our foreign trade, a sizable export surplus.
It is against that unusual background that we have had to develop
1ew approaches to reduce and eventually eliminate our balance of
)ayments deficits while at the same time promoting domestic expansion.
[n so doing, we have been guided by two principal convictions:
First, that we must achieve our goals by working within the
:ramework of a free market economy, with market disciplines and
.ncentives providing the basic motive force.
Only in this way can
'e arrive at solutions consistent with our own traditions, with'
:reer trade between nations, and with the central role of the dollar
s a world currency.
Second, we are convinced that a proper mix of fiscal, monetary,
nd debt management policies will make it both possible and
ractical for the United States to achieve our domestic and
nternational goals simultaneously.
Indeed, we are convinced that
:-lese goals can, and must, be mutually reinforcing.

- 3 -

From the very start of this Administration, the central and
crucial element in our approach to the payments problem has been our
program to provide fresh incentives for American business through tax
reductions.
President Kennedy made the reduction of business taxes
a first and urgent step shortly after he took office. This program
was implemented last year with the seven percent investment tax
credit and the liberalized tax treatment of depreciation. These
two measures together reduced business tax liabilities last year by
an estimated $2.5 billion. The tax program now before the Congress
Nould bring the total business tax reduction to almost $5 billion
a year. That, together with individual tax reductions of almost
$9 billion a year, will do much to spur our economy forward and will
~reatly increase both the profitability and the volume of business
lnvestment.
I cannot emphasize too strongly how essential the tax program
Ls: The President has called his tax proposals the most important
lomestic economic measure in fifteen years. Your awn Association
las endorsed the tax cut as one of the prime prerequisites for
~eaching balance in our international payments by increasing business
_ncentives and investment.
Tax reduction this year has the
!nthusiastic support of the business community, of labor, and of
lur leading economists, who recognize that only by revising our
lutmoded tax structure and relaxing its grip upon incentives and
;rowth, can we move decisively toward both internal and external
trengthening of our economy.
To speak only of our balance of payments difficulty, there is
o question but that the added investment that will flow from the
resent tax program -- together with the heightened investment
lready created as a result of last year's tax measures -- would
urther advance the productive efficiency of American industry.
nly an efficient, expanding American industry will be capable of
apidly incorporating new technology into new plant and equipment
~d of maintaining our traditional leadership in the introduction
f new products -- of nurturing, in short, the very elements that
1st serve as the foundation of our export effort.
And, as we move, toward full employment, with investment
~panding under the twin stimuli of greater demand and greater
~ofitability, the calIon our capital markets will become heavier,
Inger term interest rates can be expected to rise, and savings
lat have been flowing abroad will once more find ample investment
tlets here at home.
Only within such a framework of a prosperous and rapidly growing
erica can we find a sound and permanent solution to our balance
payments problems. No one is more aware of that fact than you
re today.

- 4 -

You are, however, deeply and rightly concerned by the fact that
initial impact of tax reduction will come at a time when we are
~riencing large budget deficits.
I would like, therefore, to
1 with this question at some length.
First, may I emphasize the fact that, by generating greater
nomic activity, the tax cut will increase government revenues.
m sure you remember very well how taxes were sharply cut in 1954
within two years revenues exceeded pretax cut levels. Not
r was that no isolated instance, but it reflected the consistent
?rience this country has had with major tax cuts throughout
3 century.
It reflected, for example, the experience of Secretary
:he Treasury Andrew Mellon, who said in ~
:ement before the House Ways and Means Committee -- and I
:e:

"
in spite of the very sweeping reductions
carried by the 1924 act .... we will collect in
1925 more money at lower rates than we collected in
1923 at higher rates."
In short, after a brief transitional period, cutting taxes means
ter revenue -- not less. It was so in the 1920's. It was so
J54. And it will be so after we adopt this year's tax bill.
But if we are to take full advantage of rising Federal revenues
more rapidly expanding economy, then both the Administration
:he Congress must exert a continuing, careful, and judicious
'01 over expenditures. An intensified program of expenditure
01 is an integral part of the tax bill, which states, in
on I, that both Congress and the President must join in "taking
easonable means to restrain Government spending," if we are to
n "balanced budgets in the near future."
fhe President, Chairman Mills of the House Ways and Means
~tee -- and the House of Representatives in endorsing their
-- have all made it unmistakably clear that, by adopting the
~ll, the nation will be choosing "tax reduction instead of deliberate
.ts as the principal means of boosting our economy" -- that they
ler these courses mutually exclusive and will not follow both
same time -- that, in short, the tax bill represents a major
on to rely upon greater private spending rather than greater
~ spending as the priIlt,e
factor in our economic growth.

- 5 -

The President has emphatically committed the Administration to
a course of intensive expenditure control, not only by his repeated
pledges over the past nine months, but by his record of efficient
administrative management.
Certainly the budget has increased over the past three years.
But the great bulk of that increase is accounted for by the sharp
step-up in our defense and space needs -- and by increasing interest
costs that are in large part the reflection of responsible debt
management policies and of our efforts to stem the outflow of
short-term funds.
Outside of the heavy impact of these three items upon our budget,
expenditures over the last three years have grown only moderately,
judged against the needs of our expanding population. One simple
fact should make that point abundantly clear: when you include the
1964 Budget as submitted by the President, and before any reductions
that may occur as a result of Congressional action, then -- apart
from defense, space, and ~lterest on the debt -- the total increase
in all other expenditures during the first three years of this
Administration will be $4.5 billion, one half billion less than
the increase in these same items during the preceding three years
from 1958 to 1961 -- a period during which the government was not
often accused of extravagance.
In the light of that record, we can also take encouragement from
the improvement in our immediate budgetary outlook. As you know, the
fiscal 1963 deficit dropped from an estimated $8.8 billion to an
actual $6.2 billion. Including the effect of the tax cut as approved
by the House of Representatives, we now expect the current 1964
deficit to be less than the $9.2 billion forecast last January before
allowance for the tax cut -- and far less than the $11.9 billion
originally foreseen after allowing for the tax cut.
In addition, the President has said that, in the absence of any
unforeseen economic downturn or international crisis over the next
few months, he expects to submit a fiscal 1965 budget with a deficit
smaller than the $9.2 billion originally forecast for this year
without a tax cut. In other words, despite the fact that fiscal
1965 tax revenues will reflect a major part of the tax cut -- over
$7 billion -- the projected fiscal 1965 budget will involve a lower
jeficit than that originally estimated for fiscal 1964 before any
~llowance for tax reduction.
That much, at least ,should be heartening to anyone -- whether or
'not he agrees with every policy or program recommended by the
~dministration.
And whether or not one agrees with every cut or
every appropriation the Congress has made, we can also take note of
the recent prediction by the Honorable Clarence Cannon, Chairman

- 6 -

of the House Committee on Appropriations, that this year's
appropriations will be held below last year's total for the first
time since the end of the Korean War. Appropriations, of course,
govern expenditures, as money must be appropriated before it can
be spent. Therefore the true and sensible way to measure
expenditure control is to look at current appropriation totals
rather than at expenditure totals, which are largely predetermined
by earlier appropriations.
In any given year some forty percent of expenditures flow from
funds appropriated in
preceding fiscal years. For instance,
last year, fiscal 1963, we spent $92.6 billion but new appropriations
amounted to $101.6 billion, or $9 billion more than we spent. That
is why expenditures are increasing this year to some $98 billion and
why a moderate further increase is likely in fiscal 1965 even if
current appropriations are held below last year's $101.6 billion
level.
Expenditure control is, of course, the joint responsibility of
the President and the Congress. The President must exercise it in
proposing his programs and his budget, as well as in carrying out and
3dministering programs authorized by Congress. He does not, however,
lave -- as some have implied -- the latitude to whittle expenditures
3t will to meet short-run and arbitrary expenditure ceilings. At
first glance, for example, it might seem feasible to realize
;ubstantial savings through the Commodity Credit Corporation. But
;CC sales and purchases depend upon farmers' decisions, the weather,
:he crops, and other unpredictable or uncontrollable factors. And,
:0 take another example, it would be the worst form of false
'conomy to cancel or delay needed Defense or other programs which
nvolve, as is usually the case, commitments and contracts
lready authorized, obligated, and well underway.
The only way to assure true control of expenditures is for both
he President and the Congress to join in a continuing and
Dmplementary effort. That joint and continuing effort is exactly
lat Section I of the tax bill pledges.
We must, however, live with temporary deficits during the period
len the tax cut is taking hold. While these deficits are certainly
) cause for complacency, neither should we take them as cause for
.arm.

87
- 7I think it is now well understood by informed observers both at
home and abroad that deficits need not be inflationary when there is
persistent unemployment and excess capacity. That has, in fact, been
our experience over the past six years. The rapid rise in industrial
production costs that characterized the first postwar decade has come
to an end. Year-to-year increases in wage rates are now within the
range of productivity increases, and overall unit labor costs in our
manufacturing industries have actually declined during the current
period of business expansion.
But if the short-run prospect is one we can view with sober
confidence, this can in no way excuse us from concern over the
longer-lasting monetary and financial effects of our deficits -and from pursuing with increasing vigor and vigilance policies to
assure that we are not today sowing the seeds for future trouble.
And that depends on how we finance the deficit. Let me cite briefly
from our record.
Since January of 1961, the Federal Reserve has not supplied a
;ing1e additional dollar of reserves to the banking system for the
)urpose of facilitating Treasury finance. Commercial bank holdings
)f Government securities have actually declined by almost $2 billion
:rom January 1961 through August 1963. Over that period the entire
leficit has been financed outside the commercial banks.
The total of under one year Treasury debt in the hands of the
ub1ic has increased by only $2.7 billion, or about 3 percent, since
anuary 1961, while the economy has grown by about 17 percent. At
he same time the growth in total liquid asset holdings -- including
ot only money and short-term Treasury debt, but also the enormous
ncreases in time and savings funds -- has been roughly in line with
ross National Product, as it properly should be in line with the
rowing needs of the economy.
Government debt maturing beyond five years is now more than
~O billion greater than it was in January 1961 -- an amount
)nsiderab1y larger than the total increase in our marketable debt.
ld our debt due in twenty-five years or more is now $6.3 billion
'eater. As a result the average length of the marketable debt
:s been increased from four years and six months in January 1961
, five years and three months at the present time -- the highest
vel since mid-1956. This record clearly shows that we have
cceeded in financing our deficits in a manner calculated to avoid
ture inflationary troubles.

88
- 8 We thus have every ground for pushing ahead rapidly with the
tax cut in order to improve both our economic performance here at
home and our balance of payments. That expanding economic activity
and productivity at home is the key to solving our balance of
payments problem -- and that the tax cut is the key to both -- was
cogently recognized in the balance of payments statement of your
Association earlier this year. It recommended -- and I quote:
" .... the enactment, in this session of Congress,
of an across-the-board reduction in personal and
corporate tax rates designed to improve the climate
for direct business investment in this country,
strengthen the prospects for cost-price stability,
and restrain the large outflow of private long-term
capital."
Your statement clearly underscores the urgency of the tax cut
3S a measure to sharpen the competitive edge of American business
3nd help expand our exports, as well as a measure to make our
~conomy continually more attractive for both foreign and domestic
Lnvestment. Of equally great importance, the tax, cut will, as the
)resident stated last week before the International Monetary fund,
'give greater freedom to monetary policy" in meeting our balance
)f payments requirements.
Your balance of payments statement also emphasized the need
:0 reduce the dollar drain of Government expenditures abroad.
Only
few days after the appearance of your statement, the President,
n his Balance of Payments Message of July 18th, announced his
pproval of a detailed program to reduce our dollar expenditures
verseas by $1 billion a year. This program is already under way
nd will be fully effective by the end of next year.
But these long-term efforts to achieve balance in our interational payments are not enough. We must also step-up our efforts
J keep current deficits to a minimum.
Over the past several years,
; you know, Treasury debt management policies have played a major
)le in bringing upward pressures to bear upon our short-term rates,
lile still maintaining a ready availability of long-term funds.
1 July of this year, the Federal Reserve reinforced this policy
r
raising the discount rate from 3 to 3-1/2 percent. At the same
.me, regulation Q was revised to permit banks to compete more
:fectively for time deposits of 90 days or longer. These actions
.ve proved decidedly beneficial in improving the relationship
tween our rates and those abroad, thus helping to reduce the outow of short-term capital.

- 9 -

In the area of lung-term capital outflows, we have proposed a
temporary Interest Equalization Tax on purchases of foreign securities
by Americans from foreigners. We took this step with the greatest
reluctance. But the situation was grave. During the first half of
this year the volume of new foreign security issues purchased by
Americans reached unprecedented levels. At an annual rate of
$2 billion, that volume was well over three times the annual average
from 1959 to 1961, and was almost double the 1962 figures. It
accounted for substantially all the deterioration in our balance
of payments during the first half of this year. And, at the time of
our announcement, the volume of new is sues in prospec t, the large
majority for borrowers in countries with strong balance of payments
positions, was just as forbidding.
The advantage of the proposed tax is that it can achieve the
required temporary lessening of foreign demands upon our capital
narkets while leaving the market mechanism intact. Under the tax,
It is the impersonal operation of price -- not any artificial or
~rbitrary force -- that would work to curtail our long-term outflows.
This tax, as I said last week before the International Monetary
is "a necessary -- but temporary -- expedient to meet a
:pecific situation that has arisen in large part out of a structural
.mbalance in the capital markets of the free world. If It is not a
.ong-term measure, but an interim step which we must take while our
.ong-term measures become effective and while other industrial
ountries make the necessary effort to strengthen and improve their
wn capital markets.
~und,

There are clear signs that these two actions, higher short-term
nterest rates and the proposed Interest Equalization Tax, are having
he desired results. The first, preliminary figures indicate that
Llr third quarter deficit will be no more than half as large as the
econd quarter results. While it will be another two months before
~tailed figures, pinpointing the areas of improvement, are available,
lly capital flows are capable of such rapid shifts'.
Despite this short-run improvement, it is still clear that
,entual success in achieving a steady balance in our international
lyments must rest upon our ability to achieve greater industrial
:ficiency, to utilize more of our savings at home, and to maintain
'ice stability. Our price performance over the past five years,
.r progress in bringing costs under effective control, and our firm
solve to maintain responsible monetary and debt management policies
'fer assurance against any resurgence of inflationary pressures.

- 10 We cannot, therefore, let anything restrain us from adopting
the tax reduction bill this year. We cannot burden down with
restrictions the very measure that will free our economy from the
burdens of a restrictive tax system -- we cannot dally until it is
too late over a measure that we urgently need now. Our productive
potential is unparalleled. The tax bill will give us the expanding
economy and heightened incentives that will enable us to capitalize
on that potential and achieve the still greater gains in output and
productivity that we can -- and must -- have. With its enactment,
and only with its enactment, can we look forward with confidence
to solving our problems of unemployment, unutilized capacity, and
budgetary and balance of payments deficits.

000

- 3 -

and exchange tenders vill receive equal treatment.

Cash adjustments will be mad!

for differences between the par value of maturing bills accepted in exchange

the issue price of the new bills.
Tbe income derived from Treasury bills, whether interest or gain from the
or other disposition of the bills, does not have any exemption, as such, and

1081

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 st&te, but
are exempt from all taxation now or hereaf'ter 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

Accordingly, the owner

of Treasury bills (other than life insurance companies) issued hereunder need 1n.
clude in his income tax return only the difference between the price paid for suci
bills, whether on original issue or on subsequent purchase, and the amount ac:tuallJ
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, pI'!'
scribe 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 -

92
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 comp6Jlies 6Jld from responsible and recognized dealers in investment
securities.

Tenders from others lnust be accompanied by payment of 2 percent ot

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.
Immediately after the closing hour, tenders will be opened at the FedenU
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.

Those

submitting tenders will be advised of the acceptance or rejection thereof.

secretary of 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 ~
final.

Subject to these reservations, noncompetitive tenders for :$ 200,000 or

less for the additional bills dated July 18, 1963
ing until maturity date on January
$10WjO

or less for the

~1964

fffi

, (

xtm
days remain-

X£'tti

) and noncompetitive tenders tor

182 -day bills without stated price from anyone

bidder will be accepted in full at the average price (in three decimals) of ac·
cepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Re~~
Banks on

October 17, 1963

xtnf

, in cash or other immediately available funds or

in a like face amount of Treasury bills maturing

October 17, 1963
-------~x~tiiJ:;~-------

• Cash

93
TREASURY DEPARTMENT
Washington

October 9, 1963

FOR IMMEDIATE RELEASE,
XXXXx;ooocxxx~XXXXXXXXXXJC(

TREASURY'S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders for two

Beri!1

of Treasury bills to the aggregate amount of $ 2,100,000,000 , or thereabouts I for
cash and in exchange for Treasury bills maturing

XffiX

October 17, 1963

, in the 8IIIOum

$)}X
of $ 2,100,731,000 , as follows:

XtiiX

91 -day bills (to maturity date) to be issued

xtiiX

October 17, 1963

XEOX

in the amount of $ 1,300,000,000 , or thereabouts, represent·

xt$

ing an additional amount of bills dated

July 18, 1963

5qiijX
and to mature

January 16, 1964

fflX

amount of $ 800,123,000

, originally issued in the

,the additional and original bills

xtfiij
to be freely interchangeable.

182

xtm

-day bills, for $ 800,000,000
October 17, 1963

tnP
, and

-----~~r-----

, or thereabouts, to be dated
to mature

April 16, 1964
~

The bills of both series will be issued on a discount basis under competit1n
and noncompetitive bidding as hereinafter provided, and at maturity their
amount will be payable without interest.

f~e

They will be issued in bea.rer form onlJ,

and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,OOO~d

$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
Day light Saving
closing hour, one-thirty p.m., Ea.stern/~ time, Monday, October 14, 19§L

tmEach tendll

Tenders will not be received at the Treasury Department, Washington.

must be for an even multiple of $1,000, and in the case of competitive tenders tk
price offered must be expressed on the basis of 100, with not more than

th~

TREASURY DEPARTMENT

October 9, 1963
R IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
two series of Treasury bills to the aggregate amount of
,100,000,000,or thereabouts, for cash and in exchange for
!asury bills maturing October 17,1963, in the amount of
100,731,000, as follows:
91-day bills (to maturity date) to be issued October 17, 1963,
the amount of $1,300,000,000, or thereabouts, representing an
itional amount of bills dated July 18, 1963,
and to
ure January 16,1964, originally issued in the amount of
)0,123,000, the additional and original bills to be freely
erchangeable.
182 -day bills, for $800,000,000,
or thereabouts, to be dated
)ber 17,1963,
and to mature April 16, 1964.
The bills of both series will be issued on a discount basis under
petitive and noncompetitive bidding as hereinafter provided, and at
~rity their face amount will be payable without interest.
They
1 be issued in bearer form only, and in denominations of $1,000,
)00, $10,000, $50,000, $100,000, $500,000 and $1,000,000
turity value).
Tenders will be received at Federal Reserve Banks and Branches
the closing hour, one-thirty p.m.,
Eastern Daylight Saving
Monday, October 14, 1963.
Tenders will not be
~ived at the Treasury De~artment, Washington.
Each tender must
'or an even multiple of $1,000, and in the case of competitive
iers the price offered must be expressed on the basis of 100,
1 not more than three decimals, e. g., 99.925.
Fractions may not
Lsed. It is urged that tenders be made on the printed forms and
rarded in the special envelopes which will be supplied by Federal
rve Banks or Branches on application therefor.
~o
~,

Banking institutions generally may submit tenders for account of
omers provided the names of the customers are set forth in such
ers. Others than banking institutions will not be permitted to
it tenders except for their own account. Tenders will be received
out deposit from incorporated banks and trust companies and from
onsible and recognized dealers in investment securities. Tenders
others must be accompanied by payment of 2 percent of the face
nt of Treasury bills applied for, unless the tenders are
npanied by an express guaranty of payment by an incorporated bank
rust company.
96

- 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 Departrnment of the amo~t
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, 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
July 18,1963,
(91-days remaining until maturit¥ date on
January 16,1964)
and noncompetitive tenders for ~100,000
or lesa 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 Oc tober 17,1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing October 17,1963. 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, 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 Treasu~
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 aN
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 whicht~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and tblJ
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtal~d
any Federal Reserve Bank or Branch.
000

r.>R 'RJ'J.;ASI 1. M. MEWSP1PERS,
ThU£!d!jr. ')atooer 10, ,196).
RESm.rs

'.Jct.oner 9, 196)

Q, TREASURY' S $2 BILLION 160-00 TAt AfttClPA

l'In\~

2IU. OFI'IIIIt

The T... ~ Depa.rt.ent &I'JllOUDOId lut ....ini 1iliat ttl" tenders tor $2,000,-..
or t.bereabO'ut.a, of Tax .t..ntJ.cipat.ion Series 160-dsy.:"re:'snr"; bills t.o ~... dated
196), and to IlAture Earch 23, 1964, 1fIh1ch were o.rr9red on )ctobcr 2, were openM "II
r.~ral nesern Ranks on October 9.

on..

The details of this issue are as foUove z

Total applied for - $2,957,)24,000
Tot.al accepted
... 2,000,487,000 (includes $1)1,42i).,ooo enMnd OQ a
nonc:.npeti tive baala Dad aco.pted 11
j"'lJ~l at the average priee
bMoI)

.OG

Rage of accepted ccnpetltlv8 bidsl

'.Sln _I'
,.sm"

- 98.437 Equiyalent rate of disc. . . approx.
per
... 98.421
"
..
If
..
It
l.SS);C'
... 98.428
It
.,
Ii
..
M

(93 percent of t.he aaount bid tor at t.be low pl"loe vas acoepte4)
fotal

!:PJ?l1ed
Bo8\on
New Tort
Ph 11 actel ph1a

tOl'

71 ,186,000

2,348,499,000

2$,$78,000

Cle'Nl.and

3l,7)8,000

Total
Accee.t:!d. ,
~

22,486,000

1,$70,9)7,000

12,57e,000
25,7\)),000

Riat.ODd
AtlaDta

14,759,000

1).1S9,OOO

Chicago

32,090,000

)1,$20,000

251,169,000
23,)90,000

st.

Lou1a

MinnnpoU.
Kansas Cit.y
:--allaa

San francisco

l8,h46,OOO

11,b90.000
14,)06,000

22,820,000

l6,e20,OOO

20,180,000

13,110,000

.$2,9)7 ,324,000

:~2,OOOth81.000

89,46,,000
'rOfAL

116~69,OOO

8),1e.9,OOO

a cou;.;on issue of the same lengt,h and for the __ - ' illvest.e4. tb8 ~I
these bUls voald ;>rovide a yield of 3. 65~. IDteftet. ••• _ on bUlB ..........tII
teru of bank discount witt- tbe retUl"D relat,ed \0 \be t.. IIIICJURt of tM~ ..
able fit IIlliturity rather than the aIlO\Dlt tmeated and tbelr ll!ll~ in u\al"a!' days re1s'(,ed to a 36Q-day year. In contraat, y1a14e 011 certit1caW., .....~
bonds an c~tecl in tems ot intereat. aft t,be 8IIICNDt. 1muted, and rela\t .. ...
bel' of dlqs raaining in an interest ~ ?eriod \0 the actual nullbel' ot __
the period, dth semiannual canpO\lDdinr: i t aore than OM COIQpOIl period 1.

')n

s..-

TREASURY DEPARTMENT

RELEASE A. M. NEWSPAPERS,
xsday, October 10, 1963.
RESULTS OF TREASURY'S $2 BILLION 160-DAY TAX ANTICIPATION BILL OFFERING
The Treasury Department announced last evening that the tenders for $2,000,000,000,
thereabouts, of Tax Anticipation Series l60-day Treasury bills to be dated October 15,
3, and to mature March 23, 1964, which were offered on October 2, were opened at the
eral Reserve Banks on October 9.
The details of this issue are as follows:
Total applied for - $2,957,324,000
Total accepted
- 2,000,481,000 (includes $131,424,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
Range of accepted competitive bids:
High
Low
Average
(93 percent

- 98.431 Equivalent rate of discount approx. 3.511% per annum
- 98.421
"
II
II
"
..
3.553% II
"
- 98.428
"
II"
"
"
3.531%"
"Y
of the amount bid for at the low price was accepted)

ral Reserve
rict
on
York
adelphia
eland
mond
nta
lago
Gouis
~apo11s

liS City
IS

i'rancisco
TOTAL

Total
ApE1ied for
$ 71,186,000
2,348,499,000
25,578,000
33,138,000
14,759,000
32,090,000
251,169,000
23,390,000
18,446,000
22,820,000
20,180,000
89 2469 zoo0
$2,951,324,000

Total
Accepted
$ 22,486,000
1,510,951,000
12,518,000
25,703,000
13,759,000
31,520,000
176,169,000
l1,tl90,000
14,306,000
18,820,000
13,110,000
8321892000
$2,000,481,000

coupon iosue of the same length and for the same amount invested, the return on
se bills would provide a yield of 3.65%. Interest rates on billa are quoted in
ms of bank discount with the return related to the face amount of the bills paye at maturity rather than the amount invested and their length in actual number
days related to a 360-day year. In contrast, yields on certificates, notes, and
ds are computed in tenns of interest on the amount invested, and relate the num.of days remaining in an interest payment period to the actual number of days in
period, with semiannual compounding i f more than one coupon period is involved.
97

- 7-

the program for resolution of the problem or our international payments 1robe'.
It 1.'3 a program to which the shippi..'1g industry of the Un! ted states can make, 1ZId'
is in fact making, an effective ~ntr1butlon. It 13 &180 • program which w11l
provide direct benetits and opporttmities to the industry 1tself • I am oanttdeIn
you will ta:e f'ull advantage or the challenge and opportunities ofrel"ed by it.

- 6-

le..

ConIDeroe Department study alJJo points out thin tr.8. nag .....11,
than 9 pel"Olnt or the total iJIt'OrM - ' ezporta or _ 11•••
in 1962 4ta2.'Md an en1Dated 23 peroent ot all trellb' ~ . . . .M« lJ1 . .
oeean bomt roreign trade ot the U.S. The htgher peroentep ot N.rm. thaD of
tonnage oat-ried appell'S to retlecn variou eond<SeJldtOM. AIImr tbHet •
larger proportion ot our export than our import to~ i.e 0U"r1e4 on shipe ot
U.S. registry; total export tonna.,.ae carried on our l.1ners 18 nearly tria. our
import liner cargo tonnage; higher value cargoes, on whioh might rates t.nA to
be higher as well, are rrore ot'ten oarried on linera; and about 28 percent ot U,S,
export" rrx>ving on liners J!Dve on tho8e of U.S. regiatry.

whUe

aaft"1'inc

The relation of freight rates to the conpetitivenua or AmIr10an expor\l
oontinues under active study. The President referred to it in his July 18 W.
of psyments Message to the Oongress; the White lbuae Ezport Expansion ContlNMe
oormdttee ot private bus1nesSJIen, to which I referred earUer, urged that tIN
interested in foreign trade seek to determine whether ooean freight ratel lit
disciminatory or adversel,y arrect their ability to export. TbI Joint EacaIlo
())mm1ttee of the Congress is resu.m1ng hetvinga on this subjeot, and the
Maritime Conm1ssion's new ~, Adm1.ral John Harllee, anmunoed s~.
taking oftiae that this subject \'IOUld be given top priority. I lmow you will
oooperate to the utIlX)8t in the examination of thi8 eomplex wbJeot.

hdt.

We are all engaged in critical self-examination tAt fortify the ~tI
pes1tion of our country. In that spirit that same oonmdttee ot the Export
Expansion ())nferenee was pronpted to add that "~nwnt and lalx>r in the
traruJpOrtation indwrtry should adopt all practicable methods of freight an4 . ,
handling which can lead to coat reductions and therefore lower might ratti,
tin1B Ll'lcreasing the competitiveness of American products overnu.: 1
In 8\1IlJl:&t1on, the Administration's program to restore balanoe in our
international accounts involves simulta.Y*>usly the promotion ot sound grorih
at hoIllt, rrore effective utilization of our nater1.al and lnJman reaourcea and
elim:f.n&t1on of mmeoessary costs. These actions will reault in 1mpro~t b.
compe"titiveness, increases in our trade surpluses and reduction of our aap11ll

outtlows. The first step and forenost ot the m8U'Ul'eS to ao~ these ell4I iI
the comprehensive tax reduction and revision legblatUb approved last nonth 1111
the i-louse of Representatives.
Tbe 3eoond step outlined by t.oo President is, like the first, sign1t1both tor its dOII8stic as well as its balance of p8yBltllW .treats. That ....
step is maintenal1ce of price-oost stabW ty, with business and labor ura-d tD••J
reoogn1ze and use reasonable guideposts in the resolution ot the i8SUd ot.,.
bargaining •
Paring of coata - governmental as well as private - lItiD&1lation ot . economic [;I"OVlth, expansion of U.S. exports, promtion ot tcNr1Mt trawl to"
shores, stinulation of' foreign short-term and portfolio holdinp in the U.S.,
equalization of QOIIts of lone-term borl"ow1ngs tor entAl'prist. ot developed
nations in their own and the U.S. capital markets - these in essence QOl1IUtIIII

co
v .....

-,Becauae a large part, of thI long-term ~" in our tntArllaYa.' ~
Host li8au8ar1ly be sought through 1MreUed aalM ot ~ _Nhandi. __

beoause ftCh sales are d1reotly dependent not cml\v'

pzvnbtioNl. ettort _

also on priae co~titivene,," the relat1onah1p ot ahipplxw ooeta 1e apwto
COIIiJ8titiveness w1ll inevitably be oonstantly under ~ in ~.~
ot the shipping industry's role in our balanoe-ot-~ta PJIOhl.em.
Erf'0rt8 to IllIUUft the direct ocmtrlbution of ocean ah1pp1nc to oar balan..
by considerations or acaounttnc ocma.pta aDd oel'tlh
l1m1tations implicit in the data, particru1arly .. to Port Expenditures. hi" ant
a.broad, which are included in the "Transportation Aecountl1. For exaq>le, onl1
t~aotions between U.S. and foreign reeiden"ts actually enter 1n1lo aur he]anoeof-payments aooounting. Hence, it ah1pnenta to tt. U.S. are ~ in U.S,
bottom tor the acoount ot U.S. rutdenta, the tN1ght ~U 1IMtlftCl do
at all in our balanoe-ot-~ accounts, tor t.l:&ee ue ~t.a
.AIIui~
31m:l.l.arly freight ooats tor tratl8POrt ot U.S. goods a~ on f'oN1cn IIhipI 1ft 11\
inoluded in the balanoe-ot-~nte aOOOl.Ult8 .. theae . . u1-u..~ pal. trIl " t
foreign importer and t.bwI rep~nt tranActiona bet.aezl two tore1plere, no" ID
American and a toreigner. By the s . . token, ~ta tor 8h1pJD1nW in Artwri.
bottone ot USS. mU1 tary goods and other equipDl'tnt sent to 0Ul" own .-.4 toNe
overseas do not enter into the bal.anoe.or-~t8 aooount. I am, 1no1d1nt~,
informed that approximately $2'0 million in freight chargee were paid to An81'l1n
sJiir, owners for military shipnenta ot this 1dn1 in 1962.

ot payments are aompl1oated

_-.en

DO\"

Obviously, our balance of' ~ta is helped by tbt ~ ot Amer1aan sh1pp~
(provided this does not entail pricing U. S. expol'"ta rut of wor14 Darliata) _.
though thl !nCOml or expenditure itMlt ~ not appear in the balanoe ot ~ta
statistics. If that $250 million, tor exanple, had been paid to toreign ahip',
it would have represented all addition to our defiai t , although certain ott!tta
would have oocurred through port Upenditures by thoee toreign ships hue. 'nil
POrt expe:ndituNs, which comprise a variety ot item including ~, pori
use and piloting tees, advertising, ohandler supplies, and peraonal QeDd1ng by III
crews, pertorce are estimates at best. They have, moreever, as t.bI .DIrpe1 buM ~
ConmlJ"Oe recently noted, been on the r1.e in the put decade or more, and nil
constitute an important, partially balanoing element, m1n1m1s1Dg l.up tluetua.
on the orad 1t or the debit side or the transportation aooount of the Mlanoe of
payments.

Thus, the I:epartnent ot CoI1inlrce has round that during 1962 our ships . freight revenues from foreigners approxinat1ng $6CX> ndllionJ YbUe

u.s.

paid over $800 million tor the oarr1age ot ocean t"re1aht on foreign ahipe. \'!III
deficit reneots the declining partlo1pe.t1on ot U.S. neg vetJ~ in tbt ~
ot foreign trade. But port expenditures conatittrte a partially balanoing ~
minimizing large fluctuations on the credit or debit side ot the transportat~
account ot the Balance of Pa.;rmlnts. Th1s is illUBt1"ated by tbt tact that t"'l
ships expended $679 million in our porta, in oompar1aon with $24l m:l.l1Son ~
to have been spent by our ships in foreign porta. Alter &l.l.oriIJg tor ..u
and S01DItlFhat larger expenditures tor charter hire. '\be _t etteot of 'U1MI UIIf'
aotions wu a favorable balance or $'4 mUlion in the bllanae of PIO-nts .-for ooea.n tra...~rtation or cor:r.ndi ties in 1962.

100
- 4 -

ot
ot short-term investment tunds,

F1ret indiaationa of the suaaesa

the

Qo,4tr!"lt'.

IIDfta

_at«

l.eI~

and in propodnr tbI IDteNn 1qIaU_
Tax were eiven by Searetary DUlon last week during the W02'ld Bank tmcl P\md ~
He credited these as principal reuons tor h18 expeotat1ona tlw.t the balanoe ot

the lo88

Pft.ymants def'1oit during the th1.rd quarter ot th1a year ~4 'beeabotlt halt ot t.ba1
in the I!feoond quarter. He oalled it "a ntist'actOP,Y' development".

Foreign investment works both wa.ys, ot GOUrSe. ~ in U. 8. 'Private
secur1ties by foreign savera fell to len than $1'0 mlllion in 1961. Pre.1dieDt
Kennedy pointed out that a tar 'better climaw tor that Id.nd ot ~nt oan_
from the tax bill pISSed by the Houae, but that a f'lrther stlrrulua fA also ~,
He direoted that an aation progren be initiated designed to pIQlIC)'W '\be Oftl'ltll
sales ot seourities by U. S. eompanies, and last ...k namI4 & Tuk Force to ~
ways mst etteatively to puMUe th18 objective. The gnNp wUl opeate under \II
oha1rmanahip ot Henry H. 1't1trler, Undel" Secretary ot the 'l"reaftr:r.

Thus we see that the broad issue 18 not Whether the la.t'P det101ts ot l'tGlllt
years in our international pqmmts can be reduoed cr not - but rather haw~,
and by what means. The neans already adopted ot" now proposed by this GoW1"l8ul
imply primary and continued :rellanoe on a trauework ot JlI)nltary lItabt11 ty, ~
growth and eXpanding trade not o~ as applied to our own eOOl'lOD\Y, but to •

1m!t world eoononu. ThiaI object!ve ot increued ha.rDI:m1oas QOOpel"ation wu ....
by secretary Dillon at the annual meeting ot the International M:metary P\md a
World Bank last weel-= in Washington. Indeed, you w1ll. find that tlw President'.
program for dealing with the balance ot pa;ymlnts p1'IOblem has been and will acnu.
to be rounded on then basic propositiona unt'ettered by oontl'Ols or ftatr:1et1C111
allen to Om" tradItions. I believe alncat all ABIIricans aft In aooord with tl1a
~(t.~. . i.ft ...... I am wre all mambers ot the Maritime and allled blduatri.s
concur.
The shipping industry, which depends tor 1te VfJl"9' exlnanoe on two-way toJtiI
trade and travel, nwJt be particrularly coMcious ot the neec1 tor 1I8U'\lN' wh1~
have bttoona necessary if .. are to resolve th1. preble in 1nIY8 Yhiah will p1'tI'a
rather than restrict or endanger the oontinued b1talthy growth ot the over-all
volume or world trade in goods and aervioe••
Our ,\J"lerican l!erahant r.larine haa an important role to p1.a;y' in this respeat,
fOI'emst is the service it is already rendering through its representatives htJt
and !broad in &BsUt1ng in the dis covary and developTlllllt ot Dft' uc-ket8 and CUStolDllr8 tor AmIr10an goods. Th:f.8 serviae, hiator1oal1.y cUlaraoteriatio ot tJf
industry, was the subject ot recent compl1nentary re.rka by the bwl1nM8IlBt1"
Conm1ttee on Trade ProIm:ttion Activities at tm. White HmIft ecm.terenoe on !IpII'\ .
ExpaM1on, which urged that even greater publicity be given this aontributiolllf
our ~,,1erehant Harine to the Prendent' 8 program. S1mUar important aontrilmare being IIIlde by the Shipping tndutry to our OovtmiIBnt's 4riw to p1"Orll)W'travel to the U.S. These activities ware initiated long . . . . . and will ~
long atter our balance or payments problem 1a solved; but the intensity and"
or the current t;pproach of those assooiated nth it ~ notable.

-3-

101

J:exjmising the portion or our foreign _natanoe ~ wbiGh 18 _ad tar ~
AmriGaIl goods. In the last fiaoal year AID tied tour out ot eYe17 tift clolllft
ot its aoumttnents to the e:J:pOrt or u. s. goods and
Thai pe~ 11
on the increase. By t1aaal 196' the portion ot our toft1cn aid P1"OV1ded in
ot dollars rathar than goods will be (Nt in halt tJOIl the b111:lot1 dollar -cn1..
of 1960 and 1961 to ~ 500 mUllon or 1.8S.

eern._.

Our military ~ abrotad bu al80 been held t'bI1q down.

t.bt,.

In hia hq

nass. to the eongre•• , the President Rid that b1a intention .... to t'urtbIr ..
the annual dollar outley ot 0Ul' mU1 tary r... ovel .... lIy $300 adll fon a ,....
the reduation ot purchue8 ot foreign strategic IIII1ier1al b.1 amtblr t200 mUlJa.
The rate ot total Govern.nJtnt epend1ng ~ - both by AID and Dlftnn - 11U_
• bUlion doUare over the nut year arx1 • halt.

ot aet10n in (Nt' progNm a1mad at -oh1eYt.nI a balanoe in 111'
- t..l1at ot international eapital mwmente - has be_
inoreu1ngly Dftllingtul. capital ogttlan both abort and long-term, play.
st.gn1t1oant role in teterm1ntng our deficit. Even though our uporte ot lcq..*
oapital bring baok substantial blmetita in the lonpr rml, C\Y broM progN
The third area

international

~ts

the present d.et1G1t pod,t1on IUIt tu. into acowni . . . . . . tor ~
the iJm8d1ate impact ot oapiWouttlon. 1'h th1a GODtelet, the !reuury _ _
aDd the P'ederal. ~servw systB baft been 08N~ uaing the toola ot
polley and debt ~t. :rnor.uee in short-term 1rrtereri raw. have been
etfected while at the s . . t1mI anple aNdit ava1l&billty baa been ma1ntaiDld,.
long-term and 'b.... ...,. ratAe [are lower, and in uarw .... deal.1n1Dg. \ I_I~IYL J

nmw.

~L- ~~ t~ ':V, (

-- .

.-'

With the inOJ'MM in short-term interest rawa, our 'bank8 w1ll be abl.t
ftl)N effectively in attraotin« tunda which might othftwiM leave

oompete

the"to

In the long-term inve8tmtnt tield there has been untU vary recently an
alarm1ng outtlow ot capt tal. All a renl t, new etepe are beinI taken in th1l ti6
to oonect the CUl"Nnt ~anoe.

lOi
- 2 -

wMall demand active and creative GOIl8!dera'tion by tb1a

CIOUDt.17.

_rTl_,

'l1le Administration's program seeks 1mprovetnlJlt ot our balanoe ot .,.,....
position in three major areas: oommel"otal tnde,in &DCd1 and
Qcn",-!
expeI¥1itures, and private oapital movements. All are aNd in whiab '\he ..ttbi
interests represented here today have a vi tal rlake.
The t1ret area, that of' trade, is by tar' the wtght1ert in teraB ot doUars.
oent.s. The United states has tradItionally ma1nta1nea • a1Mble Vwi• ...". h
the value or exports over imports. Tbla. eont1m&e to be larpr than tba~ ot II\'
other nattdHll. Even arter dedueting the exports t1naneed 'by aove~ 1JIIItI"
loanI!I, we find the favorable balance ot payD8Ilts trade in 1962 to have __ . .

than $2 bUlion. The COlllDln'Oial trade surplua continues at about the 1 _ ftW
this year. In our efforts to olose the deficit in the balance or ~tI, "
neither want nor intend to limit imports. OUr geal. is to expcd exportl.

This good record, however, is not good enough. We DWrt export. J1I)N. . ,
stepe are open to us. Firat, we JIIUIt maintain our ao. . . to f'oft1p aar~.
That was the goal of tbt Trade Expanaion Act lut ,ear, and the \lpOO1dnc . . of
tariff' negotiations in Geneva which will d.term1nt the climate in whiob . . .
produoera will seU gooda abroad tor any year8 to ~. ~, in an tIId4
market for our good8, and partiCNl.arly our 001'l8U1Dar good8, we oaaat aompt. . .
suc08sltully to inorease our shaae of' exported mamtacrtured goode. We halt ta1~
in the good reputation our D8mlfacturers have earned, and .... Dll8t bank lIIPOI till
quali ties to increue exports in th.1s category to keep pace with 1;boae in the.
traditional raw materials and semi-rtnished and heavy oapital goods that bin II
the past made up the bul, of our export trade.

.It.

Ju:::t as the trade bill was designed to help in the first phase of' th1t .tfII
the Government hu also IlDVed torcetully to assist private bwl1nua in
phase. The Hat:1on's productive emet.ney is oloMly related to the lelelof
investment in productive equipnent. Realizing that our investn.nts in new am
!~ern equipment were less than those abroad, President Kennedy Nt an ina'tIIl
suell inveatmant as a national goal. This DB the reuon behind the -.Jor prid
in last year's Revenwt Act to provide a 7 peraent c:Nd1t for Ilft 1nves~, III
also for l1beraluing the tax treatment or depreciable equipment. Both . . . ~
already shawn productive results.
The mst important measure noy which wUl btlp 1ncraue our expolU ... ttl
bill passed by the House late lut DDnth and yhich is at pr...nt before • ttl
As you know, this bill cal.lB tor an $11 billion reducrU.on in both iD41Yi411111i
oorporate inoome taxes. It w1ll st1naaJ ate demand and inore... 81aD1ti~ ~
the incentives to Amerioans to invest in our produotive ettioienO'Y'. It IlPIl4
greatly aid Amerioan private enterprlae in getting a laWer .haN ot feJIiF"
It is d_igned both to strengt}wn our balance ot ~r.aezrM posi tton aDd " be ,~
DDve toward providing mre Job! and speeding eOODOJde upana10n lwft at _.

et""

But trade I although 1t 18 oert~ one ot the mn ~ ..,...
in correcting the imbalance in our international IMUmenM, 18 not ta. ODlJ.'
The second area, that of Oovernment expenditures, is also of' great aign1ttelJllf
CL·r~riT'.g out our prograr~. Goverr~nt expenditures, under the President'. ~
ha'fe beer: so adr.d-rdstered a3 to !irl.ninize their impact on our balance or ~

lO?
TREASURY DEPARTMmlT
Was~n

lm.WUCS OF THE HONORABLE JAUIS A. REID
ASSIsrANT SECRI'WtC OF THE TREA.SURY
AT THE

AMERlCAl~

1:m:RCHANT I,WUNE OONFERENCE

LORD BALTDIlRE HOTEL, BALTDIlRI, MAJaI.AND,
THURSD!\Y, OCTOBER 10, 1961, OOON, IDl
It 1s a pleU'U1"e to appear before a I1'GUP de410ded to the

martu. ~

ot our C01"1try. I 11Md ~ rem1Dt you that tbe TNMu.17 ~ 1a "'11
s1mpl,v ,~"", depository ot our national rtclMta and '\lw ~'\or of OR _ _
debt; I ~1n06 lit al80 hu the ruponaibillty ot superviainl . . o-U-r tuDots.. II
our Go rernnent, ~mt of the mat important ot which relate di1"ectly' to uartUit
afraiN. Th1a reaponaibUity evolved rroa the ~I. h!nDrio ~csUell'
the nation's seaborne trade. That oonnection, appropria.~ eD£NIh, ... ~
concerl*i with the national reve.nuatI, and oontimH te be 8O.

to Alexander Hamiltan, our t"1rlIt Sec:retary ot tha 'heaII'u17, aM ....
Firat ~~.. , ten outteN were built to serve as tbI "Bevenue MariDa". ftdr
job WM to 1n8ure that the dutiM on the ~ into OIU' JOU'DI _t1aa-'iel'8c-mt.~
mlnit1ed by nuggl.erll or siphoned ott by' pirates. rr.a th1a . .,1 be&imIbr II
not onl.y the nn nation's armed foroe at "a, but CN1" C\uJtoml!I Serviae aDd Ualit
states Cout Guard. Both are still 'If1thin the 'heaII'u17 DIrpIrtDmrt, whlft I ld'
privUage and the reapoNlibUity ot supervising thlir actIvities.
'l'hanlaJ

The Coast Guard, as you are . .11

oun..

aware, performs a DUltitud. ot .na.lJ

important tltnot1ons in tbI nar1:U. . Nald. With equal1qJortaDoe, iv
along with m&!\Y other ooq>lex and vital responaibU1tl.. , IIII8t asSUft i'Ul1t,"
an annual invasion ot eo_ 48 million vee..la, atraran, enonab1l.n, tNIJaI, lit
and other oarriers entering our ports aDd a11'porta or croatng our laDd
not carry oontraband.

boIdtft.

I am pa..ed to state here that many wblrtant1a1 ehalJCU are in tbI "....
developnent, which wUl reault, I am sure, in the CoaIJt Quard axvJ cu.... __
roore eft'eot1ve, efficient and ltDdern organizationa.
But today I 'WOuld 11k8 to speak about a IlUbJect whieb tbI TreuuI7 boldI'
baing of oona1derable concern: our Balance ot ~.

Ten years ago 1 t _1Itd an adequate det1n1tion ot that .... to • ., . . t»
halmoe ot pqmanta YIU simply the d1tterenoe betawn '&bat tbe Un!tid ......
both OovernDElt and private - paid out to tore1gnera, and wbat \he7 pa14 to"
Tod", we need to know m1'e about it, and what to do abo1n it.
The n1ft upcurve of recovery in We. tern IUrope owr •
put de .... , ....
oontinued need for tOl'eign aid and de~ ~ tor aiable lJIdW ftj
expan1Itu:Ns abl'Oad - all have oombined to plaee thI eant1m1 JW detid., in ~
United statu balanoe ot payments in t~ VfIr'3' tofttrarn ot the . . . ad. ~

TREASURY DEPARTMENT
Washington

10~·

RELEASE ON DELIVERY
REMARKS OF THE HONORABLE JAMES A. REED
ASSISTANT SECRETARY OF THE TREASURY
AT THE AMERICAN MERCHANT MARINE CONFERENCE
LORD BALTIMORE HOTEL, BALTIMORE, MARYLAND,
THURSDAY, OCTOBER 10, 1963, NOON, EDT

It is a pleasure to appear before a group dedicated to the maritime interests
our country. I need hardly remind you that the Treasury Department is JlX)re than
ply the depository of our national riches and the administrator of our national
t, since it also has the responsibility of supervising many other functions of
Government, some of the most important of which relate directly to maritime
~irs.
This responsibility evolved from the Treasury's historic connection with
nation's seaborne trade. That connection, appropriately enough, was originally
~erned with the national revenues, and continues to be so.
Thanks to Alexander Hamilton, our first Secretary of the Treasury, and to the
t Congress, ten cutters were built to serve as the "Revenue Marine". Their
was to insure that the duties on the imports into our young nation were not
ified by smugglers or siphoned off by pirates. From this small beginning grew
only the new nation's armed force at sea, but our Customs Service and United
es Coast Guard. Both are still wi thin the Treasury Department, where I have the
ilege and the responsibility of supervising their activities.
The Coast Guard, as you are well aware, performs a rnul ti tude of extremely
rtant functions in the maritime field. With equal importance, its Customs Service,
g with many other complex and vital responsibilities, must assure itself that
nnual invasion of some 48 million vessels, aircraft, automobiles, trucks, busses
other carriers entering our ports and airports or crossing our land borders do
carry contraband.
I am pleased to state here that many substantial changes are in the process of
Lopment, which will result, I am sure, in the Coast Guard and Customs becoming
effective, efficient and modern organizations.
But today I would like to speak about a subject which the Treasury holds as
of considerable concern: our Balance of Payments.
Ten years ago it seemed an adequate definition of that term to say that the
ce of pRYffients was simply the difference between what the United states -Government and private -- paid out to foreigners, and what they paid to us.
we need to know more about it, and what to do about it.
The swift upcurve of recovery in Western Europe over the past decade, and the
nued need for foreign aid and defense requirements for sizable United states
ditures abroad -- all have combined to place the continuing deficit in the
:i states balance of payments in the very forefront of the economic problems

- 2 ~h

demand active and creative consideration by this country.

1.' OrJ_'

The Administration's program seeks improvement of our balance of payments
ltion in three major areas: commercial trade in goods and services, Government
~nditures, and private capital movements.
All are areas in which the maritime
~rests represented here today have a vital stake.
The first area, that of trade, is by far the weightiest in terms of dollars and
ts. The United States has traditionally maintained a sizable trade surplus in
value of exports over imports. These continue to be larger than that of any
~r natioL.
Even after deducting the exports financed by government grants and
1S, we find the favorable balance of payments trade in 1962 to have been more
1 $2 billion.
The commercial trade surplus continues at about the same rate
j year. In our efforts to close the deficit in the balance of payments, we
~her want nor intend to limit imports.
Our goal is to expand exports.
This good record, however, is not good enough. We must export nore. Two
)s are open to us. First, we must maintain our access to foreign markets.
; was the goal of the Trade Expansion Act last year, and the upcoming role of
.ff negotiations in Geneva which will determine the climate in which American
lucers will sell goods abroad for many years to come. Secondly, in an expanding
:et for our goods, and particuJ.arly our consumer goods, we must compete more
essfully to increase our share of exported manufactured goods. We have faith
he good reputation our manufacturers have earned, and we must bank upon those
ities to increase exports in this category to keep pace with those in the more
itional raw materials and semi-finished and heavy capital goods that have in
past made up the buJk of our export trade.
Just as the trade bill was designed to help in the first phase of this effort,
30vernrnent has also moved forcefully to assist private business in the second
~.
The nation's productive efficiency is closely related to the level of
jtment in productive equipment. Realizing that our investments in new and
~ equipment were less than those abroad, President Kennedy set an increase in
investmen~as a national goal.
This was the reason behind the major provision
1st year's Revenue Act to provide a 7 percent credit for new investment, and
for liberalizing the tax treatment of depreciable equipment. Both moves have
ldy shown productive results.
The most important measure now which will help increase our exports is the tax
passed by the House late last nonth and which is at present before the Senate.
u know, this bill calls for an $11 billion reduction in both individual and
rate income taxes. It will stimulate demand and increase significantly again
ncentives to Americans to invest in our productive efficiency. It should
ly aid American private enterprise in getting a larger share of foreign markets.
designed both to strengthen our balance of p~ents position and to be a major
toward providing rrore jobs and speeding economic expansion here at horre.
3ut trade, although it is certainly one of the most important areas of action
~recting the imbalance in our international payments, is not the only one.
~cond area, that of Government expenditures, is also of great significance in
lng out our program. Government expenditures, under the President's program,
)een so administered as to minimize their impact on our balance of payments by

- 3 -

lOb

maximizing the portion of our foreign assistance spending which is used for buying
American goods. In the last fiscal year AID tied four out of every five dollar~
of its commitments to the export of U. S. goods and services. That percentage lS
on the increase. By fiscal 1965 the portion of our foreign aid provided in the form
of dollars rather than goods will be cut in half from the billion dollar magnitudes
of 1960 and 1961 to $500 million or less.

Our military spending abroad has also been held firmly down. In his July
message to the Congress, the President said that his intention was to further reduce
the annual dollar outlay of our military forces overseas by $300 million a year and
the reduction of purchases of foreign strategic material by another $200 million.
The rate of total Government spending abroad -- both by AID and Defense -- will drop
a billion dollars over the next year and a half.
The third area of action in our program aimed at achieving a balance in our
international payments -- that of international capital movements -- has become
increasingly meaningful. Capital outflows both short and long-term, play a
significant role in determining our deficit. Even though our exports of long-term
capital bring back substantial benefits in the longer run, any broad program to
improve the present deficit position must take into account measures for reducing
the immediate impact of capital outflows. In this context, the Treasury Department
and the Federal Reserve system have been carefully using the tools of monetary
policy and debt management. Increases in short-term interest rates have been
effected while at the same time ample credit availability has been maintainedj both
long-term and mortgage rates have declined.
With the increase in short-term interest rates, our banks will be able to
compete more effectively in attracting funds which might otherwise leave the country.
In the long-term investment field there has been until very recently an
alarming outflow of capital. As a result, new steps are being taken in this field
to correct the current imbalance.
We have proposed to Congress that an Interest Equalization Tax be placed on
purchases of foreign securities by Americans from foreigners. Capital market
facilities in other major countries are not adequate to serve their domestic needs,
and a number of them are still subject to controls. With rare exceptions they display rate structures which are both high and rigid. The result is that the efficient
New York market has become the focal point of capital demand from allover the world.
We hope that the developed nations of the world will be encouraged to develop more
efficient markets for mobilizing and directing their own domestic s~~vlr";s both for
their o\T.n investment needs and for assistance to less developed countries.
In the interim, the Interest Equalization Tax is designed to reduce disparities
in borrowing costs here as compared to those in major foreign markets. However, we view
this tax measure as a temporary expedient. The effective results of the tax will be
to raise the interest rate for foreigners borrowing in the American market by
approximately I percent. It is designed to do the job in such a fashion that it
will not intrude into individUal negotiations bet'ween the borrowers and lenders
And it will not restrict the free use of dollars.
•

- 4First indications of the success of the Government's moves toward lessening
the loss of short-term investment funds, and in proposing the Interest Equalization
Tax were given by Secretary Dillon last week during the World Bank and Fund meetings.
He credited these as principal reasons for his expectations that the balance of
payments deficit during the third quarter of this year would be about half of that
in the second quarter. He called it "a satisfactory development".
Foreign investment works both ways, of course. Investment in U. S. private
securities by foreign savers fell to less than $150 million in 1962. President
Kennedy pointed out that a far better climate for that kind of investment can result
from the tax bill passed by the House, but that a further stimulus ~s also needed.
He directed that an action program be initiated designed to promote the overseas
sales of securities by U. S. companies, and last week named a Task Force to study
ways most effectively to pursue this objective. The group will operate under the
chairmanship of Henry H. Fowler, Under Secretary of the Treasury.
Thus we see that the broad issue is not 'whether the large deficits of recent
years in our international payments can be reduced or not -- but rather how rapidly,
and by what means. The means already adopted or now proposed by this Government
imply primary and continued reliance on a framework of monetary stability, flourishing
growth and expanding trade not only as applied to our own econoII\Y, but to a closely
knit world economy. This objective of increased harmonious cooperation was stressed
by Secretary Dillon at the annual meeting of the International MOnetary Fund and
World Bank last week in Washington. Indeed, you will find that the President's
program for dealing with the balance of payments problem has been and will continue
to be founded on these basic propositions unfettered by controls or restrictions
alien to our traditions. I believe alnost all Americans are in accord with them
and
in which I am sure all members of the Maritime and allied industries
concur.
The shipping industry, which depends for its very existence on two-way foreign
trade and travel, must be particularly conscious of the need for measures which
have become necessary if we are to resolve this problem in ways which will promote
rather than restrict or endanger the continued healthy growth of the over-all
volume of world trade in goods and services.
Our American Merchant Marine has an important role to play in this respect.
Foremost is the service it is already rendering through its representatives here
and roroad in assisting in the discovery and development of new markets and new
customers for American goods. This service, historically characteristic of the
industry, was the subject of recent complimentary remarks by the businessman's
Committee on Trade Promotion Activities at the White House Conference on Export
Expansion, which urged that even greater publicity be given this contribution by
our Merchant Marine to the President's program. Similar important contributions
are being made by the shipping industry to our Government's drive to promote tourist
travel to the U.S. These activities were initiated long before and will continue
long after our balance of payments problem is solved; but the intensity and verve
of the current approach of those associated with it are notable.

- 5 -

Because a large part of the long-term improvement in our international payments
must necessarily be sought through increased sales of American merchandise abroad
and because such sales are directly dependent not only on promotional effort but
also on price competitiveness, the relationship of shipping costs to export
competitiveness will inevitably be constantly under consideration in any examination
of the shipping industry's role in our balance-of-payments problem.
Efforts to measure the direct contribution of ocean shipping to our balance
of payments are complicated by considerations of accounting concepts and certain
limitations implicit in the data, particularly as to Port Expenditures, here and
abroad,. which are included in the "Transportation Account". For example, only
transactions between U.S. and foreign residents actually enter into our balanceof-payments accounting. Hence, if shipments to the U.S. are carried in U.S.
bottoms for the account of U.S. residents, the freight payments involved do not appear
at all in our balance-of-payments accounts, for these are payments between Americans.
Similarly freight costs for transport of U.S. goods abroad on foreign ships are not
included in the balance-of-payments accounts as these are ultimately paid for by the
foreign importer and thus represent transactions between two foreigners, not an
American and a foreigner. By the same token, payments for Shipments in American
bottoms of U.S. military goods and other equipment sent to our own armed forces
overseas do not enter into the balance-of-payments account. I am, incidentally,
informed that approximately $250 million in freight charges were paid to American
ship owners for military shipments of this kind in 1962.
Obviously, our balance of payments is helped by the use of American shipping
(provided this does not entail pricing U.S. exports out of world markets) even
though the income or expenditure itself may not appear in the balance of payments
statistics. If that $250 million, for example, had been paid to foreign ships,
it would have represented an addition to our deficit, although certain offsets
would have occurred through port expenditures by those foreign ships here. These
port expenditures, which comprise a variety of items including bunkerage, port
use and piloting fees, advertising, chandler supplies, and personal spending by the
crews, perforce are estimates at best. They have, moreover, as the Department of
Commerce recently noted, been on the rise in the past decade or more, and now
constitute an important, partially balancing element, minimizing large fluctuations
on the credit or the debit side of the transportation account of the balance of
payments.
Thus, the Department of Commerce has found that during 1962 our ships received
freight revenues from foreigners approximating $600 million; while U.S. customers
paid over $800 million for the carriage of ocean freight on foreign ships. This
deficit reflects the declining participation of U.S. Flag vessels in the transportation
of foreign trade. But port expenditures constitute a partially balancing element
minimizing large fluctuations on the credit or debit side of the transporta.tion
accOlmt of the Balance of Payments. This is illustrated by the fact that foreign
ships expended $679 million in our ports, in comparison with $241 million estimated
to have been spent by our ships in foreign ports. After allowing for small receipts
and somewhat larger expenditures for charter hire, the net effect of these transactions was a favorable balance of $54 million in the balance of payments account
for ocean transportation of commodities in 1962.

- 6 The Commerce Department study also points out that U.S. flag vessels,
while carrying less then 9 percent of the total imports and exports of the U.S.
in 1962 earned an estimated 23 percent of all freight revenue generated by such
ocean borne foreign trade of the U.S. The higher percentage of revenue than of
tonnage carried appears to reflect various considerations. Among these: a
larger proportion of our export than our import tonnage is carried on ships of
U.S. registry; total ~xport tonnage carried on our liners is nearly twice our
import liner cargo tonnage; higher value cargoes, on which freight rates tend to
be higher as well, are more often carried on liners; and about 28 percent of U.S.
exports moving on liners move on those of U.S. registry.
The relation of freight rates to the competitiveness of American exports
continues under active study. The President referred to it in his July 18 Balance
of Payments Message to the Congress; the White House Export Expansion Conference
committee of private businessmen, to which I referred earlier, urged that firms
interested in foreign trade seek to determine whether ocean freight rates are
discrl::il?_'tOlyor adversely affect their ability to export. The Joint Economic
Committee of the Congress is resuming hearings on this subject, and the Federal
Maritime Commission's new Chairman, Admiral John Harllee, announced shortly after
taking office that this subject would be given top priority. I know you will
cooperate to the utmost in the examination of this complex subject.
We are all engaged in critical self-examination to fortif'y the payments
position of our country. In that spirit that same committee of the Export
Expansion Conference was prompted to add that "management and labor in the
transportation industry should adopt all practicable methods of freight and cargo
handling which can lead to cost reductions and therefore lower freight rates,
thus increasing the competitiveness of American products overseas."
In summation, the Administration's program to restore balance in our
international accounts involves simultaneously the promotion of sound growth
at home, more effective utilization of our material and human resources and
elimination of unnecessary costs. These actions will result in improvement in our
competitiveness, increases in our trade surpluses and reduction of our capital
outflows. The first step and foremost of the measures to achieve these ends is
the comprehensive tax reduction and revision legislation approved last month by
the House of Representatives.
The second step outlined by the President is, like the first, significant
both for its domestic as well as its balance of payments effects. That second
step is maintenance of price-cost stability, with business and labor urged to
recognize and use reasonable guideposts in the resolution of the issues of collective
bargaining.
Paring of costs -- governmental as well as private -- stimulation of sound
economic growth, expansion of U.S. exports, promtion of tourist travel to our
shores, stimulation of foreign short-term and portfolio holdings in the U.S.,
equalization of costs of long-term borrowings for enterprises of developed
nations in their ovm and the U.S. capital markets -- these in essence constitute

- 7 the program for resolution of the problem of our international p~nts imbalance.
It is a program to which the shipping industry of the United States can make, and
is in fact making, an effective contribution. It is also a program which will
provide direct benefits and opportunities to the industry itself. I am confident
you will take full advantage of the challenge and opportunities offered by it.

TREASURY DEPARTMENT

October 10, 1963

FOR IMMEDIATE RELEASE
TREASURY MARKET l'RANSACTIONS IN SEPTEMBER
During September 1963, market transactions in
direct and guaranteed securities of the government
for Treasury investment and other accounts resulted
in net purchases by the Treasury Department of
$373,122,000.00.
000

D-998

111
TREASURY DEPARTMENT

October 10, 1963

FOR IMMEDIA'l'E RELEASE
TREASURY MARKET l'RANSACTIONS IN SEP'l'EMBER

During September 1963, market transactions in
direct and guaranteed securities of the government
for Treasury investment and other accounts resulted
in net purchases by the Treasury Department of
$373,122,000.00.
000

D-998

T;;'l~ASU:~Y

DI:PARTNENT

i-lashington
H1HEDI;..TE RELEASZ

D-999

FRIDAY, OCTOBER 11,1963

The Bureau of Customs has announced the following preliminary figures
shoHin:-; the imports for consumption from January 1, 1963, to September 28, 1963.
inclusive, of commodities under quotas established pursuant to the Philippine
Trade Agreement ~evision Act of 1955:

Commodity

Established Annual
Quota Quantity

Unit
of
Quantity

Imports
as of
September 28, 1963

Buttons ••••••••••

680,000

Cigars ...•..••...

160,000,000

Number

Coconut oil ••••••

358,400,000

Pound

311,436,254

6,000,000

Pound

4,155,346

5,200,000

Pound

4,968,853

Cordage ••••

o •••••

Tobacco •••••••

o ••

Gross

194,684
9,622,857

11.?
TREASURY DEPARTMENT
Washington
HiMEi) lATE RELEASE

D-999

FRIDAY, OCTOBER 11,1963

The Bureau of Customs has announced the following preliminary figures
shOto/ing the imports for consumption from January 1, 1963, to September 28, 191)3,
inclusive, of commodities under quotas established pursuant to the Philippine
Trade Agreement ~evision Act of 1955:

Commodity

Established Annual
Quota Quantity

Unit
of
Quantity

Imports
as of
September 28, 1963

Buttons ••••••••••

680,000

Cigars •••••••••••

160,000,000

Number

Coconut oil ••••••

358,400,000

Pound

311,436,254

Cordage ••••••••••

6,000,000

Pound

4,155,346

Tobacco ••••••••••

5,200,000

Pound

4,968,853

Gross

194,684
9,622,857

-2-

Commodity

··•
·•

Period and Quantity

••
: Unit
Imports •
:
of
as of
: Quantity ; Sept. 28"]

Absolute Quotas:
Butter substitutes, including
butter oil, containing 45%
Calendar
or more butterfat ••••••••••••••• Year 1963

1,200,000

Pound

Quota Fille:

Fibers of cotton processed
12 mos. from
but not spun •••••••••••••••••••• Sept. 11, 1962

1,000

Pvllni

96~

12 mos. from
Sept. 11, 1963

1,000

Pound.

5JQ

Peanuts, shelled or not shelled,
blanched, or otherwise prepared
or preserved (except peanut
12 mos. from
butter) ••••••••••••••••••••••••• August 1, 1963

1,709,000

Pound

566,465

Imports through October 7, 1963.

D-1000

TREASURY DEPARTI·fENT
v-Iashington

FRIDAY, OCTOBER 11,1963

0-1000

The Bureau of Customs announced today preliminary figures on imports for consump_
tion of the followinG commodities from the beginning of the respective quota periods
through September 28, 1963:

Commodity

unit
Imports
:
of
as of
•
: Quant.ity ! Sept. 28,

Period and Quantity

Tariff-Rate Quotas:
Cream, fresh or sour ••••••••••••

Calendar Year

1,500,000 Gallon

vfuole Milk, fresh or sour •••••••

Calendar Year

3,000,000 Gallon

Cattle, 700 lbs. or more each
(other than dairy cows) •••••••

July

534,335

I, 1963-

Sept. 30, 1963

120,000

Head

7,817

Cattle less than 200 lbs. each ••

12 mos. from
April 1, 1963

200,000

Head

45,921

Fish, fresh or frozen, filleted,
etc., cod, haddock, hake, pollock, cusk, and rosefish ••••••

Calendar Year

24,874,871 Pound

Quo ta FilledY

Tuna Fish.......................

Cal end ru' Year

63,130,642 Pound

38,082,908

l,..1hite or Irish potatoes:
Certified seed................
Other ••••••••••••••••••••••••
Certified seed................
Other ••••••••••••••••••••••••

12 mo~ from
Sept. 15, 1962
12 mos. from
Sept. 15, 1963

Stainless steel table flatware
( table knives, table forks,
table spoons) ••••••••••••••••

Nov. 1, 1962Oct. 31, 1963

000,000
36,000,000
114,000,000
45,000,000
11L~,

Pound
Pound
Pound
Pound

58,990,542
29,935,418
0

12,420

69,000,000 Pieces Quota Filled

Imports for consumption at the quota rate are limited to 18,656,154 pounds duri~
the first nine months of the calendar year.

116

TIlEA3UHY Df..PARTI-1ENT
~1ashinr,ton

EDIATE RELEASft:

IDAY, OCTOBER 11,1963

D-1000

The Bureau of Customs announced today preliminary figures on imports for consumpn of the fo11owinr; corranodities from the beginninr, of the respective quota periods
ough September 28, 1963:

Commodity

··:
.·

Period and Quantity

!JnH

.
.

Imports
as of

:Quantity • Sept. 28. 1963

iff-Rate Quotas:

am, fresh or sour ••••••••••••

Calendar Year

1,500,000 Gallon

534,335

Ie Milk, fresh or sour •••••••

Calendar Year

3,000,000 Gallon

9'7

tIe, 700 1bs. or more each
other than dairy cows) •••••••

July 1, 1963Sept. 30, 1963

120,000 Head

7,817

tle less than 200 1bs. each ••

12 mos. from
April 1, 1963

200,000 Head

45,921-

h, fresh or frozen, filleted,
te., cod, haddock, hake, po1ock, cusk, and rosefish ••••••

Calendar Year

24,874,871 Pourrl

Quo ta FilledY

a Fish •••••••••••••••••••••••

Calendar Year

63,130,642 Pound

38,082,908

12 mos. from
Sept. 15, 1962
12 mos. from
Sept. 15, 1963

114,000,000 Pourrl
36,000,000 Poun::l
114,000,000 Poun::l
45,000,000 Pourrl

58,990,542
29,935,418
0
12,420

te or Irish potatoes:
ertified seed ••••••••••••••••
ther •.••••••••••••••••••••••

ertified seed ••••••••••••••••
ther .•••••.•••••••••••••• e

••

Lnless steel table flatwarE.'
~able knives, table forks,
~able spoons) •••••••••••••• ~.

Nov. 1, 1962Oct. 31, 1963

69,000,000 Pieces

Quota Filled

Imports for consumption at the quota rate are limited to 18,656,154 pounds during
the first nine months of the calendar year.

-2-

Unit
of
; Quantity

Imports
as of
Jept. 28, la

1,200,000

Pound

Ct'Uo ta Filled

Fibers of r~tton processed
12 mos. :rom
but not spun •••••••••••••••••••• Jept. 11, 1962

1,000

Poun:!.

966

12 mos. from
Sept. 11, 1963

1,000

Pound

53~

Period and ",Ilantity

~0r.Jr:10dity

Absolute 'iuotas:
Butter substitut~s, incl~din~
butter oil, containin;' 4)"~
Calendar
or more t:ltterfat ••••••••••••••• Year 1963

Peanuts, shelled or not shelled,
blanched, or otherwise prepared
or ores2rv~d (exceot oeanut
1:2 no s • frOT,1
but~er) ••••••••••• ~ •• ~ •••••••••• Aurus~ 1, 1963

1./

Jnpo;-t:: throu;.3h Octotcr 'I, 1163.

D-1000

1,709,000

Pound

TREASURY 1m'AR'rMENT

-\ 1"

Washington, D. C.

;

IMdE:DIA TE RELEASE

D-100l

FRIDAY, OCTOBER 11,1963

PRELIMINARY DATA ON IMPORTS FOR CONSUMPTION OF UNMANtITAC'I.URED LEA.D AND ZlllC CHARGEABLE TO mE QUOTAS ESTABLISHED
BY PRESIDENTIAL PROCl.Ji.MU'IOH NO. 3257 OF SEPTEMBER 22 ... 1958... AS MODIFIED BY THE TARIIT SCHEDULES OF THE
UNITED STATES, WHICH B£CAME £ITECTIVE AUGUST 31, 1963.
QUARTERLY QUOTA PERIOD IMPORTS _

ITEM 925.01.

:
Country

Lead-b8ari~

pres
and ma terIale

of
Produotion

Ootober 1 - December 31, 1963
Ootober 1 - Ootober 4, 1963 (or as Doted)

ITEM 925.03.
Unwrou~t
lead wa~te

: Giarter-ry QUota
: Dutiable

lead and
and scrap

C:Uota
read ) Imports ' :au&rterly
: Dutiablr lead
Pound!}

s
c

1l.,22O,OOO

11,220,000

~,540,OOO

Zino-bearing ores and
materials

,QUirterly QUota
Imports: ,:', T.::

PoUMI

Australia

ITEM 925.04·

ITEM 925.02.

C.f)!"'t"'n+

_ \ "',:lundS)

Imports

:UDNrought zino (except alloys
of zinc and zino dust) and
zino waste and scrap
:aua:rterl'T Quota
By Weight

1,000,826

Belgium and
Luxemburg (total)
Bolivia

5,040,000

Canada

13,440,000

2l4,~39!1 ~,920,ooo
36,880,000

Peru

957,961

16,160,000

2,194,170

2,935,899

11 12,880,000

Republic of the Congo
(to~r1y Belgian Congo)
So. Afriea

14,880,000

All o~her foreign
countries {total}

6,560,000

509,814 y'

.See Part 2, Appendix to Tariff' SohecbJl.e••
lI~ports as
%Ill

15,760,000

YugoslaTia

ftS»~

7,520,000

66,480,000

37,840,000

2,325,547

3,600,000

Mexico

•

7,520,000
2,159,400 Y

Italy

un.

Imports

\ poUffiIJI)

October 7. 1963 •

CUS"1"Ca&S

6,080,000

70,480,000

8,052,493

6,320,000

35,120,000

1,820,369

3,760,000

1,521,::'28

5,440,000

1,102,194 Y
6,080,000

17,840,000

13,768,29111

6,080,000

TREASURY m:pAJmlENT

118

Washington, D. C.

ThNEDIATE RELEASE

D-1001

FRIDAY, OCTOBER 11,1963

PIELIMINARY DATA ON IMPORTS FOR CONSUMPTION OF UNMANUFAC'lURED LEAD AND Zlll'C CHARGEABLE TO mE QUOTAS ESTABLISHED
BY PRESIDENTIAL PROCLAMU'IClH BO. 3257 OF SEPTEMBER 221. 19581. AS MODIFIED BY THE TARIFF SCHEDULES OF THE
UNITED STATI:S, WHICH B!;CAME !;ITECTIVE AUGUST 31, 1963.
QUARTERLY QUOTA PERIOD -

IMPORTS _

ITEM 925.01-

.
:

Country
of
Produotion

Lead-bearing ores
and IDa terials

Ootober 1 - December 31, 1963
Ootober 1 - October 4, 1963 (or as noted)
ITEM 925.04-

ITEM 925.02-

Umrrowiht lead and
lead waste and scrap

Zino-bearing ores and
materials

: Giarterly QUota

' :QU&rterly

/;;.uo';&

: Dutiable tead
) Imports : Dutiablr lead
?oUDdi
?ounl!)

Australia

ITEM 925.03-

1l,220,OCO

11,220,000

~,540,OOO

:Wirterly QUota
Imports: :::: r.:; CJ")r.tpl'1-!_ \>'.)Uhds)

Imports

;u~ught zino (except alloys
: of zinc and zinc dust) and
zino was te and scrap
:QUa.t"terly-quota
By Weight

Canada

5,040,000
13,440,000

214,~39!1 ts,920,OOO

957,961

66,480,000

66,480,00C

36,880,000

16,160,000

2,935,e99

37,840,000

2,325,547

2,194,170 11 12,880,OOC

70,480,000

8,052,493

6,320,000

35,120,000

1,e20,369

3,760,000

Republic of the Congo
(to~r1y Belgian Congo)

14,eao,ooo

14,880,000
15.760,000

All

6,560,000

509,e14 ~ 6,080,,000

-See Part 2, Appendix to Tariff Sohedule••
lIImports as of October 7, 1963.

1,521,:28

5,440,000

Yugoslavia
o~her foreign
countries (total)

7,520,000

3,600,000

Mexico

,un. So. Afriea

7,520,000
2,159,400 Y

Italy

Peru

Imuorts

1,000,826

Belgiu:D aDd
Luxemburg (total)
Bolivia

(POUIIa:B)

1.102,194 11
6,080,000

17,840,000

13,7~8,291!l

6.080,000

6,080,000

TREASURY DEPARTMENT
Washington, D. C.
IMHIDIATE RELEASE

D-1002

FRIDAY, OCTOBER 11,1963

The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and milled wheat products authorized to be entered, or
withdrawn from warehouse, for consumption under the import quotas establish~
in the President's proclamation of May 28, 1941, as modified by the President1s
proclamation of April 13, 1942, and provided for in the Tariff Schedules of
the United states, for the 12 months commencing May 29, 1963, as follows:

·
Country
of
Origin

Wheat

·
·

·•
·· Milled wheat products
··
···• Established:
Quota
••
·
Pounds)

Established:
Quota

Canada
795,000
China
Hungary
Hong Kong
Japan
United Kingdom
100
Australia
Germany
100
Syria
100
New Zealand
Chile
Netherlands
100
Argentina
2,000
Italy
100
Cuba
France
1,000
Greece
Mexico
100
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Rumania
1,000
Guatemala
100
Brazil
100
Union of Soviet
Socialist Republics
100
Belgium
100
Other Foreign Countries
or areas

795,000

80),000

795,000

3,815,000
24,000
13,000
13,000
8,000
75,000
1,000
5,000
5,000
1,000
1,000
1,000
14,000
2,000
12,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000

3,815,000

210
6,180

-..

4,000,000

3,821,~

TREASURY DEPARTMENT

Washington, D. C.

120

IMMIDIATE RELEASE

FRIDAY. OCTOBER 11,1963

D-1002

The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and milled wheat products authorized to be entered, or
withdrawn from warehouse, for consumption under the import quotas established
in the President's proclamation of May 28, 1941, as modified by the President's
proclamation of April 1), 1942, and provided for in the Tariff Schedules of
the United States, for the 12 months commencing May 29, 196), as follows:

I
I

\~~

TREAStmT m!PAlmAENT

Wuhington. D. C.

0-1003

lMMEDIA n: RELEASE

FRIDAY, OCTOBER 11,1963
PRELIMINARY DATA ON IMPORTS FOR CONSUMPTION OF ONMANOFAC'lURED LEAD AND ZINC CHARGEABLE TO THE QUOTAS ES'!AlILISH!:D
BY PRESIDENTIAL PROCLAlIA.TION NO. 3257 OF SEPTEMBER 221. 19581. AS MODIFIED BY THE TARIFF SCHEDULES OF THE
UNITED STATES, WHICH B.I!;CAME .l!;FFECTIVE AUGUST 31. 1963.
QUARTERLY QUOTA PERIOD -

Ju1y

1 - September 30. 1963

IMPORTS _

Ju1y

1 - September 30, 1963

ITEM 925.01-

Country
of
Produotion

.
:

ores
and materIal.

Lead-beari~

ITEM 925.02-

ITEM 925.03-

Unwroudht lead and
lead wa!te and scrap

I
I

ITEM 925.04-

Zino-bearing oreS and
materials

:Uuwrought zino (except alloys
: of zinc and zino dust) and
zino was te and scrap

:
:QUarterly QUota

: Dutiable
Australia

read
PoUDdi'

':auarterly QUota

Import.: Dutiablr lead
Pounds)

11,220,000

1l.220.000

22.540.000

:~~terly

~ports:

QUota

Zinc Content

(P~s)

:QU&fterlyQU~a

Imports

By Weight

{po~)

Lnports

22,540,000

Belgium and
Luxemburg (total)

Bolivia
Canada

5.040.000

5,040.000

13,440.000

8,920,948

15,920.000

15,920,000

66,480,000

Italy

Peru

16.160.000

Un. So. Africa

36,880,000

70,480,000

6,320,000

6,318,582

16,160,000

12,880.000

12,879,435

35,120,000

33,751,168

3,760,000

3,759,994

5.440,000

5,438,813

6.080,000

6,080,000

14,880,000

foreign

countries (total)

6,560,000

-See Part 2. Appendix to

37,840,000

36.880,000

Yugoslavia

•

37,840,000

Republic ot the Congo
(to~rly Belgian Congo)

o~her

7,520,000

3,600,000

Mexico

All

7,520,000

Tarl~~

4,394,270
Soh.clul.•••

CUS"rGCI

15.760,000

15,718,589

6,080,000

17,840,000

r) ,)

TREAstmY' DlPAR'lYENT

Washington. D. C.

(

D-1003

:n.t.fEDIATE RELEASE

FRIDAY, OCTOBER 11,1963
PRELIMINARY DATA ON IMPORTS FOR CONSUMPTION OF UNMANIJFAC'lURED LEAD AND ZINC CHARGEABLE TO THE QUOTAS ESTABLISHED
BY PRESIDENTIAL PROCLAMl.TIOli NO. 3257 OF SEPTEMBER 221. 19581. .AS MODIFIED BY THE TARIn' SCHEDULES OF '1llE

UNITED STATES, WHICH B.e;CAME J!;FFECTIVE AUGUST 31. 1963.

QUARTERLY QIJOTA PERIOD _

July 1 - September 30, 1963

IMPORTS _

July 1 - September 30, 1963

ITEM 925.01Country

Lead-bearin,t ores
and ma terial.e

of
ProductioD

ITEM 925.02*

ITEM 925.03*

UDWro~t

lead and
lead waite and scrap

I
I

Zinc-bearing ores and

material.a

ITEM 925.04*
!Uuwrought zino (except al.1oys
: of zinc and zinc dust) and
zinc waste and scrap

11.,220,000

Australia

11,220,000

22,540,000

Belgium and
Luxemburg (total.)

5,040,000

5,040.000

13,440,000

8,920,948

Bolivia
Canada
Italy

Mexico

16,160,000

Peru

16,160,000

15,920,000

66,400,000

66,400,00(1

7.520,000

7,520,000

31,840,000

37,840,0('(\

3,600,000
36,880,000

36,A80,OOO

70,480,000

6,320,000

6,318,562

12,880,000

12,879,435

35,120,000

33,751,168

3,160.000

3,759,994

5,440,000

5,438,813

6,080.000

6,080,000

Republic of the CoDgo
(formerly Belgian CODgo)

un.

14,880,000

So. Africa

14.880,000

Yugoslavia
Al.l.

o~her foreigD
countries (total)

6.560,000

4,394,270

-See Part 2, AppeDdix to Tariff Sohedule••

PREPARED XlI

~tJ OF COSTaAS

15,760,000

15,718,589

6,080.000

6,080,000

11,840,000

17,840,000

I
I

-2-

COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:

Country of Origin
United Kingdom ••••••••••••
Canada •••• ~ •••••••••••••••
France •..••...••....•..•..
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium ••......•..•....•..
. .•..•

Japan. . • . . . • . . . • • .

China •••••••••••••••••••••
Egyp t. . .

• ........•.•
Cuba ••••••••••••••••••••••

Germany.....

• ••••.•.•.••

Italy .........•.•••..•.••.

Es tablished
TOTAL QOOTA

Total Imports
Sept. 20, 1963, to
October 7. 1963

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263

47,545
239,690
22,445

5,482,509

342,702

33,022

Established :
Imports
11
33-1/3% of: Sept. 20, 1963,
Tot~t Quota_ :_~tJ'-October] _ 19..63
1,441,152

2,379

75,807

22,445

22,747
14,796
12,853

25,443
7,088

Other, including the U. S.

Included in total imports, column 2.

~~ep_red

the BUTeau o£

Customs.

1,599,886

24,824

124
TREASUR Y DEE> ARTMENT
Washington, D. C.
IMMEDIATE RELEASE

0-1004

FRIDAY, OCTOBER 11,1963

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, as modified by
the Tariff Schedules of the United States which became effective August 31, 1963.
COTTON (other than linters) (in pounds)
Cotton under 1-1/8 inches other than rough or harsh under 3/4"
Impo!"t~September 20" 1963 - October 7. _J963
Country of Origin
Egypt and Sudan •••••••••••••
Peru ••••••••••••••••••••••••
India and Pakistan ••••••••••
China •••••••••••••••••••••••
Mexico •••••••••••••••••
Brazil ••••••••••••••••••••••
Union of Soviet
Socialist Republics •••••••
Argentina •••••••••••••••••••
Haiti •••••••••••••••••••••••
Ecuador •••••••••••••••••••••

Established Quota

Imports

Established Quota

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

204,735

Honduras ••••••••••••••••••••
Paraguay •••••••..••.••••.•••
Colombia •••••••••••••••••••.
Iraq ••....•.••.........••.••

8,883,259
600,000

British East Africa •••••••••
Indonesia and Netherlands
New Guinea •••••.••••••••••
YBritish W. Indies •••••••••••
Nigeria •••••••••••••••.••.••
llBritish W. Africa •••••••••••
Other, including the U.S ••••

Country of Origin

475,124
5,203
237
9,333

752
871
124
195
2,240
71,388
21,321
5,377
16,004

11 Except Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
11 Except Nigeria and Ghana.
Cotton 1-1/8" or more
Established YearlY Quota - 45,656,420 lbs.
v

Imports August 1,

196~

to October 7. 1963

Staple Length
1-3/8" or more

Allocation
39,590,778

Imports
39,590,778

1,500,000

81.759

1-5/32" or IlK)re and under
1-3/8" (Tangui.s)
1-1/8" or more a.nd under
)_'3.,S.ll

4_!>65- 64 2

B90

Imports

tia9

125

TREASURY DEPARTMENT
Washington, D. C.
IMMEDIATE RELEASE

D-1004

FRIDAY, OCTOBER 11,1963

••••••••••••••

India and Pakistan ••••••••••
China •••••.••••••••••••.•.••

Mexico ••••••••••••••••••••••
Brazil ••••••••••••••••••••••
Union of Soviet
Socialist Republics •••••••
Argentina •••••••••••••••••••
Haiti •••••••••••••••••••••••
Ecuador •••••••••••••••••••••

!I
II

Established Quota

Imports

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

204,735

Established Quota

Country of Origin
Honduras ••••••••••••••••••••
Paraguay •••••••.••••••••••••

8,883,259
600,000

475,124
5,203
237
9,333

Colombia •••••••••••••••••••.
Iraq ••....••••...••••••••.••
British East Africa •••••••••
Indonesia and Netherlands
New Guinea •••••.••••••••••
yBritish W. Indies •••••••••••
Nigeria •••••••••••••••••••••
llBritish W. Africa •••••••••••
Other, including the U.S ••••

Except Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
Except Nigeria and Ghana.
Cotton 1-1/8" or more
Established Yearly Quota - 45,656,420 lbs •
.
Imports August I, 1963,t~ October 7,1963
Staple Length
1-3/8" or more
1-5/3211 or more and under
1-3/8/1 CTanguis)
1-1/8" or more and under
1-3/8/1

Allocation
39,590,778

39,590,778

1,500,000

81,759

. ~,_~~~~~~2

1.890.889

Imports

752
871
124
195
2,240
71,388
21,321
5,377
16,004

Imports

-2-

Country of Origin
United Kingdom ••••••••••••
Canada ••••••••••••••••••••

Fr ance ••.••••••••...••••••

India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••.....•..•..•..••

Japan •••••••••••••••••••
China •••••••••••••••••••••
Eg'YP t .........••.•.•••••••

Cuba. • . .

• .....••.••.•.•

Gc rmany •••••••••••••••••••
1 ta 1y .•.......•...•..•.•••

Established
TOTAL QUOTA

Total Imports
Sept. 20, 1963, to
October 7. 1963

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17 ,322
8,135
6,544
76,329
21,263

47,545
239,690
22,445

5,482,509

342,702

33,022

Established :
Imports
1/
33-1/3% of: Sept. 20, 1963,
Total Q!.I9_ta _:_1:o_0ctober 7 _ lq61
1,441,152

2,379

75,807

22,445

22,747
14,796
12,853

25,443
7,088

Other, including the U. S.

1/ Included in total imports, column 2.
Prepared in the Bureau of Customs.

D-1004

1,599,886

24,824

2346

-2-

COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTIfERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3116 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:

Country of Origin
United Kingdom ••••••••••••
Canada •••• ~ •••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan. . • . . • • . . . • • .
. .•.••
China ••••.••••••..•...•.••
Egyp t .........••••..•..•••
Cuba ••••••••••••••••••••••

Germany •••.•.•••••••••••••

Italy .........•.•.•.•.....

Established
TOTAL QOOTA

Total Imports
Sept. 20, 1962, to
September 19, 1963

Established
33-1/3% of
Total Quota

Imports
1/
Sept. 20, 1962,
to September 19, 1963

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263

1,640,712
239,690
162,778
49,926
51,982
11 ,234
33,150

1,441,152

1,111,486

75,807

75,183

22,747
14,796
12,853

21,836

58,025

25,443
7,088

5,482,509

2,247,497

1,599,886

Other, including the U. S.

11 Included in total imports, column 2.
2~_~_red

the Bureau o£

Customs.

1,208,505

127

TREASURY DEPARTMENT
Washington, D. C.
IMMEDIATE RELEASE

0-1005

FRIDAY, OCTOBER 11,1963

., • • • • • • • • • • • • • •

India and Pakistan ••••••••••
China •••••.•••••••••••••••••
Mexico ••••••••••••••••••••••
Brazil .••••••.•.••••••••••••

Union of Soviet
Socialist Republics •••••••
Argentina •••••.••••••.••••••
Haiti •••••••••••••••••••••••
Ecuador •••••••••••••••••••••

11
~I

Established QUota

Established Quota

Imports

Country of Origin

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

782,857
35,995
81,640

Honduras ••••••••••••••••••••
Paraguay •••••••.••••••••••••
Colombia •••••••••••••••••••.
Iraq ••.•.•.•••.....•..•.••••

8,883,259
618,723

British East Africa •••••••••
Indonesia and Netherlands
New Guinea ••••••••••••••••
yBritish W. Indies •••••••••••
Nigeria •••••••••••••••••••••
~/British W. Africa •••••••••••
Other, including the U.S ••••

475,124
5,203
237
9,333

Except Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
Except Nigeria and Ghana.
Cotton 1-1/8 11 or more
Established Yearly Quota - 45,656,420 1bs.
Imports August 1, 1963.to

1-3/8" (Tanguis)
1.....,3,'8 ..

20. 1963

Allocation

Staple Length
1-3/8" or more
1-5/32 1J or more and under
1-1/8" or more and

Se~tember

39,590,778
1.500,000

under
4.565 642

Imports
39,590,778
81,759
1_.288.333

Imports

752
871
124
195
2,240
71,388
21,321
5,377
16,004

TREASURY DEPARTMENT
Washington, D. C.
IMMEDIATE RELEASE

D-1005

FRIDAY, OCTOBER 11,1963

••••••••••••••

India and Pakistan ••••••••••
China ••••••••••••
Mexico.
• •••••
Brazil •••••••••••
Union of Soviet
Socialist Republics •••••••
Argentina.
~iti.

• •• •

E~ador ••••••••

11
~I

• ••

Established Quota

Imports

Country of Origin

Established Quota

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

782,857
35,995
81,640

Paraguay •••••••.••••••••••••

8,883,259
618,723

British East Africa •••••••••
Indonesia and Netherlands

Honduras •••••••••••••.••••••

Colombia •••••••••••••.•.•••.
Iraq ••...••.••...•.•..•.•..•

New Guinea •••••.•••.•••.••

475,124
5,203
237
9,333

1/British W. Indies •••••.•••••
Nigeria ••••••••••••••••••.••
2/British W. Africa •••••••••.•
- Other, including the U.S ••••

Except Barbados, Bermuda, Jamdica, Trinidad, and Tobago.
Except Nigeria and Ghana.
Cotton 1-118" or more
Established Yearly Quota - 45,656,420 1bs.
Imports August 1. 1963.tQ
Staple Length
1-3/8" or more
1-5/32" or more and under
1-3/8" (Tanguis)

Se~tember 20.

Allocation

1963
Imports

39,590,778

1,500,000

81,759

752
871
124
195
2,240

71,388
21,321
5,377
16,004

Imports

-2-

COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTIlERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3116 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Es tablished
Country of Origin

TOTAL QOOTA

United Kingdom ••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands ••••••
Switzerland......
• •••••
Belgium..
• •••••
Japan....

. .••••

China....

• •••••••••••••

Egyp t. . . .
Cuba. • • • .
Germany..

. •....•.•.••••
. •.••••••

. •..•..•.•

Italy....
. •••••••••••••
Other, including the U. S.

Established
33-113% of
Total Quota

Imports
11
Sept. 20, 1962,
to September 19, 1963

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263

1,640,712
239,690
162,778
49,926
51,982
11,234
33,150

1,441,152

1, III ,486

75,807

75,183

22,747
14,796
12,853

21,836

58,025

25,443
7,088

5,482,509

2,247,497

1,599,886

l' Included in total imports, column 2.
Prepared in the Bureau of Customs.
D-~OO">

Total Imports
Sept. 20, 1962, to
September 19, 1963:

1,208,505

- 16 it is proper to explore alternatives to it.

But in

the exploration of those alternatives we should . .ke
sure we ask the hard questions that must be asked and
weigh carefully the state of economic thinking on the
answers to those questions.

In this proce.a of objec-

tive discussion and careful probing we must constantly
keep in mind the paramount question of whether a
national consensus can be developed in favor of any
major alternative to the income tax.

In our thinking

about that question, we should not lose sight of the
fact that it may'well be far easier to develop a con ••nlue
on desirable improvements in the income tax than to
achieve agreement on major alternatives to that tax.
In sum, on the fiftieth anniversary of the income tax,
it would be appropriate to pay a tribute to that tax by
renewing our efforts to improve its structure and the
contribution it can make to our national tax policy.

1-l..vV
' ... 1 I

- l' -

the tax system and eliminate the unfairnesses, .0 that
we will be in a position to determine which of tho••
decisions are likely to gain acceptance?
Finally, can we develop a con.ensua

OIl

at l • • t

some of the decisions that will enable us to continue
to move forward in the task of tax revis101l.
really brings us to the heart of the problem.

"or alt.•
The

House bill, with its substantial tax reductioD in •
tLm. of transitional budget deficits, repr•• eata . . .jor
tax policy decision.

That bill rest. on a con•••u.

perhapi unique in our tax history, in which busin••••
labor, and a maj ority of academic economi.ts have united
in approving this step.

They see the bill a. 'etting us

on a path that can lead us toward full employment aDd the
end of a history of deficits caused by an economy opera·
ting below its potential.

We must work, therefore, to

achieve a stmilar consensus on further

imp~ovemant.

the income tax.
It is here that we can return to the que.tion of
alternatives to that tax.

Certainly, along with our

consideration of improvements of the income tax itself,

131
- 14 -

We need continued hard thinking on the 'basie prohlem
of further base broadening and concomitant reduction of
rates.

The recent legislative evente have helped brtng

into focus some areas where more analY'is is needed.
The debate over the proposal of a five percent floor on
personal expenses showed how
this area.

tho~y

are the probleme in

The debate over the taxation and treatment

of capital gains, especially those passed on to heirs,
revealed some of the difficulties in that subject.
all of this means only that the experts must go
the drawing boards.

~ck

But
to

For example, as some have sUSI•• ted,

does the path to a broader base and lower rate. lie
through an optional rate scale, with lower rate. applied
to a broader and Simpler measure of a perlon's taxable
income?

Will such a scale help to lessen materially the

great disparities in tax burdens on equal income. that we
know exist under the present structure?

Will it aid in

reducing our present over-concentration on tax planning
and tax motivated arrangements?
a part of still Larger questions.

These que.tioa. are but
Can the expert. show

us the hard decisions we must make if we are to simplify

~?
1 v..t..-

- 13 -

many of the issues involved in the gr.. t majority of
these topics have been pre.anted for legislative
determination.

They have thus been considered in the

legislative decisions entering into the Revenue Aet of
1962 and the House bill.

Since many of th..e is.ues

involve social and political judgment., it is only
through bringing these i.sue. to the forefront that va
can see where lie the pathways to progr....

The public

and the Congress do not always agree with the expert••
If, after a proper debate, the solutions of the experts
do not secure public acceptance, then the experts

devise new approaches.
This suumary of developments in tax polley olearl,
shows that we are making progress in improviag,the 1acome
tax -- in keeping it responsive to national . .ecta. aed
permitting it to make its contribution to full employmeDt
and growth.

We see that the alternative to it. problema ••

to its high rate structure, ita preferential ar.... aDd
its effects on the allocation of our re.ource•• - aeed
not necessarily be a resort to other taxes with all their
unsolved and unseen problemso

The alternati.e, taatead,

can be a steady improvement in the income tax itself.

13?

- 12 -

differentiation for the over 50 percent of our

taxpaye~.

whose income fell entirely in the previoua fir.t bracket;
the adoption of the

min~

standard deductioft to

p~id.

special relief for those with very low incomes without
the wastage at upper levels that accompanies the competing approach of raising exemptions.

The•• innovation••

plus the provisions removing restrictions, involve oyer
600 million dollars under the House bill.

The lucee.,ful

development of an income tax li.. in thi. CODstant
introduction of structural innovations to meet new
problems.
Sixth, the discussion itself of ba.e broadening and
other income tax questions has, in one leue. De.,. equally
as important as the change. tbamaelves.

ll.ue8 tbac

hitherto were debated only by expert. have been plac. .
under legislative and public examinatloD.
not always have resulted in the proper

WhUe thla . ,

~ev1a1oo..

we ....t

not forget that nothing can be accompl1ahecl •• long ..
these matters remain the preserve of the experts alone.
If we look at the topics covered in the Congre•• 1onal
studies of 1955 and 1959, we find that beainnillg in 1961

134

- 11 ..
being achieved

well •• the diffioulti.. iavolved.

Each exiating preference haa it. able defend.r. and
spokesmen, and the old saying that po ••••• lem ia Dl".
points of the law certainly ref.rs to legi.1ative
contests regarding these preferenc.s.

Daapit. all

this, the course of tax legislation since 1961, ooasidered in perspective, marks both. reversal of the
prior erosion of the tax base and progress towarda •
broadening of the tax base combined with a r.duction
of high tax rates.
Fourth, the current House bill involve. an elimination of some of the existing restrictive f . .t~.a of
the income tax, a task which also is an 1IIIportant
of tax revision.

par~

The additional deduction for employ••

moving expenses and the removal of the two peroent consolidated returns tax are exampl •••
Fifth, the current House bill involvea the iotr..
duction of tax innovations designed to strengthen the
income tax -- the introduction of an averaling syatem to
meet the problem of bunched income; the apl1ttiag of the
first bracket into four bracket. to

pr~de

aoma

- 10 Third, the revenue-raising structural chang••
accomplishad under the 1962 Act and those embodied in
the House bill represent major improvements 1n the equity
of the tax system.

Even if the two measures are taken

singly, each would far exceed anything that has previously been accomplished.

Thus, the Revenue Act of

1962 represented 855 million dollars of revenue-raising
reforms.

The total for all the revenue acts since 1940

was scarcely above 600 million dollars -- the total from
1953 to 1961 was less than 200 million dollars.

The

amount involved in the current House bill 1s about $1.085
billion, so that together with the 1962 Act, the events
of 1963 and 1962 involve about two billion dollar. of
revenue-raising changes which would increase the equity
of the income tax.

These changes do not represent reform

just for reform's sake -- the revenue raised by them hal
been turned back into rate reduction. and inv•• tment
incentives.
It has been fashionable in .om. cirel.. to decry the
efforts at base broadening being undertaken under pr.sent
tax poliey.

This attitude both overlooka the so11d results

- 9 balanced fashion that has brought wide support for the
over-all appropriateness of the reductions.

The Houae

bill is fully supported both by rapr•• entativea of
business and of labor.

We do not even need all the

fingers of one hand to count the organizations Which
were opposed to the Houae bill.
Second, these changes have firmly rever.ed the
ha~ering

effect of the tax system on

inv.at~t

incen-

tives and have instead materially strengthened tho ••
incentives.

To put the matter concretely, the inv•• t-

mant credit of 1962, together with the proposed 1963
revi.ion eliminating any reduction in depreciation baet,
to reflect the credit, the 1962 revi.ed depreciation
guidelines, and the proposed 48 percent corporate rat.
have increased the after-tax profitability on inv••ta.nt
by 3.5 percent or more.

This dramatic shift in the

effect of our tax system on investment has brousht it
to the point where it now matches the investment stimuli
offered by European tax systems.

13::
.. 8 ..

in ite efforte to natch actual perfol"l8ftC. to potential
growth.

In 1961, Preeident Kennedy gave a high priot'ity

to changes in tax policy ae one of the a •• ential .tep.
to improve our economic situation. 'lver .inoa, the
topic of national tax policy hal been a 8ubject both of
active Governmental con.ideration and broad public diecussion.

Thie emph8si. on tax policy, in tun, is

bringing maj or change. in the income ta x.

Let me .t.ply

present these changes in broad outline.
First, the over-all weight of that tax on the privati
sector is in the procee. of being conliderably reduced.
The reductions under the pend ins tax bill reduoa lndi.idual income tax liabilities by about nine billion dellar.,
or 19 percent.

The ehanges 1n corporate tax rate. under

that bill, together with the 1962 reduction. under the
invee~t

credit and the revi ••d depreciation guideline.,

reduce corporate tax liabilitiee by 4.5 billion dollar.,
or aleo 19 percent.

The combined effect t. thul a 19

percent reduction in income tax liabilities.

Moreover,

this reduction of one-fifth in income tax liabilities ••
the Largest in our tax history -- is being achieved in a

138
.. 7 -

Thus the fact that the income tax baa

~ta

full

share of problem8 and controversy does not 'upport the
view that the tax should be abandoned.

Bather. 1t 1.

a sign that we are engaged in the proper and nec••••ry
task of keeping that tax responsive to our present needs.
The important question is what are we do1ng _bout the
problema we face.

I submit that much is being

plished -- and that there is still some

ba~d

.QC~

work ah..d.

The last half of the 1950'. saw a comprehensive
examination of national tax policy conducted by OoOlre.sional committees, starting with the study of the 1955
Subcommittee on Tax Policy of the Joint icouamic Committe.,
chaired by Congressman Wilbur Mills. and continuinl throuah
the 1959 studies of the House Ways and Mean. eo.mitt...
also chaired by Mr. Mills.

To some extent thi8 examina-

tion was matched by discussion in academic circl...

Yet

throughout this period the topic of natiooal tax policy
remained at this level of quiet discussion among the
experts and did not penetrate into broad public consideration or governmental action.

During this same time,

however, our national economy was beginning to fall behlad

139
- 6 -

not everyone in Michigan is enchanted with the

".1..

added tax.
We ahould not forget that fifty yearl of
on the income tax have at least made
pro~lems

mente

de~te

aware of the

under that tax and possible lin.s of

~rove

Thele years of debate have also made it .1ear

that much of the difficulty arises from the need to
keep our tax system continually responsive to an ever
changing lociety and economy.

Our problem today il not

that of improving the Revenue Act of 1913 and ita lueceslors as these measures would apply to the Unit •• ltate.
of 1913 -- our problem today is that of .pp1ylftl the
income tax to the United States of 1963 and the y..r.
ahead.

It may well be that the Revenue Act of 1913 ••emed

as good an answer to the problema of 1913

a. .om. of the

alternative taxes now being discussed look in the lilht
of 1963.

Yet, if we were to adopt any of the •• alterna-

tives today, it is inevitable that ten year. from now it
would be enmeshed in issues and debate

future cax

coamentators sought to adapt it ttFtlteir lociety -- to
eliminate its imperfections, if you will.

- 5 -

alternative taxes are or are not shifted, on the relationship between taxes and economic growth, or on the
factors that make for economic growth aad the proc•••••
by which that growth occurs or can be stimulated.
These few kind words for the income

tax --

it 1.,

after all, its golden anniversary -- do not mean. that
all is well with that tax.

For while on the one hand

we can defend its place in the Federal tax 8truc:ture.,
we can at the same time recognize its defects and
problems.

It should be clear that any mass tax .- ba.

it an income tax, sales tax, value added tax, _aufacturer8 excise tax -- will always have its imperfectLon••
And there will always be disputes as to whether thi. or
that 8olution is the answer, especially since the wiadoa
of the solution usually lies not in the realm of obJeo&lv.
and universal observation, but in the
and social judgment.

rea~

of politioal

While we see these difficultw

clearly enough in our income tax, we are le•• likely to
remember that the French see them also in their value
added tax J and the Canadians in their manufacturers axei••
tax.

Nor is it necessary for this purpo.e to look abroad.

- 4 Finally, in any tax system, just

be struck between efficiency and equity,
struck

be~een

national goals.

a balance mult
10

it must be

equity and the achievement of certatn
One of our important goals ts full

employment and greater growth.

If a tax system ta to

contribute to achievement of this goal, it mAy have to
contain certain structural features, such a. iDCefttiv••
to investment, which will result in a different allocation of tax liabilities and thus some shift in tax
equity. But here again, has it been shown that, .s a
structural matter, reliance on an income tax to rat••
our revenues is incompatible with achieving the•• Irowth
goals and that the incentives to investment tbat . , be
needed cannot be devised within an income tax framework'
Or, to put it differently, can it

clearly

shu~

that

the alternative taxes are decidedly superior in thts
respect?

One can suspect that a request for even a

modest degree of proof on these matters would likely go
unsatisfied, given the existing state of our knowledge
on such matters as the incidence of the corporate tax,
on the extent and ways in which it and other pos.ible

142
- 3 -

all this with comnendable efficiency in the light of
the tremendous volume of cOD'lllUl1ication between soYal'llment and the public that i8 involved.

Moreover, it

achieves these results through a ayat_ of vobmtary
compliance and with an administrative force that ia
quite small in relation to the population _. factors
which few other countries can match.
But while efficiency is an indispenaable requirement, it is not, of course, the final criterion of a
tax system.

We also ask that our tax .yst. . meet a

rather high standard of fairness.

We have been perhap.

more insistent on this concept of equity than . .ny other
countries.

Such a standard, however, is DOt ..., to

meet, dealing as we are with a forced exaction from
millions of people, and with rules which nece••ary cannot
be cut to every pattern.

Moreover, concepts of what i8

fair and what is t.mfair, what is equitable and inequitable,
are not Simple, observable facts.

Yet it doe. not appear

anyone is urging the possible alternative taxes on the
ground that they are decidedly more fair than the income
tax, or even defending them as no le.8 fair.

14.?
- 2 -

if we are to gain the insights that guida-the way to
rational decisions.
Your program, as I have indicated, i8 devoted to
substitutes for the present income tax.

Thu., there

are papers on the value added tax as an alternative to
the corporate income tax. on broad-based exci •• tax••
as alternatives to income taxation. and on an expenditure tax as an alternative to the individual income tax.
The general implication of all this appears to be that
our income tax structure is so defective that progress
in tax policy can lie only in new and different tax•••
Yet are matters really in such a state, and can it be
said that our income tax serves us so poorly?
After all, the income tax is efficient. in that it
raises about 70 billions of dollars.

The individual tax

reaches 100 million individuals, about 86 percent of our
adult population.

It deals each year with 60 million

individual returns and 1.2 million corporate returns,
with over 25 million refund claLms, and yet accomplishes

144
REMARKS BY TIlE HONORABLE STANLEY S. SURIlEY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE TAX INSTITUTE SYMPOSIUM

MAYFLOWER HOTEL, WASHINGTON, D. C.
FRIDAY, OCTOBER 11, 1963, 12:30 P.M. EDT
ASPECTS OF NATIONAL TAX rOLICY

The Tax Institute of America has again chosen an
intriguing topic around which to build an intereating
symposium.

This topic, Alternatives to Present Federal

Taxes -- or more precisely, in view of the topid'
discussed, Alternatives to Federal Income Taxation .is becoming rather fashionable today.

To be sure, 1963

marks the golden anniversary of the Federal income tax,
and some may complain that it is somewhat \.Ulbecominl to
discuss the possible demise of the income tax on 8uch an
occasion.

Yet the Institute has always prided itself on

a willingness to be unconventional, if need be, and so
even a golden anniversary must not stand in the way of
critical analysis.

For a tax system cannot remain static.

It must be continuously examined and shaped to make it
responsive to national needs and an appropriate force in
achieving national goals.

Searching discussion and

analysis by informed observers are therefore imperative

14~

TREASURY DEPARTMENT
Washington
FOR RELEASE:

UPON DELIVERY
REMARKS BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE TAX INSTITUTE SYMPOSIUM
MAYFLOWER HOTEL, WASHINGTON, D.C.
FRIDAY, OCTOBER 11, 1963, 12:30 P.M. EDT
ASPECTS OF NATIONAL TAX POLICY

The Tax Institute of America has again chosen an intriguing
topic around which to build an interesting symposium. This topic,
~lternatives to Present Federal Taxes -- or more precisely, in view
Jf the topics discussed, Alternatives to Federal Income Taxation -ls becoming rather fashionable today. To be sure, 1963 marks the
~olden anniversary of the Federal income tax, and some may complain
~hat it is somewhat unbecoming to discuss the possible demise of the
lncome tax on such an occasion. Yet the Institute has always priced
ltself on a willingness to be unconventional, if need be, and so
~ven a golden anniversary must not stand in the way of critical
Inalysis. For a tax system cannot remain static.
It must be
ontinuously examined and shaped to make it responsive to national
eeds and an appropriate force in achieving national goals.
earching discussion and analysis by informed observers are therefore
mperative if we are to gain the insights that guide the way to
ational decisions.
Your program, as I have indicated, is devoted to substitutes
or the present income tax. Thus, there are papers on the value
dded tax as an alternative to the corporate income tax, on broadased excise taxes as alternatives to income taxation, and on an
xpenditure tax as an alternative to the individual income tax.
he general implication of all this appears to be that our income
lax structure is so defective that progress in tax policy can lie
nly in new and different taxes. Yet are matters really in such a
tate, and can it be said that our income tax serves us so poorly?
After all, the income tax is efficient, in that it raises about
of dollars. The individual tax reaches 100 million
ndividuals, about 86 percent of our adult population. It deals
ach year with 60 million individual returns and 1.2 million
Jrporate returns, with over 25 million refund claims, and yet

o billions

D-l006

- 2 -

146'

accomplishes all this with commendabl{> efficiency in the light of
the tremendous volume of communication between government and the
public that is involved. Moreover, it achieves these results
through a system of vuluntary compliance and with an administrative
force that is quite small in relation to the population -- factors
which few other countries can match.
But while efficiency is an indispensable requirement, it is not,
of course, the final criterion of a tax system. We also ask that
our tax system meet a rather high standard of fairness.
We have been
perhaps more insistent on this concept of equity than many other
:ountries. Such a standard, however, is not easy to meet, dealing
3S we are with a forced exaction from millions of people, and with
~u1es which necessarily cannot be cut to every pattern.
Moreover,
~oncepts of what is fair and what is unfair, what is equitable and
Lnequitable, are not simple, observable facts.
Yet it does not
ippear anyone is urging the possible alternative taxes on the
~round that they are decidedly more fair than the income tax, or
~ven defend ing t hen as no les s fair.
Finally, in any tax system, just as a balance must be struck
)etween efficiency and equity, so it must be struck between equity
Ind the achievement of certain national goals. One of our important
;oa1s is full employment and greater growth.
If a tax system is to
:ontribute to achievement of this goal, it may have to contain
ertain structural features, such as incentives to investment, which
'ill result in a different allocation of tax liabilities and thus
orne shift in tax equity.
But here again, has it been shown that,
s a structural matter, reliance on an income tax to raise our
evenues is incompatible with achieving these growth goals and that
he incentives to investment that may be needed cannot be devised
ithin an income tax framework? Or, to put it differently, can it be
learly shown that the alternative taxes are decidedly superior i1
lis respect? One can suspect that a request for even a modest
~gree of proof on these matters would likely go unsatisfied, given
le existing state of our knowledge on such matters as the incidence
: the corporate tax, on the extent and ways in which it and other
)ssible alternative taxes are or are not shifted, on the relationship
~tween taxes and economic growth, or on the factors that make for
:onomic growth and the processes by which that growth occurs or can
stimulated.

- 3 -

147

These few kind words for the income tax -- it is, after all, its
golden anniversary -- do not mean that all is well with that tax.
For while on the one hand we can defend its place in the Federal tax
structure, we can at the same time recognize its defects and
problems.
It should be clear that any mass tax -- be it an income
tax, sales tax, value added tax, manufacturers excise tax -- will
always have its imperfections. And there will always be disputes
as to whether this or that solution is the answer, especially since
the wisdom of the solution usually lies not in the realm of
objective and universal observation, but in the realm of political
and social judgment. While we see these difficulties clearly
enough in our income tax, we are less likely to remember that the
French see theill also in their value added tax, and the Canadians
in their manuiacturers excise tax. Nor is it necessary for this
purpose to look abroad; not everyone in Michigan is enchanted with
the value added tax.
We should not forget that fifty years of debate on the income
tax have at least made us aware of the problems under that tax and
possible lines of improvement.
These years of debate have also made
it clear that much of the diffjculty arises from the need to keep our
tax system continually responsive to an ever changing society and
economy. Our problem today is noc that of improving the Revenue Act
of 1913 and its successors as these measures would apply to the
United States of 1913 -- our problem today is that of applying the
income tax to the United States of 1963 and the years ahead.
It may
well be that the Revenue Act of 1913 seemed as good an answer to the
problems of 1913 as some of the alternative taxes now being discussed
look in the light of 1963. Yet, if we were to adopt Any of these
alternatives today, it is inevitable that ten years from now it would
be enmeshed in issues and debate as future tax commentators sought
to adapt it to their society -- to eliminate its imperfections, if
you will.
Thus the fact that the income tax has its full share of problems
and controversy does not support the view that the tax should be
abandoned. Rather, it is a sign that we are engaged in the proper
and necessary task of keeping that tax responsive to our present
needs. The important question is what are we doing about the
problems we face.
I submit that much is being accomplished -- and
that there is still some hard work ahead.
The last half of the 1950's saw a comprehensive examination
of national tax policy conducted by Congressional committees,starting with the study of the 1955 Subcommittee on Tax Policy of
the Joint Economic Committee, chaired by Congressman Wilbur Mills,

- 4 -

148

and continuing through the 1959 studies of the House Ways and Means
Committee, also chaired by Mr. Mills.
To some extent this examination
was matched by discussion in academic circles. Yet throughout this
period the topic of national tax policy remained at this level of
quiet discussion among the experts and did not penetrate into broad
public consideration or governmental action. During this same time,
however, our national economy was beginning to fall behind in its
efforts to match actual performance to potential growth.
In 1961,
President Kennedy gave a high priority to changes in tax policy
as one of the essential steps to improve our economic situation.
Ever since, the topic of national tax policy has been a subject both
of active Governmental consideration and broad public discussion.
This emphasis on tax policy, in turn, is bringing major changes in
the income tax. Let me simply present these changes in broad
outline.
First, the over-all weight of that tax on the private sector
is in the process of being considerably reduced. The reductions
under the pending tax bill reduce individual income tax liabilities
by about nine billion dollars, or 19 percent. The changes in
corporate tax rates under that bill, together with the 1962 reductions
under the investment credit and the revised depreciation guidelines,
reduce corporate tax liabilities by 4.5 billion dollars, or also
19 percent. The combined effect is thus a 19 percent reduction in
income tax liabilities. Moreover, this reduction of one-fifth in
income tax liabilities -- the largest in our tax history -- is being
achieved in a balanced fashion that has brought wide support for the
over-all appropriateness of the reductions. The House bill is fully
supported both by representatives of business and of labor. We do not
even need all the fingers of one hand to count the organiz ations
which were opposed to the House bill.
Second, these changes have firmly reversed the hampering effect
of the tax system on investment incentives and have instead materially
strengthened those incentives. To put the matter concretely, the
investment credit of 1962, together with the proposed 1963 revision
?liminating any reduction in depreciation basis to reflect the
~redit, the 1962 revised depreciation guidelines, and the proposed
~8 percent corporate rate have increased the after-tax profitability
)n investment by 15 percent or mo~e. This dramatic shift in the
~ffect of our tax
system on investment has brought it to the point
There it now matches the investment stimuli offered by European tax
iystems.

- 5 -

149

Third, the revenue-raising structural changes accomplished under
the 1962 Act and those embodied in the House bill represent major
improvements in the equity of the tax system. Even if the two
measures are taken singly, each would far exceed anything that has
previously been accomplished. Thus, the Revenue Act of 1962
represented 855 million dollars of revenue-raising reforms.
The
total for all the revenue acts since 1940 was scarcely above 600
million dollars -- the total from 1953 to 1961 was less than 200
million dollars.
The amount involved in the current House bill is
about $1.085 billion, so that together with the 1962 Act, the events
of 1963 and 1962 involve about two billion dollars of revenue-raising
changes which would increase the equity of the income tax. These
changes do not represent reform just for reform's sake -- the
revenue raised by them has been turned back into rate reductions and
investment incentives.
It has been fashionable in some circles to decry the efforts
at base broadening being undertaken under present tax policy.
This attitude both overlooks the solid results being achieved as
well as the difficulties involved. Each existing preference has
its able defenders and spokesmen, and the old saying that possession
is nine points of the law certainly refers to legislative contests
regarding these preferences. Despite all this, the course of tax
legislation since 1961, considered in perspective, marks both a
reversal of the prior erosion of the tax base and progress towards
a broadening of the tax base combined with a reduction of high tax
rates.
Fourth, the current House bill involves an elimination of some
of the existing restrictive features of the income tax, a task
Nhich also is an important part of tax revision.
The additional
jeduction for employee moving expenses and the removal of the two
percent consolidated returns tax are examples.
Fifth, the current House bill involves the introduction of tax
lnnovations designed to strengthen the income tax -- the introduction
)f an averaging system to meet the problem of bunched income; the
;p1itting of the first bracket into four brackets to provide some
lifferentiation for the over 50 percent of our taxpayers whose
~ncome fell entirely in the previous first bracket; the adoption of
:he minimum standard deduction to provide special relief for those
lith very low incomes without the wastage at upper levels that
lccompanies the competing approach of raising exemptions. These
.nnovations, plus the provisions removing restrictions, involve over

- 6 -

600 million dollars under the House bill. The successful development
of an income tax lies in this constant introduction of structural
innovations to meet new problems.
Sixth, the discussion itself of base broadening and other
income tax questions has, in one sense, been equally as important
as the changes themselves.
Issues that hitherto were debated only
by experts have been placed under legislative and public examination.
While this may not always have resulted in the proper revision, we
must not forget that nothing can be accomplished as long as these
matters remain the preserve of the experts alone. If we look at
the topics covered in the Congressional studies of 1955 and 1959,
we find that beginning in 1961 many of the issues involved in the
great majority of these topics have been presented for legislative
determination. They have thus been considered in the legislative
decisions entering into the Revenue Act of 1962 and the House bill.
Since many of these issues involve social and political judgments,
it is only through bringing these issues to the forefront that we
can see where lie the pathways to progress. The public and the
Congress do not always agree with the experts. If, after a proper
debate, the solutions of the experts do not secure public acceptance,
then the experts must devise new approaches.
This summary of developments in tax policy clearly shmvs that
we are making progress in improving the income tax -- in keeping
it responsive to national needs, and permitting it to make its
contribution to full employment and growth. We see that the
alternative to its problems -- to its high rate structure, its
preferential areas, and its effects on the allocation of our
resources -- need not necessarily be a resort to other taxes with
all their unsolved and unseen problems. The alternative, instead,
can be a steady improvement in the income tax itself.
We need continued hard thinking on the basic problem of further
base broadening and concomitant reduction of rates. The recent
legislative events have helped bring into focus some areas where
more analysis is needed. The debate over the proposal of a five
percent floor on personal expenses showed how thorny are the problems
in this area. The debate over the taxation and treatment of capital
gains, especially those passed on to heirs, revealed some of the
difficulties in that subject. But all of this means only that the
experts must go back to the drawing boards. For example, as some
have suggested, does the path to a broader base and lower rates lie
through an optional rate scale, with lower rates applied to a
broader and simpler measure of a person's taxable income? Will such

- 7 a scale help to lessen materially the great disparities in tax
burdens on equal incomes that we know exist under the present
structure?
Will it aid in reducing our present over-concentration
on tax planning and tax motivated arrangements? These questions
are but a part of still larger questions. Can the experts show
us the hard decisions we must make if we are to simplify the tax
system and eliminate the unfairnesses, so that we will be in a
position to determine which of those decisions are likely to gain
acceptance?
Finally, can we develop a consensus on at least some of the
decisions that will enable us to continue to move forward in the
task of tax revision. For this really brings us to the heart of
the problem.
The House bill, with its substantial tax reduction in
a time of transitional budget deficits, represents a major tax
policy decision.
That bill rests on a consensus perhaps unique in
our tax history, in which business, labor, and a majority of
academic economists have united in approving this step. They see
the bill as setting us on a path that can lead us toward full
employment and the end of a historyoc deficits caused by an economy
operating below its potential. We must work, therefore, to achieve
a similar consensus on further improvements in the income tax.
It is here that we can return to the question of alternatives
to that tax. Certainly, along with our consideration of improvements of the income tax itself, it is proper to explore alternatives
to it.
But in the exploration of those alternatives we should make
sure we ask the hard questions that must be asked and wei.gh carefully
the state of economic thinking on the answers to those questions.
In this process of objective discussion and careful probing we must
constantly keep in mind the paramount question of whether a national
consensus can be developed in favor of any major alternative to the
income tax.
In our thinking about that question, we should not lose
sight of the fact that it may well be far easier to develop a
consensus on desirable improvements in the income tax than to achieve
agreement on major alternatives to that tax.
In sum, on the
fiftieth anniversary of the income tax, it would be appropriate to
pay a tribute to that tax by renewing our efforts to improve its
structure and the contribution it can make to our national tax policy.

000

MIi 1.b:L:',.3

'rue_day,

It.. M. ';

)ct,ober

.j ..",

121

P .,

1963.

Thel'reasury De:-art.meot :Announced L.st evenin& that \he tenders tor 1,..0 . .riel It
:>ne seric~ ~.) L>e an additi?nal issue of the bUla dawd Jv.l.7 18, 1M)
the otl.er aeries t.) .'~ dated )ct,)ber 17, 1963, which _ " otfered on Votober, ~
-l::le08d a.t thf> 'ederal r'iPserve :~s on .)ctober Ih.l'endera were invi't,fjd for $l,~~
')r t.berea~t8,. ~~ 9l-daJ bills and for $800,000,000, "r t.hereabouts, ot 182--, WlI
The detaih ;)f the two serie;:; are as fol1owsi

rnuury bills,

and

;iA~)!'

'.CCg?l.~D

Ct'l~·i'E:lIT I

9l-day Treasury bills
_.y-aturin!{ January 16, 1964

,n ns :

Approx.

FqUlv.

?rice

Annual Rate

99.131
99.12)
99.126

3.t38.~

).469
3.4S8 -{,

;

F.:xcept1~

one tender of $13,000
'&;£ of the amount or 91-day bills bid for at the low price was accepted
SSt.' or the &1'IlOUllt ot 182-day bUls bid for at the low pri._ was aocept.ed
TOTAL 'r.. ~m~:t~S AP?LU.D "'j : ,".aD hCCE?l'D ~. FE.'DERAL R',:.;;ERVE DlSTJUCTSI

Diatrict
Applied For ..
8 o e t o n ' p L8,~59,UOO
New.tork
1,j27,S7b,()(}:)
Philadelphia
\J,778,OOO
Cl.neland
36,912,000
Riehaand
~t1Mta
ChiC&¥o
St. Louis

Minneapolis
lanaa~, City
Dalla.:.
San r'rancisco

'f:JI'ALS

10,57S,ooO
)6,184,000
231,24:;,000

52,60),000
2S,l29,OOO
50,llL,OOO
3S,Sll,OO)
72J5PO,~
t2,178, 7fXL.OOO

!ggj!Ete4,
$
)9,903,000

79~;,256.000

;
s

AePl 'M
$

F9£
,wpW
16,S)2,OOO $

1,010,794,000

U,66I,a

587,7Sk,oao

25, n8,CXXJ I
)6,912,000:

8,6)4,000

),6)1&,-

11,lOS ,)00

17,lOS,-

),621,;)0()

),621,9,lA&,.

lJ~,57S,OOO

)2,004,000 r

9,l~J)OO

166,60),000:
46,84),000 s
21,869,000:

12$,315,000

u7,8.34,000

2B,451,000:

44,160,000
'~l,.300,288,OOO ~

lS,k64,ooo

70,4OS,.
1),7S',-

9,072,000

9,071,-

18,061,000
10,60.3,00)
61,$08,000

16,
8,lJ"-

$1,)06,01),000

'M,-

49,g.a,.
$800,)06,0lI0

!?Ilneludes ·.3)O,5h6,()i.)') noncQrI[JEttitive tenders accept.ed at the average price oI,."~
iJ Includes-·85!005,j():) nonoompetitive tenders aocept~ at the average price of
I)ft a c~upon l.ssue ~f t.he S8lne length and for t.he saM aaount invested, t.bI ,....

Ii'

'!1

these bills would provide yields of 3.S5~, tor the 91-day bUJ.s, and ).6~,
162-day bills. Int.erest rates on bills aft quotAd in teru 01' bank d~"
return related to the face anount of the bills payable at _turity rat.ber tbIIW
MOunt inv6sted And their length in actual nuaber of ~a related to • ~!!
In contrast, yields 00 certifieaws, note's, and bond.a are OQlllPUte<i 1n t,edI " _
on the aJllount invested, and relate thE!. number of da1'a I'8M1ning in an il1~ tI
per1id. to tJ'.e actual nl.llftba.,r of days in th-e period, with ..s.annual c~
1IlOl"e tLan ()l'\C COOc."ln oeriod is inv.)lved.
I

/.v

'~';-I
~

TREASURY DEPARTMENT

R RELEASE A. M.

NEWSPAPERS,
esday, October 15, 1963.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced last evening that the tenders for two series of
3asury bills, one series to be an additional issue of the bills dated July 18, 1963,

the other series to be dated October 17, 1963, which were offered on October 9, were
ened at the Federal Reserve Banks on October 14. Tenders were invited for $1,300,OOO,OO~
thereabouts, of 91-d~ bills and for $800,000,000, or thereabouts, of 182-d~ bills.
'! details of the two series are as follows:

OF ACCEPTED
lPETITIVE BIDS:

NGE

High

Low

Average

91-day Treasury bills
maturing January 16, 1964
Approx. Equiv.
Price
Annual Rate
99G131
3.438%
99.123
3.469%
99.126
3.458% Y

·
··•
··••

182-day Treasury bills
maturing April 16, 1964
Approx. Equiv.
Price
Annual Rate
98.205 !I
3.551%
98.190
3.580%
98.196
3.568%

a/ Excepting one tender of $13,000
the amount of 91-day bills bid for at the low price was accepted
59% of the amount of 182-day bills bid for at the low price was accepted
A1 TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

24% of

1strict
oston
9W York
Ulade1ph:l.a
leve1and
.lchmond
i1anta
lieago
'. Louis
.nneapo1is
illBas City
Uas
n Francisco
TOTALS

Al2l2lied For
$ 48,959,000
1,527,576,000
40,778,000
36,912,000
14,575,000
36,784,000
237,243,000
52,603,000
25,129,000
50,114,000
35,511,000
72,258°2000
$2,r(8,764,000

AcceEted
$ 39,983,000
795,256,000
25,778,000
36,912,000
14,575,000
32,004,000
166,603,000
46,843,000
21,869,000
47,834,000
28,451,000
44 2180,2000

$1,300,288,000

·:•
••
••

:
••

£I

A£Elied For
AcceEted
$ 16,532,000 $ 11,662,000
1,010,794,000 587,754,000
3,6)4,000
8,634,000
17,105,000
17,105,000
3,621,000
3,621,000
9,104,000
9,104,000
125,315,000
70,405,000
15,464,000
13,759,000
9,072,000
9,072,000
18,061,000
16,749,000
10,803,000
8,393,000
61 z508 2ooO
49 2°48 2000
$1,306,013,000 $800,306,000

neludes $330,548,000 noncompetitive tenders accepted at the average price of 99.126
ncludes $85,005,000 noncompetitive tenders accepted at the average price of 98.196
n a coupon issue of the same length and for the same amount invested, the return on
'lese bills would provide yields of 3.55%, for the 9l-day bills, and 3.69%, for the
32-day bUls. Llterest rates on bills are quoted in terms of bank discount with the
~turn related to the face amount of the bills payable at ~turity rather than the
tount invested and their length in actual number of days related to a 360-day year.
contrast, yields on certificates, notes, and bonds are computed in terms of interest
the amount invested, and relate the number of days remaining in an interest payment
riad to the actual number of days in the period, with semiannual compounding i f
re than one coupon period is involved.
)-1007

STATUTORY DEBT

LnllTAT~

September 30, 1963

Asof

r: ~

\\ .• shin.>'ton,

Oct. 15, 19~

:;c(t1,)n 21 "i Se.:onJ Llbc:ny Pond Act, as amended, pro\'ide~ that the. face amount of .obliba~ions issued under .authorit) 0
obl,,.::aClons guaranteed as to prIncIpal and Interest by. the united St.ltes (except such gUM.lntc<
the Secretary of the Treasury), "Shall not exceed In the ag~re,.::.1te. $285,000.000,000 (ACt~
J":o" ;C . • "'S'\y. S. C.' title 31, se~. 757b), ou.tst.lndlng. at anyone time: For purp?ses of thiS sectlOn the current r~J~mptiOi
\.I.UC vi ,",:: ,,,"',.::.,tIOO Iss~;d _~n a d,scount bas;'., whICh IS redeemable puor to matuCity at the opuon of the hold~r shall be COlI
'"l,." ... ,t, : .Icc' "clO~nL 1 De Act. of Aug.ust. ~ , , 19 ~3 (P. L. 88-106 8bth Congr~s s) prOVides that the .Ibove IlnHt .ltlOn shall be
te':;,;"): ,I:.::, I nde' .",c.1 ounng the perIOd be&lnnlng on September I, 1963, and ending on November 30, 1963 to 5309,000,000,000,

t':.lt "":, .I~,; t:oc i.ICC .lmount ot
"I"" •. I:,,)n . . >' C ..I}, be ne!j by

';',c :,)::,)\\1[11; t .• ble shows the face amount of obligations outstanding and the face amount which can still be issued
un\.:c: t:H:-. 11r:l1L~(i~n:

Tot .. :

1.,CC

$309,000,000,000

,U'lOunt that may be outstanding at anyone time

Out:-.t"nliln~ -

Obil;;~tio~s Issued under Second Liberty Bond Act, as amended
Intc:e,t-bcolfing:
Trc.l,ury bills _ _ _ _ _ _ _
Ccrtliic.Hcs of indebtedness

$ 48,217,115,000

!!~_ _ _ __

Trc."ury notes _ _ _ _ _ _ _ _ __

15,493,694,000
54,113,975,000

$117,825,444,000

86,456,159,550
48,597,170,041
287,315
100,724,500
25,696,000
3,812,880,000

138,992,917,406

I30nJs -

T:c.1sury _ _ _ _ _ _ _ _ _ _ __
• S.I\'O";S

(Current redemption value)

Cnited States Retirement Plan bonds
_ _ _ _ _ _ _ _ _ _ __

l)cpo~'tary

1\. E. A. series _ _ _ _ _ _ _ _ __
Investment series _ _ _ _ _ _ _ __
Certificates of IndebtednessForeign series _ _ _ _ _ _ _ _ __

324,500,000

Foreign Currency series _ _ _ _ __
Treasury notes Foreign series - - - - - - - - - Treasury bondsForci&n Currency series _ _ _ _ __
Treasury certificates _ _ _ _ _ _ __
Spcci.l! Funds Certificates of indebtedness _ _ __
Treasury notes _ _ _ _ _ _ _ _ __
Tre .. sury bonds _ _ _ _ _ _ _ _ __

163,1l8,258
2,500,000

7,022,760,951
4,683,456,000
32)944,238,000

TN .. I Interest-bearing _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
\1.Hured, interest-ceased _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Be.lring no interest:
l:nite.1 States S.lvings Stamps _ _ _ __
Excess profits tax refund bonds _ _ __
Special notes of the United States:
Internat'l \Ionetary Fund series - - - Internat'l De\'elop. Ass'n. series - - -

44,6.50,454,951
302,663,955,805
270,l4J.,600

51,958,043
695,190
3,028 ,000 ,000
128,956,600
125,000,000

Inter-American Develop. Bank series__
Total _____________________________
GU.H .lnteed obligations (not held by Treasury) :
~r.=e:est-bcarinb

1,192,639,448
2,.500,000

705 ,02l,19O

3,334,609,833
306,268,107,238

692,361,5.50
710,400

Debentures: F. H. A. So: DC Stad. Bds._
\\.lture.1, interest-ceased _ _ _ _ _ __
(;rand total outstanding _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
;, .... IC.(C

693,071,9.50

face amount of obliiiations issuable under above authority
Reconcilement with Statement of the public Debt

September '30, 1963
(Date)

(Daily Statement of the united States Treasury,
Outstanc:iing _

~tember 30, 1963
(Date)

Total gross public debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Guarantceci obligations not owned by the Treasury _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Total .;ross public cebt and guaranteed obligations _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Dec:iuct - other outstanding public debt obligations not subject to debt limitation _ _ _ _ __

D-1008

307, 328 ,Ul,
366,33~

306,961,719

STATUTORY DEBT LIMITATION
Asof

September)O,

1963

\l;' ash i ng to n,

-.::0:.. :c=--,t:c.:.,--1_5---!-,_1~9-6-,3:::...

Section 21 of Second Liberty Bond Act, as amended, provides that the face amount of oblig.lCions issued under authorit), of
at Act, and the face amount of obligations guaranteed as to princi!?al and interest by the United States (except such gU.H.lOt<.:ed
,ligations as may be held by the Secretary of the Treasury), "Shall not exceed in the aggregate $285,000,000,000 (Act of
,ne 30, 1959; U. S. c., title 31, sec. 757b), outst.lOding at anyone time. For purposes of this section the current redemption
lue of any obligation issued on a discount basis which is rede(;mable prior to maturity at the option of the holder shall be condercJ as its f.lce amounc." The Act of August 27,1963 (P.L. 88-106 88th Congress) provides that the above limitation shall be
nporarily increased during the period beginning on September I, 1963, and ending on November 30, 1963 to 5309,000,000,000.
The following table shows the face amount of obligations outstanding and the face amount which can still be issued
IOder this limitation:
~otal face cunounc that may be outstanding at anyone time
Outst.:.nding Obligations issued under Second Liberty Bond Act, as amended
Interest-bearing:
Treasury bills - - - -_ _ _ _
Certificates of indebtedness !f!.;._ _ __
Treasury notes _ _ _ _ _ _ _ _ __

$309,000,000,000

$ 48,217,775,000

15,493,694,000
54,ll3,975,000

Bonds Treasury _ _ _ _ _ _ _ _ _ _ _ __
Savings (Current redemption value)
United States Retirement Plan bonds
Depositary _ _ _ _ _ _ _ _ _ __
R. E. A. series _ _ _ _ _ _ _ _ __
Investment series _ _ _ _ _ _ _ __

86,456,159,550
48,597,170,041
281,315
100,724,500
25,696,000
3,812,880,000

Certificates of Indebtedness Foreign series _ _ _ _ _ _ _ _ _ __

324,500,000

Foreign Currency series _ _ _ _ __
Treasury notes Foreign series _ _ _ _ _ _ _ _ __
Treasury bondsForeign Currency series _ _ _ _ __
Treasury certificates _ _ _ _ _ _ __
Special Funds Certificates of indebtedness _ _ __
Treasury notes _ _ _ _ _ _ _ _ __
Treasury bonds _ _ _ _ _ _ _ _ __

163,ll8,258

70~1~8518gg
, ,

7,022,760,951
4,683,456,000
J&J 44,238,000

Total inrerest-bearing _ _ _ _ _ _ _ _ _ _ _ _ _ _ _._ _ __
Matured, interest-ceased _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Bearing no interest:
United States Savings Stamps _ _ _ __
Excess profits tax refund bonds _ _ __

$117,825,444,000

1,192.,639,448
2,500,000
44,650,454,9$1
302,663,955,,805
210,l4l,600

51,958,043
695,190

Special notes of the United States:
lntemat'l Monetary Fund series _ _ __

3,028,000,000
128,956,,600
Inter-American Develop. Bank series _ _
125,000,000
Total _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ____
lnteraar'l Develop. Ass'n. series _ __

3,334,609,833
306,268,707,238

uaranteed obligations (not held by Treasury):
Interest-bearing:

692,361,550
110,,400

Debentures: F. H. A. & DC Stad. Bds._
Matured, interest-ceased ________
Grand cocal outstanding _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ____

693,071,950

ance face amount of obligations issuable under above authority
R eco 0 c i I em e 0 t with St atem e ot

f the P ubli c Debe

-.!oS!.!.e><.pl.L!<t~eilJml!!b~e...r""___30.". ".__1.. ,.2'""6"-3,,-(Date)

(Daily Statement of the Uoited States Treasury,

_..JS~e~p~temb~~~e'"'r_30~~,-""1...9u6""3,.6-(Date)

anding •
)tal gross public debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
laranteed obligations oot owned by the Treasury _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
,tal gross public debt and guaranteed obligations - - - -_ _ _ _ _ _ _ _ _~_ __
:t - other outstanding public debt obligations not subject to debt limitation _ _ _ __

D-IOOit

306,635,039,350
693,011,950
307, 328,111, j()i3
366,332,112

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE
The Treasury today announced the membership of an informal
advisory committee it has selected to assist in its study of problems relating to tax-exempt foundations. The study is intended to
consider both the legal and administrative aspects of such problems.
The committee has held two meetings and will hold several more
before concluding its work. It plans no formal report.
The members of the committee are: F. Emerson Andrews, Director
of The Foundation Library Center (New York City); Leigh Block, President, Inland Steel-Ryerson Foundation (Chicago); Morris Hadley,
Chairman, Carnegie Corporation of New York; Barklie M. Henry, VicePresident, John Hay Whitney Foundation (New York City), and ViceChairman, Carnegie Institution of Washington, D. C.; Harry Mansfield,
Attorney, Ropes & Gray (Boston); Henry A. Moe, retired President of
Guggenheim Memorial Foundation (New York City); Robert Mueller,
Attorney, Mueller & Criss (Austin, Texas); James Patton, President,
National Farmers Union, and President, Farmers Educational Foundation
(Denver); Harry J. Rudick, Attorney, Lord, Day and Lord (New York
~ity); Albert Sacks, Professor, Harvard University Law School; Jack
S. Seidman, Accountant, Seidman & Seidman (New York City); Walter M.
Jpchurch, Jr., Vice-President, Shell Companies Foundation (New York
~ity); David Watts, Attorney, Dewey, Ballantine, Bushby, Palmer &
vood (New York City); Donald Young, President, Russell Sage Founda:ion (New York City). Professor Bernard Wolfman, University of
>ennsylvania Law School, is also participating as a consultant.

000

D-I009

- 3 -

and exchange tenders will receive equal treatment.

Cash adjustments will be made

rue

1088

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,

are exempt from all taxation now or herea.:t'ter 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

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 actu&ll1
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 -

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.

tmm

Others

banking institutions will not be pennitted to submit tenders except for their
ow 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 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.
Immediately after the closing hour, tenders will be opened at the Fedenti
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department 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, in whole or in part, and his action in any such respect shall be
final.

Subject to these reservations, noncompetitive tenders for

less for the additional bills dated

July 25, 1963

-.....;...---=~~r-----

ing until maturity date on January 23, 1964

$ 100,000 or less for the

#iJ

, (91

$ 200,000 or
J(B9lC

days remain-

) and noncompetitive tenders for

f&JX

182 -day bills without stated price from anyone

bidder will be accepted in full at the average price (in three decimals) of s.ccepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on

October 24, 1963

-------~~==~------

,in cash or other immediately available funds or

in a like face amount of Treasury bills maturing __O;...c_t_o_b_e~r~2=4:r,:.-...l9_6_3__ •

Cash

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE

October 16, 1963

~
TREASURY'S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders for two serie.
of Treasury bills to the aggregate amount of $ 2,100,000,000 , or thereabouts, for

ffl

cash and in exchange for Treasury bills maturing October 24, 1963
of $

2,10~6,000

, in the

WOO~I

fi*

, as follows:

91 -day bills (to maturity date) to be issued
~

in the amount of $1,300,000,QQO

ffl

October 24, 1963
tt5}
,or thereabouts, represent-

ing an additional amount of bills dated

July 25, 1963

{Ciij
and to mature

January 23, 1964

, originally issued in the

(dij
amount of $ 800 ,~OOO

,the additional and original bills

to be freely interchangeable.
182 -day bills, for $

6MC)C

800,000,000 ,or thereabouts, to be dated
~
October,Hr 1963 ,and to mature
April 23, 1964

~~~~~~-=~--

--~--~~~~---------

The bills of both series will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their faee
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 ~d
$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
Daylight Saving
clOSing hour, one-thirty p.m., Eastern~ time, Monday, October 21, 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 tender8t~
price offered must be expressed on the basis of 100, with not more than three

TREASURY DEPARTMENT
=::.....-

Oc tober 16, 1963
fOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
or two series of Treasu.ry bills to the aggregate amount of
2,100,000,000,or thereabouts, for cash and in exchange for
reasury bills maturing Oc tober 24, 1963, in the amount of
2,101,156,000, as follows~
91-day bills (to maturity date) to be issued
.n the amount of $1,300,000,000, or thereabouts,
ldditional amount of bills dated July 25, 1963,
Lature January 23,1964, originally issued in the
800,497,000, the additional and original bills
.nterchangeable.

October 24, 1963,
representing an
and to
amount of
to be freely

182 -day bills, for .$800 ,000 ,000,
or thereabouts, to be dELted
24,1963,
and to mature April 23,1964.

~tober

The bills of both series will be issued on a discount basis under
ompetitive and noncompetitive bidding as hereinafter provided, and at
aturity their face amount will be payable without interest. They
ill be issued in bearer form only, and in denominations of $1,000,
5,000, $10,000, $50,000, $100,000 1 $500,000 and $1,000,000
maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
? to the cloSing hour, one-thirty p.m., Eastern Daylight Saving

1me, Monday, Oc tober 21, 1963.

Tenders will not be

~ceived at the Treasury De~al'tment, Washington.
Each tender must
~ for an even multiple of $1,000$ and in the case of competitive

3nders the price offered must be expressed on the baSis of 100,
lth not more than three decimals~ e. g., 99.925. Fractions may not
) used. It is urged that tenders be made on the printed forms and
)rwarded in the special <envelopes which will be 8~pplied by Federal
!serve Banks or Branches on application therefor'
0

Banking institutions generally may submit tenders for account of
lstomers provided the nam4es of the customers are set forth in such
:nders. Others than banl{ing instituttons will not be permitted to
.bmit tenders except for their own account. Tenders will be received
thout deposit from incorporated banks and trust companies and from
sponsible and recognized dealers 1n investment securities. Tenders
'am others must be accompanied by payment of 2 percent of the face
aunt of Treasury bills applied for, unless the tenders are
companied by an express guaranty of payment by an incorporated bank
trust company.
D-1010

- 2 -

Inunediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public
announcement '1'1111 be made by the Treasury Departmment of the amount
and pr1ce 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, in whole or 1n part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $ 200,OOOor less for the additional bills dated
July 25, 1963
(91-days remaining until maturit¥ date on
J;lllLldry 23,1964)
and noncompetitive tenders for ~ 100,000
or les8 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 Banlcs on Oc tober 24, 1963,
in cash or other 1nunediately available funds or in a like face
amount of Treasury bills maturing Oc t ()be r 2.4,1963. 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 r.L'l'easu.ry 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. 'Ehe 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
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 con:lide::ed to accrue until such bills are
sold, redeemed or otherwise d ispo:,ed of, and such bills are excluded
from consideration as c api tal asset s. Accordingly, the owner of
Treasury bills (other than lL'e insuranc e companie s) issued hereunder
need include in his income tax retu.rn 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 du~ing the taxabie year for which t~
return is made: as ord.inary gain or loss.
'I'reasury Department Circular No. 418 (c:urrent revision) and this
tlotice prescribe the:; terms of the rl'rea.:3ury bills and govern the
conditions of their issue, eODies cf the circular may be obtained f~
any Federal Reserve Bank or Br~nch.
oOG

- 1 -

Unc.lcl' CecUons 151 (b) unel 1221 (5) of thc Internnl r.cvenuc Code of 1~31
Lhc :'~'lO'lU1t of c.liscmml. 0.1. vhich bills issued hC:Tcw1dcr o.rc sold is not con-

sLc.lcred co accrue until such bills nrc sold,

re<lcelJl(~d

or othervisc disposed of ,

[nd

Gu~il

Ll1C

mmcr O.l.~ Treasury billn (other then Ufo incurance compc.nics) issued he~.

bills arc excluded from consideration o,s capital assets.

AccordinclJ,

tU1dcr need include in his inco[.lC tax return only the difference between the
price p,d.d for Guch bill:;, vhcthcr on oriGinal issue or on sub:::;equent purchase,
8l1d the [U,loune uctun.lly received oj. ther upon Gale or redemption at HD.tur:i.ty
dvrinc;i.;he taxable year for ,lh:ich the l'eturn is made, as ordinary eain or loss.
PUIcho.Gers of n strip of the bills offered hereunder should, for tax purposes,
tr'lcc such bills on to their books on the bas:l.s of their purchase price prorated
to cP_ch of thc ten

-~..--~

outstandil1[; issucs us:i.ng as a bo.sis for proration

ehc closinc mo.rlcet priccs for each of the issues on October 28, 1963.
Ecscnrc

no.n1~s

rICIT YorI~.

(Pederol

'rIll have availo.ble n list of these market prices, based on the

:.lCCU1 behrecn the bid and
of

asI~ec1

quotat:Lons :rurnishcd by the Federal Reserve Bank

)

Treasury fupartnent Circulo.r Ho. 118, TIevised, and this notice, prescribe
the terns of the Treasw'Y bills and Govern the conditions of their issue.
Copies of the circular rn~ be obtaIned fl'om any Federal Reserve Bank or Branch.

000

r,ub,li Ltinc; Lenders "ill be rllivJscd of the acceptance or rejection thereof.
0CCl'C ~~.l:"

01'

Tne

or thc 'l'rCGSul'Y e).'I)l'c::JriJy rcserveG t.he ric;ht to accept or reject DIrt

all tcnders, in ",holc or in Tlart, ::-Jld his action in any such respect 6hall

be i'jn~.1.l.

HoncolitTlctitivc tenders for !plOO,OOO

:;;10 ,000

) ,ri thout etuted pricc from any one bidder 'rill be accepted in full

;¢i$

or less (in even lJIultiples of

::tL tht; nVel'(1{,;C pricc (in three dccimo.ls) of accepted competitive bids, provided
ilO'I!'Cver, that if the total of nOnCOJrll)cti 1.,i ve tenders exceeds ~200 ,000 ,000 , the

«iill

Sccl'cLm'Y of thc 'l'rc2.::J1U"J' rescrvcs the ri8ht to allot less th811 the mnount
~jl:9J.i.Cd

"Gl1C

for on

s·c,l'Cl.:i.c;h1., pcrcenl:;c:,,:;e bo,sis "l-r.L th ndjustments ",here necessary to

nc::c 11:1[:;11c1' nultiple of ~10 ~

nccord~.ncc

01'

'Iri.th tI1C bids nrust bc

'Dl'cnC l1 in cO::Jh

01'

Ll~A.1c

Sc [:;tlement for accepted tendcrs in
or completcd at the Federal Reserve Bank

othcr :i.r,I,lcd.i.o.Lc\;' available funds on

October 28, 1963.

The incoJ:lc del'l ved ;~ro~l 'l'rC8.Su.l-Y b:i.J.l::> , ilhethcr interest or cain from the
sale or O'::'11er dlsposi tion of the bills, dOCG not have any exempt:l.on, as such,
end lossll'o~;J tIle ::Jnle or other dicposi'cion 0:L' Tl'C8.eury bills does not have ~
specio.l b'co.blent, c;s such, undcl" the Il1l;crno.l Revenue Codc of 1951.

The biJ.J.s

c.:::c ::Jubjcct to cc·co.te, inheritoncc;, t.;ift or othcr cxciGC to.xes, .m.ether Fcder"c.:
or Sto.tc, but m'c CXC!1pt frOl'l all tc-xo:cion no', or hereafter imposed on the
principal or interes'c thereof by

e.ns'

state, or any of the possessions of the

Uniced States, or by eny local taxinc o.uthori ty.

For purposes of taxation the

ailot.!.l1'~ of discount E'.t which TreasUlJ' bills are originally sold by the United
S'ca)ccc is considered to be (interest.

rl~lC

bIlL:; of'ferccl hcrcunclcl' ,rill

l)[~~I"Llvc ['l"ld

Lhcir

l)c

j,,:::;ucd on a dl;.jcount bi'.Gis under co:))-

noncolt1pcticive bluuin.::; cc hereJ.nr.fter pl'ovided, lmd nt PlQGur5.ty

c.nounL 'rlll be }?L:.;)rublc 1f.L \,huul; :inkre[;t.

2.CC:

They 'Hill be iCGued in

bearer fonn only, cncl in denomlno.tionc of :ill,OJO, :;;5,000, :taD,OOOi J:i50jOeO,
~;100, 000, :~500, 000 end ~ll, 000,000 (mCl"LUl':i ty value).

FJ.'enuel'::J ,rlll be reeeived nL Fcdel'[ll DCC;Cl'VC B2111~s uncl Branches up to the
Daylight Saving
clos.inc hour, one-thirty p.m., Er."Gcrn/~ liilJle, Tuesday, October 22, 1923.
Tenders "rill not be reeci ved at the 'l'ye8.cuY"J Department,
C8.se of cOI.1peti tive tenders the pdce oi'l'ered
ai' 100, llith

be UGcu.

no~

DruS

In the

L be expresscd on the bncis

Llol'cchun three rlcCij,K',ls, e.c., J3.925.

Fractions mny I)ot

A single price llTlWt be subi,lHted .lor e8cll unit of $10~

cvcn ilrultiple thereof.

l,l['.de on the printed

i'OrTI13

DonJ.~s

cml Branchcs on application therefor.

Don],j.nc; institutions cenerally
11m,lCS

It is lli'Ced that tenders be

and fon·TE.rdcd in the Gpecio.l enveloI,es ,.;hich will be

.supplicd by Fcclcrul Reserve

provj.dcd the

, or

J\ unit rcprcGcnts :~l, 000 fn.ce 2Jnount of each is(>ue of

bills offerecl hcreunder, as pl'cviously described.

b::lJll~Lnc

0d&

\In.shil~ Lon.

of the cus tomers

ljlD:~C

subnll t tenders for account of customers

['o1'C

set forth in such tenders.

Others than

instl. Lutions lrill not be pcnuttcd to subml t tenders except for their

olm account.

'l'endcrG '-rill be received lri'chout cleposi t from incorporated banks

c.ncl trust cor,1panics ond from rcsponoible Dnd recoGnized dealers in investment
ceclli'i ties.
of 'Ghe face

Tenders from others r,mGt be accompanied b Jr payment of 2 percent
CI.I01..U1t

of Treasury bj,lls applied for, unless the tenders are acco:n-

pClliccl by on express e;uarenty of po.;y:;nen'L by on incorporat.ed bank or trust comp2lti'
Irflll1cdio.tely after the cloGirlG hour, tenders ",ill be opened at the Federal
Reserve Bonks and Branches, follO'l·rirlG which public announcement Will be made by
the Treasury Department <>f the amount end price range of accepted bids.

Those

TREASURY DEPAR'lMENT
Washington
FOR JM.iEDIATE RELEASE

October 16, 1963

TREASURY OFFERS

STRIP OF 1-lEEKLY BILLS

1 Bn.LION

OOC

'l'he Treasury Department, by this pubUc notice, invites tenders for add!•
tional amounts of

ten

,...---

-~W==-·

of $1,000,000,000
issued.

eerieG of 'rreasury bills to an aggregate alnount

,or thereabouts, for caGh.

6ikk

October 28, 1963

The additional bills will be

, will be in the amounts, and will be in addition to

G6&

the bills orJcinally issued and maturiI1G, as follows:
Amount of
Additional
Issue

-\>

100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000

r,laturity
Dates

Original
Issue Dates

1963
~

1964

August 8
August 15
August 22
August 29
September 5
September 12
September 19
September 26
October 3
October 10

February
February
February
February
March 5
March 12
March 19
March 26
April 2
April 9

6
13
20
27

Days from
October 28. 1963

to J4aturity

101
108
115
122
129
136
143
150
157
164

Amount
Currently
Outstanding
iin millions)

801
800
801
800
802
800

801
800
798

800

It;

'1'1,000,000,000
The additional and orieinal bills vnll be freely interchangeable.

Each tender subrni tted

l1ll1S t

be in the p.l!}ount of ::>10,000, or an even mult:!.!

thereof, and the amount tendered vrj.ll be applied to each of the above serie~
bills on the basis of the ratio

0:;:'

each series to the total of all series.

(111

to the
example, an accepted tender for $50 000
will be applied $5,000
....;;...;.~~~
with original date of August 8, 1963
, ond $5,000
to each of the addi'

)(We

tional weekly issues through the insue with original date of October 10, ~I

;6&iJ&

TREASURY DEPARTMENT
,

OR IMMEDIATE RELEASE
TREASURY OFFERS

~?l

BILLION STRIP OF WEEKLY BILLS

The Treasury Department, by this public notice, invites tenders for
jditional amounts of ten series of Treasury bills to an aggregate
uount of $1,000,000,000, or thereabouts, for cash. The additional
ills will be issued October 28, 1963, will be in the amounts, and will
? in addition to the bills originally issued and maturing, as follows:

[lount of
lditional
Issue
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
1°°2°00 2000
,000,000,000

Original
Issue Dates
1963
August 8
August 15
August 22
Augus t 29
September 5
September 12
September 19
September 26
October 3
October 10

Maturity
Dates
1964
February 6
February 13
February 20
February 27
March 5
March 12
March 19
March 26
April 2
April 9

Amount
Days from
Currently
October 28,1963 Outstanding
to Maturity
(In mil1ions2
101
801
$
108
800
115
801
800
122
129
802
136
800
143
801
150
800
157
798
164
800

e additional and original bills will be freely interchangeable.
Each tender submitted must be in the amount of $10,000, or an even
ltiple thereof, and the amount tendered will be applied to each of the
gve series of bills on the basis of the ratio of each series to the
tal of all series. (For example, an accepted tender for $50,000 will
applied $5,000 to the issue with original date of August 8, 1963, and
)000 to each of the additional weekly issues through the issue with
(ginal date of October 10, 1963.)
The bills offered hereunder will be issued on a discount basis under
lpetitive and noncompetitive bidding as hereinafter provided~ and at
.011

- 2 maturity their [(lce Lll110unt \vill be payable \vithout interest. They will
be issul,d in bL'arer form only, and in dL'nominLlt ions 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 u
"
P tl
.
h our, one - t h lr
. ty .p. m., Eas tern Day 119ht
c 1 os lng
Savlng time, TueSdav
October 22, 1963. Tenders will not be received at the Treasury
.
Dl'partment, Washington.
In the case of competitive tenders the price
offL'red must be expressed on the basis of 100, with not more than three
decimals, e.g., 99.925. Fractions may not be used. A single price must
be submitted for each unit of $10,000, or even multiple thereof. A unit
represents $1,000 face amount of each issue of bills offered hereunder ,
as previously described.
It is urged that tenders be made on the
printed forms and forwarded in the special envelopes which will be
suppl ied by Federal Reserve Banks and Branches on application therefor.
t he

Bank ing ins titutions generally may submi t 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 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.
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement
\ViII be made by the Treasury Department of the amount and price range of
accepted bids. Those submitting tenders will be advised of the
acceptance or rej ec tion thereof. The Secretary of the Tre asury expressl
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. Noncompetitive tenders for $100,000 or less (in even multiples of $10,000)
wi thout stated price from anyone bidder will be accepted in full at t~
average price (in three decimals) of accepted competitive bids, provid~
however, that if the total of noncompetitive tenders exceeds
$200,000,000, the Secretary of the Treasury reserves the right to allot
less than the amount applied for on a straight percentage basis with
adjustments where necessary to the next higher multiple of $10,000.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank or Branch in cash or
other immediately available funds on October 28, 1963.
The income derived from Treasury bills, whether interest or ga~
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 e
Treasury bills does not have any special treatment, as such, under th
Internal Revenue Code of 1954. The bills are subject to estate, ~~
inheritance, gift or other excise taxes, whether Federal or State,

- 3 -

ire exempt from all taxation now or hereafter imposed on the principal
)r interest thereof by any State, or any of the possessions of the
Jnited States, or by any local taxing authority. For purposes of
~axation the amount of discount at which Treasury bills are originally
'old by the United States is considered to be interest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code
f 1954 the amount of discount at which bills issued hereunder are
old is not considered to accrue until such bills are sold, redeemed
r otherwise disposed of, and such bills are excluded from consideration
s capital assets. Accordingly, the owner of Treasury bills (other
han life insurance companies) issued hereunder need include in his
ncome tax return only the difference between the price paid for such
ills, whether on original issue or on subsequent purchase, and the
mount actually received either upon sale or redemption at maturity
uring the taxable year for which the return is made, as ordinary gain
r loss. Purchasers of a strip of the bills offered hereunder should,
or tax purposes, take such bills on to their books on the basis of
1eir purchase price prorated to each of the ten outstanding issues
3ing as a basis for proration the closing market prices for each of
le issues on October 28, 1963.
(Federal Reserve Banks will have
milab1e a list of these market prices, based on the mean between the
_d and asked quotations furnished by the Federal Reserve Bank of
w York.)
Treasury Department Circular No. 418, Revised, and this notice,
escribe the terms of the Treasury bills and govern the conditions
their issue. Copies of the circular may be obtained from any
dera1 Reserve Bank or Branch.

000

TREASURY DEPARTMENT

October 16, 1963

FOR IMMEDIATE REIEASE
WITHHOLDING OF APPRAISEMENT ON
COPPER SHEETS

Press release dated September 5, 1963, is hereby corrected
as follows:

The words "copper sheets" should be amended wherever

they appear to read "copper in sheets and strips whether or not
in rolls or coilS."

000

TREASURY DEPARTMENT
==

FOR IMIvIEDIATE RElEASE
WI'l'HHOLDING OF APPHAlSr:ME;N'l' ON

COPPEH SHEETS
Press release dated SeptemlJer ), lSlG3, is hereby corrected
as follows:

The words "copper sheets

should be amended wherever

they appear to read "copper in sheets and strips whether or not
in rolls or coils."

- 2 From the time he submitted his Budget Message in January, the
President has emphasized again and again that tax reduction must,
and will, be accompanied by strict expenditure control. The House
of Representatives has endorsed the President's position by
recognizing, in Section I of the tax bill, how vital the prudent
control of expenditures is to the achievement of balanced budgets in
the near future. Expenditure control is, of course, the joint
responsibility of the President and the Congress. For while the
Administration recommends and administers programs, it is the
Congress that authorizes them -- and expenditures can never exceed
the amounts actually appropriated by Congress.

****
During the transition period while the tax cut is taking hold,
we will, of course, have to live with temporary deficits. But our
record in financing past deficits and our substantial margin of
unutilized manpower and manufacturing capacity should suffice to
preclude any likelihood of inflation in the near future. We must,
however, redouble our efforts to maintain the price stability we
have enjoyed for more than five years. Industry and labor must
exercise the same restraint in controlling prices and wages that the
government must exercise in controlling expenditures.

**
With the maintenance of price stability, the more rapid
productivity advances that would result from the tax bill would
greatly enhance the competitive position of American industry in
international trade. And a more buoyant domestic economy offering
a higher rate of return on investment would not only become a far
more powerful magnet to both domestic and foreign investment, but
would allow far more flexibility to monetary policy in preserving
the dollar against any pressures that may arise. In these
respects the tax bill is vital and indispensable in our long-range
effort to restore equilibrium to our balance of payments.

000

TREASURY DEPARTMENT
Washington

FOR RELEASE P.M. NEWSPAPERS
SATURDAY, OCTOBER 19, 1963

EXCERPTS FROM REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE BUSINESS COUNCIL
AT THE HOMESTEAD, HOT SPRINGS, VIRGINIA
SATURDAY, OCTOBER 19, 1963, 11:30 A.M., EST
Passage of the tax bill now before the Senate is essential to
the solution of every major economic problem that confronts us -- our
budgetary and balance of payments deficits, our excessive and
persistent unemployment, and our chronic postwar pattern of recession
and abortive recovery. The decision on the tax bill will determine
whether, in the years ahead, our economy will be surging upward or
limping along or dipping downward. It will determine whether we can
quicken the rise in the productivity of American business and at the
same time make full use of our available manpower -- or whether our
advances in productivity will be progressively offset by the waste
of unemployment. It will determine whether the dynamism of the
market place, of private initiative and incentives, will playa far
greater and more vital role in the expansion of our economy, or
whether the enlarged government expenditures will assume that role.

The tax bill will accomplish something American business has
been trying to get done for decades -- it will remove the
repressive grip of high tax rates upon investment incentives and
revitalize the principle of greater rewards for intensified private
initiative and effort as a crucial element in economic activity and
~rowth.
The proposed 48 percent corporate rate, together with the
~nvestment credit and depreciation reform of 1962 -- and the
proposed elimination of the requirement that depreciation be reduc~
by the amount of the credit -- will increase the after-tax profitability on new investment by nearly 35 percent. This large and
dramatic shift in the impact of our tax sys tem upon inves tment would
bring it to the point where it would for the first time, just about
match the investment stimuli offered by Western European tax syste~.
D-1012

TREASURY DEPARTMENT
Washington
'OR RELEASE P. M. NEWSPAPERS
:AWRDAY, OCTOBER 19, 1963

EXCERPTS FROM REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE BUSINESS COUNCIL
AT THE HOMESTEAD, HOT SPRINGS, VIRGINIA
SATURDAY, OCTOBER 19, 1963, 11:30 A.M., EST
Passage of the tax bill now before the Senate is essential to
he solution of every maj or economic problem that confronts us -- our
udgetary and balance of payments deficits, our excessive and
ersistent unemployment, and our chronic postwar pattern of recession
ad abortive recovery. The decision on the tax bill will determine
lether, in the years ahead, our economy will be surging upward or
imping along or dipping downward. It will determine whether we can
licken the rise in the productivity of American business and at the
lme time make full use of our available manpower -- or whether our
jvances in productivity will be progressively offset by the waste
~ unemployment.
It will determine whether the dynamism of the
,rket place, of private initiative and incentives, will playa far
:eater and more vital role in the expansion of our economy, or
tether the enlarged government expenditures will assume that role.

The tax bill will accomplish something American business has
en trying to get done for decades -- it will remove the
pressive grip of high tax rates upon investment incentives and
vitalize the principle of greater rewards for intensified private
itiative and effort as a crucial element in economic activity and
owth. The proposed 48 percent corporate rate, together with the
vestment credit and depreciation reform of 1962 -- and the
)posed elimination of the requirement that depreciation be reduced
the amount of the credit -- will increase the after-tax profitLlity on new investment by nearly 35 percent. This large and
lmatic shift in the impact of our tax system upon investment would
.ng it to the point where it would for the first time, just about
:ch the investment stimuli offered by Western European tax systems.
012

- 2 -

From the tillle he submitted his Buuget Met:>t:>age in January, the
President has emphasizeu again and again that tax reduction mut:>t,
and will, be accompanied by strict expenditure control. The Hout:>e
of Representatives has endorsed the Pret:>ident's position by
recognizing, in Section I of the tax bill, how vital the prudent
control of expenditures is to the achievement of balanced budgets in
the near future. Expenditure control is, of course, the joint
responsibility of the President and the Congress. For while the
Administration recommends and administers programs, it is the
Congress that authorizes them -- and expenditures can never exceed
the amounts actually appropriated by Congress.

During the transition period while the tax cut is taking hold,
we will, of course, have to live with temporary deficits. But our
record in financing past deficits and our substantial margin of
lnutilized manpower and manufacturing capacity should suffice to
preclude any likelihood of inflation in the near future. We mut:>t,
lowever, redouble our effortt:> to maintain the price stability we
lave enjoyed for more than five years. Industry and labor must
?xercise the same restraint in controlling prices and wages that the
;overnment must exercise in controlling expenditures.

With the maintenance of price stability, the more rapid
,roductivity advances that would result from the tax bill would
;reatly enhance the competitive position of American industry in
nternational trade. And a more buoyant domestic economy offering
higher rate of return on investment would not only become a far
:ore powerful magnet to D'" It domestic and foreign investment, but
ould allow far more flexibility to monetary policy in preserving
he dollar against any pressures that may arise. In these
espects the tax bill is vital and indispensable in our long-range
ffort to restore equilibrium to our balance of payments.

000

1 7, ')

F~I { ;{; U:~F. A. '~. ,,' ·w:';'.'! :)~:,6,
'h••51 'JctoDer it, l~). •

C:i;'U;J~-

ootober

21, l1(Jj

.'''''iUlll

;lr:·\S ',n'3 w"\':lLf ''''':~.L

t~lCt 'inuurj' iApart.:r,ent announced laat eYenilld that t.he tendlra for tva MrS... 01
'I'nuur bille, oou aenee to be an addit.ionaliHue ot the billa datud Jllll 2S, lPtiJ,
aoJ till/otIMU· eorl6. to be dGWd OctoOor 24, l1b), vil1eh V.N ott.red on 'Jcto~r 16,
_ra opa1l8d at tile Federal ,\e_rve i3&nU 0lJ ,:)otoO&r 21. T~ ~ invi'te4 t.
'l,J00,.)\.'0,JJU, or ti"d>rea.~u'te, of .Jl-day billa and for i800,OJO,O\X), or tllereabo1lt.e, II
lb2-da, bUls. Tl'ltt detallfJ of tile 't;wo aerie. are . . follow••
J\C -,','; .
Wiri'f4'I:_: L.':· ~1·r . B:
:tA .... ,

)l-uaj 'lr.wluri billa
.maturing January 2l. 1964
,\pprox. ;~qllI".

!nee
·;!.gh

19.126

n.l17
Aftr&6en.ud
Low

,!nnual ate
3.458';:,
3.4i)';

J.4B8 ~ !/

:
I

182-da7 'l'reaaury bUll

""!!"1!!1 .lprllApprox.
2). l~
Pl1.oI
Annual ita"

}8.1'n.
9d.l!i8

!!I

96.167
wudet" ·:::f J550,ooo; .,2/ Exceptint;'ae tenc»r of t60,voo

3.612'

3.6Wd

3.~6%

::.xoe~t1.n,., ODe
Jl-' of tile aount of }l-<Ja,i billa bid for at the low ;,n.oe "". aOCEtp.tcd
ilL of tbe QtOunt of 1:12-·:I.a,y bUls b:1.d for at tM low ;"rice vu accepted

TREASURY DEPARTMENT

RELEASE A. M.

l~EWSPAPERS,

!sday, October 22, 1963.

October 21, 1963

RESULTS OF TREASURY'S WEEKLY BILL OFFERIKG
The Treasury Department announced last evening that the tenders for two series of
!asury bills, one series to be an additional issue of the bills dated July 25, 1963,

the other series to be dated October 24, 1963, which were offered on October 16,
opened at the Federal Reserve Banks on October 21. Tenders were inn ted for
300,000,000, or thereabouts, of 91-day bills and for $800,000,000, or thereabouts, of
'-day bills. The details of the two series are as follows:
'e

182-day Treasury bills
91-day Treasury bills
maturing January 23, 1964
maturing April 23, 1964
Approx. Equiv.
Approx. Equiv.
Annual Rate
Price
Price
Annual Rate
High
3.612%
99.126 a/
98.174 bl
3.458;t
Low
98.158
99.117 3.644~
3.493;t
Average
98.167
99.118
3.488;t ~/
3.626' ~/
Excepting one tender of $550,000; bl Excepting one tender of $60,000
9H of the amount of 9l-day bills bid for at the low price was accepted
4% of the amount of 182-day bills bid for at the low price was accepted

IGE OF ACCEPTED
,PETITIVE BIns:

TENDERS APPLIED FOd. AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

~strict
Applied For
Accepted
Applied For
Accepted
)ston
$ 40,491,000
$ 24,591,000
$ 15,998,000
$ 12,078,000
:3W York
1,504,757,000
804,462,000
1,027,285,000
634,805,000
llladelpbia
31,554,000
16,423,000
9,106,000
4,106,000
Leveland
32,873,000
32,460,000
7,556 ,000
7,556,000
Lchmond
13,412,000
13,386,000
3,243,000
3,243,000
jlanta
29,273,000
20,121,000
9,159,000
8,159,000
ucago
321,196,000
192,294,000
107,451,000
54,731,000
,i. Louis
36,650,000
31,050,000
12,178,000
11,198,000
19,145,000
12,419,000
7,128,000
6,128,000
nneapolis
Ins as City
45,742,000
27,160,000
13,171,000
10,191,000
'lIas
29,361,000
16,315,000
10,320,000
5,360,000
n Francisco
159,940,000
1ll,493,000
55,587,000
42,587,000
TOTAL
$2,264,394,000
$1,302,174,000 ~I $1,278,182,000
$800,142,000 ~I
ncludes $258,959,000 noncompetitive tenders accepted at the average price of 99.118
ncludes $71,126,000 noncompetitive tenders accepted at the average price of 98.167
n a coupon issue of the same length and for the same amount invested, the return on
hese bills would provide yields of 3.58%, for the 91-day bills, and 3.76%, for the
82-day bills. Interest rates on bills are quoted in terms of bank discount with the
eturn related to the face amount of the bills payable at maturity rather than the
nount invested and their le~th in actual number of days related to a )6o-day rear.
n contrast, yields on certif1cates, notes, and bonds are computed in terms of 1nterest
,;1 the amount invested, and relate the numoer of days remaining in an interest payment
~riod to the actual number of days in the period, with semiannual compounding if more
~ one coupon period is involved.

-1013

C::c::cb: r 21, 196)

7r::
I

Income Tax Treaty Between the United States and the
Philippines to Be Discussed

Representatives of the United States are expected to meet with
representatives of the Philippine government in the near future to
discuss a possible income tax convention to avoid double taxation of
income and facilitate trade and investment between the two countries.
It is anticipated that among the subjects to be discussed will
be the tax treatment of trading and other business enterprises,
investment, and income from services.
Interested persons in the United States who desire to submit
comments on the scope of the discussions or to submit information
relating to the subjects mentioned are invited to send their views
to Mr. Stanley S. Surrey, Assistant Secretary of the Treasury,
Washington 25, D. C.

The deadline for receipt of such comments is

December 6, 1963.

lAt.

/
/

TREASURY DEPARTMENT

Oc to b (' r 2 1, 1 96 '3
FOR LMMEDIATE RELEASE

INCOME TAX TREATY BETWEEN THE UNITED STATES
AND THE PHILIPPINES TO BE DISCUSSED
Representatives of the United States are expected to
meet with representatives of the Philippine government in the
near future to discuss a possible income tax convention to
avoid double taxation of income and facilitate trade and
investment between the two countries.
It is anticipated that among the subjects to be discussed
will be the tax treatment of trading and other

business

enterprises, investment, and income from services.
Interested persons in the United States who desire to
submit comments on the scope of the discussions or to submit
information relating to the subjects mentioned are invited
to send their views to Mr. Stanley S. Surrey, Assistant
Secretary of the Treasury, Washington 25, D. C.
for receipt of such comments is December 6, 1963.

000

D-lOl4

The deadline

TREASURY DEPARTMENT
Washington
OPENING STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
ON THE INTEREST EQUALIZATION TAX BEFORE
liTHE EXECUTIVE SESSION OF
THE HOUSE WAYS AND MEANS COMMITTEE
MONDAY, OCTOBER 21, 1963, 11:00 A.M., EDT
Before you consider the provisions of H.R. 8000 in detail,
I would like to review briefly the urgent need for this
legislation, developments in our balance of payments during the
period

sinc~

the Interest Equalization Tax was proposed on

July 18, and the ways in which the markets for foreign securities
have already adjusted to this proposal.
As you know, the Interest Equalization proposal is for a
temporary excise tax on acquisitions from foreigners of both
new and outstanding foreign securities
maturing in more than three years.

whether debt or equity

In the case of debt

obligations, the amount of the tax levied on the United States
person acquiring the security would be graduated by maturity in
a manner calculated to be equivalent to approximately 1% in
yield.

As this tax is passed back to the foreign borrower, it

will bring his net interest cost for capital raised in our market
into much closer alignment with the costs prevailing in other
industrialized countries -- thereby diverting to other markets
a substantial portion of the demands that would otherwise reach

Released by the House Ways and Means Committee at the conclusion
of Secretary Dillon's apperance on this date.

-1015

- 2 -

our market.

In the case of equities -- which, of course, have

no fixed maturity -- the tax would be 15%, the same as the rate
applied to the longest dated bonds.

Acquisitions of foreign

securities from other United States persons would remain free
of tax, as would direct investment abroad and acquisitions of
the securities of developing countries.
H.R. 8000 provides that, with certain exceptions, the tax
would be applied to all acquisitions after July 18, when the
President first proposed this measure.

Participants in the

markets have thus been conducting their affairs in that knowledge
for more than three months.

I believe that experience over this

period has amply confinued our initial judgment that this temporary
tax will be an effective means for assuring the needed reduction
in the outflow of portfolio capital, while preserving the essential
freedom of the market to raise and distribute this capital on the
basis of price and other competitive criteria.

A number of more

or less technical amendments to the bill will be helpful in
meeting certain special problems that have been brought to our
attention and in clarifying the application of the tax to
types of transactions.

certa~

We are, of course, prepared to work

closely with the Committee in resolving these problems.

But

- 3 -

the basic provisions of the bill as proposed have, in our
judgment, successfully met the dual test of effectiveness and
market practicability.
At the time I testified before this Committee in August
with respect to the Interest Equalization Tax, I pointed out
that a sharply accelerating outflow of portfolio capital had
been responsible for a marked deterioration in our over-all
balance of payments position.

Purchases by United States

investors of new foreign securities doubled between 1961 and
1962, rising from a little over $500 million in 1961 -- a figure
well within the normal range of recent years
$1 billion last year.

to more than

During the first half of 1963, the

outflow almost doubled again, exceeding $1 billion in this
six-month period.
Meanwhile, our balance of payments deficit -- excluding
all special inter-Governmental transactions -- rose by over
$500 million in 1962 and by $900 million more, at an annual
rate, during the first six months of this year.

These increases,

closely paralleling the steeply rising outflow of portfolio
capital, brought this deficit on regular transactions to an
annual rate of $4.5 billion.

I wish to stress that, while

- 4 there were numerous offsetting changes in the composition of
our deficit on regular transactions between 1961, when it
totaled $3,043 million, and the first six months of 1963, when
it averaged $4,480 million at an annual rate, the entire
deterioration is more than accounted for by the sudden and
unprecedented increase in the purchase of new foreign security
issues by American investors.

This phenomenon totally transfomed

our overall balance of payments and created a situation which,
if allowed to continue, would have inevitably resulted in a
major crisis in the international payments system, the
dangerous consequences of which for the security and well being
of our nation and for the free world as a whole can hardly be
exaggerated.
It is true that we have been successful in absorbing a
portion of the dollars passing into foreign hands as a result
of this deficit on regular transactions by medium-term Treasury
borrowing from other countries in a strong balance of payments
position, by prepayments of debts owed to us by our allies,
and by other special inter-Governmental transactions.

But by

mid-year it had become apparent that, along with savings in
other directions, prompt and decisive action was required to

- 5 -

curtail the enormous outflow of portfolio capital if we were
to arrest and reverse the deterioration in our over-all accounts,
and thus assure our continuing ability to finance our deficit
in an orderly manner and to protect the stability of the dollar.
That, of course, is the special purpose of the Interest
Equalization Tax, which complements our efforts to further
lessen short-term capital outflows by increasing upward pressure
on short-term interest rates and the measures announced by the
President on July 18 to reduce Government expenditures abroad.
The role of the tax is temporary and transitional, for the
ultimate solution lies in other directions -- in the building
of a more prosperous and profitable home economy that will be
more attractive to both domestic and foreign capital, and in the
development of broader and more efficient capital markets in
other industrialized countries.

However, the urgent need for

effective action to meet our innnediate problem simply did not
permit us to wait for those essentially longer-term solutions.
Some portion of the outflow of portfolio capital during
the latter part of 1962 and early 1963 reflected temporary
influences

particularly the Canadian difficulties of

last year and Canada's desire to rebuild its reserves
by long-term borrowing in our market.

But beyond these

- 6 special circumstances, the ominous fact was that momentum was
visibly building up for still greater demands on our capital
market from borrowers in virtually all other major industrialized
countries.

For instance, Japan -- already a sizable borrower

during the first half of 1963 -- had apparently been
doubling

the

anticipat~g

rate of its flotations in the United States market

over the remainder of the year, which would have brought the total
for the year to approximately $300 million.

At the same time,

more and more industrial firms and municipalities in Europe were
beginning to turn to our market.
These accelerating demands were reflected, for example, in
the volume of new foreign corporate issues known to have been
in the final process of negotiation with American interests at
the time the tax was proposed.

These issues totaled over $200

million, with borrowers in Japan and Europe each accounting for
more than $90 million.

This particular compilation, confined to

corporate issues, is only symptomatic of the much greater

vol~

of potential borrowings from industrialized foreign countries
other than Canada that were on the horizon, including large
issues of both central and local governments.

In discussions

with responsible European financial officials over the past few
months, we learned of many more prospective flotations.

- 7 The urgency of this situation, combined with the essential need
to forestall a flood of anticipatory borrowing by foreigners and
accelerated purchases of foreign issues by U. S. investors, compelled
the President to ask that this tax become effective the day following
his special message.

Enough is known of the third quarter balance

of payments to make clear that, along side the recent actions to
firm the level of short-term interest rates,this proposal for an
Interest Equalization Tax is playing a key role in reducing the
outflow of capital and permitting the needed improvement in our
over-all position.

Present indications are that, during the three

months ended in September, the deficit on regular transactions
that is, excluding all special inter-Governmental payments -declined, on a seasonally adjusted basis, to less than half of
the annual rate of $4.5 billion at which it was running over the
January-June period as a whole.

Sizable debt prepayments,

medium-term borrowing from other nations, and other special
Government transactions reduced the over-all net deficit still
further -- the preliminary figure should become available very
shortly.
Much of the sharp third quarter improvement can be traced
directly to a decline each month since June in purchases of new
foreign stocks and bonds.

A further significant portion of the

- 8 decline appears to reflect a cessation of the sizable net
purchases of outstanding foreign securities that occurred during
the first half of the year, when such buying had resulted in a
net outflow at an annual rate of $200 million.

What has happened

judging from preliminary data through August -- is that foreigners
have continued to purchase these securities in our market in
somewhat reduced volume, while Americans have sharply limited
their purchases from foreigners.
It is worth noting that the substantially improved third
quarter figures include a significant volume of further purchases
of new foreign issues by Americans, amounting as nearly as we can
determine today to between $150 and $200 million.

In itself, this

would imply purchases at a rate at or above that of the 1959-1961
period, when the outflow of portfolio capital was maintained
within a more sustainable range of $500 - 650 million annually.
These purchases have almost entirely reflected transactions
completed or firmly committed before the proposed July 19th
effect i ve date for the tax.
ceased.

By September the flow had practically

So far as we know, no sizable new commitments have been

undertaken since July 18.

- 9 -

Clearly, the initial impact of the tax on negotiations
between potential lenders and borrowers has been exaggerated by
a tendency to postpone action pending legislative resolution of
the proposal.

This has been particularly evident in the case of

Canadian borrowers, who have refrained from entering our market
even though we have proposed that the President exercise his
discretionary authority under the bill to exempt new issues from
that country.
It can be expected that some negotiations will be reactivated
once the tax becomes definite.

A few issuers have already

expressed willingness to bear the higher costs that will result,
and the present uncertainties concerning the tax treatment of
Canadian borrowers will be ended.

On the other hand,

the backlog

of earlier commitments has now been worked off in large part, and
the clear consensus of market participants is that, once the
proposed tax has become law, the renewed flow will not again
approach the excessive levels of earlier months.

Meanwhile, the

progressive effects of measures to reduce the dollar outflow from
Government spending abroad, together with other actions to improve
our over-all position, should assure our continuing capacity to
sustain a reasonable outflow of portfolio capital in line with
our experience before 1962.

- 10 While negotiation of new foreign issues has temporarily come
to a standstill, active trading markets have been maintained in
the United States for outstanding foreign securities held by
American investors, both on the exchanges and over-the-counter.
Beginning August 19, the date we proposed the tax should become
effective for securities traded on U.S. stock exchanges, the
principal exchanges introduced new procedures for identifying
transactions involving foreign-owned securities which, if purchasea
by a U.S. investor, would be subject to tax.

Meanwhile, tax free

trading in foreign securities among U.S. investors has continued
in the regular way.
Total trading volume in these issues on the exchanges initial
tended to contract, but as brokers and investors bec8'me accustomed
to the new procedures, it recovered, although still remaining
below normal levels.

Trading of foreign-owned securities on the

exchanges has been rather inactive, but these transactions, never
before reported separately, may always have been relatively limite
American dealers have continued to arrange transactions among
foreigners in foreign dollar bonds, which they may handle free of
tax under the terms of the proposed bill.

This trading exemption"

entailing a refund or credit to dealers of the tax on securities
promptly resold to foreigners, appears to be operating effective1l
and could reasonably be extended to other foreign bond issues.

- 11 As had been anticipated, trading in foreign securities among
U. S. investors has frequently, but far from uniformly, taken place
at prices above the prices prevailing in trading among foreigners
in the same securities.

No regular pattern has developed and, for

the most part, these premiums have been small.

In the case of

actively traded stocks, premiums have g'enerally varied from less than

1% to as much as about 4%, and in the case of bonds they have seldom,
if at all, exceeded 2%.

No discernible premium has developed for

some of the most widely held foreign stocks and for many bond issues.
In a few special instances, however, particular foreign industrial
~quities
I

with exceptional appeal to U. S. investors have traded at

premium of as much as 15% -- the full amount of the tax -- and

.n these cases some net purchases from abroad have continued, although
lpparently

in reduced volume.

Sizable premiums initially developed

In some highly speculative gold shares as well, but demand for these
tocks subsided during September and the premiums have now almost
isappeared.
I should also emphasize that no evidence has developed of any
ignificant withdrawal of foreign capital out of U. S. securities
or of flight of

S. capital abroad.

The sharp improvement in our

ver-all accounts during the full third quarter is by itself an
1dication that any outflow of funds from these sources could not have
len large.

Moreover, the more specific data awi lable for August

- 12 indicate that, on balance, foreigners were net buyers of U. S.

cO~o~

securities in an amount greater than in most of the earlier months
this year.

I should add, too, that responsible officials in Europe

have both recognized the need to reduce our outflow of portfolio
capital, and welcomed our proposal as a further indication of our
firm intention to end our deficit

and maintain the stability of the

dollar.
Some concern has been expressed that the effectiveness of the
tax in restraining outflows of portfolio capital will be diluted by
two of the proposed exemptions -- one for loans made by commercial
banks in the ordinary course of their business, and the other for

ne~

issues of particular countries to be invoked only at the President's
discretion when necessary to avert

a threat to the stability of

the international monetary system.

As I indicated earlier, it is our

intention to exempt new Canadian issues under the terms of the latter
provision.
This Canadian exemption is designed to meet a highly unus~l
combination of circumstances.

Canada will for some time have a need

to borrow abroad enough funds to cover a sizable and continuing
current account deficit.

Because of the exceptionally close lin~~

Canadian financial markets and those in the United States, and bec8U

- 13 of other trading and business relationships between the two
countries, the great bulk of these Canadian needs have traditionally
been met in our market.

In addition, under present circumstances

Canadian access to other markets may be too limited to meet their
requirements.

Under these conditions, the prospect of sharply

higher borrowing costs in the United States was interpreted in
Canada as threatening the ability of the Canadian authorities to
maintain the stability of their currency without serious damage
to their internal economy, and an exceptionally large speculative
outflow of funds from Canada raised the prospect of an immediate
exchange crisis.

Faced with this situation, the Canadian

authorities suggested that appropriate restraints on their
borrowing in the United States could be achieved by other measures
of their own choosing consistent with their domestic objectives.
In these unique circumstances, an exemption from the tax for
Canadian new issues was clearly appropriate.
At the same time, it is vital that an important reduction
be achieved in the high level of recent outflows of portfolio
capital to Canada, and that total Canadian recourse to our capital
markets return to more normal levels.
only if consistent with that objective.

An exemption can be justified
The Canadians fully

understand tha.t we intend to closely watch the volume of their
borrowing in this country and that, should the total appear to be

- 14 exceeding prudent limits, we will recommend that the President
exercise his discretionary authority to impose a limitation
on the volume of their exempt borrowings.

This discretionary

power to limit the size of any exemption is an essential element
of the exemption proposal.

Without it, the proposed Canadian

exemption could undermine the whole purpose of the proposed
tax.
The exemption proposed for commercial banks will assure
that financing for American exports will remain amply available
on reasonable terms and that other short- and medium-term
borrowing in support of normal and recurring business operations
abroad will not be unnecessarily impeded.

However, the possibility

of abuse of this exemption, particularly if potential foreign
long-term borrowers attempt to shift their demands to the banks,
must be recognized.

Therefore it is important that we follow

developments in this area closely.

Our ability promptly to detect

and discourage any such possible abuse would be greatly facilitated
by an amendment to H. R. 8000 providing the Treasury with specifiC
authority to obtain from the banks timely reports in adequate
detail on the nature of their current foreign lending activity.

- 15 Existing procedures for the compilation of statistical information
on the over-all volume of outstanding bank loans are not adequate
to meet the need for timely and detailed information on this matter.
In the event that, contrary to our expectations, circumstances
should arise that would require some revision of the exemption for
bank loans, the kind of detailed information on the nature of bank
lending to foreigners which will be provided by these reports will
be of great assistance to the Administration and to the Congress
in determining means for dealing with this problem effectively, without
damage to the financing of American trade or normal business
transactions.
Since the announcement of the proposed tax, Treasury officials
have been in almost daily contact with investor interests, business
firms with operations abroad, and representatives of security houses,
identifying with them special problems presented by their particular
situations and exploring appropriate ways of dealing with them.

a number of instances, practical and mutually satisfactory solutions
to these problems appear feasible within the general framework of

H.R. 8000, and we will be happy to suggest amendments to this
effect at the appropriate point in your discussions.

However, some

)f the proposals presented to us for additional exemptions and
~xclusions

would undermine the effectiveness of the tax,

- 16 unnecessarily distort normal market relationships, or require
for their implementation the kind of detailed adninistrative
apparatus and surveillance more characteristic of a general
system of exchange controls.

Intensive review of all these

considerations has confirmed our initial judgment that outstanding
foreign issues acquired from foreigners should be subject to tax
together with new issues, and that a general tax free switching
privilege is neither desirable in the interest of equity and
effectiveness nor feasible without creating serious new problems.
Exemptions of this nature would be

incons~tentwith

our

intent that the Interest Equalization Tax work in a manner
analogous to a 1 percent increase in the structure of our
long-term interest rates relative to those prevailing abroad.
Such a change in interest rates, in addition to increasing the
cost of new foreign borrowings, would, of course, affect the
relative advantages of purchasing outstanding foreign securities.
The proposed tax, properly viewed as a substitute for a change
in relative interest rates that today cannot be achieved directly,
will and should have closely similar effects on international
investment and borrowing decisions, and on flows of funds abroad.

- 17 Within this framework, the distribution of available ca.pital will
continue to be determined, consistent with normal market forces,
by relative prices and other competitive criteria, without direct
Government intervention in the process of private decision-making.
This concept is very different from that lying behind the
prinCipal alternative means that has been suggested to achieve
the needed reduction in the outward flow of portfolio capital
selective rationing by some form of capital issues committee,
presumably operating on a more or less voluntary basis, but under
Government auspices.

By its very nature, this would mean that

market price would be rejected as an appropriate criterion.
Instead, market forces would be supplanted by generalized criteria
for "good" or "bad" types of investment or by some kind of ceiling
on the holdings of individual institutions to which purchasers of
foreign securities would be expected to conform.
There are many difficulties implicit in this kind of approach.
When a large number of competing firms are involved, and when
transactions entered into at one point in time frequently have
important implications for subsequent competitive relationships
among firms, there are strong market incentives to interpret
generalized voluntary guidelines loosely, or to observe the letter
while neglecting the spirit.

In the absence of clear lega.l

- 18 -

sanctions and the discipline of price, the entire system can break
down quickly under competitive pressure as soon as any suspicion
arises that some participants are not conforming to the intent of
the program.

This danger is reinforced when, as in this case, the

application of general guidelines to specific circumstances would
seldom be clear cut and unambiguous, for each transaction would
necessarily have unique characteristics.

Moreover, it would not

be feasible even to attempt to cover purchases of outstanding
issues by the thousands of investors involved, thus not only
leaving that channel for portfolio outflow untouched but encouraginb
investors withdrawing from the new issues market to transfer their
buying in that direction.
Past experience indicates that, to be effective at all,
voluntary restraint in so complex an area will require specific
"yes" or "no" decisions on many proposed transactions.

In the

last analysis the burden for making these decisions can only
properly and practically fall back on the Government itself.

The

net re£ult would be to inject the Government squarely into the
proces s of indi vidua 1 dec is ion making, and thus into the whole
fabric of our economic life, to an extent that this country has
always found unacceptable during peacetime.

Moreover, in

dealing with foreign borrowing, these decisions, case by
case, will inevitably be colored by our relationships at

- 19 the time with the other nation involved, bringing into the negotiations
considerations of foreign policy far removed from the purpose of the
effort and further complicating the task of achieving effective
restraint.
Government cannot, of course, escape a responsibility for
identifying the nature of the problem, pointing to the main
directions in which the public interest lies, and developing policies
to support that interest; judgments of this kind are, of course,
embodied in the bill before you.

But, to pass beyond this to an

3ttempt to direct specific private transactions would be to accept
1eavy and undesirable responsibilities of another kind.

And I am

:horoughly convinced that it is an illusion to believe that these
:esponsibilities could be escaped behind the facade of a voluntary
.• rogram.
In conclusion, I would point out again that the effectiveness
nd workability of the approach embodied in H.R. 8000 has been
emonstrated by the developmments of recent months.

The essential

etroactivity feature has provided us with the necessary time to
dentify and appraise the special problems that have arisen, and I
n confident that these-problems can be dealt with effectively and

1uitably by your Committee.

- 20 -

But unless the basic approach embodied in this bill is enacted
into law, the gravest of risks will promptly ensue for the dollar.
Certainly, capital outflows could be expected to resume on a
massive scale if we, by our own actions, demonstrate to all the
world an unwillingness to take those actions that are necessary to
reduce and eliminate our deficit,

In that event, no one could answer

for the continued stability of the dollar.
I know of no substitute for the legislation before you that
will adequately meet the need without turning in the direction of
direct controls.

Thus, it should be clearly understood that

rejection of the substance of this legislation would force the
United States to move, in this area of portfolio investment" to
measures of direct control contrary to our traditions -- measures
that we must do everything in our power to avoid.

For these reasoos,

I consider it of utmost importance that your Committee take prompt
and affirmative action in support of the general principles embodied
in this proposal.

TREASURY DEPARTMENT

October 22,1963

FOR IM}lEDIATE REIEASE
WITHHOLDING OF APPRAISEMENT ON

PIASTIC BABY CARRIERS (INFANSEAT)

'The Treasury Department is instructing customs field officers
to withhold appraisement of plastic baby carriers (Infanseat) from
Japan, manufactured by Marui Corporation, Tokyo, Japan, pending a
determination as to whether this merchandise is being sold in the
United States at less than fair value.

Notice to this effect is

being published in the Federal Register.
Under the Antidumping Act, determination of sales in the United
states at less than fair value would require reference of the case
to the Tariff Commission, which would consider whether American industry was being injured.

Both dumping price and injury must be

shown to justif,y a finding of dumping under the law.
The complaint in this case was received on July 18, 1963, and
was made by the Infanseat Company, Eldora, Iowa.

The dollar value

of imports received during the first 8 months of 1963 was approximately $47,000.

000

TREASURY DEPARTMENT

October 22,1963

FOR IMMEDIATE RElEASE

WITHHOIDING OF APPRAISEMENT ON
PIASTIC BABY CARRIERS (INFANSEAT)

The Treasury Department is instructing customs field officers
to withhold appraisement of plastic baby carriers (Infanseat) from
Japan, manufactured by Marui Corporation, Tokyo, Japan, pending a
determination as to whether this merchandise is being sold in the
United States at less than fair value.

Notice to this effect is

Both dumping price and injury must be

shown to justifY a finding of dumping under the law.
The complaint in this case was received on July 18, 1963, and
was made by the Inf'anseat Company, Eldora, Iowa.

The dollar value

of imports received during the first 8 months of 1963 was approximatelY $47,000.

000

H• • ;':nSfA~t:ri ~
uctober 2), 196).

!~,l .EL~.A..::)F. h.

~d.Deldal,

~!;L'1;$ Of' O~'i~iUNU ,JF

lULLIOM S1'IUP 01 1R: 3~f,U 8~LLS

,,_to

fbi 'lrealury Uepan.ent armounced 181t ....nia&
"endore tor addi"loMl _ .
ot wn •• rio. of Trea.UI'1 bUll to an aura,a" . .WIt 01 11,000,000,000, or t.hen.Do'
to be blued llct.ober 26, l~J, which were oft.reel on OCt.ober 16, W8re opued at. tbl
'ederal . . ." 0 Sanks OIl ':Jctober 22. 'the . .unt ot aooept.ed tender. will be equall1
cl1ri.ded .OQl t.he t.en regular w. .kl.! hlue. 01 01ltnudi.. Treasury o1.lls _t.ur~ '11
roar, 6, 1'164, to Anril 9, 1~4, inclualYe. Tbe doteU. of tne otterlng aN II t01101

Total applied for - 12,101,S10,ooo
Total aCOIpted
- $1,000,820,000

lUaoE OF ACClPTgD

BlUS.

CUlPltrT[V~

:.pprox1llate equ1Yal.ut. aJIIlual rate of Jilocnat 0ltNd
em 132.5 dall ~a'"ftl. . .bel' ot dal! to JUt-tn,,) •

).S61'

98.681

Hlch

........

).601'
).601'

98.672
96.61$

X-

WI.J

Price

(iDol. . . "',220,000 uterect on a "OMOIIpItiU"
balia aad ao..,... la tull at tbe a....... pri.
ahnn belcnr)

of t.he . .\lilt. bid tor at the low price . . aooep\ed

,.AL t • • • " " , q fICMl AID
Datl'1'"

,o.mD.'

nRML . . . . . . OISTilIctlh

Applied '01'
$ :)7 ,000,000

ao.t.oa

1,7$6,100,000

lew loft

Pb1laclelphla
CleftlaDd
rtioleo8d

lO,2OO,000
100,000

280,000

Acoeptecl

'21,&0,000
88S.340,000
200,000
)OO,(XX)

260,000

.,600,000

6oD,ooo

4S,8)O,000

San o'Nool800

1S',)OO,OOO
17,'SO,OOO
1,]10,000
2,820,000
20,110,000
,.,,100,000

TOTWS

12,101,S70,OOO

I} ,000,820,000

AUu\a
~bi~o
St.. Loul.

JllinDaapoll.

" .... Cl\¥
llIlUa.

•

6,SSo,OOO

no ,000

1,820,000
),090,000
34'740 ,000

~ 1O'IpOIl i.sue ot the a.me length . . tt. aft1"qe tor the bill. and for t~~
___t iDftItecl, t.he retum on the •• biUa would prort* a yle1d of ).
~
rates OD billa are quoted. in tvras ot bani: d1800UDt .\h the return related t~~"
ta.. ..auat. ot tbe bUlB P&1&ble at. MtUl"lt..1 ntber \ban the aourat il1ft.ted "lUI
tbeir llDlth in aotual oQlber ot da18 relatect to • )6O.day year. In contra=--i
on _nUl_tes, DOtee, and boDda are cowput.ecl 18 _ _ of lntere.-t on the
"tI
aDd relat. \be nu.ber of
~1.D1Dc 18 aD lntereet pAJUlent period ",
actual naber ot ~ 1D the period, with 1M1a~ .-poUDding U JnOre tbID

ni.

cia,..

".ted,
ocnapoD

{

per10d 18 iAYOlftd.

~(Cll/

TREASURY DEPARTMENT

RELEASE A. M. NEwSPAPEiLJ,

esday, october 23, 1963.
rtESULTS OF O?FERING OF $1 BIIl..ION S'lRIP OF TREASUrtY BiIl..S

The Treasury Department armounced last evening that tenders for additional amounts
en series of Treasury bills to an aggregate amount of;l.l,OOO,OOO,OOO, or thereabouts,
e issued October 28, 1963, which were offered on October 16, were opened at the
ral Reserve Banks on October 22. The amount of accepted tenders will be equally
ded among the ten regular weekly issues of outstanding Treasury Dills maturing Feby 6, 1964, to April 9, 1964, inclusive.
The details of the offering are as follows:
1 applied for - $2,107,570,000
1 accepted
- $1,000,820,000

OF ACCEPTED
'l:TITIVE BIDS:

High

Low

Average
44~

Price
98.687
98.672
98.675

(includes $4,220,000 entered on a noncompetitive
basis and accepted in full at the average price
shown below)

Approximate equivalent annual rate of discount hased
on 132.5 days (average number of days to maturit,)
3.567%
3.608%
3.601% !I

of the amount bid. for at the low price was accepted

TE.NDErtS APPLIED fOrt AiID ACCZ.':lT::;D BY ?3DS.iAL
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS

RESErtV~

Applied For
$
37,000,000
1,756,100,000
10,200,000
700,000
280,000
4,600,000
159,300,000
17,950,000
1,310,000
2,820,000
20,210,000
97,100,000
$2,107,570,000

DISTRiCTS:

Accepted
$ 21,840,000
885,340,000
200,000
300,000
280,000
600,000
45,850,000
6,550,000
210,000
1,820,000
3,090,000
34,740,000
$1,000,820,000

a coupon issue of the same length as the average for the bills and for the same
)unt invested, the return on these bills would provide a yield of 3.71%. Interest
~es on bills are quoted in terms of bank discount with the return related to the
:e amount of the bills payable at maturity rather than the amount invested and
!ir length in actual number of days related to a 360-day year. In contrast, yields
certificates, notes, and bonds are computed in terms of interest on the amount inted, and relate the number of days remaining in an interest payment period to the
ua1 nlDl1ber of days in the period, with semiarmual compounding i f more than one
pon period is involved.

D-I016

- 3 -

-; q ..
. v

DLTA -

MODIFIED

and exchange tenders viII 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.
'!'be income derived from Treasury bills, whether interest or gain from the aale
or other disposition of the bills, does not have any exemption, as such, and 1088

trom 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 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 19~

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 actua1l1
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,

p~.

scribe 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 LlJ'l'A - t.10DIFIED

decimals, e. g., 99.925.

Fractions may not be used.

It is urged that 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 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.
Immediately after the closing hour, tenders will be opened at the Fedenl
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department 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, in whole or in part, and his action in any such respect shall 00
final.

Subject to these reservations, noncompetitive tenders for

less for the additional bills dated

August

ing until maturity date on Januar.1964

$~ooor

days remain·

5¢fi)C

) and noncompetitive tenders for

$ 100,000 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 ten·

ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on

October 61, 1963

XlJ(W}X

, in cash or other immediately available funds or

in a like face amount of Treasury bills maturing --.;;O;.,;C;.,;t..;.ob_e_r...~.,3=1~,....1_9_63___ •

cash

, q ')
·.V

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE,

October 23, 1963

X)OOOOOOOOCXXX~~
TREASURY'S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders for two serie
of Treasury bills to the aggregate amount of $ 2 .10~0 .000, or thereabouts, tor
cash and in exchange for Treasury bills maturing
of $

2,10~05,OOO,

~daY

October 31, 1963 , in the amoun'

X5($

as follows:

bills (to maturity date) to be issued
in the amount of $

1,3~0,000,

October~

1963

or thereabouts, represent-

ing an additional amount of bills dated

August 1, 1963

5(BOk
and to mature

January 30, 1964

,originally issued in the

:(j')O
amount of $ 799,911,000 ,the additional and original bills
~
to be freely interchangeable.
182 -day bills, for $ 800,000,000 ,or thereabouts, to be dated
tm
~
October 31, 1963 ,and to mature April 30, 1964
----~~==~---

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 will be issued in bea.rer form only,

and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 ~d
$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 Standard time,

Monday, October 28, 1963_

(D9
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~
price offered must be expressed on the basis of 100, with not more than three

TREASURY DEPARTMENT

October 23, 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
~,100,OOO,000, or thereabouts, for cash and in exchange for
rreasury bills maturing October 31, 1963, in the amount of
$ 2,101,605,000, as follows:
91-day bills (to maturity date) to be issued
tn the amount of $1,300,000,000, or thereabouts,
1dditional amount of bills dated Augus t 1, 1963,
nature January 30,1964, originally issued in the
~799,911,000,
the additional and original bills
lnterchangeable.

October 31, 1963,
representing an
and to
amount of
to be freely

182-day bills, for $ 800,000,000,
or thereabouts, to be dated
etober 31, 1963, and to mature April 30, 1964.
The bills of both series will be issued on a discount basis under
ompetitive and noncompetitive bidding as hereinafter provided, and at
laturity their face amount will be payable without interest. They
rill 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
p to the closing hour, one-thirty p.m., Eastern Standard
ime, Monday, October 28, 1963.
Tenders will not be
eceived at the Treasury De~artment, Washington. Each tender must
e for an even multiple of $1,000, and in the case of competitive
enders the price offered must be expressed on the basis of 100,
ith not more than three decimals, e. g., 99.925. Fractions may not
~ used.
It is urged that tenders be made on the printed forms and
)rwarded in the special envelopes which will be supplied by Federal
~serve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
lstomers provided the names of the customers are set forth in such
!nders. Others than banking institutions will not be permitted to
lbmit tenders except for their own account. Tenders will be received
thout deposit from incorporated banks and trust companies and from
sponsible and recognized dealers in investment securities. Tenders
am others must be accompanied by payment of 2 percent of the face
lount of Treasury bills applied for, unless the tenders are
companied by an express guaranty of payment by an incorporated bank
trust company.
D-1017

- 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, 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
August 1, 1963,
(91~ays remaining until maturit¥ date on
January 30, 1964) and noncompetitive tenders for $100,000
or lesa 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 October 31, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing October 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, 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
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 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
condi tions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.
000

- 3 -

ex.

i!ipL

['rom all tfljmtlon nO"l-' or hereafter imposed on the principal or interest

thcrcof by any State, or any of the possesGions of the United States, or by any
locn'. to..'Cinc; [tuthori ty.

For purposes of taxation the amount of discoWlt at which

Treasury aills nrc oriGinally sold by the United states is considered to be

intere~:

Unckl' Sections 1!.J A (b) ond 1221 (5) of the Internal Revenue Code of 1954 the £lmount
of discoWlt et 1-Thic11 bills issued hereunder are sold is not considered to accrue
Wltil such billc are cold, redeemed or othenrise disposed of, and such bills a.re
c::cluded frl'll cons:Ldcration

0.8

capi tal assets.

AccordinGly, the owner of Treasury

bills (()thcr them life insurance companies) isr.ued hereunder need include in his in,

come

t!"1.X

l'(~ t.l.ll'11

on oric; in~'.

only i.he differcnce bctl1ccn the price paid for such bille, vmeLher

iG:;lI('

oj' on subsequcn L purcha,se, and the mnount actually received cithc:

upon snlc or rcL1c'r,lption at maturity durinG the taxable year for which the return is
lJ1~dc,

;:1.8

orc1 Lnrtr.~· Lo-in or loss.

'J'n~:LGUJ.y DCP:1.rLlllcnt Circular No.

:::;cril)c the tenl:"; of the

Trc~'.13\llJ

lao (current revision) and this notice,

pre·

b11.113 and Govern the condi t10ns of their issue.

Copies of the "ircular mo.y be ohtained from any Federal Reserve Bank or Branch.

- 2 -

f Treasury bills applied for, unlesG the tenders are accompanied by an express
uaranty of payment by an incorporated bank or trust company.

Innnediately after the closine hour, tenders will be opened at the Federal Re~rve

Banks and Branches, follmvinc vThich public announcement will be made by the

~easury
~ng

Department of the amount and price ranee of accepted bids.

tenders will be advised of the acceptance or rejection thereof.

: the Treasury
j

eA~rcssly

Those submitThe Secretary

reserves the right to accept or reject any or all tenders,

whole or in part, and his action in any such respect shall be final.
lese reservations, noncompetitive tenders for $ 20~OO

Subject to

or less without stated

'ice from any one bidder will be accepted in full at the average price (in three
cimals) of accepted competitive bids.

Payment of accepted tenders at the prices

fered must be made or completed at the Federal Reserve BankS in cash or other im-,
diately available funds on

The income derived

fr~n

Noyerr~4,

1963

Treasury bills, whether interest or gain from the sale

other disposition of the bills, does not have any exemption, as such, and loss
m the sale or other disposition of Treasury bills does not have any special treatt, as such, under the Internal Revenue Code of 1954.

The bills are subject to

ate, inheritance, gift or other excise taxes, whether Federal or state, but are

(Notwi thstanci<.tpg the fact that thc!se bills V111
for 361 days, the discount rate will be COIIIput l
a bank discount basi s of 360 days, 8S 1s curr:
the practice on all issues of Treasury bil~.) ~

'l'HliJ".SUl cr D·,,:rfl.m'j rrmr
iT(~Ghjl1:=;ton

October 23, 1963
ERS $1 BILLION ONE-YFAR BILLS

'1'he T:l.'ec.:::mry Department, uy this pu1)l:i.e notice, invites tcmlers for $l,OOO,OOOa,g
or thel'c 00 out s ,of

Xbi

cou:petiti ve and noncompeti t1 v::! biddinG
~Cl':i.er~

lriJJ. be clo.ted

hercinn.:i'ter provided.

0.:;

onl~r,

(".11n

in denor,unn:V.ons of

:;a,ooo,

inLcI'c:~L.

They

ffi

bnsis undc:

The bills of this

, end ,rill me:.tul'e

November fh1963

ull..!:1 Ute ,:i:c.ee C;jlOunt ,rill 'be :r':C;YT'.ble v:i:i.lJOl rL
:j'Ol',')

discotm'~

-dr'.y TreD.cury b1113, to 1)c i::wuco. on a

361

~rlll

October

~ l~

be issued in

bCO.1'Cl

:;;~j,OOO, ;;)10,000, :;;50,000, :;ilOO,OOO, :~500JOl

em. . ::il,OOO,OOO (r,lD.tul'it~r vnlue).
Tende:.,.':; \Till bc l'cc<.:.i.'ll]d at Pe(lc).'<:'.l
l!o1.1-,',

onc-thil't~r

r:C8Cl'VC

p.PI., Eo.::;tc:;:n ~jtc.nd~'.):d tine,

Dnnl;.::;

[~ncl

B:L'D.l1ches up to the cloGin;;

WedneSdaYxbjtober 30. 1963

'rill not be received c.t the 'l'rea:::;ury Department, llo.shil1cton.

• Tcndcn

Each tender must be

fOi

an even r.mlt1ple 01' !~1,000, and in the cnce oi' cO;]jpet~tc:i.vc tender::; the price offered
.
·.nl8t. 'be c;;:pre::;r..;cd on the bo.c:i.::; oi' 100, irlth not 1'10:;:'e -[;hon three declmCJ.ln, e. C., 99.9

:::o:··, ....-..rclecl :i.n the cpccir,.l cnveJ.opcG iT]ri.ch ,rLU. be
r.;'·~'Jlches

GUP1)1~j.cd by

li'cdel'ul l1cse:i."'Ve

nc.nl~s

on e.ppHco.tiol1 therefor.

EcllJ~ill[;

in:::;titutionc

ccne;"2.1~r

1.12.y ::;U'bl;CL t tender::;

:;:'01'

8.ceount of customer:> pro-

vicbd the neues of the cuuto;nel'o nrc Get l:o:_'[;h in such tei1ders.
institutions lri)J. not be pel'.llittcd

)';0

Others than bnnkiDG

f,uonit J.;cnc1e:rc. except for their ovm account.

Tenders lrill be l'eeeived lrithout dcpos.it i'rom incorporated bD.nl~S and tru::;t COlIIPaniet
ond iroi.} l'ecponsi'ble nnd recoc;nized deo,leI'c in investment securities.
ot.hers muc;t be r.ccoT,l]?c:nied

l)~'

pt7i.lcn-C 0:1: 2 pel'cent of the face alUount

Tenders fJ'Ol

TREASURY DEPARTMENT

OR IMMEDIATE RELEASE
TREASURY OFFERS $1 BILLION ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders for
1,000,000,000, or thereabouts, of 362-day Treasury bills, to be issued
n a discount basis under competitive and noncompetitive bidding as
ereinafter provided. The bills of this series will be dated
ovember 4, 1963, and will mature October 3Q, 1964, when the face amount
ill be payable without interest. They will be issued in bearer form
n1y, 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
o the closing hour, one-thirty p.m., Eastern Standard time, Wednesday,
ctober 30, 1963. Tenders will not be received at the Treasury
epartment, Washington. Each tender must be for an even multiple of
1,000, and in the case of competitive tenders the price offered must
e expressed on the basis of 100, with not more than three decimals,
. g., 99.925. Fractions may not be used. (Notwithstanding the fact
hat these bills will run for 362-days, the discount rate will be
)mputed on a bank discount basis of 360 days, as is currently the
ractice on all issues of Treasury bills.) It is urged that tenders
~ made on the printed forms and forwarded in the special envelopes
lich will be supplied by Federal Reserve Banks or Branches on
?p1ication therefor.
Banking institutions generally may submit tenders for account of
Jstomers provided the names of the customers are set forth in such
~nders.
Others than banking institutions will not be permitted to
Ibmit tenders except for their own account. Tenders will be received
.thout deposit from incorporated banks and trust companies and from
!sponsib1e and recognized dealers in investment securities. Tenders
'om others must be accompanied by payment of 2 percent of the face
tount of Treasury bills applied for, unless the tenders are accompanied
an express guaranty of payment by an incorporated bank or trust
Impany.
Immediately after the c1o~ing hour, tenders will be opened at the
dera1 Reserve Banks and Branches, following which public announcement
11 be made by the Treasury Department of the amount and price range
1018

- 2 -

of accepted bids. Those submitting tenders will be advised of the
acceptance or rejection thereof. The Secretary of the Treasury
express ly reserves the right to accept or rej ec t 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 without stated price from anyone bidder will be accepted in full
at the average price (in three decimals) of accepted competitive bids
Payment of accepted tenders at the prices offered must be made or
.
completed at the Federal Reserve Banks in cash or other immediately
available funds on November 4, 1963.
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 ~e
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 bills are original~
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 oo~
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 taxab~
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

TREASURY DEPARTMENT

FUR IMMEDIATE RELEASE

October 23, 1963

TREASURY ANNOUNCES PLANS FOR NOVEMBER REFUNDING AND
ISSUANCE OF $1 BILLION OF ONE-YEAR TREASURY BILLS
The Treasury will borrow $7.6 billion, or thereabouts, through the issuance
of ls-month 3-7/8% Treasury notes, at par, on November 15, 1963, for the purpose
of paying off in cash $7.6 billion of the following Treasury securities maturing
November 15, 1963:
$4,554 million of 3-1/8% Certificates of Indebtedness of
Series D-1963, dated November 15, 1962; and
$3,011 million of 4-7/8% Treasury Notes of Series C-1963,
dated November 15, 1959.
The new notes will be dated November 15, 1963, and will mature May 15, 1955.
Interest will be payable semiannually on May 15 and November 15, 1964, and on
May 15, 1965. The notes will be made available in registered as "Tell as bearer
fonn.
Subscriptions to the new Treasury notes will be received subject to allotment. 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. Payment may be made in cash, or in
3-l/8~ Treasury Certificates of Indebtedness of Se~ies D-1963 or 4-7/8% Treasury
Notes of Series C-1963, maturing November 15, 1963, which will be accepted at
par, in payment or exchange, in whole or in part, for the Treasury Notes subscribed
for, to the extent such subscriptions are allotted by the Treasury.
The subscription books will be open for the 3-7/8~ Treasury Notes only ££
Monday, October 28.
Any subscriptions for the 3-7/8~ Treasury Notes with the required deposits
addressed to a Federal Reserve Bank or Branch, or to the Treasurer of the United
States, and placed in the mail before midnight, October 28, 1963, will be considered timely.
The new issue may not be paid for by credit in Treasury Tax and Loan
-Account s •
other details concerning the new 3-7/8% Treasury Notes are as follows:
Subscriptions from commercia: banks, for their own account, will be restricted in each case to an amount not exceeding 50 percent of the combined
~apital, surplus and undivided profits of the subscribing bank.
D-1019

- 2 -

Subscriptions from commercial and other banks for their own account,
Federally-insured savings and loan associations, States, political subdivisions
or instrumentalities thereof, public pension and retirement and other public
funds, international organizations in which the United States holds membership,
foreign central banks and foreign States, dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank of New York
their positions with respect to Government securities and borrowings thereon,
Government Investment Accounts, and the Federal Reserve Banks will be received
without depos it.
Subscriptions from all others must be accompanied by pa~nent of 2% (in
cash, or Treasury Certificates of Indebtedness of Series D-1963, or Treasury
Notes of Series C-1963, maturing November 15, 1963, at par) of the amount of
notes applied for not subject to withdrawal until after allotment.
The Secretary of the Treasury reserves the right to reject or reduce any
subscription, to allot less than the amount of 3-7/8% notes applied for, and to
make different percentage allotments to various classes of subscribers; and any
action he may take in these respects shall be final. Subject to these reservations, and the submission of a written certification by the subscriber that the
amount of the subscription does not exceed the amount of the two eligible securities
owned or contracted for purchase for value, at 4 p.m., Eastern Daylight Saving
time, October 23, 1963, all subscriptions from States, political subdivisions
or instrumentalities thereof, public pension and retirement and other public
funds, international organizations in which the United States holds membership,
foreign central banks and foreign States, Government Investment Accounts, and
the Federal Reserve Banks, will be allotted in full. Provided, however, when
any such subscriber elects to enter any subscription which does not carry the
certification as to ownership of the maturing securities, any and all subscriptions received from the subscriber will be allotted on the basis of the allotment
to be publicly announced. The basis of the allotment of all other subscriptions
will be publicly announced, and allotment notices will be sent out promptly upon
allotment.
All subscribers are required to agree not to purchase or to sell, or to
make any agreements with respect to the purchase or sale or other disposition
of any of the 3-7/8% notes until after midnight October 28, 1963.
Commercial banks in submitting subscriptions will be required to certify
that they have no beneficial interest in any of the subscriptions they enter for
the account of their customers, and that their customers have no beneficial
mterest in the banks' subscriptions for their own account.
l'REASURy BILlS -

The Treasury will also issue $1 billion, or thereabouts, of l-year Treasury
)ills on Monday, November 4, for cash. The bills will be sold on an auction
las1s, and tenders for such bills will be received on Wednesday, October 30, 1963.
)ayment for such bills by credit in Treasury Tax and Loan Accounts will not be
)enn1tted.

Full details concerning these Treasury bills are contained in the Treasury's
nnouncement inviting tenders which is being released today.

- 2 -

The protocol provides for a gradual increase in the United
States tax rate on dividends and interest paid to existing
Antillian investment companies.

The full 30 percent statutory

rate will not be applicable until

1967 for these companies.

How-

ever, in the case of investment companies incorporated in the
Netherlands Antilles after May

14, 1963, the statutory tax rate

on dividends and interest will become generally applicable in the
first year following the year in which the protocol takes effect.
The protocol also provides for an increase to 30 percent in
the United States tax rate on royalties paid to Antillian investment companies.

This tax rate would be generally applicable for

existing companies as well as new companies as soon as the protocol
becomes operative.

DRAFT PRESS

FOR RELEA.SE

RELFAsE

NEWSPAPERS

Wednesday, October 23', 1963
NETHERIJ\1IDS ANTILLES TAX TREATY SIGNED

The Treasury announced that a protocol modifying the tax
convention between the United States and the Netherlands as it
applies to the Netherlands Antilles was signed in the Hague

,1.-,;''.,
' . . . rIt."

The protocol will not take effect until after it is ratified by
the Governments of the United States and the Netherlands.

It is

anticipated that the advice and consent of the Senate to ratification of the protocol by the United States will be requested
shortly.
The protocol will provide for changes in the United States
tax rate on dividends, interest and royalties received from United
States sources by Netherlands Antilles investment companies owned
by persons who are not residents of the Netherlands or the Netherlands Antilles.

These investment companies are presently subject

to only a nominal tax in the Netherlands Antilles on income from
United States sources.

The existing tax convention substantially

reduces the statutory United States tax rate of 30 percent on
payments of these types of income to Antillian corporations.
Generally, dividends are subject to only a

15 percent tax and

interest and royalties are exempt from United States tax.

1'-' J1

TREASURY DEPARTMENT

October 23, 1963
'bR RELEASE A. M. NEWSPAPERS
:HURSDAY, OCTOBER 24,1963
NETHERLANDS ANTILLES TAX TREATY SIGNED
The Treasury announced that a protocol modifying the tax
onvention between the United States and the Netherlands as it
lpplies to the Netherlands Antilles was signed in the Hague
'esterday. The protocol will not take effect until after it is
'atified by the Governments of the United States and the Netherlands.
t is anticipated that the advice and consent of the Senate to
atification of the protocol by the United States will be requested
hortly.
The protocol will provide for changes in the United States
ax rate on dividends, interest and royalties received from
nited States sources by Netherlands Antilles investment companies
wned by persons who are not residents of the Netherlands or the
etherlands Antilles. These investment companies are presently
ubject to only a nominal tax in the Netherlands Antilles on
ncome from United States sources. The existing tax convention
ubstantially reduces the statutory United States tax rate of
o percent on payments of these types of income to Antillian
orporations. Generally, dividends are subject to only a 15 percent
ax and interest and royalties are exempt from United States tax.
The protocol provides for a gradual increase in the United
tates tax rate on dividends and interest paid to existing
ltillian investment companies. The full 30 percent statutory
lte will not be applicable until 1967 for these companies.
~ever, in the case of investment companies incorporated in the
~therlands Antilles after May 14, 1963, the statutory tax rate
1 dividends and interest will become generally applicable in the
.rst year following the year in which the protocol takes effect.
The protocol also provides for an increase to 30 percent in
,e United States tax rate on royalties paid to Antillian investment
Impanies. This tax rate would be generally applicable for existing
mpanies as well as new companies as soon as the protocol becomes
erative.
000

1020

STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE HOUSE WAYS AND MEANS COMMITTEE
ON THE DEBT CEILING
10:00 A.M., TUESDAY, OCTOBER 29, 1963
Twice since last spring, the temporary debt ceiling has
been extended by the Congress for relatively short intervals of
three months.

This departure from the usual practice of setting

a debt ceiling for the entire fiscal year reflected the unusual
degree of uncertainty that until recently has surrounded estimates
of both receipts and expenditures for the full fiscal year 1964.
In these circumstances, the evident desire of the Congress to
maintain a debt limit as close as practicable to clearly foreseeable
needs resulted in the period of extension being confined to only
a few months without any provision for the increase that inevitably
becomes necessary during the course of a fiscal year in which a
substantial deficit is nrojected.
According to our latest estimates, the debt subject to limit
as of today should be $307.4 billion and by mid-November will reach
$308 billion.

On November 30, the current temporary limit of

$309 billion is scheduled to expire, and the debt ceiling will
revert to its permanent level of $285 billion, far below oresent
levels.

Consequently, the need to extend and raise the temporary

limit is imperative.

D-I021

- 2 Current estimates of expenditures and receipts now provide
an adequate basis for extending the debt ceiling through the
remainder of the fiscal year.
remain.

Of course, some uncertainties

As you know, Congress has not completed its work on

either appropriations or the tax bill, and, as usual, our receipts
will also be affected by the course of economic activity in
corning months.

But we do have a much firmer base for planning

than was possible at the start of this fiscal year, and the
remaining uncertainties are now no greater, and are in some
respects less, than those we have been accustomed to when we set
debt ceilings in past years.
Experience over the first four months of fiscal 1964, together
with an evaluation of progress to date on appropriations, has
provided a realistic basis for reassessing the expenditure outlook.
While present projections must still be considered tentative, a
significant reduction from the initial estimates submitted in
the President's budget last January is clearly in prospect, as a
result both of continuing and intense efforts by the Administration
to maintain effective expenditure control and of reductions in
lppropriations by the Congress.

These savings are considerably

Larger than partially offsetting upward revisions in earlier
~stimates

for two important items -- interest on the debt and farm

)rice support programs -- for which expenditures are independent

- 3 of usual administrative controls.

Consequently, as the Director

of the Bureau of the Budget will testify in detail, fiscal 1964
expenditures are now estimated at a level of $97.8 billion, $1
billion below the January budget.
In estimating fiscal year revenues, which are of course largely
determined by the level of profits and income during calendar 1963,
we are in a better position for projecting final results than is
typical in setting the debt ceiling for a full twelve months ahead.
It is now clear that economic activity has been maintained at
somewhat higher levels than anticipated in January, and the higher
taxable incomes implied by this performance promise to generate
approximately $1 billion of additional revenues.

The tax program

will entail a smaller net loss of revenue in fiscal 1964 than
anticipated in January primarily because the tax reduction scheduled
,

in the bill passed by the House of Representatives last month and
now before the Senate will become effective six months later than
we had originally proposed.

This delay will reduce the 1964 revenue

cost of the tax program from $2.7 billion to $1.8 billion and thus
increase revenues by $900 million.

As a result, total receipts are

now estimated at $88.8 billion, $1.9 billion higher than in January.
The net outcome would be a deficit in the administrative budget
of $9.0 billion, substant~lly less than the $11.9 billion originally
foreseen.

This estimate, making full allowance for the tax program

reported by this Committee and passed by the House, is also less

- 4 than the deficit of $9.2 billion projected last January in the
absence of any tax reduction.
The table accompanying my statement shows the implications
of this budgetary outlook for the debt subject to limitation at
semi-monthly intervals through next June.

As can be seen, we

are rapidly approaching a seasonal peak in borrowing needs in
mid-December, to be followed by somewhat higher peaks in mid-March
and mid-June, in each case immediately preceding heavy collections
of corporate taxes.
The final column of the table shows that the required debt
ceiling would reach a peak of almost $316 billion in March and
of slightly more than $317 billion in June, assuming at both dates
an operating cash balance of only $4.0 billion -- somewhat less
than is required to meet our average needs and less than half a
,

normal month's expenditures -- as well as the usual allowance of
$3 billion for flexibility and contingencies.

Accordingly, an

extension of the temporary ceiling through June 30, 1964, would
normally require an increase in the limit to $317 billion.
However, we have now nearly reached November, five months
later than the date on which this Committee usually considers
the debt limit for the ensuing fiscal year.

This means that we have

a much firmer basis than usual on which to rest our revenue estimates.
Moreover this Administration is firmly determined to maintain in

- 5 -

every practicable way a tight control over expenditures.

I am

therefore prepared to recommend a temporary debt ceiling of $315
billion.

Such a ceiling, of course, will involve some risks when

the peak requirements are reached in June.

It will be possible,

however, to appraise such risks by early April after receipt of
the customarily heavy March tax payments.

Should it appear at

that time that a higher ceiling will be needed to cover the peak
needs during the seasonal lull in cash inflow prior to June 15th,
there will still be adequate opportunity to enact appropriate
legislation.
In making this recommendation, I am fully aware that Congress
still has some important appropriation bills before it, and that
the final disposition of these bills will govern the expenditures
of a number of agencies.

But there is typically a considerable

lag between appropriations and subsequent changes in expenditure
patterns.

This year, for instance, nearly 50% of our expenditures

are determined by appropriations of earlier years, including the
continuing appropriation for payment of interest on the public
debt.

The remaining

Congression~l

decisions on this matter will

be much more significant in terms of the spending trend beyond
next June than during the current fiscal year, just as the increase
in budget expenditures this year is heavily determined by last

- 6 year's action in appropriating
was spent in fiscal 1963.

$101~

billion, $9 billion more than

Under these circumstances, the need for

the debt ceiling recommended for the remainder of fiscal 1964 -only eight months ahead -- is virtually independent of the results
of remaining Congressional decisions on appropriations.

And I

can assure you that a ceiling of $315 billion, in relation to our
peak seasonal needs, will provide no margin for in any way relaxing
the controls which this Administration is maintaining on current
spending.
As the official responsible for the prompt payment

the

obligations of the United States Government, for effective and
economical management of the public debt, for conducting our
financial relationships with other countries, and for the timely
investment of the monies accruing to the Federal trust funds, I
:annot contemplate any lower debt limit.

We can only hold the

Limit to $315 billion at the cost of impairing the customary margin
cor contingencies and flexibility.

There is no room in this projection

:or any further cut; the risks are simply too great.
Experience through the years has clearly shown that estimates
If eventual revenues and expenditures even at this point in a
Isca1 year are subject to a considerable margin of error in either
irection.

We have learned in the past of the costs and difficulties

- 7 of managing a debt when it is within a few hundred million dollars
of the ceiling -- the inability to take advantage of favorable
financing opportunities, the necessity at times to depart from
normal financing techniques because even a normal range of uncertainty
in gauging market response could not be tolerated, and the danger
of interfering with the proper execution of the Treasury's trustee
function with respect to planning and carrying out trust fund
acquisitions.

Flexibility is also needed to permit the Treasury

to respond in timely fashion to the need to keep our short-term
rates in reasonable alignment with those abroad so that funds
will not flow overseas and strain our balance of payments.

In the

past few years this has, on occasion, forced the Treasury to increase
substantially the supply of bills on very short notice.
In summary, a $315 billion debt limit through the remainder
of this fiscal year is not only fully consistent with the compelling
need to exercise firm restraint on expenditures, but, during early
June, also practically eliminates the margin for unforeseen
contingencies and financing flexibility.
entail unacceptable risks.

Any lower ceiling would

PUBLIC DEBT SUBJECT TO LOOTATION

FISCAL YEAR 1964
(In billions)
Assumes Tax Cut (Effectiye January 1964)

Operating
Cash Balance
(exclUdiA!
free go

Public Debt
Subject to
Lirn-itation

Allowance to Provide Flexibility
in Financing and
for COntin~encies

Total Public
Debt
Limitation
Requjred

r.t1~al

e 12, 196.3

$4.2
.ba1ance for June)
= 30
11.1

$.305 •.3

7.7
6.2
5.1
6.1
4.4

306.0
305.1
305.0

'JW

Y' 31
1St 15

1St 31

15
;ember 30
)ber 15
~ember

306.1

306.B

B.9

307.5
307.0

5.1

306.B

:til!lates based on pro jected actual cash balance
lber 31
mber 15
mber 30

3.9
3.5
4.6

307.0
30B.l

30B.B

ttTl'8tes based on constant minimum operating cash balance of $4,0 billion
mber

15
mber 31

4.0
4.0

310.7
307.6

$3.0
3.0

$313.7
310.6

s.ry 15 I 1964
s.ry 31

4.0
4.0

310.4
309.5

3.0
3.0

313.4
312.5

Jary 15
lary 28

4.0
4.0

310.6
310.1

3.0
3.0

313.6
31.3.1

1 15
131

4.0
4.0

312.9
307.9

3.0
3.0

.315.9
.310.9

15
,30

4.0
4.0

311.5
.310.7

.3.0
3.0

314.5
.31.3.7

5
1

4.0
4.0

310.8
311.4

.3.0
3.0

3l3.B
.314.4

15
30

4.0
4.0

.314.2
308.1

3.0
3.0

.317.2
311.1

'.)R .1.:::1..' '\' >. .0\. i-~ •..
,. " '
T.sdaj ,,x,t:>Ci£r 29, 1.1 ).
·'~,1

BILL

'ft.. Ireullr,.,.,.:e)art'.ent ann'YJ,nced la.~t eve~il'l~ tht: c, t
~"'~\t.(.:: ;s, f:lr two -ite
T"aaur:.1" bills, one scri~3 to be an addl t . .J..'~nal ~gsue 0::'.. ul..t.s oliTted AlJ(;IJS~ 1,
and tl'le other series tJ b", dnted :;ct~ber 31,191:3, wbit:' ';,,['f). 'Jfic:r..:;d :):-. October,
opened ,'It the f8~erd l!.eserve::l.ni.:Dlll-k:tober 28. Tel. 'Of;, ···,c:r·;" i!lV1. ted. tor fl,)
or thereab ,ute;, )f Yl-day bUlB and for ;PbYJ,(};Y), UOD, \)!,:,i',)'':·;~~ily.k, of 162.., I
','he '1i!'~.:.~L of the t ... ) ser-l::;. n.l"e ~l..<;; f,111a-ws:
91-(!a;y 'l're.~sur./ ~il1t.l
aA;n'; ;' i~C:'-,'Y" ;1
"";. t·"_Ltrin;...:*
Jf:atl.. r i. '.): J Hp.;).r.ry .}j, 19 fk
c: . !-" I' . ~'
"1 :' ~ :
'i
_ , . . ...., . . . .

, ' ._ _

_ _ _"

A:,.·;;r-v:v.. Lqu.1 v.

-%'

:l.~·t"
;.

~:t·

...~.,.

.1..~2

Loy

.;
•

f:.nnufJ.iJ.). t.e
"

•. 1..

1')'')
•

;,>e.~

;:·~.1~~;7

.~vera:,'~

.J.

;' :.hr! :.'..Dun ~ or ~;l-' ;" ;',ilL~ ttl~ ~ f ,)1"
.If t.!;': c:::c :J:ln~, I ) f F 2-da~. ::;1118 bi.d :['01'

~OJ
2~':;~

ttle
t.hl!i

~-""'",

(

'\;:iE

2cce.pt.td

. :.W

;,:coopted

'I Yi' Ui'° '.

:1, ,JllaJ

rtatri.:t
fiost.on
: ',.; w '1' ork
,r.ilrt«alphh

Cleveland
: icbllond
iitlantB

22,,341,000
82, '113, I).)~
a,a66,66J,vJ)
Ci

~ :l~.!'~~~

I,Lt: .!'

-di:

':jl):),

7'",;, ]~\ J ')jO :-

'1:.113

2),.327,000
40,462,000
If:, 34l, or...x>
79, n;,.oc£

ni.(~l

r!,};l::~'~~-JBt'it,i"ie

·~<:(···-,mi)et,i ':-:: ~ ~~

t,·~·~·.·e~::..

~en6erf

:j·~~:~t~~,Lf..~"
:.lCC0

_.4

:.. -'~

>,.,.'

:·~.,,~~'.')ri bUl~ jJ"8 qU)

~~l!

""d~8 ;:"~1Junt 'J! t.he bill:;. .!
c.i't' :':.p,;: U:1 r l<">fl,~t,h in actual n ..J!!.Cp?J

IV'1 ~t,

TJ!'.":

~;e'-l!'".

. .r! c-:l:1,:·r,,_,t., ;,i'.:l
o~ :"::t.~t' :;
U:-' !.J":,:';'T'
inter";}\.- Q~:l'if':rlv
i'l)
cx..-,OU:ld 1'I.
"I ,',
..
u

,~1,300,313l1O"X)

: __ Su(; ·)f ~r ~ :.~$'1€ } ~n ti: tlna '~'"\)r \.L~::: ~.<:J':"~\:
',. :l:~ ~Ir""'i" ,~ .1, 1 :~, (lJ J.Sh;, t;)r :..:' ,.. } ..

:.~lls.

r~t.:~;,
(,:,10 WlI ~\ll'l'.

'j'"

)5,062,000

40.562,000

,1,::
:,~

2) J 801, LYJO
20,674) ::XJO
28,,08,3,000
171,117,000

21.,077.000

Halbs

13.620.000

39,082,000

'an~Ik.~i t.;.,'

1~,t15,o30
824,27B,OtJO

220,111 ,OO~J

;t. Loub
"inneap:)ll ':l

~ 1;;

:>r

'~hic5 '0

a/
-r-.
)/

38, )15;,)00
1,291, 776,O{)(j
213,520, );}j
29,801,000
2<), (:, 71~ • U(>O
28 ,,")"83 JOO

<: '

cert',.fic.~~t.es.
;-

notes, =',~
and rel.i.e: the !11
:,~ctusl !'lUliber
dajS

(;

l·)an.,~riod ia

::';'

::c.e·"

)';

1.nvolY1 ':'.

i),:

avera;;e pries.

~,,~,~~~ i,v·e:-".'~~~

.::~

price
in'l'Cfctce, the
~L2, and ).71$
. O.:wi< dbaot
;i. t:U'i ty "'
;·;:l;,t· 0 it
c·:).'"llput,ed

.:. ;"', - .3

t'e!fl&.i.,
, wttJI

212
~EASURY

~SE

DEPARTMENT

A.M. NEWSPAPERS,

Treasury Department announced last evening that the tenders for two series of
bills, one series to be an additional issue of the bills dated August 1, 1963,
)ther series to be dated October 31, 1963, which were offered on October 23, were
the Federal Reserve Banks on October 28. Tenders were invited for ~1,300,OOO,OOO,
bouts, of 91-day bills and for $800,000,000, or thereabouts, of 182-day bills.
Is of the two series are as follows:
\CCEPTED
91-day Treasury bills
182-day Treasury bills
lIE BIDS:
maturing January 30, 1964
maturing April 30, 1964
Approx. Equiv.
Approx. Equiv.
Price
Annual Rate
Annual Rate
Price
99.132
98.195
3.434%
3.570%
98.185
3.469%
99.123
3.590%
.ge
98.187
99.127
3.452% !I
3.586%

of the amount of 91-day bills bid for at the low price was accepted
f the amount of 182-day bills bid for at the low price was accepted
APPLIED FOR A}ID ACCEPTSD BY FEDERAL RESERVE DISTRICTS:
Al?E1ied For
AEElied For
AcceEted
$ 38,315,000 $ 15,815,000
$ 29,451,000
1,291,778,000
824,278,000
1,121,674,000
hia
28,620,000
13,620,000
8,335,000
29,801,000
29,801,000
6,659,000
20,674,000
20,674,000
5,038,000
28,083,000
9,211,000
28,583,000
220,117,000
171,117,000
200,361,000
39,082,000
35,082,000
23,447,000
s
23,327,000
8,033,000
24,077,000
y
40,462,000
40,562,000
14,350,000
10, tl02, 000
18,341,000
22,341,000
sco
000
1
19 27 32
10tl2~ZOOO
82 211 3 2°00
u.s
$1,866,663,000 $1,300,313,000 !I $1,545,402,000

~RS

Acce,eted
4,458,000
551,019,000
3,335,000
6,259,000
3,431,000
5,596,000
115,568, 000
20,947,000
5,533,000
10,975,000
6,037,000
67,2 103,2000

800,261,000

249,989,000 noncompetitive tenders accepted at the average price of 99.127
70,318,000 noncompetitive tenders accepted at the average price of 9tl.187
n issue of the same length and for the same amount invested, the return on
s would provide yields of 3.S4%, for the 91-day bills, and 3.11%, for the
11s. Interest rates on bills are quoted in terms of bank discount with
related to the face amount of the bills payable at maturity rather than
invested and their length in actual number of days related to a 360-day
~ontrast, yields on certificates, notes, and bonds are computed in terms
on the amount invested, and relate the number of days remaining in an
\yment period to the actual number of days in the period, with semiannual
if more than one coupon period is involved.

£/

TREASURY DEPARTMENT

October 29, 1963
FOR U11-iEDIATE

RE~EASE

TREASURY SEEKS HORE NEGRO APPLI CANTS FOR COAST GUARD ACADEMY
Too few Negro hi~h school and colle~e students are
arrl vi n~ for the Coast Guard AcadeJT'v, accordin~ to Assistant
Secretarv Rohert A. ~vallace, Treasury's Employment Policy
Officer.
Coast Guard recruiters
and colle~es and the homes of
Hr. ~vallace said, !'hut we are
seek. Unless \"e receive more
enterin~ in July may not have

have visited Negro schools
potential candidates,"
not ~etti ng the response we
applicants, the Academy class
a single Negro."

Si nce 1961, the Coas t Guard Academy has hi red a Negro
faculty member and now has a Ne~ro cadet. To attract
additional Negroes to the Academy, the Treasury has asked
the rress, radio, and television to help the Department
interest qualified Negro youths to compete for the 230
acade~y appointments to be made for the school year begin~~
next Julv.
Applicants are required to take the College Board
exarrination on December 7,1963. The F. H. Richmond Foundatio
of New York has exrressed a willin~ness to assist qualifi~
Ne~roes, who are in need of financial help, in meeting the
exa~ination costs of $12.50.
The Academv provides a four-year course of training
leadin~ to a hachelor of science degree and a commission as
a career officer in the U. S. Coast Guard. Interested applicants li,av arplv in writin~ to the Cornmandant, U. S. Coast
Guard, \Vashin~ton, D. C.

000

D-1C23

TREASURY DEPARTMENT

Octoher 29, 1963
FOR IMNEDIATE RELEASE
._TREASURY SEEKS HORE NEGRO APPLICANTS FOR COAST GUARD ACADEr-W
Too few Negro hi~h school and colle~e students are
for the Coast Guard Acaderrv, accordin~ to Assistant
SecretarY Rohert A. 1,vallace, Treasurv' s Emplovrnent Pol icy
Officer •
arrlvin~

. Coast Guard recruiters
and colle~es and the homes of
Hr. ~.Jallace said, "hut we are
seek. Unless we receive more
enterin~ in July may not have

have visited Ne~ro schools
potential candidates,"
not ~ettin~ the response we
applicants, the Academy class
a single Negro."

Since 1961, the Coast Guard Academy has hired a Ne~ro
faculty memher and now has a Ne~ro cadet. To attract
additional Negroes to the Academy, the Treasury has asked
the rress, radio, and television to help the Department
interest qualified Negro youths to compete for the 230
acaderr,y appointments to be made for the school year be~inning
next July.
Applicants are required to take the Colle~e Board
exarrination on December 7, 1963. The F. H. Richmond Foundation
of New York has eXFressed a willin~ness to assist qualified
Ne~roes, who are in need of financial help, in meeting the
exa~ination costs of $12.50.
The Academy provides a four-year course of training
leading to a hachelor of science de~ree and a commission as
a career officer in the U. S. Coast r.uard. Interested applicants may apply in writin~ to the Commandant, U. S. Coast
Guard, Hashinp,ton, D. C.

000

D-1023

- 3 JIl:'D)3C(MI»IU r IlU!

and exchange tenders will receive equal treatment.

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 gain from the I&le
or other disposition of the bills, does not have any exemption, as such, and loal
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, girt or other excise taxes, whether Federal or state, but
are exempt from all taxation now or hereafter imposed on the principal or interelt
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

'l'reasury bills are originally sold by the United States is considered to be in.
terest.

Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code of 1954

Accordingly, the owner

of Treasury bills (other than life insurance companies) issued hereunder need

a·

elude in his income tax return only the difference between the price paid for I~h
bills, whether on original issue or on subsequent purchase, and the amount actuallJ
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.

- 2 -

')1 ':,. '

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 ot 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 must be accompanied by payment of 2 percent ot

the face amount of Treasury bills applied for, unless the tenders are accompanied
by an express gua.ra.nty of payment by an incorporated bank or trust company.
Dmnediately 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 Department 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, in whole or in part, and his action in any such respect
final.

subject to these reservations, noncompetitive tenders for

less for the additional bills dated

August W/63

, (

s~ ~

$2~O

days rem&iD.

}(iOO
) and noncompetitive tenders tor

ing until maturity date on

Februa1Sd 1964

$l~OO

182 -day bills without stated price from anyone

or less for the

bidder will be accepted in full at the average price (in three decimals) of ac·
cepted competitive bids for the respective issues.

Settlement for accepted ten·

ders in accordance with the bids must be made or completed at the Federal Rese11l
Banks on

Novembe. 1963

, in cash or other immediately availa.ble runds or

in a like face amount of Treasury bills maturing

November 7, 1963

(iM{

• cash

TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,

October 30, 1963

)OOOOOOOOOO()OOO~OOOOOOOOOOOOOOOOO

TREASURY I S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two seriel
of Treasury bills to the aggregate amount of $...?,looifio,ooo , or thereabouts, tor
cash and in exchange for Treasury bills maturing
of $ 2,103,057,000

, in the amount

November 7, 1963

, as follows:

ill

91 -day bills (to maturity date) to be issued November 7, 1963

ttJ

((ft
in the amount of $

1,300,000,000, or thereabouts, represent-

ing an additional amount of bills dated
and to mature

August lii1963

February 6, 1964 , originally issued in the
(an addi ti onal $100,092,000 was issue4
amount of $ 800,503,000 :-.(the additional and original bills Octobe
Hfd
19.
to be freely interchangeable.
182

-day bills, for $ 800'0tfff0o
Novembeilii 1963

, or thereabouts, to be dated

, and to mature

May 7, 1964

tii!

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 will be issued in bea.rer form onlJ,

and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 ~
$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 Standard time,

Monday, November 4, 1963_

tlif

Tenders will not be received at the Treasury Department, Washington.

Each tendS

must be for an even multiple of $1,000, and in the case of competitive tender8~
price offered must be expressed on the basis of 100, with not more tha.n three

TREASURY DEPARTMENT
!

1 IMMED lATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
r two series of Treasury bills to the aggregate amount of

:,100,000,000,or thereabouts, for cash and in exchange for
~asury bills maturing November 7,1963,
in the amount of
,103,057,000, as follows:
91-day bills (to maturity date) to be issued November 7, 1963, in
e amount of $1,300,000,000, or thereabouts, representing an
ditiona1 amount of bills dated August 8, 1963, and to mature
bruary 6, 1964, originally issued in the amount of $800,503,000(an
ditional $100,092,000 was issued October 28, 1963), the additional
d original bills to be freely interchangeable.
182-day bills, for $800,000,000, or thereabouts, to be dated
Nember 7, 1963, and to mature May 7, 1964.
The bills of both series will be issued on a discount basis under
and noncompetitive bidding as hereinafter provided, and at
turity their face amount will be payable without interest. They
11 be issued in bearer form only, and in denominations of $1,000,
,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
~turi ty value).
~petitive

Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Standard
Ile, Monday, November 4, 1963.
Tenders will not be
eived at the Treasury De~artment, Washington. Each tender must
for an even multiple of $1,000, and in the case of competitive
lders the price offered must be expressed on the basis of 100,
;h not more than three decimals, e. g., 99.925. Fractions may not
used. It is urged that tenders be made on the printed forms and
warded in the special envelopes which will be supplied by Federal
erve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
tomers provided the names of the customers are set forth in such
ders. Others than banking institutions will not be permitted to
mit tenders except for their own account. Tenders will be received
hout deposit from incorporated banks and trust companies and from
ponsible and recognized dealers in investment securities. Tenders
n others mus,t be accompanied by payment of 2 percent of the face
lnt of Treasury bills applied for, unless the tenders are
)mpanied by an express guaranty of payment by an incorporated bank
-;rust company.
D-I024

- 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, 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
August 8, 1963,
(91~ays remaining until maturit¥ date on
February 6, 1964) aL1d noncompetitive tenders for ~ 100,000
or lesa 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 November 7, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing November 7, 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, 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
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 (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 frOi
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE

October 31, 1963

INDUSTRIAL PAYROLL SAVINGS COMMITTEE
TO MAP PLANS FOR 1964
More than 35 American business and industrial leaders will meet
in Washington Tuesday (Nov. 5) to review accomplishments of the past
year's industrial payroll savings program for United States Savings
Bonds, and map plans for 1964.
The businessmen constitute the U. S. Industrial Payroll Savings
Committee named by Treasury Secretary Dillon last January, and are
returning to Washington at the invitation of the Secretary. Represented in the group will be the 28 present members of the Committee, plus nine new men who will succeed retiring members of the
group at the meeting.
H. S. Geneen, New York, President of the International Telephone and Telegraph Corp., is chairman of the committee and will
preside over sessions in the Benjamin Franklin Room at the Department of State.
Secretary Dillon will be the principal speaker at a noon
luncheon launching the meeting and later will accompany the
committee members to the White House. President Kennedy will
receive them at 4 p. m.
Other speakers on the day's program include Under Secretary of
the Treasury Henry H. Fowler and William H. Neal, National Director
of the U. S. Savings Bonds Division.
As a resul t of the work of the commi ttee, each member of which
represents his particular industry in the Savings Bond industrial
payroll savings effort, sign-up campaigns have been conducted in
more than 9,000 companies since January, resul ting in more than one
million new savers. In the companies of the commi ttee members alone l
252,675 new savers have been enrolled.
A list of the 28-member group, and the nine new members, is
attached.

22u
TREASURY DEPARTMENT

rOR IMMEDIATE RELEASE

October 31, 1963

INDUSTRIAL PAYROLL SAVINGS COMMITTEE
TO MAP PLANS FOR 1964
More than 35 American business and industrial leaders will meet
n Washington Tuesday (Nov. 5) to review accomplishments of the past
'ear's industrial payroll savings program for United States Savings
onds, and map plans for 1964.
The businessmen constitute the U. S. Industrial Payroll Savings
:ommittee named by Treasury Secretary Dillon last January, and are
eturning to Washington at the invitation of the Secretary. Reresented in the group will be the 28 present members of the Comittee, plus nine new men who will succeed retiring members of the
roup at the meeting.
H. S. Geneen, New York, President of the International Telehone and Telegraph Corp., is chairman of the committee and will
reside over sessions in the Benjamin Franklin Room at the Departent of State.
Secretary Dillon will be the principal speaker at a noon
Incheon launching the meeting and later will accompany the
)mmittee members to the White House. President Kennedy will
~ceive them at 4 p. m.
Other speakers on the day's program include Under Secretary of
le Treasury Henry H. Fowler and William H. Neal, National Director
the U. S. Savings Bonds Division.
As a result of the work of the committee, each member of which
presents his particular industry in the Savings Bond industrial
yroll savings effort, sign-up campaigns have been conducted in
re than 9,000 companies since January, resulting in more than one
Ilion new savers. In the companies of the committee members alone,
2,675 new savers have been enrolled.
A list of the 28-member group, and the nine new members, is
tached.

P'Oft RF.L-':,\SF A. ;<. ~Et;S?A;>·~lc...S,
1'hv!d!y. Oct.ot'el" )1,

lW.

The Tna8UZ7 Dep~rt.mant announoed last 8ftD1.nc that, t.be teDders tor ;f.l,ooo,ooo,.
or t.henaboata, of )62-clay TreasUJ7 bills to be dated ~ h, 196), and \0 ..... ,
Jnober )1, 1961.&, tdlich were ottered on Jct.ober 23, weN opened at the Federal ......
Bank. on r.>ctober.)O.
the det.aU1 ot this issue are as follows J

Total applied tor -

31,890,88S,000

Total aocept.ed

$1,000,21),000

(1Dolude.

$'3,9IaS,OOO

~ltl'"

entencl OIl •

buta end aocepted 11

tull at tbe ayv... price ahown below)

- 96.)65 Equlftlut rat.e of disoount approx. 3.615:

,?U' _

".."

).64~

- 96.347"

".,,,

).6),),;6"

- 96.)40

(81 percent of the aout bid tor a1; t.be low price vas acaepted)
Federal heMl"ft
Distr1ct

Boston
New York
PhUadel:)hia
Claftland
nicblland
AtJ.ant,a

Chicago
St.. Louis
Mirmeapolls

lua.. Cit.y

Dalla.
San 1"anc1aco

total.

AwH!!! tor
$

35,819,000

total
looept.ed

26,)22,000

),664,O'JO

696,26),000
1,661,000
Ul,761,000
1,664,000

9,22;,000
208,940,000
12,821,000

6,l!)S,OOO
1)6,800,000
2,)27,000

1,406,963,000

11,667,'JOQ

43,561,000

18,307,000
9,845,000

22,)00,000
107.S!7,~J

6,421,000
S, 870,000
10,120,000

64.911.qg2

'rJl'AL
$l,89Q,88S,OOO
$1,000,27),On a coupon issue of t.he salle length aad for the salle .....t ilJvested, the ,...~
\hen billa would i,rmde a yield or ).80%. IDt.eJut rate. OIl bUll aI"I .....~
tu'IIle ~f Dank discount. with t..bt; return related to the fa. -.ount of t.bI ~,..
able at. a .. t.urity rather than the aJIOUIIt inveat.ed aDd \hell' ~ in ..
of dq. related t.o a )60-d:i1' year. .In oont.ra.n, )'ielcls on certiticat.el, ........
bonds are cCllputed in t.enu of interest on the 8aO\1Il\ 1rtYNt.ec1, and rela\l ...
bel' of daya rnaininr~ in an interest payment. period to tbe ectWll m. . .
~ peri.xi, .d.th uerniannual cOIIlpOWld1.ng if Jltore thaD a. ooapon ~od 11

t.u1-:
tlu:.

TREASURY DEPARTMENT
REL~SE

A. M. NEWSPA Pl<~RS,

October 30, 1963

rsd3Y, October 31, 1963.

RESULTS OF TREASURY'.3 ONE-YEAR BILL OFFERING

The Treasury Dep~~nt announced· last evening that the tenders for $1 , 000, 000 , 000 ,
of 362-day Tr~asur,y b111s to be dated November 4, 1963, and to mature
')ber 31, 1964, which were offered on October 23, were opened at the Federal Reserve
(8 on October 30.
~hereabouts,

The details of this issue are as follows:
Total applied for Total accepted

Range

$1,890,885,000
$1,000,273,000

of accepted competitive bids:

High

Low
Average

(includes $33,945,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
(Excepting one tender of $300,000)

- 96.365 Equivalent rate of discount approx. 3.615% per annum
- 96.340"
"""
"3.640%""
- 96.347"
"""
II
3.633%"
"
y'

(81 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
st. Louis
Minneapolis
Kansas City
Dallas
San Francisco

Total
Applied for

Total
Accepted

$ 35,819,000
26,322,000
$
1,406,963,000
696,263,000
11,667,000
1,667,000
43,561,000
41,761,000
3,664,000
1,664,000
9,225,000
6,tl35,000
208,940,000
136,800,000
12,827,000
2,527,000
18,307,000
6,427,000
9,845,000
5,870,000
22,500,000
10,120,000
107,567,000
64,017,000
TOTAL
$1,890,885,000
$1,000,273,000
a coupon issue of the same length and for the same amount invested, the return on
pese bills would provide a yield of 3.80%. Interest rates on bills are quoted in
~nns of bank discount with the return related to the face amount of the bills paypIe at maturity rather than the amount invested and their length in actual number
f days related to a 360-day year. In contrast, yields on certificates, notes, and
pnds are computed in terms of interest on the amount invested, and relate the numpr of days remaining in an interest payment period to the actual number of days in
1e period, with semiannual compounding if more than one coupon period is involved.
1

D-I025

TREASURY DEPARTMENT
Washington
R RELEASE: P. M. NEWSPAPERS
IDAY, NOVEMBER 1, 1963

22.3

REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE SECOND ARKANSAS FEDERAL TAX INSTITUTE
AT THE HOTEL LAFAYETTE, LITTLE ROCK, ARKANSAS
FRIDAY, NOVEMBER 1, 1963, 12:00 P. M., CST
I am extremely pleased to be here today in this vigorous State
ich is engaged in such an intensive effort to breed and attract
N indus try and to expand its economy.
I have the good fortune to be extremely familiar with the great
1tributions to our national well-being of two of Arkansas' most
lustrious citizens -- Senator J. William Fulbright, whom I have
ne to know well both in his capacity as Chairman of the Foreign
Lations Committee, and as a stalwart member of the Finance Committee,
j my good friend Wilbur Mills, Chairman of the House Committee on
1S and Means.
Today I particularly want to pay tribute to Wilbur Mills.
1m constantly impressed with the skill, the wisdom, and the under1nding that Mr. Mills brings to any issue before him. It is due
his brilliant and inspiring leadership that the President's tax
_1 has moved successfully through his Committee and the House of
)resentatives.
That tax bill as it now stands -- with the single exception of
, proposed reductions in capital gains rates -- is a sound bill,
:air bill, an effective bill. It provides for two-stage reductions
both individual and corporate income tax rates: cutting individual
es from the present scale of 20 to 91 percent to a sharply lower
.ge of 14 to 70 percent, and dropping the overall corporate rate
1m 52 percent to 48 percent while the rate on small business falls
the way from 30 percent to 22 percent. These rate reductions
the single most important reform in the bill. They are vital,
only because they release more than $11-1/2 billion into the
vate economy, but also because they provide a permanent and
stantial increase in incentives to work harder and to invest more.

026

- 2 -

221

The bill also includes a substantial number of reforms that
)rovide major improvements in the equity of our tax system. They are,
=0 be sure, only a beginning, but don't let anyone tell you that they
ire not a significant beginning. Revenue-raising reforms in the
)resent bill, plus those contained in the Revenue Act of 1962, total
learly $2 billion. When one considers that the total revenue increases
:rom structural changes in all other revenue acts since 1940 have
)arely exceeded $600 million, the magnitude of the present
lccomplishment becomes clearer.
The structural reforms in the present bill contribute markedly
:0 the equitable distribution of the tax reductions.
Without these
'eforms, the tax reductions would unduly favor upper income taxpayers.
'he minimum standard deduction, for example, channels more than
;300 million in tax relief directly to those in the lowest income
;roups, and avoids the large overflow into other brackets that
'auld accompany the increased exemption approach that is sometimes
Iroposed. The income-averaging provision would remove the present
nequitable tax treatment of "bunched" income. New deductions for
loving expenses would improve the mobility of labor and thus ease
he problem of structural unemployment. The repeal of the dividend
redit, as well as the tighter rules governing the tax treatment of
tack options, depreciable real property, the aggregation of unrelated
il and gas properties for depletion purposes, multiple surtax
xemptions and others, would help rectify existing inequities, broaden
he tax base, or offset what would otherwise be excessive tax
eduction for privileged groups.
The tax bill, therefore, represents a good start toward greater
implicity and equity in our tax structure -- toward the kind of
2form that Chairman Mills and I would like to achieve. If it is not
11 we would like, that is because the economic urgency of immediate
3X reduction must override our desire for thorough-going revision
E our tax s truc ture .
Nothing should delude us into thinking that tax cuts are no
)nger as important as they were six or nine months ago. True, we
~e now enjoying moderately pleasant economic weather, and the
lrrent upturn demonstrates that there are basic strengths in our
:onomy. But we cannot be so blinded by the bright spots around us
lat we fail to see the pitfalls that lie ahead.

- 3 -

225

The fact is that this year's upturn, as well as the entire
covery since 1961, have failed to make adequate inroads into the
rsistent and serious problems that have plagued us ever since
57 -- long-range problems that the tax cut is designed to alleviate.
r the past six years our unemployment rate has been much too high.
have been unable to reduce it at allover the past 12 months, a
riod in which Gross National Product grew by $32 billion dollars
5-3/4 percent. If we do not greatly improve our performance -d soon~ -- then the sharp increase in our labor force over the
xt few years will result in more and more unemployment, followed
osely by irresistable pressures for ever greater government
ending. This is just one of the critical problems that brings
to bold relief the undiminished urgency of the tax bill as a
lanced stimulus to more rapid and more durable economic growth.
In addition to its rate reductions, the tax bill would improve
52's investment credit by restoring the provisions originally
proved last year in the House of Representatives. It would eliminate
= requirement that the depreciation basis of new investment must be
juced by the amount of the investment credit -- thus removing the
fficult accounting complexities that flow from the current statute.
addition, repeal of that requirement would almost double the
?sent incentive of the credit and would give substantial additional
~ouragement to more rapid modernization and expansion of plant and
lipment.
The 48 percent corporate tax rate, when added to last year's
lestment credit and revised depreciation guidelines, would reduce
:porate tax liabilities by a total of $4.5 billion annually. And
~n you add to this the proposed liberalization of the investment
~dit, the after-tax profitability of new investment would be
:reased by more than one - th ird.
I do not have to emphasize to you here in Arkansas how vital such
incentives are to greater industrial growth and expansion. Few
ltes are more intensely concerned with industrial progress than
:ansas. Few can match your recent achievements. From 1957 to
,2, for example, Arkansas per capita income grew by 31 percent,
by almost double the 16 percent figure for the nation as a
,leo Even more revealing in terms of your industrial development
'gram is the fact that -- as a percentage of total civilian
sonal income from productive activity -- income from manufacturing
Arkansas rose by 2 percent from 1957 to 1962, while for the nation
a whole, such income declined by 2 percent during the same
iod.

22S
- 4 Figures such as these demonstrate how successful you have been
making Arkansas an extraordinarily attractive magnet for new and
eater industrial investment. A number of other investors from
rious parts of the nation have made known their intention to expand
to Arkansas when the time is propitious. That time will come when
e removal of repressive wartime tax rate opens the way to more
oyant and sustained economic growth and sharply increases the
centives for expanded investment in plant and equipment. These
jor increases in the incentive to invest at home, rather than
road, are also, of course, an essential and highly important part
our program to achieve balance in our international payments.
Expanded investment will flow not only from the large direct tax
imu1us to business that I have just described, but also from the
bstantial boost in consumer demand that will result from the
dividual tax reductions. Nearly $9 billion of the overall tax
duction will go to individuals. Well over 90 percent of that money
11 be spent, setting in motion the familiar economic process in
ich money circulates throughout the economy and ultimately increases
nsumer spending by several times the amount of the initial tax
t. That strong and sustained rise in consumer demand -- and thus
markets for industry -- will further bolster the direct tax
:entives to investment.
Without this kind of balanced stimulus to both consumer demand
j investment incentives, we will not have the expansion in all
:tors of our economy that we must have if our overall growth is to
both strong and durable. Those who suggest that the tax
juctions are too heavily weighted in favor of either consumer demand
investment, simply do not understand that fact. Similarly, those
) suggest that the individual tax reductions favor the upper income
)UPs forget that, by the very nature of our steeply progressive
~ rate structure, equivalent percentage rate reductions in the
ler and upper brackets inevitably mean much greater increases in
:er tax income in the upper brackets -- particularly if the
luctions in the upper brackets are not somewhat offset by base)adening reforms. To achieve equal percentage increases in
:er-tax income would simply require total abandonment of any thought
reducing our current excessively high rates.
The fallacy in the after-tax income approach as a measurement of
reduction is clearly shown by the following extreme example:
'pose we reduced the present bottom rate of 20 percent all the way
n to zero. That would increase a taxpayer's after-tax income
m $80 to $100, or 25 percent. Now look at our highest bracket,

.:! 2'
- 5 L percent, with nine percent left after tax: An increase of 25
'rcent in after-tax income at this level would be 2-1/4 percent, or
total after-tax income of 11-1/4 percent, giving a top tax rate of
\-3/4 percent. Thus almost any reduction in our top individual tax
Ites is bound to give a greater percentage increase in after-tax
lcome to today's 91 percent taxpayer than to the present 20 percent
Ixpayer.
Under the current bill, when you consider the total effect of
Ite changes and structural reforms, nearly 60 percent of the overall
.dividual tax reduction goes to those in the under-$lO,OOO income
·oup, wi th their share of the total income tax load being slightly
duced from 50 percent to 48 percent.
Let there be no mistake: The tax bill this nation needs and
en you eliminate the capital gains reductions -- the bill this
tion now has before it, is not a bill to make the rich richer.
is a bill to make this nation richer, stronger, and more
oductive in jobs, in investment, and in government revenues. It
a bill that has the support of the AFL-CIO as well as the
amber of Commerce, of academic economists as well as business
onomists. It is a bill that has the support of citizens in all
cupations throughout the land.
One great concern of many citizens -- a concern fully shared
the President and by the Congress -- is that tax reduction be
~ompanied by strict and careful control over Federal expenditures.
=re is neither time nor need to cite the wealth of evidence that
= Administration and the Congress are not only committed to
firm program of expenditure control, but that such a program is
~eady well underway.
Let me simply emphasize a few major
Lnts:
First, the President, Chairman Mills -- and the House of
>resentatives in endorsing their views -- have all made it
listakably clear that, by adopting the tax bill, the nation will
choosing, in Chairman Mill's words, "tax reduction instead of
.iberate deficits as the principal means of boosting our
)nomy" -- that they consider these courses mutually exclusive -!t, in short, the tax bill represents a firm decision to rely
In greater private spending rather than upon greater government
nding as the prime factor in our economic growth.

- 6 -

228

Second, the fiscal 1963 deficit dropped from an estimated $8.8
L1ion to an actual $6.2 billion -- and two-thirds of that decline
ju1ted from lower expenditures. The largest single factor in those
7er expenditures was the Administration's policy of substituting
.vate for public credit -- a policy the Administration intends to
ltinue in the future. Fiscal 1964 expenditures are currently
:imated at $1 billion below last January's estimate. Partly
ponsible for that decline is the fact that, as Chairman Clarence
.non of the House Appropriations Committee has pointed out, this
.r's appropriations are being held below last year's -- the first
.e that has been done since the end of the Korean War. Also
ponsible is the extremely prudent management of Government
sonne1 instituted at the President's direction. This program has
bled the federal government, during the past twelve months, to
t the needs of our expanding population while at the same time
ually reducing the number of its regular civilian employees.
Third, the President has said that in the absence of any
oreseen crisis, he intends to submit a fiscal 1965 budget with
naIler deficit than the $9.2 billion originally forecast for this
r before any allowance for tax reduction -- despite the fact that,
ing fiscal 1965, tax revenues must absorb more than $7 billion of
tax cut.
Fourth, more than 70 percent of our budgetary increase from
:a1 1961 through fiscal 1964 occurred in the area of defense,
:e, and interest on the national debt. Excluding these items,
overall record in all other areas of government over the past
!e years has been markedly better than that of the preceding
.nistration. Our expenditure increase has been some $1.2 billion,
:early 25 percent, lower than the $5 billion increase in those
. same items over the three preceding years, fiscal 1958 through
al 1961. And as Budget Director Kermit Gordon pointed out last
in testifying before the Senate Finance Committee, the need for
inuing expenditure increases for defense has just about ended
will soon begin to taper off on space programs.
Why is it, then, that one still encounters doubt and confusion
any quarters? The answer, it seems to me, is failure to
rstand how our government in Washington actually works. In
~t, we have two budgets:
One, familiar to all, records
1ditures as we meet our bills. The other, and far more
rtant budget, is probably known to only one out of every thousand
icans. This is the budget of new appropriations from which all
ling flows.

229
- 7 In our private lives, the proper way to cut spending is not to
fuse to pay our old bills, but to stop incurring new ones. It is
st the same in government. Once the Congress appropriates funds
r previously authorized purposes, the President, with one
portant exception -- permitting him, as Commander-in-Chief, to
fuse to undertake defense expenditures for purposes which he deems
be unnecessary or unwise -- has no clear authority to refuse to
?nd those funds.
While government agencies are responsible for the prudent
lagement of their operations, the power to arbitrarily eliminate
19ressionally-approved programs is simply not available. Only if
were clothed with such power could a President carry out
~nificant reductions in Congressionally-approved programs outside
~ area of defense.
This would require that Congress entrust
~ President with the right of the item veto -- a right that
19ress, in defense of its own prerogatives as a coordinate branch
government, has consistently refused to turn over to the Executive
mch.
Thus, once the appropriation budget has been adopted,
,enditures are sure to follow -- but only on a delayed basis.
lce many of the dollars in appropriation bills go for such things
public works and complex defense or space hardware, the bills
:en do not come due for several years. For instance, only about
.f the money we will payout this year, fiscal 1964, will come
1m this year's appropriation bills. The rest will come from
ies appropriated in earlier years.
Now, just what does all this mean when we look at expenditure
trol in the context of today's situation? It means simply that
should pay continuing and close attention to new appropriations
tead of merely watching the current level of expenditures.
enture to say that there are few among you who realize that during
fiscal year that ended last June, a total of $101.5 billion in
ropriations was approved -- $9 billion more than was spent. That
why expenditures during the current fiscal year will rise by about
billion dollars from last year's level of $92.6. And even if we
ceed, as Congressman Cannon hopes and expects, in holding this
r's appropriations to last year's $101-1/2 billion level, fiscal
r 1965 expenditures, which include the costs of many programs and
jects approved in previous years, can be expected to rise somewhat
ve the 1964 level as a natural response to the lingering effects
?arlier appropriation budgets.

- 8 However, to the extent we level off appropriations, our future
Lls -- and hence our future expenditures -- will also level off,
only after the usual and necessary time lag of about two years.
those who say that we should not cut taxes and increase expenditures
the same time, I say simply this: look at the record being
tten today in new appropriations instead of merely concentrating
the level of expenditures required to meet old bills. When you
)k at this year's appropriations and compare them with last year's,
l will see a clear example of firm expenditure control -- a record
It will show up in the spending level of future years.
Therefore, there is simply no reason for undue delay on the tax
1. It will not only give us expanding economy that will generate
greater Federal revenues we need to balance our budget, but it
1 also increasingly enlarge the role of the private economy in
ting our economic needs.
No one knows for certain what our immediate future holds. What
certain is that we cannot afford to be so shortsighted -- or so
getful of our postwar economic history -- as to assume that because
are doing relatively well today, we are doing anywhere near well
ugh to simply let matters proceed as they are into the future.
side of the prospect of a prompt tax cut -- starting next January
-- there is nothing in our present economic situation or in our
t history that permits us to expect that we can ride out 1964 on
ontinuing upswing. By next April 1st, it will have been 37
ths since the end of the last recession. If we are still in an
lrn, it will be the longest peacetime recovery in this century -1 the single exception of the 1933-37 pull-out from the Great
ression. And a downturn -- even of the relatively mild magnitude
)ur last two recessions -- could easily cost us between $5 and
billion in Federal revenue. It would also bring soaring
nployment, which in turn would inevitably lead to greater government
lding. The result would be a deficit that could range as high as
or $20 billion -- a deficit accompanied by unnecessary suffering and
'ation, and far larger than any we foresee with tax reduction.
The more we delay on the tax cut, the more we risk losing the
lrtunity now before us of choosing, decisively and firmly, to
Ind the role of the private sector in achieving economic growth
in meeting national needs. We risk, as well, foregoing into the
future the single best hope for ending our chronic budgetary
cits, and for reinvigorating the incentives for increased
rt and investment.

- 9 We could not be in a better position to adopt the tax bill than
are today. We know that our economy is still on the way up. We
o know that beyond the first few months of next year, its course
uncertain. We can pass the tax bill this year, and let the
rent upturn serve as a springboard toward the more rapid and
tained economic growth that we can and must achieve. Or we can
1 to pass it and cast our entire economic future into doubt. I
not see how our choice could be clearer -- or more important.

000

TREASURY DEPARTMENT

FOR IMMEDIATE REL~E

October 31, 1963

RE3ULTS OF TRFASURY' S CASH OFFERING OF 3- 7/ 8~ NarE
Reports received from the Federal Reserve Banks show that subscriptions
total about $20,070 million for the offering of $7,600 million, or thereabouts,
of 3-7/8 percent Treasury Notes of Series C-1965, due May 15, 1965.

Total sub-

scriptions accepted amount to about $7,975 million.
The Treasury will allot in full, as provided in the offering circular,
~bout $4,299 million of subSCriptions from States, political subdivisions or

instrumentalities thereof, public pension and retirement and other public funds,
international organizations in which the united States holds membership, foreign
~entral

banks and foreign States, Government Investment Accounts, and the Federal

1eserve Banks, where the subscriber made the required certification of ownership
)f securities maturing on November 15, 1963.

On subSCriptions received subject to allotment, the Treasury will allot in
"ull. subscriptions up to $100,000 and other subscriptions will be subject to a

percent allotment with a minimum allotment of $100,000 per subscription.

teports received thus far from the Federal Reserve Banks show that subscriptions
:ubject to allotment total about $8,106 million from cODlllercial banks for their
'WD

account and

$ 7,665 million from all others.

Details by Federal Reserve Districts as to subscriptions and allotments
ill be announced when final reports are rece1 ved fran the Federal Reserve Banks.

000

1-1027

INCOME TAX TREATY BETWEEN THE UNITED STATES
AND THAILAND TO BE DISCUSSED

Representatives of the United States are expected to meet
with representatives of the Thailand government in the near future
to discuss a possible income tax convention to avoid double taxation
of income and facilitate trade and investment between the two countries,
It is anticipated that among the subjects to be discussed
~ill

be the tax treatment of trading and other business enterprises,

investment, and income from services.
Interested persons in the United States who desire to submit
comments on the scope of the discussions or to submit information
relating to the subjects mentioned are invited to send their views
to

~tr.

Stanley S. Surrey, Assistant Secretary of the Treasury,

Washington 25, D. C.
December 13, 1963.

The deadline for receipt of such comments is

TREASURY DEPARTMENT

October 31, 1963
~OR

IMMEDIATE RELEASE
INCOME TAX TREATY BETWEEN THE UNITED STATES
AND THAILAND TO BE DISCUSSED
Representatives of the United States are expected to meet

vith representatives of the Thailand government in the near
:uture to discuss a possible income tax convention to avoid
louble taxation of income and facilitate trade and investment
letween the two countries.
It is anticipated that among the subjects to be discussed
rill be the tax treatment of trading and other business enterprises,
nvestment, and income from services.
Interested persons in the United States who desire to submit
omments on the scope of the discussions or to submit information
elating to the subjects mentioned are invited to send their
iews to Mr. Stanley S. Surrey, Assistant Secretary of the
reasury, Washington 25, D. C.

The deadline for receipt

uch comments is December 13, 1963.

000

-1028

Uni ted States. Saving~ Bonds Issued and R~d •••• d
(Dollar amounts l..n mUllons - rounded and will not
Amount
Amount
Issued 11 Redeemed
MATUTED

'"'""lib I Oct~er 31, 1.96)
necessarily add to total. )
s
[I
~~~
, %~ts~
, ~tst~ 1l1t; tI of Junt,l.!!

~Lj

5,003
28,512

4,990
28,388

1946 •.•••••••••••••••••••
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960 • ••••••••••••••••••••
1961 • ••••••••••••••••••••
1962 • ••••••••••••••••••••
1963 • ••••••••••••••••••••

1,828
8,076
13,006
15,136
11,848
5,327
5,019
5,170
5,086
4,435
3,841
4,021
4,573
4,620
4,780
4,589
4,310
4,167
3,894
3,873
3,883
3,735
2,679

1,544
6,844
11,013
12,679
9,721
4,147
3,726
3,731
3,582
3,039
2,618
2,677
2,856
2,738
2,796
2,694
2,450
2,204
2,015
1,844
1,636
1,360
481

284
1,232
1,993
2,457
2,127
1,180
1,293
1,439
1,504
1,396
1,223
1,344
1,718
1,882
1,984
1,895
1,860
1,963
1,878
2,029
2,247
2,375
2,198

Unclassified ••••••••••••••••••
Total Series E ••••••••••••••••

494
128,388

476
88,869

17
39,519

Series H (1952 - Jan. 1957) ~~ •••
H (Feb. 1957 - 1963) •••••

3,670
5,729

1,393
683

2,278
5,046

2,075
90,945

7,324
46,843

77.

Total Series E and H ••••••••••

9,399
137,787

Series F and G (1951 - 1952) •••••

1,008

838

169

Series J and K (1952 - 1957) ••••

3,702

2,029

1,675

~
~

TO"l.al Series F, G, J and K ••••

4,710

2,867

1,843

iTotal matured •••••••
All Series Total unmatured •••••
Grand Total •••••••••

33,515
142,497
176,012

33,378
93,812
127,190

137
48,686
48,823

A-1935 - D-1941 ••••••••••
Series F & 0-1941 - 1950 .~ ••••••
~rie6

lIK',Vl.TURE D
~r1es E:

·....................
·....................
·....................
1945 •••••••••••••••••••••

1941
1942
1943 •••••••••••••••••••••
1944

··....................
....................
·....................
··....................
....................
··....................
....................
·....................
··....................
....................
·....................
·....................
•

• • • • • • • • • • • • • • • •

.....

Total Series H ••••••••••••••••

zI
:JI

IaI

Includes accrued discount.
Current redemption value.
At option of ovmer bonds may be held and
will earn interest for additional periods
after original maturity dates.
Includes matured bonds which have not been
presented for redemption.

BUREAU OF THE PUBI.IC DEBT

15.3

16.~

1M
22.~

25.,
2M
2M
31~

31.'
33~

40.1
4l.J
4l.l
43J
47J
48~

63J
82J
31:
30i

3,j
I

.....

United States Savings Bonds Issued and Redeemed Through October 31, 1963
(Dollar amounts in millions - rotmded and will not necessarily add to totals)
Amount
AmOWlt
Amount
: ~ Outstanding
Issued J.I Redeemed 11 OutstandinG 1/ of Amt.IsDued

m
~s A-19J5

5,003
28,512

4,990
28,388

13
l24

1,828
8,076
13,006
15,136
11,848
5,327
5,019
5,170
5,086
4,435
3,841
4,021
4,573
4,620
4,780
4,589
4,310
4,167
3,894
3,873
3,883
3,735
2,679

1,544
6,844
il,013
12,679
9,721
4,147
3,726
3,731
3,582
3,039
2,618
2,677
2,856
2,738
2,796
2,694
2,450
2,204
2,015
1,844
1,636
1,360
481

284
1,232
1,993
2,457
2,127
1,180
1,293
1,439
1,504
1,396
1,223
1,344
1,718
1,882
1,984
1,895
1,860
1,963
1,878
2,029
2,247
2,198

40.74
41.51
41.30
43.16
47.11
48.23
52.39
57.87
63.59
82.05

494
128,388

476
88,869

17
39,519

3.44
30.78

H (Feb. 1957 - 1963) •••••

3,670
5,729

1,393
683

2,278
5,046

62.07
88.08

1 Series H ••••••••••••••••
1 Series E and H ••••••••• ~

9,399
137,787

2,075
90,945 .

7,324
46,843

77 .92
34.00

F and G (1951 - 1952) •••••

1,008

838

169

16.77

K (1952 - 1957)

••••

3,702

2,029

1,675

45.26

....

4,710

2,867

1,843

39.13

iTotal matured ••••••.
ries Total unmatured •••••
Grand Total •••••••••

33,515
142,497
176,012

33,378
93,812
127,190

137
48,686
48,823

.41
34_17

- D-1941 ••••••••••
F & 0-1941 - 1950 .........

I.lMt!:J!·....................
E:

1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
...
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962 •••••••••••••••••••••

··....................
....................
··....................
....................
·....................
....................
···....................
....................
....................
···....................
................
·....................
~

·....................
•

••••••••••••• 8 ••••••

···....................
....................
....................
···....................
....................
....................

1963 •••••••••••••••••••••

Lassified ••••••••••••••••••
Series E ••••••••••••••••
3/
H (1952 - Jan. 1957) •••••

J and

1 Series F, G, J and K

ludes accrued discount.
rent redemption value.
:>ption of owner bonds may be held and
l earn interest for additional periods
~r original maturity dates.
Ludes matured bonds which have not been
iented for redemption.

15.54
15.26
15.32
16.23
17.95
22.15
25.76
27.83
29.57
31.48
31.84
33.42
,

2,375

.26
.43

BUREAU OF THE PUB:"IC DZB7

37.~7

27.74

- 52 -

You may well have anticipated th••• ooocluaioD8.
To me, they seem to be compelled by the fact that
tax rates are too high, by the logic of the
economic situation, by the n.ed for expanaion and
long-term growth to meet the

ne.~

of our people,

by our fiscal circumatance. with budgetary defioit.
resulting from inadequate economio performance, by
our determination to control federal expend1 ture.,
and by the discipline of our balance of paymenta
defiCit.

I trust that you will be persuaded by this

logic of events and circWDlltanc. . that haa !lOved the
Administration
agree.

the.e conclusion. and that you will

- 51 -

hopes and aspirations of the bu.1ne•• and f1D&DOtai
world.

To frustrate tho.e expectat10na by de1&1

and doubts as to the future paaeage of tbe btll
entails serious economic riak8 that ..., enaue fro.
diminished confidence.
The answers to the three que.tiona with whioh

we began, then, are:

!!!, the national intereat
by

would be .erved

the enactment of a law Bubatantially reduc10K

the rates of Federal income tax...

!!!,

this rate reduction should be a balanced

one designed to increase both consumer purcb. .toK
power and direct investment incentives.
:\nd, yes, the national economy is far more

likely to

benefited by an early

enac~Dt

the tax progaam than by a later one next year.

(--

-~;"<)
~~,~.
I

- 50 sustaiued by a tax cut, would attract investment

dollars fl'om domestic and foreign sources, sharpen

ow.' competi ti va

ed~;e

and OPPoI'tuni ty for an increu10g

trade surplus, and free up our monetary tools for
in event interest

l'a te

ua,

differentials trigger further

out! 10\~s.

Delay in the passing of the tax bill may
mean lilo;;:e tilan
ha~·m.

!(lis~ed

opportuni ties; it may do posi th.

The tax progl'a.m has become the leading

psychological factor in the world of business a.nd
It is viewed, rightly or wrongly, as the

finance.
touchstone
for the
·';()!If·:umel~

iOlc

pro;jress and the element of promis8

lOii[)-t01'1'1

b'.lyin:~

ini;he futUJ:e.

:tlltlU"e.

:it

lar~e

Business expansion and
measure reflect confidence

}~Apectatious of

the enactment of the

- ., peacetime recovery in the oentury with tbe ....ptloD
of the 1933-37 pull-out fro. the ~.at Depr...lon.
80 on either premise -- that the eoono., will
continue to expand or begin to oontract -- th.
earlier the enactment of the tax prolram the better.
Another time faotor is the ne.d to achiev.,
as 800n as possible, an equilibrium in our int.rnational balance of payments.

Continued defloit.

in our payments situation, with tbeir potential drain
on our gold supply and threat to the role ot the
dollar as the prinCipal reserve curr.ncy, provide
a compelling reason tor prompt action on the tax
program.

The net outflow of long-ten inv•• tment

($2.5 billion) in 1962 was the single blgg. .t .ourae
of disequilibrium.

A rapidly expanding .CODO."

- 48 p~ogram

is not to arrest a rae.881oB but to .ove

an a.dvancing economy into a scale and pace

00II-

mensurate with its respons1b1l1t1 . . and our
national needs.
If the tax program is an effort to remedy the
wi thdrawal fl'om the private economy ot.

too much of

the Nation's substance in the for. of taxe., to
lift the tax drag, and to restore 80. . Deeded 1ncentives for job creating investment, the 800ner
the remedy is applied the better.

If, in addition to its long-term objective, the
enacuoent of the tax program is viewed as anti-rece•• ioD

insurance, the time is ripe for tutn" out that insurlDGt.
The patient is well and insurable, but he is moviDi iaw

a vulnerable period of hi. 11fe.

By next

April 1st,

it will have been 37 months since the end of the last
1"ecessi:)11.

be the longest

the economy is still advancing, it will

-.,,Th1s 1s part1oulal"ly twe lD Uae Upt .f
the cogent realtona for aa ..... ly and ,......

.u....

posi tlon of this partloulU' p1.o. of les'.latl v. b\l81.

ne8s.
The .conollY ls atll1 upantiDI. but

tun ,.

still a large cap of unWIN _power an..........ltJ.

'ftle economic climate is gooel.

enac tmen t of the tax prog"..

In tIa1a ••"tl118 the
DOW

would. •••, . . . 1 t •

• ffectiveneS8 in achieving ita iDlUa1

to move the economy to full employment and a .ore

effective utilization of all our reeouwo..

particularly our increaaing humaD ..-ourc...
To wait until

1I0me

later t1_ aad 1'18ll jo1at.a1

the tax cut to a receding or 1evelllna ecoaa.r 18
to put it to ita appointed taak UDder
circumstances.

adv.~

The overriding purpo. . of tbe tu

- 46 -

a declaration of policy which reads aa follows:
f'

It is the sense of Congre.. that the

tax reduction provided by this Act through
stimulation of the economy, will, after a brief
transitional period, raise (rather than lower) r.v....
4nd that such revenue increas.s should first be
used to eliminate the detici ts in the adminlatrath.
budgets and then to reduce the public debt."
The President endorsed this statement before the vote.
These facts, plus the even more fundamental one, tu'
expenditures can never exceed the amounts actually
appropriated by the Congress -- which controls the MatiCll'1
purse strings -- makes it difficult to justify poatpOD""
of a final Senate vote on the tax bill for an alleged
lack of evidence of an expenditure control policy.

- 4" 'I.

As for the fiscal year 1965 and followiDI ,earl,

the President has assured the Congre•• that he intenda to
maintain a tight rein on expendi turea and that a aubatuUa!
part of the tax revenues from economic expansion will be
used to reduce the budgetary deficit until balanoe i l reu",
8•

this basis -- and barring an unfor....n 11 _ _

of the economy or international contingency -- the Prell".
expects to submit a budget for fiscal 1965 with a defioit
less than presently forecast for fiecal 1964, despite t.
fact that the second stage of the tax reduction will haft
gone into effect and that the revenue loss from 'tax nduoU.

in 1965 -- before feedback -- will be $5 billion Ireat.,
than

in 1964.
9.

The House of Representatives bas emphasized t ....

factors by specifically including in the bill

a8 lectl~l

- 44 :.,J'.)'i

lJudget (excluding de fen . . , apace aDd inter•• t) thaa

in the previous year

only the third

tu.e that baa Mea

a t tempted in twe 1 ve yea.rs, during a period in which populaUoo
has incl'eased and state a.nd local goverDlD8nt apendinl baa
IrOWAl at a ra tc aVHraging more than

Fiscal 1964

eXl~llditure8

15 pel'cent a year.

are currently ••t1aated

billion below last January'. estimate.

three months of tile fiscal year

1~64

expcudi tures in the c1 viliall sector

In the f1n'

(July through 8eptabtr)

the I'ederal budpt

wer£:.' $lU'I million less than the same quarter last year.
5.

This September there were 242 less regular civ1l1al

Federa.l e.nployees on the payroll in the Executive braoch tbaD

'.;>.

Chairman Cannon of the House AppropriatlOD11 c-U~

has observed that new Cl.ppropria.tions may aggregate

11.St

ye.u"s t)t;:.:

1••• tb&I

-- ~~nc first time that will have beeD

dOlI

- 43 In f<.l.ct an. effective program of expenditure control

is ~',cl1 'underway ~l,.nrl convincing evidence of accompll.baent

is already dt hand:
1•

Accordin~~

to the Director of the Budget, the DHd

.for continuing expenditure increa.ses for defense has jUlt
~:'OO\l t

ended and will

S0011

taper off on space program., wblob,

tog;ethcr wi th interest on the debt, have accounted for

.or.

than '70 percent of the blldgetary increase from fiscal nel

through flscal 1964.
2.

f~ince

proposing the tax program in January the

fiscal l'J63 deficit has declined from an estimated
$8.8 billim. to an actual $6.2 billion -- and

two-thlr~

of that decline :ccs\..ll ted from lower expendi tures.
:3 •

In proposing the tax program last January, the

P:i'csident lJudgetf'::c! less for the civilian sector of the

- 42 -

A ccabinatioa of the two w111

as the two joined together.
interact in such a faahioo

a.8

to fOliter

aceelera". of

economic activity, which ehould contiDue for ,ear. to ...
to produce jobs and rai .. output .ore effectively ,baa
same amount of tax reduction devoted solel, to

eit~r

investment or consumer demand.
III

This brings us to the third i.sue -- whether tbe earl,
enactment of the tax program is likely to be more . . .1l01l1
to the national economy than a later one next ,ear.
Many favoring tax reduction in the abstract f ••l
tha t i t should be enacted only in the context of :liM&!
responsibility, and deferred until there is cODviDCiDI
evidence of accomplishment in the control ot the

iDO~

in lederal expenditures and the reduction of dettct t

n .....

- 41 1s the

mOISt

effecti Y8 "'J to

aan

lION

_'tl'&Otl. . . . .

investaent eleci.101U1 whicb are Dot beiDe ta. . -.-,.

It ls tbe .oat .ffective "'J to . . . . tlMt ......Paal
project of today the 8upenaarglD&l prOjeot of toaw', ••
It 1s tbe moat effecti va

ft, to ..xi8l.

tbe ....fl •

the tremendous technological, edueatlooal, &Ad hu.aa

resources ot the United States.

As De. tecbDlq"" . . . . .

products are developed aDd &8 De.II&I"Ut8 are ope'" ..

De. demand wlll be created, De. ia..-taeDt wl11 be

and Dew jobs will be available that would . .vel'

_we .....

available otherwise.

We __ Uft

This then is the crux of tba .1tuatloa.
a stiaulus to expaDsl00 that 1. cOllti.uia" J
and self-reinforcing.

If........''l11

. i ther direct 1Dv. .t.eat

1.n."

Dor increased conauaer deIIaad .111 do the job al_ 1I.u

-<60our balaDf» ot pa,..ata.

To tile ••teat t ...,

..octeralu.tiOD &Dd De. procIucU

to coapew at

tJaer ••b. . . . . .

aIli1'"

aDd io tale export . . . . ., aad

lUintalD or expaad our tr... .urplwa.

It 1. equal1,

laponaDt to our balaDce of pa,..ata to iDON. . .

United States.

u.....,

The. . are 1IIportant beG&..... capital

outflOWll for long-tera private lDy. . . . . .t abroad " .......,

a significant part ot our balaace ot ..,..at. deliot'.
I'lna11"

ODe

ot the

IDOIIt 0 . .r1'"*-4

. .pee_ 01

creating a sustained economic expaaalOD ia the Deed to
utilize the fruits of ne. technolOC1 1a the

., ...

products or the adaptation of exl.tiD. product. to ...
.arketa.

Increasing the profltabilltJ 01 DeW

lA~'

r8aultiag frGl "deJI&Dd pull."
to II&ke itself felt in

~ .C~

at_........

dn. . . . . .

&Ad 111 tM parUoUar

Mctor of the industr)' in queat1. be'ere 1. wU1 . '..1ft....
affect 1AV. .1aeDt dec1a1oas.

T. ._, then , . . . . furtMr

del.)' for 1Dvest.eAt decia1.s to be trualatN 1.to 1'8&11".

If there were aDJ poasibllit, 01 '.,1.'100 ,.
reduclDg the 8t1aulu8 to 1aV••t..Dt woultl
t

~ t.a.~~

~&'l,

.... ,••

Price iDcreases are . .t likel1 'to oocur ..... cine"

outatrips productlOD
capac1 ty •

aDd tAe utl1lsatlOD

.If'.'...

If product loa &ad tM quaati t1 of .fll01_t

capac1 t)' expand to keep pace w1'tb . . . . "tI. tM _ _• e1

laflation 1s kept at a

.iD~.

Third, direct tax inceDtives w11l alfect favorabl,

-38-

1n the United States with earDing. of 1. . . thaD '26,000
per year.

The entire tax prograa iacludiq this ohap

would provide a 17.9 percent reductioa in aD additioaal
54,000 corporatiODs whose income. were 1. . . thaD '60,000
(}1
andA~.5

percent reduction for the 26,600 caapani•••~

incomes were less than $100,000.

The critics of reductions in individual tax rate_
of those with adjusted gross incOMeS in axc••• of 'lO,OM
should remeaber thAt of the eleven aillioo buaiDa__ 11

the United States, ten million are 8018 proprietorship'
or partnerships and many are established and operated
by individuals in these higher bracketa.

The.. are tile ....

who would be Most likely to invest tax savingtl iD tlMt
uusiness or businesses which they are operating, wbiGb
in turn might provide more jobs or faci1itie ••

-31-

their expaD8ion and lIOClern1zatloa for

out of their own interual

DeW

Yeat-.-

firuuaclal~.

-n..,

very .uch Ileed the iocnasecl cub flow of tile ..ate
reductiOQ for corporations.

of the overall corporate rate fro. 52 peroeDt to
48 percent provided by the bill.

For that " __ . .

new bill contains a provlsioll pl'ftid1q

l~.te

...

substantial investment iaceatly. to _11e1' COI'pOftUtil

For 1964 the present DO~l tu of 30 pen.at, .,,11_11
to the first $25,000 of taxable corporate iaca.. ~
drop

to 22 percent.

1bus

i-.t1ate tax recl1I8U- II

most 27 percent would be provided for .67,000 . . .11

- 36 lU~OE

to fiuaace new iavestment ignore ••veral

illlpol'taat j:>Oints.
4

The tax bill does Dot afford

liquidity windfall to much of the corporate

sector.

Simultaneously with tae rate reductioo it

requires

cOl'porat1o~

~luO.uOO

to initiate a tax payment Bchedule whereby

they will
lH70.

wi tll incoaaea in .xc... of

making their tax payments current by

In the interim, a.lthough their tax liabili-

ties will be reduced as a result of the corporate

rate reduction, these larger campaDies will DOt
have the benefit of an iacreased cash flow as a
result of the corporate rate cut.
More significantly, the critics

that despite the

~.neral

i~r.

the fact

availability of money in

corporate treasuries and credi t in the capi tal
rl1d.rket for large

cQmpanies for investment needs,

- 36 1 t bas faIleD to ro,,&bly aiDe pa-cnt.

81.. 1817

tAe rat. of lDCl"8aa. in OUI' etock of b. .l _ plut

a.aG equip-.ot bU risen by 1... \baD two pe.....t .-

leu, COIIPued to four percellt a year 111

poetwar decacle.

11nt

;'urth.r.or., tJIeI'. baa bee. a di...

tU&"biq 1'1•• in the proportion of our Mell1...., ...
equip_nt which 18 1101'8 thaD ten

y.a.ra old.

CoI"pora.

profits and the ratio of expenditure. 011 pl. .t aDd
equ1~Dt

to gross aational product have been _low

prevloua postwar levels.

Our rich store of

~aroh

and develOPMDt haa not been joined to capital aad

labor to produce the exploaloll of

DeW

products,

sanie88 IUld jobs of wh1ch the lfatton 18 capable.
Moreover, critlcs of tbe tax bill

011

tbe

that 1 t ioclucleB direct ioeent! V88 for 11lVat.eDt
when bUSiness has adequate or Il0l". thaD adequate

-14prop-ali will play

ll1pOnut part.

with lut ye... ' . 7 perceDt la. . .t.eat

cnd1' ....

depreciation refON, tbe propoeed .. pen_t .....
cluctlon in the corporate tax I"ate, topu.... witll
the l1be1'al1aat1on of the cred1 t, wou1cl 1 . .. - - tbe
after-tax profitability 01

DeW

,ear asaets, for example, bJ

1a...t.eat la tea

_t1l1&ted H peneat.

Tbat, I subm1 t, i8 a fact widell will _ipa Yer/
heavily 1n any iovestunt clee1aloa.

!Ileae OOD81....U.

apply DOt only to expaA810Jl of capul t7 to IIake .......
pl'Oclucta and new capac1 ty to Mke new p.roducte, but

also to the IIOClerniaatloll of ex1.tlaa ful11 U . 'to
provide ex1atl,q product. 011 a

.ore .ffioi_t ......

1ft 1956 and 1937 buslaeea fixed lDv. .t.eat
avera.pd 11 percent of total output.

81_ tbat t ....

-33board of cl1rectora will aot be detenliled . . . .17
by couidera tlon of the utut to wlaicb total

persoJl&1 iocOile Qut year i . 11kel, to . . . .d the

current ficure.

Certainly __aDd wl11 be iJlpcd'taat

produce when there

18 AO

expectation of bari... a

aarket for one'. pl'oclucta.

ADd certainly the

.fteet

of dellaDd on the overall ecODOll1c outlook 1. a _tw
whicb will be given . .rlous couideratioD 1.11 ukiq
such a

decision.

But

ODe

of the vi tal factors 1n aD1 aarpaal

iovestment decis10n is the rate of retlll'D -

tile

increase in after-tax illC08l8 in retUl"R for a Ii""

outlay io iov•• blent.

TIll. ie where the direct

stlaulus to investment proviclecl 11l the curreat tax

-D-

1da1ch pZ'Ov1cle a 811P&1fioaat illlO~ 1. _~ " ••••

tAe PZ'OV181oD of &erYicee.

- 31 -

noraal capacity

~tillsatloa.

But con.waer d....nd 1. Dot tIM

.bole

sttaulua to iDV••t.eDt i. aleo .......

.t~.

dlreot

While it 1.

that if a sufficieDtly .trODe iDore.... 1.

is provided tbis will 1Dcrease

tbroucb"l. . .

lav..~t

pull," it i . equally true tbat a

lION

.,..10

'MPH

Ud IIealth,

expansion in investment will ca.e fro. a coab1aatioa of

increas1ng consuaer deJa&lld aDd direO"t la. .a'tlleat 1aeenl••
Characteri.tically, th088 who are critic&! 01 the
inclusiOD of a corporate tax cut aDd reductioaa iD tbl
rates of those whose adjuste. &roaa iaoa.ea exceed

-30-

would illyl t. 1 t.

III tIlat

a . .~

opa'at~

rate. for lIIUlufactur1q bay. lODe fro. 17 percat

to 87 perce.t of capacity bMt

p~~

aldered aa ooraal by baai. . . .

''''If.

, . aub-

IIIo8t of the lnc...... ill c ....i ...~ "tlU. .'l_

81n08 the begillllinB of 1962.

h-a. tbe 11n" '

quarter of 1962 to the third fluarter of lMa tbe

In lI&Ilufacturin. rose from aIaout 1& pen_t to u . t

81 .,.rcent of capac1 ty.

Al tbouah att_...t .......1 ta

have risen approximately 40 percent, fro. t19.2 bltuto $26.8 billioll in this recovery, they are atl11 ~

- 29 -

capaci ty will be worthwhile.

01 counae if tbe

econoll1c 8i tuation were clifferent -

i1 all of

economic resource. were fully employed -

C01l8waer

is today.
~OD.OaY

OUl"

atnA(ltbeD111

demand aight DOt be . . important . . it
But.e do not have a full

eaplo~Dt

aDd we are not utillzin& existing proclucU".

capacity to make sufficiently invitina the provlaloD
of additional capacity for old products or the Dew
capacity for new products that would make for a .ore
dynUlic economy.
For example, even though the nation 1s eDjol1D1

a recovery and expansion that has already lasted
thirty-two months, average operating rate. in .....

facturing have not reached a point of provid1DI .1.,

the rate of utilization that would trigger to. 8Oal.

- 28 -

in the relatively lower ioco.. bracket. -- • .,

below adjusted gross inco_ of $10,000 -- tile
an...er .\lSt be that they account for el. . to
85 percent of all taxable returna and are 11kely
to put a large part of their tas savi_ iDto the
spending

.tr....

customers live.

In other 1fOI'da, th18 ie wben the

Under the CurreDt btll they p t

nearly 60 percent of the overall iDclivldual I'eduetion, wi th their share of the load beiq decreased from 50 to 48 percent.

To encourage investment in job procluc1nc
facilities, strengthening of
required.

COI18U8er

demand

Tbe purchasing power of the conaUMJ"

must be increased to utilize present productive

capacity fully so that add1tlona to productive

- 27 -

This balance of $8 billion

ot tax nductioa

for conswapt1on and approxl_te17 '5.6 bllll_ IN
direct investment lllOentiv. . wu adjws.ed to .,.
appropriate by the Souae Way. and .....
after hearing most of the .... wi to.....
before the Senate Finance
points.

C~ttee

C~tt

DOW

."peu1 11

.ak. the ....

This two-pronied character or balaace iD

the tax program is perbapa the . .t ll1POl"tut and

moat overlooked aspect.

It 1s likely to be til.

decisi ve factor in assurlni that the program finall,
adopted will not substantially alte.. the

bal~

arrived at and will include both a etlaulua to ooraSWIer

purchasiai power &ad direct Inv_tMDt

incea ti ves.
To those cri tics of the present bill wbo would

eliminate or sharply reduce tax cute for tupaye...

- J6 of cOrpol'atiou anel uaiDOOI'pOJ'atecl ~-- bJ

,2.5 billion OOD8titute a

.~'-Atlal ~CW"

dinet iaceaUy_ to lay. .~at tokll1q

.... billion pe.. anaua.
be iDv_tec:l.

IIuch of tla1. -..owlt will

..idee. the iac. .U

01 10.... tax

rat. i . likely to dl'aw adcl1 tioA&1 -.1_ fl'OJl otb.1"
. a n _ iato iav_t.at 1n Job pnduciq 1aciUU..
aDd . ."1e_.

lbus the opuatioD8 of thea. di.-.ct

lDy. . bent ioe.nti v.. will add to the total of

co..uaer purchaaiq power in the llanelli 01 acicI1tloaal
job holden, 8Upp11 ers, etc.

Tbl. pJ"OCe8ll adU

wbat the ecoDOa1.ta ten an accelerato.. effect to
tbe pZ'oc_ of powth that will 110w IJ"011 the tax
Pl'Ogr...

TIle interaction

t.....

two facet., wi til tbe OIl

aiding aDd abetting ~ otbU', ia of vi tal lJ1POl'taate.

- 25 -

about .1 billion will be spent on acWitJoaal
.uaption.

GOD-

'lbe•• expend! ture_ will . . t io .Uoa

faa1liar ecoftOllic proc._ in which " "

clrculat.

throushout the economy and ultl. .tely lacre....
1"COlUlu.er spending by several t l _ the UM)uat of the

initial tax cut -- the so-called aultlpller factow.

Tbat strong and austained ri •• In

eo_~1'

"-aDd --

and thus in aarketa and protl t. tor inclustry -

will

further bolster the direct tax lDCeot1v. to lD. . . . .t.

nu. estlaated difference
viduals receive and

CODSUII8,

betweea the UIOWlt 1....-

approxl_tely 1800 all11...

wi 11 go into investment or savinp.

1'1118

IIWI

&114 a

$2.2 billion reduction going to corporatloaa, wken
ac:ldecl to last year's investment credit anel revlari

depreciation guideline. which reduced tax llabl11t1"

- 24 -

One of the chief virtues of the tax bill DOW

be'~

the Senate Finance Committee is that 1t lDcorporate. U.
constructive advice of both sets of critics but rejeo'.
their "1Ihole hog or none" approach.
it is a soundly balanced bill

The re.ul t 1. tbat

one purp088fullJ de.l....

to provide both additional consumer purcha.ing power

direct investment incentives.
The short answer to these critics ot the .ix of
reduction in the bill is that both approaches

iDt.rao'~

together will achieve a more dynamic and healtb1er

than would result fram a reliance upon one .ethod to , .
virtual exclusion of the other.
The btll provides a substantial sti.ulu8 to COD""
purchasing power.

Of the reductl00s to individual.,

amounting to $8.9 billion. it 1s reliably ••t18&ted ,--

- 13 -

talking about the

BaM

tax bill.

Tbi.. 1. particularl,

true of the t.sue of bow the tax neluctiOll8 ahcNld be

di vided •

Seme think low

others too It ttl. •

iDC~

t&&p&Jera set too auoll,

Sa.. tb1ak the upper

should get 80re, others 1__ •
incQ18 taxpayers should get

Ila.GJ who

tuP&Jln

araue that

the 111

1ar•• r aha" of the reduot!.

say that tax cuts for corporations and individuals in tilt
upper aDd .1ddle tncome brackets are ....t.d becaUA tbl .,

to lDcrease inv.st._at and job. 1. to lacr....
purcballlng power.

c~r

Conver. . ly, IlaDJ wbo araue that liPPI'

or a1ddl. income taxpayers aDel corporati0D8 should lit &
la.rger share say that tax cute tor those in the low 1....

brackets are wasted or will provide only a ODe-shot .t~
and tba t the way to increaa1q Irowth is to iucre... dlincentlves to inveat.ent.

- 22 Hevenue Act of 1963 .a8 approved b,

verJ 8&&-tut1&1

majority ot the House of BepreeeDtatlve••
In

SWIl.

there is a natiOAal

COGHUU.

that tbe uti..

interest ia served by the enactaeDt of ala. au..taatlall,
reducing the rates of Federal iacaae taxea.
II
This brings us to our aeeood iaue:
tax rate reduction program

DaMl"

widel, eadoraed be a

one designed to increase both cooaumer purcbaa1..
and direct iuvestment incoativ.a or be

8boul. till
b&l~

pre~iD&Dtl,

aimed at only one of the.. objective••
You a.ll know the poem about the d1fferent deHr1,-1_

given by six bliud men eacb of whoa had irabbed
different part of an elephant.

hold~'

The public eli.cuu!_ . .

the kind of a tax cut contained in the bill as it ~
the House is like that:

you'd never think people were

- 21 -

a single-shot effect of the tax program des1Kned aa 1t is
to create a healtby environment of au.tained demand and
investment i!lcentives conducive to a full e.ploY_At
Through the

.COla.,.

interaction of inveetaent, demaDd, and proflu,

the tax lJrogram will ioster an upward spiral of econoalc
d.ctlvlty which will geuerate new and sustained vitality.

resal t will he not merely three mil110n jobs but a cooUnlili

high level of job production resulting from an econoay

operating at full poteotial.

The

e~rly

enactment of a law substantially reduclDi

the rates of Federal income taxes has been strongly endoJ'llj
tJy

a broa.d cross-section of the leaders of business a.ad

labor, by financial leaders at home and abroad, SOll8 for"~
governors, and by a long list of the most distingui8bed

economists in our universities.

After months of publiC

diSCUSSion in the press a.nd other aed1a, the proposed

- 19 ·}ur ecollOlay on a scale and a dimension never before UDdertq

by it except in tiilles of all Oi..lt war or crash build-up for

Oile.

There

IllUSt

be and is full l"ecogni tion that, if the

tllA progr.l.rll is to "" t taiu its objectives, it must be carri"

fOl'lVal'd as ..l pai't of a sound and consistent overall fiDILDOU

first, .:t suustailtLtl net reduction in Federal taxea,

tbrelll

ale ..mingful lower lng, in sevcrlll stages of tax .['atea OIl
i.H.li vidual .wd corpOrft te income from

second,

;.lS

tl:l.c t..LX

(;U

top to botta.", lid;

t lJecomes fully effect! ve and the

C(;ouomy eXjJa.l1ds in response,

tile allocation of a

sub.taat~

purt of tile resulting revenU.e increa.ses ea.ch year toward
eliPlinatLlg

The

t<.4X

t!l.€

t.l.'allsitioil~j.l

p ...·OgT<\.ill,

deficit.

with reLt ted policies of expendltUft

- 18 -

spending l,>ower in the hand. of private Coa8uaer. aDd

investors and otfer more encouragement to private
initiative.

The most effective policy, therefore,

is to expand demand and

~nlea.b

iDcenti ••• throu,b

a program of tax reductl00 and refor., coupled with
the most prudent po8aible policy of public
e.xpclldi tures."

The p4ssage by the House of Repre.entative. of the

pr~

i(.evenue Act of 1963 is a lir., positive aseertiou. of it.
preference for the tax reduction-private enterpri. .-leM.u
expenditure control road to a bigger, .ore productt •• ~~
If the opportunity to move down that road by enac~
of that bill is passed up, then the likelihood is

gnaU,

increased that the economic problems of the past decadewhich arE: the economic problems ahea.d for the Sut1 •• lVill be

met by

national Government tha.t takes a role 11

- 17 body, but even more important, the free aarket

keeps economic power widely diaper.ed.

It thua

1s a vi toll uuderpinning of our cte.ocratic ayate•• n

In any choice of fiscal policy between a priaary
reliance on massive increases in Government expeDdltur••
a

pri vate economy 1nvigorated by

DeW

tax . .&aures a.s the

Wd.y to a higher level of economic act1vi ty, we as a. nati.

prefer to rely primarily on a more prosperous aDd e11101llt
private economy initiating a larger aDd larger volume of
economic activity under the stimulus of generalized tax
incentives.

The President in his Tax Me.sage in

JaDU&~

made his clear a.nd unequivocal choice saying:

"I do not fa.vor raising demand by a massive
increase in Government expenditures.

In today'.

circumstances, it is desirable to seek expansl00
through our free market proce. . .a -- to place

lae~

- 16 acti_ -- Federal, .tate aad local -

. . _11 . . prlYate

action, to _ t the probl_ of .tl"1lCtura1

~l.,...t

the fact tba t the loeatlO1a8, .1dl1.. eduoa'tlOD ....

tralalai

of available workers do Dot .-tob tbe ..... of . .p1"'H.
The IlaDpower DevelOPMtDt aDd lletralala. Act . . . , - Ana

DevelOpMDt Act are r •• poo81ve to thi.

_4.

But the dec lara tlon of pollcy 1a 'tile "plo,aeDt ...

of 1948 directs that the Peeler&! KOYer_at, 1D pr__l11
aaxiawa _ploymeDt, productlOD &ad purcballlDC power. l1li11

coordln&te 1 t. plana, fuactloa8 aad re....rce. for enat_
and llalatainlng the.. cOIldl tlCJ1U1 "ill a 8Ul_r oa10ula'"
to foater and promote free ocapetl tl ve enwrprl.. aad UI
general welfare. I t

I believe we all abare Oe the CM8Y~

voiced by President leADed,. laat year when be 8&1d1
"The free market 1& Dot oa1,.

.ore .fflol81'

decl.1on IBaker tba.D evea tile wt_t ceDtral pl......

_'.,;-~
--

, __ ,

- 15 The other is the road of. Gover_at ellpeDcl1 tun
increases.
There is

vi tal dif.ference betweea tbe_ two routel.

To depend upon IUJJslve increase. io Gover __ ot expend1tUtl

as the primary reliance for

fA.

hlgher level 01 eCOA<alc

activity is to expand the role 01 Qoveru.eDt in makinK
1.:.>.1.'

ryiug

Ol.lt

economic decision..

AD ever larger proportl.

of the Nation' s labor and AlODey wl11 be uaed directl,

by the Government.

'fhe Gover.DDleDt

act1'11 tie. . . . a IN,,,,

lender or clonal' will determine in la.rger &Ad larger part '"

use of laDor and capital even iD the private sector of till
ecouOlllY·

in dealing "ito proillems oi eDlployaeot and WleaplG,.eDt.

- ... '

~~h~-l~!llJle,

there i . great Deed for bot 11 gover.....ul

of our tax system, a restructuring to be achieved aalal,
througb the siugle most important tax nfora -- reduce4

The adoption of this policy would

rates.

tow4rd

be a

slut ate,

tax structure which interfere. as 11ttle ..

wi tb the opera. tion of the free raarket . .chaDi_ while

supplying the revenues necessary to our national . .curl~
and national public needs.

Chairman Mills in opening the debate au the
Revenue Act of 1963

the issue squarely.

pro~

in the House of Repre. .otatlvea put
He

said:

., I am cODvinced that there Are two road8

the Government can follow toward the achiev...Dt
of this larger and more proaperOWl ecoacxay.

believe we are at the fork of tbose two roada
tocUy .

One of these i8 the tax reduction road.

!4?~
~)

,.) C-

limited the poasibility of relyiDK upoo sharpl,

deo~~

inter.at rates and greatly illcreaMd IN,p11e. of . . ., 1M

credit, President Kennedy 10 Jalluary offered hie prosr..
of tax reduction and revisioo

all

the

ke, e l _ t ill

AdlBinistratioo' & econQBic procram tor the years i_d1atllr

a.head.
This program aDd the seven perceDt investment tax

credit enacted in 1962 together .1tb the ada1D18trati"
Itberaltzatioo of depreciation were a package de8ilDld
to eliminate an unduly heavy tax draa OD purcba8iDl ,...
and demand -- to provide Dew tax iocenttves tor aore

investment and increased etfort -- to encourage tbe
utilization of Dew technology and the provislO1l ot

fa.cil! ties that would add to "Clr.pte delaaDd. capaaUJcompetitive efficiency.

It involve. . . basic reatrucQWUI

l~ -

under-utilization of productive resources in the United
States.
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.

Many long-term

factors for growth are more favorable today than they ha"
been in almost a decade.

But, some determina ti ve elements

of long-term national policy remain to be fixed.
quite clear that the unemployment and unused plant

It is
cap~i~

~r.~,~-L

and inadequate growth rate that

aa.s

marked our recent past,

and which we can expect in the period ahead if some new
decisive initiative is not undertaken, will cause the
coun try to take some kind of action.

This Nation is deteJ'l

to move boldly and forcefully toward an economy with a mor
rapidly rising level of activity.
when to do it.

We must choose how ~d

)

"--

.- I

,'"

Z~
- 11 -

Only

d.D

ecooOBlY, enabled by

DeW ' " pollq for

to operate at or near full eap10YJ88at, with

11'''

rate of gr. .

substantially exceeding the reeord of ta. paat a1& year.
and the adoption of a firm national palteJ to hold don
increasing Federal expenditures
of del lei ts and lea.d to a new

C&Jl

wipe out thi. patterD

era of b&laDced. budpta &Ad

surpluses.
Fioally, our national Irowtb rate of barel, three
percent since early 1955 C<Bparea untavorabl, .1 tla re,ular

rates in Western hurope of four to .ix peroeDt, aad eyeD
with our own lour percent trend in much of the period
before 195:>.
By almost a.ny measure you choose, our

eoOG~c

perfol'Dla.Jlce over the past five or six ,eare baa been far
from adequate.

~ltb

the exceptioll of tbe Depre. .1OD,

period in thiS century has witne.sed Buch a persiatent

- 10 -

ability to compete with foreign gooda iD aarketa abroad
and at home and to make the United States a .ore attract!"
place for the investment dollar to stay aDd be joiaed by
a streaJll from abroad.

These are the two . .ans . . shOUld

depend upon primarily if we are to bring our iDterDatio_l
payments into balance, without relinquishing our
respoDsibilities for leadership in a.suring Free World
security and development.
A

third measure of our inadequate

.con~c perfo~~

over the past five or six years is the deficit 1n tbe
lederal budget.

The Federal budget ha.s had five deficit.

in the past six years -- delici ts which avera.ged $ •• 3 bllU4

a year.

Those deficits were clearly tbe result of tbe

failure of our economy to perform at its higher poteDti~,
Consequently, tax revenues failed to reach adequate 1.~U,
~nd

a deficit occurred.

_ 9 _

tner~

~'rc DO

other

~on.id.ratiOQ

at all, the Deed to

create addi tloJlal jObs Mould IU.ke the tax program a llatter

c~~pelliDg

urgeDcy.

But ther(;: are other vitd.l considerations aa well.
Our illtt:rllation..a.l b..a.l.:.t.nce of pay.aenta bas been a. cause fer

The persistent large deficit.

COnCaI'll ever siLlce l~bi.

in o'ur lJ.... 1U.llCC ui pajlll1tUlts have led to a aal'ked drain on
our lld.tiou.ll

~:old

stOCK$.

Ttl.l~

situ.l.tion ;:wst

not be

.lll ..:'hyed to pel'5ist L,eca.llse ul tiaately 1 t could tbream
the va.lue of the dolL.t1;

Ii or 10

monetary bystt.:: .•l.

which is the ba.se for the Free
president Kennedy recently allaO!lllClHi

a. 'lew series ot measu.ces to cope witb the bala.nce of
lh\yments.

tie ;udc 1 t a.uundantly cledr that the tax proc1'll

is the vital e.Letllcnt in a.llY long-range solution of thl.
t-irolJlem.

for a. tax Cu t 1s needed botb to sharpen AaeriCil

- 8 -

last June 30 more than one 111111011 work.... we... added
to the labor force, but one out of .v.ry alx alao j01. .
the ranks of the unemployed.

As the poetwar babJ boola

111 t& the labor market, and it i.
the

j~t

be&1nDina to do 10.

pressure to create more ne" Jot. Will inc"... wltla

a flood tide of new YOWlg people enter1 . . the labor f ....
In add! tion we need to provide at l.ut a mllion jo.

a year for those workers idled by technological ad".....
An additional million or more job. wl11 be required

bring unemployment down to our inter!. 10&1 of

*-\11"

percent.
Tb18 problem 1s of great concern to the leaun .f

labor, to our mayors and governors, to our
and to business.

1.s1.1a~

W. P. Gu11ander, Pre.ident of tbe

National Aesociation of Manufacturers baa . . t1. .ted ~t
if our economy keeps on procluclnK jobs only at th.

level of recent years, by 1910 unewployaent could
rise to a staggering 12.1 percent.

- 7 -

Federal budgets, and a large aDd ever lJ10ftulal
gap between potential

i8 that

and perforaanc..

!be tr.tb

our national econoaay hu not NeD pertOftltaa

adequately, and

all

a DAtion we . . t do better.

Let us review the paat and look iato the

future.
Unemployment haa varied from fl.e to ....n

for more than five years ,avel'aging 81x pereat.
Today unemployment has been reduced to flve aad
one-half percent.

But that happened earlier in

this econOllic expansion, and.,. ba•• had to

barel to get back down to the pl'• •nt level.
a half percent is too high, and

stantially better.

,.l.e &ad

IIUIIt do 8ub-

Today around foUl' Bdll10D

Americans who are actively lookiag for work
unable to finel it.

won

DuriDC tbe year whiCh ended

,
)

- 6 -

increasing business inve.tmeDt ill plant aDd equip_nt,
iacreasing consumer

spendiQ~,

in spite of a drop

in retail sa.les in September, rising GoY.r....t
outlays in the fourth quarter, aDd a balanced and
reasonable relationship between iDventori . . and
sales.
But the issue we are considering i . DOt an.......
by a l001t

at our particular penonal 01' buaiue8

picture or the outlook for sa.e
improvement.

teapor~y

additional

The hard fact ia that, even with the

current economic advance setting

DeW

recorda in

terms of gross prOduct, sal. . and othel' similar

categories, its pace and scale leav. . the national
economy with too

mt~y

unemployed, too .uGh unused

capacity, too little investment and growth, a continuing imbalance in our international paYJI8Qta and

- 5 -

wi 11 say we se. . to be doiq fairly ,..11,

paJ:ticularly in the last few

IIOA'tha.

The

aroe.

national product and induatrial proc:luctioG aJld
people employed are at an all ti . .

Diab -- aloAI

with the stock market, profits, plant and equipment
expendi tures and many other ina ice. of proeperi tf.

It is true that the short-ter. view is a
somewhat pleasant one.

Many individuals and

businesses are comparatively well off, particularly
if the 81 tuatlon is measured aaainat SOlIe of the
dark and uncerta.in periods of recent years.

It ia

true that there is a. clear prospect into the first
DIOnths of next yeiilr for cont1Jluin" upward IIIOv....nt.

even aftcl" thirty-two alD'tha of expansion.

This

outlook is based upon such favorable factors as

- 4 1

Tbe first issue -

whether t1ae oational interat

is served by the substantial redUction 01 Federal
income tax rates -

1101'.

reaUatical17 co.fronted

in the perspecti ve of both • backward aDd • fonrard
look -

six.

before the last six lIOathe aad beyoad the alxt

Much more is at stake in deCiding thi. question

than a tem.porary economic pickup or avertins an early

recess1on.

Our goal must be a sustaiaed eooDoadc

expansion wb1cll will procblce joba, lnc:a., proflu,

and tax revenue at a algnlf1caDtly b1gbel' level over
the long-term future.

What 1s at .take 1s the

achievement of a higher DOraal level of 8COAOII1C
activity than that which characterised the 1. ., .1x

years.

-3and Federal tax. revea.,.. that
private ecoaa.y CaD

lDrilOZ'atecl

p~Yl".

OUt

of tbe debate of 'Uat. leI1alatl" .....

1. tbe aat10aal 1at__ t ....... bJ ....

eaact.eat of a law sub8taatlall, ..a.tq .........
of l'eden1 laco_ tuea?

II.

Should tb1. rate nducU_ . . .

domlWltly aiM" at on11 _
III.

18 the early

.nac~t

tIl._

1Ia'.""

elajecU...?

of tlle t o

pz'OP"

likely to be more beneficial '- tbe aat1...1
thaD a later one next year?

eeaa.mr

- 2 -

The bill would foster a .,re proeperou.

economy by loosenillg the conatraiaU wbicb the
present Federal tax syat_ ilap08"
enterprise ayste..

011

our pl'ivate

Through a top-to-bottoa re-

ductioll in th$ high incOM tu rate. tllpOtlecl durilll

wartime to restraIn less ....ntlal coaau.pt1oD aDd
tnvest.ent, accompanied by

structural reri.1oa

to broaden the tax base aDd re.:)ve 8o.t lnequltl.,

this bIll is designed to r.l. . . . aDd .acour_ the
inherent expansionary fore. in our areat priYate

market ecollOllY.

Ill8tead of seekl. . to p'atlf7

particular groups of taxpayers wi tb special tax

preferences, the objective of this tax btll 1. to
achieve the increases in Jobs, wages, aalari.,
profi ts, consWIlptlon, invutraent in the UD1 ted Stahl,

REMARKS OF THE HONORABLE IIBlGLY B. rOWLD.
Ulfl)D SECIlBTARY fW 'lHB BaA8uaT, 4'1 'fill

TWENTY-THIRD ANNUAL SYIIPOSIUII O. ACCOUITIIG
AND TAXATION OF THE JIOR'nI CABOLllfA 488OCIATI0I
01' CEBTIFIBD PUBLIC ACCOUftAftB, ,... CAIOLI.A
INN, CHAPEL HILL, NORm CAROLINA, SUlmAT.
NOVEMBER 3, 1963, 6: 30 P. M. (OT)

There is pending before the UDited Stat.
Senate the most s1gnificant piece of

ec~o

legislation in the last fift ••D ,.are -- the proposed Revenue Act of 1963.

Tbi. bill paaaed

House of Representatives by a substantial lU,Jol'1t,
on September 25.

It .mbodi •• the prlDC1pal

recommendations of a tax reduction aDd rev1810a
program recommended early in Jaauary by Pr. .lde.t
Kennedy to meet the leadiQ& econoa1c p.l"obl_ 01 tM
past six years: chroniC uneaploy_nt, UDCIer-utiUsaU.

of industrial capacity, inadequate (p'OW"th, aael

continuing defic! ts both in our lnterlUltloaal bal. . .
of payments and in our Federal budget.

TREASURY DEPARTMENT
Washington
R RELEASE: ON DELIVERY
REMARKS OF THE HONORABLE HENRY H. FOWLER,
UNDER SECRETARY OF THE TREASURY, AT THE
TWENTY-THIRD ANNUAL SYMPOSIUM ON ACCOUNTING
AND TAXATION OF THE NORTH CAROLINA ASSOCIATION
OF CERTIFIED PUBLIC ACCOUNTANTS, THE CAROLINA
INN, CHAPEL HILL, NORTH CAROLINA, SUNDAY,
NOVEMBER 3, 1963, 6:30 P. M., (EST)
There is pending before the United States Senate the most
;nificant piece of economic legislation in the last fifteen years
proposed Revenue Act of 1963. This bill passed the House of
,resentatives by a substantial majority on September 25. It
lodies the principal recommendations of a tax reduction and revision
Igram recommended early in January by President Kennedy to meet the
ding economic problems of the past six years: chronic unemployment,
er-utilization of industrial capacity, inadequate growth, and
tinuing deficits both in our international balance of payments and
our Federal budget.
I

The bill would foster a more prosperous economy by loosening the
straints which the present Federal tax system imposes on our
vate enterprise system. Through a top-to-bottom reduction in the
h income tax rates imposed during wartime to restrain less
ential consumption and investment, accompanied by some structural
ision to broaden the tax base and remove some inequities, this
1 is designed to release and encourage the inherent expansionary
:es in our great private market economy. Instead of seeking to
tify particular groups of taxpayers with special tax preferences,
objective of this tax bill is to achieve the increases in jobs,
~s, salaries, profits, consumption, investment in the United
tes, and Federal tax revenues that an invigorated private
10my can provide.
Out of the debate of this legislative proposal three
iamental issues have emerged which I should like to discuss here
Lgh t . They are:
I. Is the national interest served by the enactment
of a law substantially reducing the rates of Federal
income taxes?

- 2 -

II.
Should this rate reduction be a balanced one
designed to increase both consumer purchasing power and
direct investment incentives or be predominantly aimed
at only one of these objectives?
III.
Is the early enactment of the tax program likely
to be more beneficial to the national economy than a later
one next year?
I

The first iSSUE
-- whether the national interest is served by
substantial reduction of Federal income tax rates -- is more
listically confronted in the perspective of both a backward and
8rward look -- before the last six months and beyond the next
Much more is at stake in deciding this question than a temporary
Jomic pickup or averting an early recession.
Our goal must be a
tained economic expansion which will produce jobs, income, profits,
tax revenue at a significantly higher level over the long-term
Ire. What is at stake is the achievement of a higher normal level
~conomic activity than that which characterized the last six years.
Some will ask why must we do anything? They will say we seem
)e doing fairly well, particularly in the last few months.
The
;s national product and industrial production and people employed
at an all time high -- along with the stock market, profits,
it and equipment expenditures and many other indices of prosperity.
It is true that the short-term view is a somewhat pleasant one.
r individuals and businesses are comparatively well off, particularly
:he situation is measured against some of the dark and uncertain
_ods of recent years.
It is true that there is a clear prospect
) the first months of next year for continuing upward movement,
l after thirty-two months of expansion.
This outlook is based
l such favorable
factors as increasing business investment in
It and equipment, increasing consumer spending, in spite of a drop
'etail sales in September, rising Government outlays in the
'th quarter, and a balanced and reasonable relationship between
ntories and sales.
But the issue we are considering is not answered by a look at
particular personal or business picture of the outlook for some
orary additional improvement.
The hard fact is that, even with
current economic advance setting new records in terms of gross
uct, sales and other similar categories, its pace and scale
es the national economy with too many unemployed, too much unused
city, too little investment and growth, a continuing imbalance
ur international payments and Federal budgets, and a large and
increasing gap between potential and performance. The truth

- 3 that our national economy has not been per f()rming adL:'quate ly, and
a nation we must do better.
Let us review the past and look into the future.
Unemployment has varied from five to seven percent for more than
ve years, averaging six percent. Today unemployment has been
duced to five and one-half percL:'nt.
But that happened earlier in
is economic expansion, and we have had to work hard to get back
wn to the present level.
Five and a half percent is too high, and
must do substantially better.
Today around four million
ericans who are actively looking for work are unable to find it.
ring the year which ended last June 30 more than one million
rkers were added to the labor force, but one out of every six also
ined the ranks of the unemployed.
As the postwar baby boom hits
= labor market, and it is just beginning to do so, the pressure
create more new jobs will increase with a flood tide of new young
Jple entering the labor force.
In addition we need to provide at
~st a million jobs a year for those workers idled by technological
lances. An additional million or more jobs will be required to
Lng unemployment down to our interim goal of four percent.
This problem is of great concern to the leaders of labor, to
mayors and governors, to our legislators and to business.
P. Gullander, President of the National Association of
lufacturers,has estimated that if our economy keeps on producing
IS only at the level of recent years, by 1970 unemployment could
;e to a staggering 12.7 percent.
If there were no other consideration
all, the need to create additional jobs would make the tax program
~tter of compelling urgency.
But there are other vital considerations as well.
Our
ernational balance of payments has been a cause for concern ever
ce 1957. The persistent large deficits in our balance of payments
e led to a marked drain on our national gold stocks. This
uation must not be allowed to persist because ultimately it could
eaten the value of the dollar,which is the base for the Free
ld monetary system.
President Kennedy recently announced a new
ies of measures to cope with the balance of payments. He made it
ndantly clear that the tax program is the vital element in any
g-range solution of this problem.
For a tax cut is needed both
sharpen American ability to compete with foreign goods in markets
Jad and at home and to make the United States a more attractive
~e for the investment dollar to stay and be joined by a stream
n abroad.
These are the two means we should depend upon primarily
ve are to bring our international payments into balance, without
Lnquishing our responsibilities for leadership in assuring Free
Ld security and development.

- 4 A third measure of our inadequate economic performance over the
;t five or six years is the deficit in the Federal budget.
The
ieral budget has had five deficits in the PdSt six years -ficits which averaged $6.3 billion a year.
Those deficits were
~arly the result of the failure of our economy to perform at its
~her potential.
Consequently, tax revenues failed to reach
'quate levels, and a deficit occurred.
Only an economy, enabled by a new tax policy for growth to
'rate at or near full employment, with a rate of growth
lstantially exceeding the record of the past six years and the
lption of a firm national policy to hold down increasing Federal
lenditures can wipe out this pattern of deficits and lead to a new
I of balanced budgets and surpluses.
Finally, our national growth rate of barely three percent since
ly 1955 compares unfavorably with regular rates in Western Europe
four to six percent, and even with our own four percent trend in
h of the period before 1955.
By almost any measure you choose, our economic performance over
past five or six years has been far from adequate. With the
eption of the Depression, no period in this century has witnessed
h a persistent under-utilization of productive resources in the
ted States.
The time is ripe for a wave of U. S. economic expansion closer
the recent rapid pace in Western Europe than to our own slack
formance since 1957. Many long-term factors for growth are more
Jrable today than they have been in almost a decade.
But, some
:rminative elements of long-term national policy remain to be
:d. It is quite clear that the unemployment and unused plant
lcity and inadequate growth rate that ha~marked our recent past,
which we can expect in the period ahead if some new decisive
:iative is not undertaken, will cause the country to take some
I of action.
This Nation is determined to move boldly and
:efully toward an economy with a more rapidly rising level of
_vity. We must choose how and when to do it.
Faced with a balance of payments problem that seriously limited
possibility of relying upon sharply decreased interest rates and
tly increased supplies of money and credit, President Kennedy
anuary offered his program of tax reduction and revision as the
element in the Administration's economic program for the years
diately ahead.

- 5 -

This program and the seven percent investment tax credit enacted
1962 together with the administrative liberalization of
preciation ~ere a package designed to eliminate an unduly heavy tax
ag on purchasing power and demand -- to provide new tax incentives
r more investment and increased effort -- to encourage the
i1ization of new technology and the provision of new facilities that
~ld add to aggregate demand, capacity and competitive efficiency.
involves a basic restructuring of our tax system, a restructuring
be achieved mainly through the single most important tax reform
juced rates. The adoption of this policy would be a giant step
vard a tax structure which interferes as little as possible with
= operation of the free market mechanism while supplying the revenues
~essary to our national security and national public needs.
Chairman Mills in opening the debate on the proposed Revenue Act
1963 in the House of Representatives put the issue squarely.
said:
"I am convinced that there are two roads
the Government can follow toward the achievement
of this larger and more prosperous economy. I
believe we are at the fork of those two roads
today. One of these is the tax reduction road.
The other is the road of Government expenditure
increases."
There is a vital difference between these two routes. To
end upon massive increases in Government expenditures as the
mary reliance for a higher level of economic activity is to expand
role of Government in making and carrying out economic decisions.
ever larger proportion of the Nation's labor and money will be
d directly by the Government. The Government's activities as a
er, lender or donor will determine in larger and larger part the
of labor and capital even in the private sector of the economy.
The Federal government has many appropriate functions in dealing
1 problems of employment and unemployment.
For example, there is
1t need for both governmental action -- Federal, state and
11 -- as well as private action, to meet the problems of
lctura1 unemployment -- the fact that the locations, skills,
:ation and training of available workers do not match the needs
~mp10yers.
The Manpower Development and Retraining Act and the Area
~ve10pment
Act are responsive to this need.
But the declaration of policy in the Employment Act of 1946
'cts that the Federal government, in promoting maximum employment,
luction and purchasing power, shall coordinate its plans,
tions and resources for creating and maintaining these conditions

- 6 1 a manner calculated to foster and promote free competitive
terprise and the general welfare." I believe we all share the
1viction voiced by President Kennedy last year when he said:
"The free market is not only a more efficient
decision maker than even the wisest central planning
body, but even more important, the free market keeps
economic power widely dispersed.
It thus is a vital
underpinning of our democratic syster.1."
In any choice of fiscal policy between a primary reliance on
isive increases in Government expenditures or a private economy
Tigorated by new tax measures as the way to a higher level of
lnomic activity, we as a nation prefer to rely primarily on a more
lsperous and efficient private economy initiating a larger and
'ger volume of economic activity under the stimulus of generalized
incentives. The President in his Tax Message in January made
: clear and unequivocal choice saying:
"I do not favor raising demand by a massive
increase in Government expenditures.
In today's
circumstances, it is desirable to seek expansion
through our free market processes -- to place
increased spending power in the hands of private
consumers and investors and offer more encouragement
to private initiative. The most effective policy,
therefore, is to expand demand and unleash incentives
through a program of tax reduction and reform,
coupled with the most prudent possible policy of
public expenditures."
passage by the House of Representatives of the proposed Revenue
of 1963 is a firm, positive assertion of its preference for the
reduction-private enterprise-Federal expenditure control road
a bigger, more productive economy.
If the opportunity to move down that road by enactment of that
1 is passed up, then the likelihood is greatly increased that
economic problems of the past decade -- which are the economic
)lems ahead for the Sixties -- will be met by a national
~rnment that takes a role in our economy on a scale and a
~nsion never before undertaken by it except in times of all out
or crash build-up for one.

- 7 There must be and is full recognition that, if the tax program
to attain its objectives, it must be carried forward as a part of
sound and consistent overall financial program. In particular,
at program has two main elements: first, a substantial net
duction in Federal taxes, through a meaningful lowering, in
veral stages of tax rates on individual and corporate income from
op to bottom", and; second, as the tax cut becomes fully effective
d the economy expands in response, the allocation of a substantial
rt of the resulting revenue increases each year toward eliminating
2 transitional deficit.
The tax program, with related policies of expenditure control,
Jt management and monetary affairs, seeks to establish a financial
vironment suitable for the Sixties, so that we can take full
vantage of the gathering forces for economic progress inherent
our growing labor force, our unprecedented expansion in research
i development, and the new market opportunities that exist at home
i abroad.
The Joint Economic Committee of Congress has estimated that a
billion tax reduction such as the President proposed would
:rease our gross national product by approximately $40 billion in
) years just ahead over what it would be under the present tax
~ucture.
It would add an extra layer of growth onto what we
LId expect from existing arrangements.
It has been estimated that such an addition would create somere between two and three million new jobs.
Increased job creation will be a continuing, rather than a single't effect of the tax program designed as it is to create a healthy
ironment of sustained demand and investment incentives conducive
a full employment economy. Through the interaction of investment,
and, and profits, the tax program will foster an upward spiral
economic activity which will generate new and sustained
ality. The result will be not merely three million jobs but a
tinuing high level of job production resulting from an economy
rating at full potential.
The early enactment of a law substantially reducing the rates
income taxes has been strongly endorsed by a broad
5s-section of the leaders of business and labor, by financial
jers at home and abroad, some forty-two governors, and by a long
t of the most distinguished economists in our universities.
~r months of public discussion in the press and other media, the
)osed Revenue Act of 1963 was approved by a very substantial
)rity of the House of Representatives.
~ederal

- 8 In sum, there is a national consensus that the national interest
5 served by the enactment of a law substantially reducing the rates
E Federal income taxes.
II

This brings us to our second issue: namely, should the tax rate
~duction program so widely endorsed be a balanced one designed to
lcrease both consumer purchasing power and direct investment
~entives or be predominantly aimed at only one of these objectives.
You all know the poem about the different descriptions given by
_x blind men each of whom had grabbed hold of a different part of
l elephant.
The public discussion about the kind of a tax cut
lntained in the bill as it passed the House is like that: you'd
'ver think people were talking about the same tax bill. This is
rticularly true of the issue of how the tax reductions should be
vided. Some think low income taxpayers get too much, others too
ttle. Some think the upper income taxpayers should get more, others
SSe
Many who argue that the low income taxpayers should get a
rger share of the reductions say that tax cuts for corporations
d individuals in the upper and middle income brackets are wasted
cause the way to increase investment and jobs is to increase
nsumer purchasing power. Conversely, many who argue that upper
middle income taxpayers and corporations should get a larger
are say that tax cuts for those in the low income brackets are
sted or will provide only a one-shot stimulus and that the way to
creasing growth is to increase direct incentives to investment.
One of the chief virtues of the tax bill now before the Senate
lance Committee is that it incorporates the constructive advice
both sets of critics but rejects their "whole hog or none"
Jroach. The result is that it is a soundly balanced bill -- one
~posefully designed to provide both additional consumer purchasing
ver and direct investment incentives.
The short answer to these critics of the mix of tax reduction
the bill is that both approaches interacting together will
lieve a more dynamic and healthier economy than would result from
:eliance upon one method to the virtual exclusion of the other.
The bill provides a substantial stimulus to consumer purchasing
rer. Of the reductions to individuals, amounting to $8.9 billion,
is reliably estimated that about $8 billion will be spent on
itional consumption. These expenditures will set in motion the
.iliar economic process in which money circulates throughout the
nomy and ultimately increases consumer spending by several times

- 9 -

e amount of the initial tax cut -- the so-called multiplier factor.
at strong and sustained rise in consumer demand -- and thus in
rkets and profits for industry -- will further bolster the direct
x incentives to investment.
The estimated difference between the amount individuals receive
J consume, approximately $900 million, will go into investment or
vings. This sum and a $2.2 billion reduction going to corporations,
~n added to last year's investment credit and revised depreciation
idelines which reduced tax liabilities of corporations and un:orporated businesses by $2.5 billion constitute a substantial
Jgram of direct incentives to investment totalling $5.6 billion
~ annum.
Much of this amount will be invested. Besides, the
~entive of lower tax rates is likely to draw additional monies
)m other savings into investment in job producing facilities and
~vices.
Thus the operations of these direct investment incentives
Ll add to the total of consumer purchasing power in the hands of
litional job holders, suppliers, etc. This process adds what the
momists term an accelerator effect to the processes of growth
It will flow from the tax program.
The interaction of these two facets, with the one aiding and
~tting the other, is of vital importance.
This balance of $8 billion of tax reduction for consumption and
,roximately $5.6 billion for direct investment incentives was
udged to be appropriate by the House Ways and Means Committee after
ring most of the same witnesses now appearing before the Senate
ance Committee make the same points. This two-pronged character
balance in the tax program is perhaps the most important and
t overlooked aspect. It is likely to be the decisive factor in
uring that the program finally adopted will not substantially
er the balance arrived at and will include both a stimulus to
sumer purchasing power and direct investment incentives.
To those critics of the present bill who would eliminate or
rply reduce tax cuts for taxpayers in the relatively lower income
~kets -- say below adjusted gross incomes of $10,000 -- the answer
t be that they account for close to 85 percent of all taxable
lrns and are likely to put a large part of their tax savings into
spending stream. In other words, this is where the customers
~.
Under the current bill they get nearly 60 percent of the
~all individual reduction, with their share of the load being
~eased from 50 to 48 percent.

- 10 To encourage investment in job producing facilities, strengthening
consumer demand is required. The purchasing power of the consumer
st be increased to utilize present productive capacity fully so
at additions to productive capacity will be worthwhile. Of course
the economic situation were different -- if all of our economic
sources were fully employed -- strengthening of consumer demand
ght not be as important as it is today. But we do not have a
11 employment economy and we are not utilizing existing productive
pacity to make sufficiently inviting the provision of addjtional
pacity for old products or the new capacity for new products
at would make for a more dynamic economy.
For example, even though the nation is enjoying a recovery and
pansion that has already lasted thirty-two months, average
~rating rates in mRnufacturing have not reached a point of
)viding either the rate of utilization that would trigger the scale
expansion we need or the rate of profits that would invite it.
that time average operating rates for manufacturing have gone from
percent to 87 percent of capacity but production is substantially
low the 92 percent average rate considered as normal by business
;elf.
Most of the increase in capacity utilization occurred in 1961,
th very little improvement since the beginning of 1962. From the
rst quarter of 1962 to the third quarter of 1963 the average rate
utilization of plant and equipment in manufacturing rose from
out 85 percent to about 87 percent of capacity. Although after-tax
ofits have risen approximately 40 percent, from $19.2 billion to
6.8 billion in this recovery, they are still short of the $30
Ilion a year that would be earned if the Nation's present facilities
re operating at what would be considered normal capacity utilization.
But consumer demand is not the whole story. A direct stimulus to
vestment is also needed. While it is true that if a sufficiently
rong increase in consumer demand is provided this will increase in:;tment through "demand pull," it is equally true that a more dynamic
j healthy expansion in investment will corne from a combination of
:reasing consumer demand and direct investment incentives.
Characteristically, those who are critical of the inclusion of a
:porate tax cut and reductions in the rates of those whose adjusted
>ss incomes exceed $10,000 per annum argue that business has plenty
cash and credit available today and there is no need for more direct
lestment incentives.

- 11 -

This prompts a closer examination of why it is desirable to provide
Lrect incentives to investment through tax reductions in addition to
lose reductions which provide a significant increase in consumer demand.
!t us consider for a moment the problem of an individual, a partnership,
~ a corporation deciding whether to make an investment in new plant or
luipment or the provision of services.
Anyone facing an investment decision considers two things above
.1: First, the nature and period of risk involved in the investment
Ld, second, the likelihood of a favorable return. The decision of a
lard of directors will not be determined merely by consideration of
~ extent to which total personal income next year is likely to exceed
Le current figure.
Certainly demand will be important to them, for
lone expects to invest in order to produce when there is no expectaon of having a market for one's products. And certainly the effect
demand on the overall economic outlook is a matter which will be
ven serious consideration in making such a decision.
But one of the vital factors in any marginal investment decision
the rate of return -- the increase in after-tax income in return
~ a given outlay in investment.
This is where the direct stimulus to
vestment provided in the current tax program will play an important
~t.
In combination with last year's seven percent investment credit
j depreciation reform, the proposed reduction in the corporate tax
:e from 52 to 48 percent, together with the liberalization of the
~dit, would increase the after-tax profitability of new investment in
1 year assets, for example, by an estimated 35 percent.
That, I
)mit, is a fact which will weigh very heavily in any investment
:~s~on.
These considerations apply not only to expansion of capacity
make standard products and new capacity to make new products, but
iO to the modernization of existing facilities to provide existing
lducts on a more efficient basis.
In 1956 and 1957 business fixed investment averaged 11 percent of
tal output.
Since that time it has fallen to roughly nine percent.
lce 1957 the rate of increase in our stock of business plant and
lipment has risen by less than two percent a year, compared to four
~cent a year in the first postwar decade.
Furthermore, there has
~n a disturbing rise in the proportion of our machinery and equipment
~ch is more than ten years old.
Corporate profits and the ratio of
)enditures on plant and equipment to gross national product have been
.ow previous postwar levels. Our rich store of research and developLt has not been joined to capital and labor to produce the explosion
new products, services and jobs of which the Nation is capable.

- 12 -

Moreover, critics of the tax bill on the score that it includes
rect incentives for investment when business has adequate or more
an adequate funds to finance new investment ignore several important
ints. The tax bill does not afford a cash [low increase to much of
e corporate sector. Simultaneously with the rate reduction it require~
rporations with incomes in excess of $100,000 to initiate a tax payment
hedule whereby they will be making their tax payments current by 1970.
the interim, although their tax liabilities will be reduced as a
suIt of the corporate rate reduction, these larger companies will not
ve the benefit of an increased cash flow as a result of the corporate
te cut.
More significantly, the critics ignore the fact that despite the
leral availability of money in corporate treasuries and credit in
= capital market for large companies for investment needs, many small
ms simply are not in a position to take advantage of investment oprtunities by borrowing. These smaller companies must finance their
)ansion and modernization for new ventures out of their own internal
lancial resources. They very much need the increased cash flow of
rate reduction for corporations.
Indeed, they need more than the mere reduction of the overall
porate rate from 52 percent to 48 percent provided by the bill.
that reason the new bill contains a provision providing immediate
substantial investment incentives to smaller corporations. For
4 the present normal tax of 30 percent, applicable to the first
,000 of taxable corporate income would drop to 22 percent. Thus
immediate tax reduction of almost 27 percent would be provided for
,000 small corporations in the United States with earnings of
3 than $25,000 per year.
The entire tax program including this
1ge would provide a 17.9 percent reduction in an additional
)00 corporations whose incomes were less than $50,000 and a
percent reduction for the 25,000 companies whose incomes were
than $100,000.
The critics of reductions in individual tax rates of those
1 adjusted gross incomes in excess of $10,000 should remember that
:he eleven million businesses in the United States, ten million
sole proprietorships or partnerships and many are established
operated by individuals in these higher brackets. These are the
lIe who would be most likely to invest tax savings in the business
lusinesses which they are operating, which in turn might provide
jobs or facilities.

- 13 A second major reason for direct investment incentives is the
3racteristic lag of indirect investment stimulus resulting from
~mand pull." In other words, demand has to make itself felt in
~ economy and in the particular sector of the industry in question
:ore it will significantly affect investment decisions. Then,
!re is the further delay for investment decisions to be translated
:0 reality.
If there were any possibility of inflation in the tax
19ram reducing the stimulus to investment would great exaggerate
Price increases are most likely to occur when demand outstrips
lduction and the utilization of efficient capacity. If production
I the quantity of efficient capacity expand to keep pace with deld, the danger of inflation is kept at a minimum.
Third, direct tax incentives will affect favorably our balance
payments. To the extent they encourage modernization and new
,ducts they enhance our ability to compete at home and in the
'ort market and thereby maintain or expand our trade surplus. It
equally important to our balance of payments to increase the atctiveness of investment opportunities in the United States. These
important because capital outflows for long-term private invest.t a bLoad represent a significant part of our balance of payments
icit.
Finally, one of the most overlooked aspects of creating a susned economic expansion is the need to utilize the fruits of new
hnology in the form of new products or the adaptation of existing
ducts to new markets. Increasing the profitability of new investt is the most effective way to make more attractive the investment
isions which are not being taken today. It is the most effective
to make the submarginal project of today the supermarginal prot of tomorrow. It is the most effective way to maximize the
efits of the tremendous technological, educational, and human
Jurces of the United States. As new techniques and new products
developed and as new markets are opened up new demand will be
lted, new investment will be fostered, and new jobs will be avail~ that would never have been available otherwise.
This then is the crux of the situation. We must have a stimulus
=xpansion that is continuing, self-sustaining and self-reinforcing.
~her direct investment incentives nor increased consumer demand
l do the job alone as well as the two joined together. A combination
:he two will interact in such a fashion as to foster an acceleration
~conomic activity, which should continue for years to come to produce
) and raise output more effectively than the same amount of tax
lction devoted solely to either investment or consumer demand.

- 14 -

III
This brings us to the third issue -- whether the early enact~nt of the tax program is likely to be more beneficial to the
3tional economy than a later one next year.
Many favoring tax reduction in the abstract feel that it should
~ enacted only in the context of fiscal responsibility, and deferred
lti1 there is convincing evidence of accomplishment in the control of
le increase in Federal expenditures and the reduction of deficit
Lnancing.
In fact an effective program of expenditure control is well underly and convincing evidence of accomplishment is already at hand:
1.

According to the Director of the Budget, the need for continu-

19 expenditure increases for defense has just about ended and will

Ion taper off on space programs, which together with interest on the
~bt, have accounted fo~ more than 70 percent of the budgetary increase
'om fiscal 1961 through fiscal 1964.

2. Since proposing the tax program in January the fiscal 1963
ficit has declined from an estimated $8.8 billion to an actual $6.2
llion -- and two-thirds of that decline resulted from lower expendi.res.
3. In proposing the tax program last January, the President
dgeted less for the civilian sector of the 1964 budget (excluding
fense, space and interest) than in the previous year -- only the
ird time that has been attempted in twelve years, during a period in
ich population has increased and state and local government spending
s grown at a rate averaging more than 15 percent a year.

Fiscal 1964 expenditures are currently estimated at $1 billion
low last January's estimate. In the first three months of the fiscal
3r 1964 (July through September) expenditures in the civilian sector
the Federal budget were $107 million less than the same quarter last
3r.
5. This September there were 242 less regular civilian Federal
>loyees on the payroll in the Executive branch than in September last
Ir.
6. Chairman Cannon of the House Appropriations Committee has
;erved that new appropriations may aggregate less than last year's
:al -- the first time that will have been done in some years.

- 15 -

7. As for the fiscal year 1965 and following years, the
!sident has assured the Congress that he intends to maintain a tight
on on expenditures and that a substantial part of the tax revenues
1m economic expansion will be used to reduce the budgetary deficit
:il balance is reached.
8. On this basis -- and barring an unforeseen slowdown of the
Inomy or international contingency -- the President expects to sub: a budget for fiscal 1965 with a deficit less than presently fore:t for fiscal 1964, despite the fact that the second stage of the
: reduction will have gone into effect and that the revenue loss
m tax reduction in 1965 -- before feedback -- will be $5 billion
ater than in 1964.
9. The House of Representatives has emphasized these factors by
cifica11y including in the bill as Section 1 a declaration of policy
ch reads as follows:
"It is the sense of Congress that the tax reduction provided by this Act through stimulation of the
economy, will, after a brief transitional period, raise
(rather than lower) revenues and that such revenue increases should first be used to eliminate the deficits
in the administrative budgets and then to reduce the
public debt."
President endorsed this statement before the vote.
These facts, plus the even more fundamental one, that expenditures
never exceed the amounts actually appropriated by the Congress
~h controls the Nation's purse strings -- makes it difficult to
tify postponement of a final Senate vote on the tax bill for an
~ged lack of evidence of an expenditure control policy.
This is particularly true in the light of the cogent reasons for
~arly and prompt disposition of this particular piece of legislative
Lness.
The economy is still expanding, but there is still a large gap of
led manpower and capacity. The economic climate is goodo In this
:ing the enactment of the tax program now would maximize its effec!ness in achieving its initial purpose -- to move the economy to
o employment and a more effective utilization of all our resources -:icu1arly our increasing htunan resources.

- 16 -

To wait until some later time and risk joining the tax cut to
or levelling economy is to put it to its appointed task
er adverse circumstances. The overriding purpose of the tax
gram is not to arrest a recession but to move an advancing
Inomy into a scale and pace commensurate with its responsibilities
our national needs.
~ceding

If the tax program is an effort to remedy the withdrawal from
private economy of too much of the Nation's substance in the form
taxes, to lift the tax drag, and to restore some needed incentives
job creating investment, the sooner the remedy is applied the
ter.
If, in addition to its long-term objective, the enactment of the
program is viewed as anti-recession insurance, the time is ripe
taking out that insurance. The patient is well and insurable,
he is moving into a vulnerable period of his life. By next
il 1st, it will have been 37 months since the end of the last resion. If the economy is still advancing, it will be the longest
ctime recovery in the century with the exception of the 1933-37
l-out from the Great Depression.
So on either premise -- that the economy will continue to expand
begin to contract -- the earlier the enactment of the tax program
better.
Another time factor is the need to achieve, as soon as possible,
equilibrium in our international balance of payments. Continued
icits in our payments situation, with their potential drain on our
d supply and threat to the role of the dollar as the principal
erve currency, provide a compelling reason for prompt action on the
program. The net outflow of long-term investment ($2.5 billion)
1962 was the single biggest source of disequilibrium. A rapidly
anding economy, sustained by a tax cut, would attract investment
lars from domestic and foreign sources, sharpen our competitive
~ and opportunity for an increasing trade surplus, and free up our
~tary tools for use in event interest rate differentials trigger
ther outflows.
Delay in the passing of the tax bill may mean more than missed
)rtunities; it may do positive harm. The tax program has become
leading psychological factor in the world of business and finance.
Ls viewed, rightly or wrongly, as the touchstone for progress and
element of promise for the long-term future. Business expansion
consumer buying in
a large measure reflect confidence in the
lre. Expectations of the enactment of the tax program have become
lilt-in factor in the hopes and aspirations of the business and

- 17 -

ancial world. To frustrate those expectations by delay and doubts
to the future passage of the bill entails serious economic risks
t may ensue from diminished confidence.
The answers to the three questions with which we began, then, are:
Yes, the national interest would be served by the enactment of a
substantially reducing the rates of Federal income taxes.
Yes, this rate reduction should be a balanced one designed to inase both consumer purchasing power and direct investment incentives.
And, ~, the national economy is far more likely to be benefited
early enactment of the tax program than by a later one next year.

You may well have anticipated these conclusions. To me, they seem
)e compelled by the fact that tax rates are too high, by the logic
:he economic situation, by the need for expansion and long-term
vth to meet the needs of our people, by our fiscal circumstances with
setary deficits resulting from inadequate economic performance, by
determination to control federal expenditures, and by the discipline
)ur balance of payments deficit. I trust that you will be persuaded
:his logic of events and circumstances that has moved the Administra1 to these conclusions and that you will agree.

000

.·,-'\Pf.I~

,.,!,L

Tulsd.q, :~'J~~_]J 196~.

The l'J"e<.:.sUJ')' D9: &1'1:.r&ent. ~ounced last awning that. the teDditn tor two _rit • .,'
'
frellsur,y bi1l3, ')00 series to be an addiUooal iaaue of t.he bill. dated AUgun c
and t.he Jt"er ~rie5 t,) tIt:! dated {lov_bar 7, 196), Which were offered .:>n (JotoOer'JO
~N! l'·.ened iod;, the ';edel'a1~.S8rve~anklS on ~ber 4. rendlln w.re inrtt.ecl t.lI' '
; 1, }JO,OOO,d()v, or therellbouts, .)f 51-day billa and tor $800,000,000, or t.he1"ttb0lll\a
,r F2-day bHls. 'ftJ8 detaUs of ('&1,. tv; serit:s are aa to1101l8'
'

U6r

4.,\ : J

)r t.,~~\:;:::i"'·i

::)l' TIT!":-"

(-;T

,I-day

D
.:

'I~5ur,y

maturing "-·ebruary 6, 1964
lip~rox "dYe
;'rice
;'i,nmaal~t.e

-----99.116 !I

:ii~

Low

bills

Aftr&ge

182-d.,. l'naavy bills
M., 7, U6!~

"'!!1Jw

J.497,~

99.10S

3.1)29;.;

99.111

J.Sln}j:

xcopt~ one tender~ of tl,1.)(),OOO ,
th~ 8JIOtIDt
91-day billa bid tor at t., e low prioe . . accepted
l~ ~:' tt:e 8JIOWlt of 182-day bUl!l bid for at. the low ;irice . . acMptM

7il.' or

District.

Ea.ton
}4ew

York

Ph il a delphi ..,

Cleveland
:\ichllond
Atlanta
Chlc~~o
::;t.. Laui.5
Minnea>lUs
Itansas City

;:.all&1j
)an "rancisco

1'-/1'~.L

£1

~o2l1ed

for
$
42,802,000
l,!63,8)(), )00
27,669,000
2 j,:Y)iJ"JOO
l' .• 361, )iN
2~',3:;:~.'XX>
2),f;,91:~. JOi)

36,LIL,i)())
2l,tYJ,'IJQ

J2,'Jf:L,CKlO
39,)6,l~,OOf)
79,911,GOO
,.2,()51,969,OOO

Acce,eted
_.
~;
1.8,8$2,000 I
854,102,000:

12,689,000:
20,606,000:
Ih, :361, {):)O

21,211,000 ~
179,BJU,OOO I
)1,296, )00:

11,310,:).()()

Aeil1ed t..
$
8,(6),000
977,210,000

AO!!J?\I4 r
$ S,Oll,a
617,1)0,.

9,545,000
6,lS1, 000
8,262,000
l24,331,000

,;as,-

1O,~OOO

10,878,000

7,688,cxx>

S,ell,-

6,lST,8,~"

12,).)1,.

,,16),-

7,688,GIID
8,,),aI

8.49,,000
lO,m,OOO
,18,oca,ooo

1l,Q1J,g

·j;,l,3JO,339,OOO -gJ $1,219,06l,000

$8OO,OI6,GIID

29,Jeh,O(J):
)2,974,000:

68,011.000:

1O,)p2,.

Include8 ,~2:.t ,'))7,000 !'toncornpetitive tende1'8 aooepted at. tbe ~ priet tI "~
InclUdes - !,2,39S,OOO [,oncom~.Jetitbre tenders aocept.ed at t.hc ."~:. pn- ,,91 .,:n a coo' ,on issue of th~ same lengt!; l.il1d for the . . . ,aaount lI1ft8t.;d, tbe "~,
.!':::se bi~s would .ir-.1Vicie yields of ).61:t, for the /l-d~ billa, and l. 7~, -'I
,L,,2-d&;, bllb. Interest. rr<~s on bUlB are Quoted 1n t.eru of b:ank ~ .,.
the ret.ur~ rel~t':~d t,:, the face aaount of the bUla pqable . , Mt.UI"it.1 rdMI')6Oo4l'
t.he ~nt in\'ested Me their length in actual mather
dqI relatA. to. ...:
Y.~· to c')ntrn.. yields :m certificates, Dotes, and bonda aN ~"IIii'
l"! int.arest. \.in l:.he C3I1\)unt in-Jested, .:n.<1 relate the ...oer ot dare i - ' - : ' "
1.nt..er-: ~t -'qrnent ~JSrilY.i to '"bc actual nuauer of daJ8 1n t,he period, td.~
cc.p:JUndiJll" 1! more th.;n ,)06 C')Upon period 1s lnYolftd.

,t,

TREASURY DEPARTMENT

SE A. M• NEWSPAPERS,
~, November 5, 1963.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING

.The Treasury Depar'tPlent announced last evening that the tenders for two series of
~ bills, one series to be an additional issue of the bills dated August 8, 1963
fue other series to be dated November 7, 1963, which were offered on October 30, '
lopened at the Federal Reserve Banks on November 4. Tenders were invited for
~,ooo,ooo, or thereabouts, of 91-day bills and for $800,000,000, or thereabouts,
2-day bills. The details of the two series are as follows:
t OF ACCEPTED
~TITrvE BIDS:

91-day Treasury bills
182-day Treas~J bills
maturing February 6, 1964
maturing May 7, 1964
Approx Equiv.
~
Approx Equiv.
Annual Rate
I
Price
Annual Rate
Price
High
99.ll6 Y
3.497~
98.190
3.580%
~
99.108
3.529;
3.651%
98.154
98.169
P.verage
990lll
3.517% Y
3.621% ~/
9./ Excepting one tender of $1,700,000
~% of the amount of 91-day bills bid for at the low price was accepted
11% of the amount of l82-day bills bid for at the low price was accepted

TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

.Ijon

~rict

Ap;elied for
$ 42,802,000
1,453,83 0,000
27,689,000
20,606,000
14,361,000
26,394,000
255,914,000
36,414,000
21,400,000
32,084,000
39,564,000

Accepted
$ 18,852,000
854,102,000
12,689,000
20,606,000
14,361,000
21,214,000
179,834,000
31,296,000
17,310,000
29,084,000
32,974,000
68 2 °171. 000

AEPlied for
$
8,063,000
977,210,000
10,041,000
9,545,000
6,157,000
8,262,000
124,331,000
10,878,000
7,688,000
8,493,000
10,392,000
3820012000
$1,219,061,000

Acce;eted
$ 8,063,000
617,260,000
5,041,000
9,545,000
6,151,000
8,262,000
72,331,000
9,883,000
7,688,000
8,393,000
10,392,000
37 2°11,1000
$800,026,000 ~

:!ork
tadelphia
reland
lIIlond
Ulta
;ago
Louis
leapolis
las City
.as
Francisco
79,9111. 000
TOTAL
$2,050,969,000 $1,300,339,000
11udes $248,037,000 noncompetitive tenders accepted at the average p::ice of 99.111
,:ludes $62,398,000 noncompetitive tenders accepted at the average prl.ce of 98.169
'a coupon issue of the same length and for the same amount invested, the return on
~ese bills would provide yields of 3.61%, for the 9l-day bills, and 3.75%, for the
.82-day bills. Interest rates on bills are quoted in tems of bank discount with
he return related to the face amount of the bills payable at maturity rather than
he amount invested and their length in actual number of days related to a 360-day
ear. In contrast , yields on certificates, notes, and bonds are computed
.. in .terms
t interest on the amount invested, and relate the number of days remal.IlJ.ng J.n an
nterest payment period to the actual number of days in the period, with semiannual
ompounding if more than one coupon period is involved.

D-I030

£I

and eltchaoge tenders vill receive equal treatment.

Cash adjustments will be made

tor difterences between the par value of maturing bills accepted in exchanse IIlIl
the issue price of the new bills.
Tbe income derived from Treasury bills, whether interest or pin Irom the ale

or other disposition ot the bills, does not h&ve any exemption, as such, aDd loaa
tram the sale or other disposition ot ~easul"1 billa does not bave
treatment, as such, under the Internal Revenue Code ot 1954.

&Dy

apec1&l.

bllls are subject

to estate, inheritance, g1ft or otber excise taxes, whether Federa.l or state, but
are exempt from i l l taxation now or herea:rter imposed on the principal or iJrtertd
thereof by a:JJ:'f state, or any ot the poBsessioDs ot the United states, or by any
local taxing authority.

For purposes of taxation the amcnmt ot discount &t 1Ib1cb

lJ.'reaaul'1 bills are orig1nal.ly sold by the United States is considered to be iD·

tereBt.

Under Sections 454 (b) and 1221 (5) ot the Intemal Revenue Code ot 195&

the amount ot discount at vh1ch billa issued hereunder are sold is DOt conaide1'l4

to accrue until such billa are sold, redeemed or otherwise disposed ot, and auch
bills are excluded from consideration as capital. assets.

Accordingly, the ovuer

ot Treasury bills (other thaD lite insurance companies) 18s11ed hereunder need 11elude in his income tax: return only the dif'f'erence between the price paid tor .blUs, whether on orig1naJ. Issue or on subsequent purcbaae, and the

amowrt act1lllll

received either upon sale or redemption at maturity during the taxable year for
which the return 1s made,

ordinary

ga1D

or los8.

Treasury Department C1rcul.&r 10. 418 (current revision) and this notice, prescribe the terms ot the i'rea.aury bills aDd govern the conditions o't their.ia'"
Copies ot the circular Dl&1 be obtained from any FederaJ. Reserve BaDk or JrBIlch. ;

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
Others than

provided the names of the customers are set forth in such tenders.

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 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.
Irmnediately 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 Department of the amount and price range of accepted bids.

Those
~e

submitting tenders will be advised of the acceptance or rejection thereof.

Secretary of the Treasury expressly reserves the right to accept or reject any
or a.ll tenders, in whole or in part, and his action in any such respect shaJ.l be
final.

Subject to these reservations, noncompetitive tenders for

less for the additional bills dated

August 1£J963

$100,000 or less for the

182

200,000 or

91 days remain·

:i(lii9J

¥lLj

ing until maturity date on February 13, 1964

) and noncompetitive tenders for

£W

-day bills without stated price f'rom anyone

bidder will be accepted in full a.t the average price (in three decimals) of accepted competitive bids for the respective issues.

Settlement for accepted ten·

ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on _N_Ov_emb_e_r--r7-1:,,:,:4~,_1_9..:..6_3_ _ , in cash or other immediately available funds ot

in a like face amount of Treasury bills maturing

November 14, 1963
•
------~~c=~-----

Cash

TREASURY DEPAR1'MEftT
Washington

FOR IMMEDIATE RELEASE

November " 1963

Jet:

TREASURY'S WBBKLY BILL OFFIRDG
!he 'l'reasury Dellfrlment, by this public notice, invites tenders tor tllO Hriee

of \'re8.aUry bllls to the aggregate

8IIIOUJ1t

ot $ 2,100£,000

or thereabout.,

cash and 1n exchange for Treasury bills ma.turiDs November 14 t 1963

l(iOC

ot • 2,101",512,000 , as tollow:

91 -day bills (to maturity date) to be Issued

iii

in the ....

November 14. 1963 ,

J(IO

in the amount of $ 1,300.0,000 , or thereabouts, repreaent.

1ng 8D add1tional amount of billa dated
and to mature February lSi 1964

XiI

amount of • 800,1l6,OOO

AU§?!tl.5, 1963

orig1D8Jll' issued 111 the
an 84Mtional $100,092,000 was issued ..
, the additional. _d oris1Dal bl11~
I

\11

to be freely intercbaDpable.
182_da.y billa, for

$ 800,000,000

November 14, 1963

tid
!he bills

tor

, or thereabouts, to be dated

lid
,and to mature

May 14, 1964

•

BiJ

ot both seriea will be iasued on a discount basis under ccmpet1t111

aDd noDCCIIIlpet1t1ve bidding aa hereinafter proTlc1ed, &Del at maturlt, their flee

IIIlOWlt will be payable without interest. !hey will be issued in bearer

tOI'll

0JlI

ad in deDOlDina.tioD8 ot $1,000, $5,000, $10,000, $50,000, .100,000, $500,000 u4
$1,000,000 (maturity vaJ.ue).

'renders Yill be rece1ved at Federal Reserve BaDks a.ncl BreAches up to the
cloSing hour, one-thirty p.m., Eaatem Stanaard tlJDe, Friday, November 8, 1965....

4Bi

'!'enders Yill not be received at the Treasury Department, WaahiqtoD.

I&Ch t ....

must be for an even IIIUltip1e ot $1,000, a.ud in the case of caapet:lt:lve teacJert til
price offered must be expressed on the basis ot 100, with not

110ft thaD threl

TREASURY DEPARTMENT

November 4, 1963
R ~DIATE RELEASE

TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
r two series of Treasury bills to the aggregate amount of
:,lOO,OOO,OOO,or thereabouts, for cash and in exchange for
easury bills maturing November 14,1963, in the amount of
:,101,512,000, as follows:
91-day bills (to maturity date) to be issued November 14, 1963,
1 the amount of $1,300,000,000, or thereabouts, representing an
Iditiona1 amount of bills dated August 15, 1963, and to mature
?bruary 13, 1964, originally issued in the amount of $800,116,000
In additional $100,092,000 was issued on October 28,1963), the
,lditiona1 and original bills to be freely interchangeable.
182-day bills, for $800,000,000, or thereabouts, to be dated
:lvember 14, 1963, and to mature May 14, 1964.
The bills of both series will be issued on a discount basis under
petitive and noncompetitive bidding as hereinafter provided, and at
~rity their face amount will be payable without interest.
They
1 be issued in bearer form only, and in denominations of $1,000,
)00, $10,000, $50,000, $100,000, $500,000 and $1,000,000
turity value).
, Tenders will be received at Federal Reserve Banks and Branches
';0 the closing hour, one-thirty p.m., Eastern Standard
}, Friday, November 8, 1963.
Tenders will not be
'!ived at the Treasury De{>artment, Washington. Each tender must
,'or an even multiple of $1,000, and in the case of competitive
ters the price offered must be expressed on the basis of 100,
1 not more than three decimals, e, g., 99.925.
Fractions may not
lsed. It is urged that tenders be made on the printed forms and
rarded in the special envelopes which will be supplied by Federal
rye Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
omers provided the names of the customers are set forth in such
ers. Others than banking institutions will not be permitted to
it tenders except for their own account. Tenders will be received
out deposit from incorporated banks and trust companies and from
onsible and recognized dealers in investment securities. Tenders
others must be accompanied by payment of 2 percent of the face
nt of Treasury bills applied for, unless the tenders are
~anied by an express guaranty of payment by an incorporated bank
rust company.
1031

- 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, 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
Au ust 15 1963 (91-days remaining until maturit¥ date on
Fe~ruary i3, 1964)and noncompetitive tenders for $100,000
or lesa for the 182-day bills without stated price from anyone
bidder will be accepted in full at the average pr1ce (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the E1ds1~usi9~i
made or completed at the Federal Reserve Banks on Novem er
,
,
in cash or other immedlately available funds or in a like face
amount of Treasury bills maturing November 14,1963. 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 b11ls.
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 lOBS 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 authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States 1s considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which b1lls issued
hereunder are sold is not considered to accrue until such b1lls a~
sold, redeemed or otherwise disposed of, and such b1l1s 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 rece1ved 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 f~
any Federal Reserve Bank or Branch.
000

- 17 ..
concentrating on the level

expenditures required to . e t old bUla.

Loo!< :.I.t this ye.?r t s ;;ppropri<ltions ,~md compare them with last

r-ar"t

!lnd you ~:i 11 see .~ clear example of firm expenditure control .. •
exoenditure control trldt will show up in the sp~nding level of

fu ture years.
There is. therefore, not one good reason for undue delay

the tax btll.

OIl

The more we delay, the more we risk. 108111& the

unparalleled opportunity

n~'

before us co expand tile role of tbe

private sector -- r3ther than to rely upon greater Federal
spendi.ng -- i.n .:!ci1ieving economic growth and in meeting national

needs.

wr need for more raptd and durable economic growth .- for

relief from budget ~nd balance
excesslve uneID't'loyment -later.

beCIJmeS

payments deficit., and fro.
more pressing as the hour "ca.'

I tilin;: most of us agree tnnt the tax btll 18 clearl,. tIII-

t iaae t.J C.~oose it.

- 16 Chd lrmfln Cl ;rence Ct~nnon oJ. tile Kouse Approprlatloaa

Cc-.lttet

h.opes :md expects th..lt we will nold th'ls year's appropri.ation. at
or belo~,' lEst yerlr's $101.) billion 1...1 --.,...bich, of cour•• 1•• tUI
at least $4 billion above thi.s year' 8 expected expenditure leMl.
But even if Chctirtn'.i.Il C.Hnnon' 5 hopes ~re realized, fiscal 1965

expenditures \1'1.11 inevitp.bly rise aomewhat above the 1964 level .for the simple reason

md projects for

w~li.ch

th~t we IllUst

meet tne bills .for lUIly progr_

funds were appropri.ated in previous

yea~••

'1'0 the extent, hOt-!ever, thet.... level off appropriations, our
future bills -- ~~nd thus our future expenditures -- will a180 1.vel

oir. but only

two ye;;.rs.

:j;.ter

the normal and inevitable tiJae lag of about

Therefore, to those t-ib,o say we should not

~ut tae.

-Lncrellse expenditures {:t the same time, I say siaaply this:

and

100k.t

the record be i.n:; ~.'ritten today in new appropriations tnateacl of ..._

1) -

l)nee

tbe Cotl::.xess c;p:)r')priltes funds for previously authorized

purposes, the President -- tiith one specialized exception covering
defense expenditures -- hAS no clear authority to refuse to spend

tLl0Se

funds.

Thus, once the eppropri3tion budget has been adopted,

expenditures "ce sure to iollov.' -- but only on a delayed basis.
Often, the bills do not come due tor several years.

This year, for

eXDmple -- tisc:Jl l'jfj4 -- only about hall.: of our expenditures
\-..,il1 come from this

come from monies

Duriu6 the

ye~lr'

s approprtotion bills.

;"~JFropr L~ted

i~sci::'.l

in earl ier years.

yedr tll.::.:.t ,:ended last June, a total of

$101.::' billion in npPl"opriDtions
th,..:.n ~'AS spent.

The rest will

Wf;.S

approved -- $9 billion more

Th:::.t;5 why expenditures durin5 the current fiscal

year are rising i:md \'.,tll be Jbout $5 billion higher than last year'.
level

:;":~,')
'('/
__ 0(,

,
. "11"lOlL.
1)1

- 14 exercise the same self-discipline in that respect
contr~lling

must exercise in

th~t

the

gOYe~t

expenditures.

I heve Dot the time today to discU8. with you this que.tlan of
expenditure control as thoroughly as I would llke to.

Certainly no

11ngle subject of national concern has been atten4ed by more
Pt the core of that misunderstanding, it . . . .

lIlisunderstanding.

to me, is a fl1ilure to realize that, in effect, the governMnt baa
two budgets:

One, familiar to ttll, records expenditures aa we

meet our bills.

The other J farr:::mOl1e important and fii 1•••

familiar budget records the new appro~rtation. from which all
eX'l'endttures

fl~].

It is this

se~ond

budget which we must weigh in deciding

,,'hether or not ~"e are aCllievi.ng eXQend1.t\lre control.

liS

In goverMIDt.

in our private lives, tile proper way to cut spending 1s

Dot

refuse to pay our old t·Uls) b1.1t to stop incurring new ones.

... 13 •
The expanded investment ... along with IaOn buOYUlt .coo_i.e
grO"-th generally"· Is of -Qurae vital in our progr_ to reatore

balE-nee to our international payments.

For a. it re.ulta 10

rapidly advancing productivity and more intenaive exploration ad
development of new markets and new product., it will lharpen
the competitive edge ~f ft-mericsn business both at ho.e and

And

aDro".

our econouay grows i.n response to the tax cut and e.,lo,.nt

and productive efficiency clilDb, the United Statel will beca.

contlnually more Ilttractive to both foreign and domestic inv•• t..ut··

and Monetary policy will be gradually freed fraa the present
restraints upon its use as n means oi stabilizing our balance of
payments position.
If we are not, hO\l'ever, to dissipate theae fruita of the til

cut, then i.t is essentinl c~1.nt we maintain the kind of wage and
price stability tn~t \.Ye have enjoyed in recent year..

We auat

.. 12 ..
add on top of this the proposed liberalization of the invea~nt
credit, the after-tBx profitability of new invesc.ent would be
increased by more than one-tnirci.

That, certainly, 1e one dr__ tic

indicat ion of how much the passage of the tax btll Mans to
"merican bus mess.
To support the large direct ta.3stilllUlua to buaine •• that I
have jus t descr lbed, the tax bill will a180 releaae nearly $9 bl1l1OD
i.n individuAl tax reductions into tne private economy.

SaM of that

amount will be saved and invested -- particularly since the 1ower iii
of individual marginal rates makes individual investment more
profitable.

But we 11 over 90 ?ercent of that lD.oney will be spent,

circulating throut;i1.ou~ the ec.onomy l:wd ultimately in~rea8ing conSUlfr
spending by severRl times the amount of the initial tax cut.

strong and sustnined rise in consumer demand will provide the
expAnded markets necess:.:try to absorb the fruita

0.1.

expanded 10"'-

- 11 ...
larlier thia year, buetne •••n credited thea. . . .UNa for

of their planned 1963 incre ••• in capieal .peacH·DI.
...ka ago, the Wall Stre,t Jaurnal

r~orted

,"I.

Lea. th8a tIM

that iDcn.... Ga.

flow .a a result of these _alurea ia a ujor reaaOD why " " " ef
our lara.st steel companies plan newt year to booat their capital
.pendin& by a sizable 25 percent.

That lain would kiD, i ..... tIp-

wide .pending to aaore than $1.5 billion .- an aouDt tupr tbaa . ,

.inc. 1960 and verging upon the 1957 peak of $1.7· billion.
Pas. age of the current tax bill would alaoat doubl. the .......
incentive of the investment credit by elillinat1n& the nqutr..at
that the depreciation basis of new inveatJaerlt _at be reduce• .., . .
_aunt of the credit.

It would also rellOVe the difficult

._.-eill

procedures that flow from the current 8tatute.
Together. the 48 percent corporate tax rate. aacI l •• t
year

•I

lnvel~nt and depreciation ref__ , VOIIld re4aee oorponll
•

ta liabilities by a total of $4.5 hil1L()ummlally.

,~nd'

- 10 •
government.

the same time, the private economy, under the 1IIpetu

of th~ tax 1.,111, ~·oill itself contribute far more than it

t. now

doi.ng to\';:i.1~d .!lee tlng our nB. tional economic needs -- and will thua

lessen pressures for grec!ter Federal action and eS8e the burden OIl tile
r"ederal budge t •
I cannot emphasize Chat laat point too strongly.
n~'

The tax bill

before t41e Sent:te l'l.l1doce Coamittee represents a conac1OUI,

deliberate dec:lsion by the .j\,dministration, the House Ways 81ld Mlan.
Committee, .:ind tile House of Representatives, to rely upon expand.d
private activity rather than expanded gpver!!¥nt 8cttvity to
genert:ite

ti,1e

greater economic growth that -- by one _an. or the

other -- we :nust and ,d.ll J,chieve.

Aibready tile tex ::aeaSl.lreS adopted last year -- the i.nveatlleDt

credit end de?reciation reform .... have done a great deal to
encol.lrase bre&ter business

investment and ri8ing eCODomic activity.

- 9 -

Thst tax bill, 8S the President hal repeatedly

.t~.,

..d.l.

most important domesttc economic mea8ure to COIle befo~ the

in fifteen years.

Conar",

Upon its passage hinge the solution. to every

major economic probiim that confronts this country -- the deftcitJ

1n our Federal budget and our intern3tional balance of payments,
exces8i~ly

of recession

high rate of unemployment, our chronic postwar patten
~nd

abortive recovery.

I do not, for a moment, imply that

full

an~er

to these ?roblems.

th~

tax bill alon@ is tM

We will continue, for example. to

need specific pro6rams to reduce our balance of payments deficit
and to ClllevlBte so-called structural unemployment.

But the tax

bill ulone c.gn give us the more robust and r8pidly expanding privati
e~onomy in wnich these progrc:ms will be most efficient, most

productive "lnd ulti!Il"~tely t therefore, leaat costly to the Fed.ral

- 8 -

(PRESENTS CITATION)
(HR. GENEEN WILL RESPOND BRIltFLY •••• T8H SICRftAU

WILL CONTINUE WITH HIS FOBMAL SPIKeR).

The volunteer efforts of 8uch di8eingullbed bustn••• 1.....
81

yourselves on behalf oi the Payroll

Savin~

Drive are certainl,

• notable instance of the active and productive concern of '-rice
buaine.s generally for the fiscal soundness and economic well-beiDa
of this o.:.;tion.

But it is by no meana the only instance.

A uu.btr

of you, 1 am sure, are among the more than 2,500 _.her. of the
Business Committee for Troc Reduction in 1963 -- buaiDe •• le.den
throughout the country \t.~ho are translating into action theu lIMe

awareness that, tn the months and years ahead, the role of the
nriv8te sector in "our economic growth i.. heavily dependent upOD

what nappens to the tax bill n~' before the Congress.

- 7 "Inspired by hi. enthu8ia. and .plenclid
AIMrican industry in 1963 enrolled ClOre than

-..,18

ODe

million new r.gular buyers of United State. Saviaaa
Bonds through the Payroll Saving. Plan.

While the..

are the direct beneficiaries of his devoted effort.,
our Nation

a whole 1s til bis debt.

"His generous aervice i . in the fineat traclitiOll

of the volunteer spirit wwhich aymboltzees

Savina'

Bonds program and gives strength and vitality to our
A_rican way of life.

"Given under my hand and aeal thia fifth day of
November, nine teen hundred and • izty three.

Douglas Dillon
Secretary of the Treasury"
I ask you to accept this citation, Mr. GeDeen. with . . 0 ....
and congratulation.

-. Again, tUae doea not allow for individual pr. . .ntatlou to the
other metlbers, so they will be given to you at yoar place..
8ay in passing, Mr. Geneen, that in dcmat1D& the .. unique

Ita, I

aifu. _

of your IIOtives may have been to help lengthe.D the . . turity .tnotln
of the debt.

payraent very

At leaat 1 don't expect to ••• the . . bOftCl. pn'eD~ far
8000..

Finally, I have BIldaward for
electroolc8 industry and
COIIIIlitt.e.

c~.lrman

A$
cbaix-.an
A

HarOld~ Geneen

for tbt

of tne Induatrial Payroll

Sav~

It i8 a special Treasury citation in reco811itiOD of tbe
\.

uny contributions he has sude to the success of this 1963 c.,.t.p.
,

I would like to re~ the citation:
"United States Treasury Deparc:.nt Citation
to Harold S. Geneen, Chairman,

U.S. Indu.trial Payroll

Savings Committee.
, For distingui.shed leadersbip in the aoat

successful Payroll Savings camp-Lia ot the p •• cet~.

.. 5 Nmv't I have

except Mr. GeneeD.

rather UIluaual award.

In "resenting it, I _

intermediary. because the gift is not

!bts 1.1 to .ach of , .
really GIlly

8ft

tr_ _ • but fro. you- ebaU-.

I am lure each menaber of the ca.aitt.. 1m_ with what ""rati. at
appreciation Mr. Geneen has followed

,.r proan"

ill thu

c..,.•.

He haa tbtrefore 8tTsneed for this very .peclal __nto which can1e.

his thanKS and good wi.bel.
(HOLDS UP FRAMED GIFT)
This is a United States Savinga BoDeS ••pecial1,. lues-De. . . .

louvenir of your committee exoer1ence _. and 8cc0IDp8llieeS by • 1• •
from

1'Ie.

Thi.s one ba!,pens to be yours J Mr. Mill1ken. and I _

happy to present it on behalf of Mr. GeneeD.

(MILLIKEN ACCEPTS IT)

- 4 rendered for your country.
(HOLDS UP MED!.L)

This is the Treasury medal for

di.ttngui8~

••rvice, a ...11

thing in ltselt, but representing much in teru of exceptional public

servlce.

On its face is the Minute Man, syaabol of the Saving. . . . .

volunteer program, with a ring of 13 stars representing the
colonies.

On the back. the

ori&~l

ses1 of the Treasury Department.

<2b_~).1..~~~~_, .~. ~~

.Hl:......!;eneeQ., I am happy to present this medal t~~Chai"
o

the Industrial PaYToll

SaVing~._cOlDlll~ ~.

GEN!EN ACCKPTI

; \ie tuwe a similar medal for each member of the committee.

wish time permitted my presenting e8ch

01l@

individually.

Sinc. it

<bes not, I h.lve asked our staff members to present them to you It

your plAces.Conbratu1ations to each of you.

- 3 as your chairman for 1964.

A long time supporter of the 'a1l'011

Savings Plan, Mr. Milliken led

moat 8uccessful enrpaign 11\

ta.. tIfI

industry this year, in which his own ecmpany achieved 76 pere_t , .
ticipation.

I am sure you will find

an able, active. and

leader.
We will be following your

pro.~re8.

next year with keen iat..,.,

particularly in view of the succes8ful beginnings of our
Payroll Savings Committee.

IDdu.~

\Je will be working closely with

ing you in every possible way.

,OIl, IMI

I bope we will be able to ...t . . .

next fall to hear the final report of another diat1aguiabed

It is perfectly clear that the success of this year's p~U
Savings campaign was brou.ght about by this Coumittee'. l . .derlldJ.
enthusiasm, and determination.

For that reason, it is DOW . , , , -

pleasure to present to the ccmnittee members tangible evid. . .

appreciation for their excellent work.

We bope that the .,...l~

will prove a meanin~ful reminder of ~~ ~~!"U .. ~A~ ~~J h.'~~ . . . . .

- 2 the new members "ho have joined our caanittee today.

'lbe1. 11k. tb.

original members, enjoy wide acquaintance aad re."ect within th.ir
industries, and will meet with the .... favorable respons. fro. th.lt
countet'llarts in other compa&r.es when they ask for support of tb. PI,.
roll

Savin~s

Plan.

Our request of yo\.' for next year i8 the .ame 88 this year'l: "
stimulate active interest on the part of management within the c...

of your industry and wherever else your influenee extends.
is also the same:
Savin~s Plan durin~

to sign up

1964.

Our

&tilt

million new participants on the ..,.

Later this afternoon, Mr. Neal will Sl"~

you the details of the campaign, as well as information about lufl
members who will assist
I

at!'

YOll.

deli';hted to announce at this time that ~t". Frank i.

Milliken, p~esident of the Kennecott eol'Per Corporation and chatJill
for the copper industr\T in this year' a campaign, has a~reed to . .

REHAIUtS BY !BE . . . . . . . . DCIJIaAS DDrl.
SECUTAIlY OF 'DIE ftIUUrl, IlIOU !II
MEETIlC or DfWSTRIAL PADOLL IAVDDI CCI.una
DII'UIIlUC JlllCUQlI
1UISDlY, lfOVlMBD S, 1963, 1:45 P •••• 1ft

,-""'1'Ws

"IA.

Last January, when this Coaa1tt•• w.a organized, I ..

tMt a..

of the moat direct Ileana by which you could bol.eer our _tlea l ,
financial position was to promote the ova.rebip of

Your success has been outstanding.

Savtac.

We a.ked you to bel, • lip

up a million new savers on tll. Payroll SaviDga Plea.

be met through industry alone.

Utl. 81111111

The influeac8 of your work wilL br

the end of the year, have produced perhaps

addit1cmal _I'''' •

• avers outside of the industrial field.

You) the members of this Industrial Payroll Saving. Ca a it"'J
were selected in January beeause of your leadership in ~leIl.
foremost industries, which contribute

Bleb to tbe .tr....G of our

economy, and because you personally furthered the progr••• • 1 PIytO
Savings in your own Companies.

Th. . . . . . . factor. led u.

ce briP

TREASURY DEPARTMENT
Washington
R RELEASE:

UPON DELIVERY
REMARKS BY THE HONORABLE DOUGLAS DILLON

SECRETARY OF THE TREASURY, BEFORE THE
MEETING OF INDUSTRIAL PAYROLL SAVINGS COMMITTEE
DIPLOMATIC FUNCTIONS AREA, DEPARTMENT OF STATE
TUESDAY, NOVEMBER 5,1963,1:45 P.M., EST
Last January, when this Committee was organized, I said that one
the most direct means by which you could bolster our nation's
.ancial position was to promote the ownership of Savings Bonds
og your employees and those of other companies in your industries.
Your success has been outstanding. We asked you to help us sign
a million new savers on the Payroll Savings Plan. This goal will
met through industry alone. The influence of your work will, by
. end of the year, have produced perbaps an additional balf-million
~rs outside of the industrial field.
You the members of this Industrial Payroll Savings Committee
e selected in January because of your leadership in America's
emost industries', which contribute so much to the strength of our
l~, and because you personally furthered the progress of Payroll
.tngs in your own Companies. These same factors led us to invite
new members who have joined our committee today. They, like the
Jinal members, enjoy wide acquaintance and respect within their
"stries, and will meet with the same favorable response from their
lterparts in other companies when they ask for support of the
·011 Savings Plan.
Our request of you for next year is the same as this year's: to
alate active interest on the part of management within the
lanies of your industry and wherever else your influence extends.
goal is also the same: to sign up a million new participants
.he Payroll Savings Plan during 1964. Later this afternoon, Mr. Neal
give you the details of the campaign, as well as information about
f members who will assist you •
. I am delighted to announce at this time that Mr. Frank R.
lken, president of the Kennecott Copper Corporation and chairman
the copper industry in this year's campaign, has agreed to serve
,our chairman for 1964. A long time supporter of the Payroll
19S Plan, Mr. Milliken led a most successful campaign in the
!r industry this year, in which his own company achieved 76 percent
~cipation. I am sure you will find him an able, active, and
lring leader.
D-1032

- 2 -

We will be followi.ng your progress nc.'xt year with ke(>n intcres t,
·ticularly in view of the successful beginnings of our Industrial
'roll Savings Committee. We will be working closely with you,
.ping you in every possible way. I hope we will be able to meet
lin next fall to hear the final report of another distinguished
lievement.
It is perfectly clear that the success of this year's Payroll
'ings campaign was brought about by this Committee's leadership,
:husiasm, and determination. For that reason, it is now my great
'asure to present to the committee members tangible evidence of
. appreciation for their excellent work. We hope that the symbol
Isen will prove a meaningful reminder of the services you have so
lirably rendered for your country.
This is the Treasury medal for distinguished service, a small
.ng in itself, but representing much in terms of exceptional public
'vice. On its face is the Minute Man, symbol of the Savings Bonds
unteer program, with a ring of 13 stars representing the original
onies. On the back, the seal of the Treasury Department.
I am happy to present this medal to Mr. Harold S. Geneen, as
irman of the Industrial Payroll Savings Committee. We have a
.ilar ffip.dal for each member of the committee. I wish time
mitted my presenting each one individually. Since it does not,
ave asked our staff members to present them to you at your places.
gratulations to each of you.
Now, I have a rather unusual award. This goes to each of you
~ Mr. Geneen.
In presenting it, I am really only an intermediar)
ause the gift is not from me, but from your chairman. I am sure
h member of the committee knows with what admiration and
reciation Mr. Geneen has followed your progress in this campaign.
has therefore arranged for this very special memento which carries
thanks and good wishes.
This is a United States Savings Bond especially inscribed as a
venir of your committee experience -- and accompanied by a letter
m me. This one happens to be yours, Mr. Milliken, and I am happy
present it on behalf of Mr. Geneen.
Again, time does not allow for individual presentation to the
er members, so they will be given to you at your places. May I
in passing, Mr. Geneen, that in donating these unique gifts, one
rour motives may have been to help lengthen the maturity structure
the debt. At least I don't expect to see these bonds presented
payment very soon.

- 3 -

Finally, I have an award for Harold s. Gen~~n as chairman for
the electronics industry and chairman of th<.' Tndustrial Payroll
Savings Committee. It is a special Treasury citation in r(.cognition
of the many contributions he has made to the success of this 1963
campaign. I would like to read the citation:
"United States Treasury Department Citation
to Harold S. Geneen, Chairman, U. S. Industrial
Payroll Savings Committee.
"For distinguished leadership in the most
successful Payroll Savings campaign of the
peacetime years.
"Inspired by his enthusiasm and splendid
example American industry in 1963 enrolled more
than one million new regular buyers of United
States Savings Bonds through the Payroll Savings
Plan. While these are the direct beneficiaries
of his devoted efforts, our Nation as a whole is
in his debt.
"His generous service is in the finest tradition
of the volunteer spirit which symbolizes the Savings
Bonds program and gives strength and vitality to our
American way of life.
"Given under my hand and seal this fifth day of
November, nineteen hundred and sixty three.
Douglas Dillon
Secretary of the Treasury"
I ask you to accept this citation, Mr. Geneen, with my thanks
and congratulations.
The volunteer efforts of such distinguished business leaders
as yourselves on behalf of the Payroll Savings Drive are certainly
a notable instance of the active and productive concern of American
business generally for the fiscal soundness and economic well-being
of this nation. But it is by no means the only instance. A number
of you, I am sure, are among the more than 2,500 members of the
Business Committee for Tax Reduction in 1963 -- business leaders

- 4 -

throughout the country who are translating into action th(·ir kf:'('n
awareness that, in the months and years ahead, the roll' of the
private sector in your l'conomic growth is hl'Llvi ly oepeno<.:nt upon
what happens to the tax bill now before the Congress.
That tax bill, as the President has repeatedly stressed, is the
most important domestic economic measure to come before the Congress
in fifteen years. Upon its passage hinge the solutions to ev(·ry
major economic problem that confronts this country -- the deficits
in our Federal budget and our internati.onal balance of paym(.'TIts, our
excessively high rate of unemployment, our chronic postwar pattern
of recession and abortive recovery.
I do not, for a moment, imply that the tax bill alone is the
full answer to those problems. We will continue, for example, to
need specific programs to reduce our balance of payments deficit
and to alleviate so-called structural unemployment. But the tax
bill alone can give us the more robust and rapidly expanding private
economy in which these programs will be most efficient, most
productive and ultimately, therefore, least costly to the Federal
government. At the same time, the private economy, under the impetus
of the tax bill, will itself contribute far more than it is now
doing toward meeting our national economic needs -- and will thus
lessen pressures for greater Federal action and ease the burden on
the Federal budget.
I cannot emphasize that last point too strongly. The tax bill
now before the Senate Finance Committee represents a conscious,
deliberate decision by the Administration, the House Ways and Means
Committee, and the House of Representatives, to rely upon expanded
private activity rather than expanded government activity to
generate the greater economic growth that -- by one means or the other
we must and will achieve.
Already the tax measures adopted last year -- the investment
credit and depreciation reform -- have done a great deal to
encourage greater business investment and rising economic activity.
Earlier this year, businessmen credited these measures for 43 percent
of their planned 1963 increase in capital spending. Less than two
weeks ago, the Wall Street Journal reported that increased cash
flow as a result of these measures is a major reason why seven of
OUr largest steel companies plan next year to boost their capital
spending by a sizable 25 percent. That gain would bring industrywide spending to more than $1.5 billion -- an amount larger than any
since 1960 and verging upon the 1957 peak of $1.7 billion.

- 5 -

Passage of the current tax bill would almost double the present
lncentive of the investment cn.'dit by eliminating the requiremt'nt
:hat the depreciation basis of new investment must be reduced by the
Imount of the credit. It would also remove the difficult accounting
)rocedures that flow from the current statute.
Together, the 48 percent corporate tax rate, and last year's
lnvestment and depreciation reform, would reduce corporate tax
Liabilities by a total of $4.5 billion annually. And when you
Idd on top of this the proposed liberalization of the investment
!redit, the after-tax profitability of new investment would be
~creased by more than one-third.
That, certainly, is one dramatic
Lndication of how much the passage of the tax bill means to American
)usiness.
To support the large direct tax stimulus to business that I
lave just described, the tax bill will also release nearly $9 billion
~ individual tax reductions into the private economy.
Some of that
lmount will be saved and invested -- particularly since the lowering
)f individual marginal rates makes individual investment more
)rofitable. But well over 90 percent of that money will be spent,
:irculating throughout the economy and ultimately increasing consumer
;pending by several times the amount of the initial tax cut. That
;trong and sustained rise in consumer demand will provide the
~xpanded markets necessary to absorb the fruits of expanded investment.
The expanded investment -- along with more buoyant economic
;rowth generally -- is of course vital in our program to restore
lalance to our international payments. For as it results in more
'apidly advancing productivity and more intensive exploration and
:evelopment of "new markets and new products, it will sharpen
:he competitive edge of American business both at home and abroad.
nd as our economy grows in response to the tax cut and employment
.nd productive efficiency climb, the Uni ted States will become
antinually more attractive to both foreign and domestic investment
nd monetary policy will be gradually freed from the present
estraints upon its use as a means of stabilizing our balance of
ayments position.

If we are not, however, to dissipate these fruits of the tax

ut, then it is essential that we maintain the kind of wage and

rice stability that we have enjoyed in recent years. We must
xercise the same self-discipline in that respect that the government
ust exercise in controlling expenditures.

- 6 -

I have not the time today to discuss with you this question of
expenditure control as thoroughly as ] would like to. Certainly no
single subject of national concern has been attended by more
misunderstanding. At the core of that misunderstanding, it seems
to me, is a failure to realize that, in effect, the government has
two budgets: One, familiar to all, records expenditures as we
meet our bills. The other, far more important and far lE.'ss
familiar budget,records the new appropriations from which all
expenditures flow.
It is this second budget which we must weigh in deciding
whether or not we are achieving expenditure control. In government,
as in our private lives, the proper way to cut spending is not to
refuse to pay our old bills, but to stop incurring new ones.
Once the Congres s appropriates funds for previous ly au thori zed
purposes, the President -- with one specialized exception covering
defense expenditures -- has no clear authority to refuse to spend
those funds. Thus, once the appropriation budget has been adopted,
expenditures are sure to follow -- but only on a delayed basis.
Often, the bills do not come due for several years. This year, for
example -- fiscal 1964 -- only about half of our expenditures
will come from this year's appropriation bills. The rest will
come from monies appropriated in earlier years.
During the fiscal year that ended last June, a total of
$101.5 billion in appropriations was approved -- $9 billion more
than was spent. That is why expenditures during the current fiscal
year are rising and will be about $5 billion higher than last year's
level of $92.6 billion.
Chairman Clarence Cannon of the House Appropriations Committee
hopes and expects that we will hold this year's appropriations at
or below last year's $101.5 billion level -- which, of course is stil:
at least $4 billion above this year's expected expenditure level.
But even if Chairman Cannon's hopes are realized, fiscal 1965
expenditures will inevitably rise somewhat above the 1964 level -for the simple reason that we must meet the bills for many programs
and projects for which funds were appropriated in previous years.
To the extent, however, that we level off appropriations, our
future bills -- and thus our future expenditures -- will also level
off, but only after the normal and inevitable time lag of about
~o years.
Therefore, to those who say we should not cut taxes and
increase expenditures at the same time, I say simply this: look at
the record being written today in new appropriations instead of mere1~
concentrating on the level of expenditures required to meet old bills
Look at this year's appropriations and compare them with last year's,
and you will see a clear example of firm expenditure control -""-?nditure control that will show up in the spending level of future
:,s.

- 7 There is, therefore, not one good reason for undue delay on
he tax bill. The more we delay, the more we risk losing the
nparalleled opportunity now before us to expand the role of the
rivate sector -- rather than to rely upon greater Federal
pending -- in achieving economic growth and in meeting national
eeds. Our need for more rapid and durable economic growth -- for
elief from budget and balance of payments deficits, and from
xcessive unemployment -- becomes more pressing as the hour becomes
ater. I think most of us agree that the tax bill is clearly the
ore preferable means to achieve that growth. And now is clearly
he time to choose it.

000

-3-

hold in

addition to .3ecretar.r Dillon am Mr. Gene&n J . speakers at the eeting,
t~

Benjamin FranY..lir.: Room of the State Departnent, included Henry

H. Fowler, Under Secretary of the Treasury, and William H. Neal, kssistant to
the Seere~l'Y-~M National Director of the Savings Boms Division.
k1; t.be. cOI-lel llSj ~

conmitt':'le members were to be

"c· lilli

White House by President Kennedy.

(List of those attending at.tached.

(*)

denotes new member.)

received at

-- 2 --

:l.eferring to a report by Mr. Geneen, revealine that more p~! 011 i3.'~
Bonds have re~n purchased during

1963 than in any year since the end·. World.

War II, Secretary Dillon told the Conmittee that "your success has been outstanding. "
He recalled that the Committee originally had been asked to help sign
up a million new savers on the Payroll .3alJ'ings Plan, adding:
"This goal will be met through industry alone. The influence of your work
will, by the end of the year, have }roduced perhaps an additiol"'.a.l half-milllon
savers outside of the incllstrial field."
As another highlight of the session, Secretary Dillon presented Treasury
~~I J. { ~ .
.a.NWlds for di stinguiohed service to the 28 memre rs of the original committee,
and pred.ict ed that nine new members, attending tlleir first meeting, would "meet

with the same favorable response from their counterparts in other imustries when
they ask for support of the Payroll Savings Plan."
The Secretary's citation to 111". Geneen -

a parchment scroll -

described

his service as 'tBing "in tm .finest tradition of the volunteer spirit which
symbolizes the Savings Bonds program and ghres strength and vitality to our
Ameri CCln way of Ii! e. "

ea9h--of-··t;he--··ce·~-r··members

J3resented a ei.-l-ver medal.

In a surprise award, Mr. Geneen gave each of his committee m3mbers a
framed $100

S. Savings Bond, accompanie d by a letter of appreciation from

Secretar,y Dillon,
The ccxl1!d.ttee' 5 plalls for the 1964 P~roll Savings Drive include a concentration,lof effort Jai on approximately 300 large cCJ!lpanies, with sCIIle six
million employees. Theso; are canpanies ~ich, for a va~iety of reasons, wer.
unable to ,ondu ct all-out Bond campdgns during the past ye ar or 1.-'erel compep.td
to postpone~ th~r drives until a

Ittter time.

!'tId R.~IF.ASE AT 12 NOON ("fi;ST)

TtRSDAY, NOv:<":MBSR

5, 1963
MILLION NEW PAYROLL SAvmS IS GOAL

OF TR:<'.ASURY roND CONMITTSB IN 1964
Thi~ty-four

business leaders, representing 27 major American industries,

met wiUl Treasury Secretary Douglas Dillon he re today and

designed to rmroll an additional one million new

~roll

a program

savers for U. S.

Savings Bonds in 1964.

At the same time, the group Savings Corrmittee -

designated the U. S. Industrial. Payroll

heard words of praise from Secretary Dillon and other

'Nay Treasu17 officials for their D: efforts in making

'I
{i'"
, '. ~ ", r . . ~

.
• .

1963 the most productive

year for SerJings -1tmtte since 1945.
Said Secretary Dillon:

liThe volunteer efforts of such distinguished business leaders as yourselves on behalf of the Pqroll Savings Drive are certainly a notable instance
of the active

productive concem of American business generall.y fer the

fiscal. soundness am economic well-being of this nation.1I
t:t Ifr. Dillon also announc~d the appointment of Frank R. Milliken, New

York, PrB sid "'nt of the Kennecott Copper Corp., to serve as chai ~an of th e comitt
during th ~ next ;year. He succeeds Harold S. Ganeen, New York, Pr9sident of the

.l.nte rnational TelephoJ'E and Telegraph Corp., ..,tho will remain ad a member of the
cor.md.ttee at la:'ge. Mr. Milliken has represented the copper and brass industl'1

_on the commit tee :.:ince it was formed last January.

TREASURY DEPARTMENT

FOR RELEASE AT 12 NOON (EST)
TUESDAY, NOVEMBER 5,1963
MILLION NEW PAYROLL SAVERS IS GOAL
OF TREASURY BOND COMMITTEE IN 1964
Thirty-four business leaders, representing 27 major American
industries, met with Treasury Secretary Douglas Dillon here today
and mapped a program designed to enroll an additional one million
new payroll savers for U.S. Savings Bonds in 1964.
At the same time, the group -- designated the U.S. Industrial
Payroll Savings Committee -- heard words of praise from Secretary
Dillon and other Treasury officials for their efforts in making
1963 the most productive year for Payroll Savings since 1945.
Said Secretary Dillon:
"The volunteer efforts of such distinguished business leaders
as yourselves on behalf of the Payroll Savings Drive are certainly
a notable instance of the active and productive concern of American
business generally for the fiscal soundness and economic well-being
of this na tian •"
Mr. Dillon also announced the appointment of Frank R. Milliken,
New York, President of the Kennecott Copper Corporation, to serve
as chairman of the committee during the next year. He succeeds
Harold S. Geneen, New York, President of the International
Telephone and Te1graph Corporation, who will remain as a member of
the committee at large. Mr. Milliken has represented the copper
and brass industry on the committee since it was formed last
January.
Referring to a report by Mr. Geneen, revealing that more
small denomination Series E Bonds _.. the "payroll savings
bonds" -- have been purchased during 1963 than in any year since
World War II, Secretary Dillon told the Conmittee that "your
success has been outstanding."

- 2 -

He recalled that the Committee originally had been asked to help
sign up a million new savers on the Payroll Savings Plan, adding:
"This goal will be met through i.ndustry alone. The influence
of your work will, by the end of the year, have produced perhaps
an additional half-million savers outside of the industrial field."
As another highlight of the session, Secretary Dillon presented
Treasury medals for distinguished service to the 28 members of the
original committee, and predicted that nine new members, attending
their first meeting, would "meet with the same favorable response
from their counterparts in other industries when they ask for support
of the Payroll Savings Plan."
The Secretary's citation to Mr. Geneen -- a parchment scroll
described his service as being "in the finest tradition of the
volunteer spirit which symbolizes the Savings Bonds program and
gives strength and vitality to our American way of life."
In a surprise award, Mr. Geneen gave each of his committee
members a framed $100 U.S. Savings Bond, accompanied by a letter
of appreciation from Secretary Dillon, as a memento of the 1963
campaign.
Other speakers at the meeting, held in the Benjamin Franklin
Room of the State Department, included Henry H. Fowler, Under
Secretary of the Treasury, and William H. Neal, National Director
of the U. S. Savings Bonds Division.
Later in the day, committee members were to be received at the
White House by President Kennedy.

(List of those attending attached.

(*) denotes new members.)

LIST OF THOSE ATTENDING U. S. INDUSTRIAL PAYROLL SAVINGS mMMITTEE
MEETING CALLED BY SECRETARY DILLON, NOVEMBER 5, 196).

Crowdus ~aker
President
Sears, Roebuck and 'Campsny
Chicago, Illino~s

John D. Ehrgott
Chairman of the Board
The Great Atlantic & Pacific
Tea Company, Inc.
New Y~rk, New York

~X Edward B. Bates
Executive Vice President
Connecticut Mutual Life
Insurance Co.
Hartford, Connecticut

}(

-x
;'

Walter Bouldlin
Pt'esident
Alabama Power Company
Birmingham, Alabama

Ray R. Eppert
President
Burroughs Corporation
Detroit, Michigan

J. J. Bricker
Vice President
International B~siness
Machines Corporation
New York, New York

Raymond C. Fit'estone
President
The Firestone Tire & Rubber
Company
Akron, Ohio

Maurice R.Chambers
President
International Shoe Company
St. Louis, Missouri

Alexander H. Galloway
President
R~ J. Reynolds Tobacco Company
Winston-Salem, North Carolina

Harold W. Comfort
President
The Borden Company
~ew York, New York

Harold S. Geneen
President
International Telephone and
Telegraph Corporation
New York, New York

John Davies
Assistant Treasut'er
The Goodyear Tire & Rubber Co.
Akron, Ohio

Emile F. du Pont
Director
E. I. du Pont de Nemours & Co.,
Wilmington, Delaware
Charles W. Ebersold
Assistant to the President
Illinois Bell Telephone' Company
Chicago, Illinois

Dr. Elmer W. Engstrom
President
Radio Corporation of America
New York. New York

James T. Griffin
Vice President
Sears, Roebuck and Company
Chicago, 11linoi's

ln~o

John L. :;c shman
President
Anchor Hocking Glass Corp.
Lancaster, Ohio

Leon E•• Hidoman
Executive Vice President
Aluminum Company of America
Pittsburgh, Pennsylvania

Charles F. Myers, Jr.
PresidEnt
Burlington Industries, Inc.
Gre"ensboro. North Carolina

Earl D. Johnson
Executive Vice President
Delta Air Lines, Inc.
Atlanta, Georgia

M. Nielsen

L. B. Johnson
Treasurer
Standard Oil Company
New York, New York

President
Babcock & Wilcox Company
New York, New York
Thomas F. Owens
Trea.urer and Director
National Lead Company
New York, New York

(~,r'

Thomas V. Jones
President
Northrop Corporation
Beverly Hills, California

Clarence A. Kelley
President
Dixie Ohio Express, Inc.
Akron, Ohio
Lawrence Litchfield, Jr.
Chairman of the Board
Aluminum Company of 'merica
Pittsburgh, Pennsylvania

William J. Quinn
Chairman and President
Chicago, Milwaukee, St. Paul
~Pacific Railroad
Chicago, Illinois
Louil G. S.aton
Vice PreBident
General Motor. Corporation
DetrOit. Michisan

IS. S. Mar.h
Prealdent
Atcbison, Topeka , Santa ,.
IlaUway Syat_
Chic_la, Illinoi.

B. G. lleblbou.e
Vice Preaident
Ve,tern Electric eo.pa." lac.

lev York, ... York

'reak I. "'ltlk.n
Ire. lint
lennecott Copper COrporatioa
-.w York; lev fork

(*) _ Denote s new member.
(**) _ Representative of new member.

W. Corde. Snyder. Jr.
Chairman of tha Board
Blaw-Knox Company
Pitt.bur.h. Pennsylvania
!arl G. Spiker
Attorney
hi ft 8& Company
Wa.hinaton, D. C.
Robert M. Wachob
Vice President
Bell Telephone Camp any of
Pennsylvania
Philadelphia, Pennsylvania
Leslie B. Worthington
President
U. S. Steel Corporation
Pittsburgh. Pennsylvania

TREASURY DEPARTMENT

November 7, 1963

FOR IMMEDIATE RELEASE
Tax Treaty Discussions Between Belgium
and the United states Announced
Discussions are to be held in the near future between Belgium and
the United States on possible modification in the existing income tax
convention between the two countries, the Treasury Department announced
today.
The principal purpooc of the disuussions will be to consider revisions
that may have been made necessary by recent amendments to the Belgium tax
system, although other matters are also likely to be discussed.

It is

expected that modifications in the tax convention will not result in
any appreciable change in the total tax burden on profits which are

derived in Belgium by American fir.ms operating there through subsidiary
corporations and which are subsequently distributed as dividends.
Interested taxpayers in the United States are invited to submit
their connnents on such matters as they believe should be considered in
the forthcoming discussions to Mr. Stanley S. Surrey, Assistant Secretary

of the Treasury, ,.,rashington 25, D. C.
is NOVember 22, 1963.

000

D-1033

Deadline for receipt of comments

TREASURY DEPARTMENT

November 7, 1963

FOR IMMEDIATE RELEASE

Tax Treaty Discussions Between Belgium
and the United States Announced
Discussions are to be held in the near future between Belgium and
the United States on possible modification in the existing income tax
convention between the two countries, the Treasury Department announced
today.

The principal purpose of the disuussions will be to consider revisions
that may have been made necessary by recent amendments to the Belgium tax
system, although other matters are also likely to be discussed.

It is

expected that modifications in the tax convention will not result in
any appreciable change in the total tax burden on profits which are
derived in Belgium by American fir.ms operating there through subsidiary
corporations and which are subsequently distributed as dividends.
Interested taxpayers in the United States are invited to submit
their comments on such matters as they believe should be considered in
the forthcoming discussions to Mr. Stanley S. Surrey, Assistant Secretary
of the Treasury, Washington 25, D. C.
is November 22, 1963.

000

0-1033

Deadline for receipt of comments

r::he ne~-:i fo.:..- rrompt R.c':ion.

this tittle, ..;itr! the

eCOnO(;IY

r~nactment

of the tax bJ 11 at

:it11l on the recovery side,

'"ill enable us to link the existing economic momentum \(ith
tile

e)~pi:ins1onary

thrust

the bill.

The tiu&e is thus r:f.pe

f"l" the tax bill and the bill 1s well suited to the time.

Its early enactment will enable our Federal tax policy to

make a clear.ly needed, clearly desirable, and clearly effective contribution to the accomplishment of our national
go:tls.

more bouyant economy we can keep the reces8ions shallower

We would

and the recoveries longer lasting and stronger.

thus avoid the economic waste, the business dislocations
and the human suffering that these jarring economic swings
have meant.

Here also, the tax btll is the basic precondi-

tion to breaking out of our post-war pattern.
As a fifth example, an economy operating at high levels
can help us solve many of our social problems that are linked
to economic factors.

The remedies for racial discrimination

in employment operate far better when jobs are plentiful,
so that the gains of one group do not occur at the expense

of another.

State and local governments can best cope with

the problems of crm",ded schools and hospitals, of inadequate

urban transportation, of slum clearance, when their efforts
are fortified by th.e higher tax revenues they will enjoy in

a stronger economy.

In this perspective, it is not surprising that a national
consensus, joined in by business, labor, and the academic
world, has developed in support of the tax bill.
sensus

probably unique in our tax history.

The con-

These groups

grasp both the far-reaching importance of the tax bill and

- 30revenues we need.

Expenditure restraint by itself will not

tranRform chronic deficits into balanced budgets; indeed,
by itself it could lead us to an economie downswing and
still

~reater

budgetary problems.

But expenditure restraint

accompanied by a tax reduction will lead us to our goal of
a balanced budget in an expanding economy.
AS

a third example, the President has stated that the

tax bill is the single most effective measure needed to
restore equilibrium to our balance of payments.

The increased

Droductivity \vhich the htll would promote will, with price
stability, improve the international competitive position
of fUnerican industry.

The incentives to investment in the

tax hi 11) to;ether -c;>rith the higher level of activity that
\;.:il1 result, will attract to the United :3tates a greater
share of both domestic capital and forei.gn capital.

These

results are essential. to a tlBsic improvement in our balance
d:.·

payments positi.on and the tax bill is an indispensable

"
. ~h'
con"dit ~ont:.o
__ e1.r aeh"l.evernent.
_-~s

a fourth example, our economy must seek to halt the

post-war pattern of recession and inadequate recovery.
may not yet have the key to end recessions.

But with a

--i/national problems.

President Kennedy has said that the

tax bill is the most significant piece of economic legislation in the last fifteen years.

The reason for this is

that its enactment is essential to the solution of every
major economic problem which we face today.

It is not

the sole solution for these problems -- but it is a necessary ingredient to their effective solution.
As one example, we have already spoken of our chronic
unemployment, our under-utilization of industrial capacity,
our low rate of investment in plant and equipment.

higher level of economic activity will end these problems,
and the tax bill is essential to our obtaining that higher
level.

To be sure, some problems of structural unemployment

will require special measures, such as manpower retraining
and improved education.

But all such special measures will

be far more effective in an expanding, flourishing economy
~lere

general employment

prospects are strong.

As a second example, for a number of years we have been
experiencing chronic budgetary deficits.

These deficits

have been caused by the failure of the economy to achieve
levels of economic activity capable of producing the revenues
neede~

to balancp- our

level of the economy,

bu~ryets
D
U

~7ill

•

The tax bill, by raising the

permit us to achieve the increased

ThE: tax

bill, and its predecessor in 1962, obviously

do not solv2 all the outstanding problems of tax policy.
!.}ut the pi·ogrcss being made constantly narrows the area of
study, leading us inevitably to the most difficult subjects.
The consideration of tax poltey issues that has accompanied
the legislative raeasures of these years has served to bring
these issues beyond the borders of the technical journals,
'3err~inar:.;

anJ learneJ symposia into the domain of broad

public discussion.
le;~islation

One of the invisible benefits of this

",Jill thus be the attention, both public and

legislative, '.·JitlCh has been focused on the entire tax ares.
exaL.,~erdtion

Today it is no
~ecome

I~tter

to say that tax policy has

Of urgent national attention.

This fact in

itself will make the likelihood of future improvements far
greater than it was be.col.-e these measures were started.
~ince

the hard

problf:~liS

that remain involve social and

political jUG~~ments, thL~ exposure to public debate is
essential to their ultimate resolution.

III
As my final point, I 'would like to conside"!:" the contributions the proposed changes in tax polley will make to our

In addition to these innovations, the House bill also
eliminates some of the existing restrictive features of the
income tax.

examples in this area are the additional deduc-

tion for employee moving expenses and the removal of the two
percent consolidated returns tax.
These features of the House bill involve $485 million
in revenue loss.

Put together with the over a billion

dollars of revenue-raising changes, the combination is a
substantial step forward in improving the income tax structure.

Naturally more remains to be done.

Thus the recent

legislative events have helped bring into focus some areas
where more analysis is needed.

The debate over the proposal

of a five percent floor on personal expenses showed how

thorny are the problems in this area.

The debate over the

taxation and treatment of capital gains, especially those
passed on to heirs, revealed some of the difficulties in
that subject.

The proposal for an optional rate scale, with

lower rates applied to a broader and simpler measure of a
person's taxable income, raises the question whether this
i::; a feasible patn to lessen or eliminate the great dispari-

ties in tax burdens on equal incomes that we know exist

under Fresent i:ates.

- Jfirst bracket of income, $0 - $2,000 for a single person and

$0 - $4,000 for a married person, into four brackets subject
to rates from 14 percent through 17 percent.

Since the

income of over half of our taxpayers falls entirely in the
present first bracket, this splitting of that bracket adds
significantly to the fairness of the tax by introducing this
differentiation in its application at this level of income.
The introduction of a minimum standard deduction of $300
for a single person and $100 for a wife or dependent makes
it possible to provide special relief for those with very
low incomes, relief beyond that which tax reduction itself
can accomplish.

Up to now the approach used to achieve this

special relief for these groups has been a raising of exemptions.

But since such an approach applies to taxpayers at

all levels, it fails to concentrate lts relief on the low
income recipients and, in this sense, wastes revenue.

The

minimum standard deduction involves a revenue loss of $320
million, almost all of
less than $5,000.

~mich

goes to taxpayers with incomes

$100 increase in exemptions would cost

$2.6 billion, but 78 percent of this would go to incomes over
$5,000.

that, starting

~vith

the returns over $50,000 and going up

the ::::cale t divLiend income on the average rises from 20
percent to 50 percent of all income -- as compared to

1 percent to

percent on returns up to $20,000 -- the

real function of the dividend credit, as Secretary Dillon
stated to the Senate Finance Committee, was to mitigate
the severity of top bracket rates running up to 90
and over.

~ercent

The Congress in 1954 did not feel in a position

to cut these high rates directly, but did so in a roundabout
fashion throush the dividend credit.

Since the House bill

noVl directly reduces those rates, the dropping of the dividend credit is an appropriate and necessary companion measure.

In addition to its revenue-raising changes, the House
bill involves the introduction of tax innovations designed
to strengthen the income tax and increase its fairness.
Thus the bill provides for the first time a broad averaging

system to meet the problems of fluctuating income.

It will

thereby ease the burdens of those taxpayers whose activities .be they authors, athletes, actors, farmers, loggers, propri-

etors of small businesses -- generally result in fluctuating
or bunched inco-::ne.

"'Che bi 11 also splits the present 20 percent

This leaves only 2.5 million returns -- 4.9 percent of
all taxable returns -- on which the tax on dividends would
be increased.

But on these returns the tax rate reductions,

ranging from 15 percent to 23 percent and applicable to all
income -- including dividend income -- clearly outweigh the
loss of a four percent credit on the same dividend income.
This is simply because four percent is less than 15 percent
or 23 percent.

~\Thile

it may happen that a technical and

erroneous quirk of drafting in the present law relating the
retirement income credit to the dividend credit may. on
elimination of the dividend credit, increase the over-all
tax slightly in a few cases -- in which a taxpayer receives
the retirement income credit and has stockholdings, say, of
$200,000 for married couples -- yet even here the final
result under the bill is an over-all increase in after-tax
income since the corporate tax reduction will undoubtedly
result in an increase in dividend payments.
These facts on the effect of the House bill reinforce
the sound arguments for the repeal of the dividend credit
advanced in the House Report.

In essence, given the fact

that half of all dividends go to taxpayers above $20,000 and

-23 .1t

the same tire that it repealed the credit, the House

increased the dividend exclusion from $50 to $100 -- or $200
where husband and wife both qualify.

Let us consider the

combined effect of this change and theaimination of the
credit.

First, at present about 88 percent of taxable returns,
or 44.8 million returns, involve taxpayers with no dividend
income at all.
Of the remaining 12 percent of taxable returns (about

6.2 million), the dividends in about one-third, or 1.7 million returns, are excluded from tax under the present $50
exclusion.
The dividends of another one million returns would be
completely excluded from tax under the $100 exclusion of the
House bill.
The dividends of still another one million returns would
be taxed less than under present law, since for these taxpayers -- 1idth incomes up to $16,000 for married persons and
dividends up to about $600 (stock holdings of about $20,000) -the addit1.onal exclusion is worth more than the four percent
credit.

- 22 t'l·~

!-;ouse \Jays and Means Committee states:
"
. the notion that the dividend credit would
encourage equity financing does not seem to be borne
out by the events which have occurred since 1954. As
pointed out to you.r committee by the Secretary of the
Treasury in the hearings before your committee on this
bill, the ratio of equity to debt financing by corporations has not increased despite the presence of the
4-percent credit.
'"The form of the present dividend credit, in any

event, is undesirable since it reduces any double taxation by a much larger percentage for the higher income
bracket stockholders than it does for those in the
lower bracket. Information presented by the Secretary
of the Treasury to your committee indicated that the
dividend credit, even combined with the present exclusion, reduces the extra burden of double taxation by
10.4 percent in the hicihest income bracket, while
reducing it by only 4.3 percent for those subject to
the first bracket rate.
j'

It was also pointed out

t~lat

the proposed reduction from

52 percent to 48 percent in the corporate tax rate would
effectively eliminate for all taxpayers 7.7 percent of the
extra burden of double taxation, \vhich is as much as the
iividend credit accomplishes, except for those taxpayers

above ';;00 ,000 oi income.

It may also be observed that since

tile corporate tax cut amounts to $2.2 billion in reduced taxes,

the removal of a divid~nci credit involving $300 million can
han~ly

be tal,en C?~S leavin; the bill adverse to investment

- 21 The $30,000 figure can hardly be said to be unreasonably low.

J:roposals to alter the House bill by basing the

excludable insurance on some multiple of salary, such as
tv,'o

or three times salary, would simply for many companies

exclude policies running up to $300,000 and $400,000 and

even to the million dollar level.

Criticism of this pro-

vision. moreover. generally overlooks several important
aspects :

the taxable cost can easily be computed from

a table, which incidentally is based on "bargain rates".
in the sense that no loading factor is involved; and

under this table and the individual income tax rates of
the House bill the employee's tax on this item -- which tax
is the cost to him of the insurance -- still compares very
favorably with \o]hat any person,

sayan accountant. would

have to pay \vho purchases his own insurance under a groupterm plan.
Another provision l'V'hich appears to involve some disagreement concerns the four percent dividend credit.

The

House bill repealed this credit, regarding it both as ineffective to encourage equity financing and as an undesirable
approach to the problem of double taxation.

The Report of

- 20 -

to the extent the protection exceeds $30,000, is said to
be \"rong on the grounds that the employee does not receive

a taxable benefit, and that in any event $30,000 is too
low a figure.

Yet surely we can all understand that to

have one's life insurance paid for by his employer is an
important benefit, and the larger the insurance policy the
greater the benefit.

For this reason, the tax law has

always included the cost of employer-provided l1fe insurance in the employee's income, so that the group term
situation is an historical aberration.

The Report of the

House ways and Means Connnittee stresses this:
" • • • this tax-free status for employer-financed
group term life insurance is inconsistent with the
tax treatment of other types of life insurance
protection furnished employees by their employers.
!.Vhile this complete exclusion might have been considered relatively insignificant when tax rates
were 1m'1, the present relatively high rates as well
as the growing volume of group term life insurance
now provided makes it particularly inequitable to
continue this complete exclusion. The employee in
such case receives a substantial economic benefit
from this insurance protection whether or not the
policy for a specific year leads to a payment to
his beneficiary. The provision of this insurance
by the employer relieves the employee of substantial
costs of providing his own insurance protection for
his family \\mich he would otherwise have to provide
out of tax-paid dollars. rr

- 19 -

previously accomplished -- the total for all the revenue
acts since 1940 was scarcely above $600 million, the total
from 1953 to 1954 was less than $200 million.

Nor do the

changes in 1962 and 1963 represent reform just for reform's
sake

the revenue raised by them has been turned back

into rate reductions and investment incentives.
Naturally there are differing views on 80me of these
changes.

Each existing preference has its able defenders

and spokesmen, and the old saying that possession i8 ninetenths of the law certainly refers to legislative contests
regarding these preferences.

Despite all this, the course

of tax legislation since 1961, considered 1n perspective,
marks both a reversal of the prior erosion of the tax base
and progress toward elimination of tax preferences combined
\vith a reduction of high rates.

While these revenue-raising provisions in the House
bill, worked out as they were with considerable debate and
thought by the House

~ays

and Means Committee, are generally

acceptable, there are of course some who may disagree.

For

example, the provision regarding group life insurance, which
includes in an employee I s income the cost of such insurance

- 18 current earnings of foreign tax haven companies, the removal
of the tax advantages of foreign investment companies and

foreign trusts, the restrictions on the exemptions for
earned income of Americans resident abroad, the end of the

estate tax exemption for foreign real estate.
The present House bill continues the task, moving over
equally difficult terrain -- for example, the elimination

of the dividend credit, the disallowance of deductions for
certain State and local taxes, the curtailment of the exclu-

sion for sick pay, the floor under the casualty

1088

deduction,

the taxation of compensation represented by sizable group-

term life insurance policies, the restrictions on the
eligibility of executive stock options, the tightening of
the rules governing personal holding companies. the additional
tax on multiple corporations, the change in the aggregation
rules for large oil operations.

These changes embody major improvements in the equity

of the tax system.

The Revenue Act of 1962 involved $855

million of revenue-raising reforms, the House bill involves
$1.085 billion -- all together about $2 billion in changes
increaSing the equity of the tax.

This far exceeds anything

- 17 governmental a.cti.on.

But starting in 1961, as a result of

the high priority President Kennedy has given to changes

in tax policy, these matters have been the subject both
of active Governraental consideration and broad public

discussion.

This emphasis on tax policy is bringing major

structural changes in the income tax.
The 1962 Act involved significant improvements in tax
equity, accomplished through revenue-raising changes in
areas that, while clearly in need of change, presented
complex and thorny problems difficult of resolution.

The

mere enumeration of the changes underscores both the obvious
difficulty of the task and the significant reforms accomplished -- the taxation of mutual savings banks and savings

and loan associations, the taxation of the underwriting
income of mutual fire anu casualty companies, the current

taxation of the income of cooperatives, the revision of the
rules involving expense accounts and business gifts, the
elimination of the conversion of ordinary income into capital
gatn on sales of depreciable personal property, an effective
reporting system for dividend and interest income, the many
changes in (he foreign area, such as the taxation of the

... 16 -

achieved in a balanced fashion that baa hrouaht wide aupport
for the over-all appropriatenes8 of the reductions.
II

Let me turn now to the second significant aspect of
these tax measures, the structural changes contained in the
proposed bill, together with those already enacted in the
1962 Act.

The last half of the 1950' 8 saw a comprehen8ive

examination of national tax policy conducted by Congressional
committees, starting with the study of the 1955 Subcommittee

on Tax Policy of the Joint Economic Committee, chaired by
Congressman Wilbur Mills, and continuing through the 1959
studies of the House Ways and Means Committee, also chaired
by Mr. Mills.

To some extent this examination was matched

by discussion in academic circles.

The examination disclosed

many criticisms of the tax structure, centering mainly on the
preferences that favored some taxpayers, the hardships or
inequalities faced by others, and the resulting great disparities in tax burdens.

To this was added a concern over

the growing complexity of the tax laws.

Throughout this

period these criticisms and concerns remained at the di8cuasion level and did not arouse broad publie consideration or

- 15 increase aiter-tax incomes more in these brackets.
In point of fact, the House bill reduces taxes at all
levels.

It Drovides the greatest percentage reduction in

the lmvest brackets where the hardship of the present system
is evident.

In short, there is in the current tax bill no

group of taxpayers \vhich has been "forgotten", nor -- and
this is important, given the Treasury recommendation that
capital gain rates not be changed -- any group which has
been too well remembered.
Placed in this perspective, the central aspect of the
1962 and 1963 tax measures is the considerable reduction in
the over-all weight of the income tax.

The reductions under

the pending tax bill reduce individual income tax liabilities
by about nine billion dollars, or 19 percent.

The changes

in corporate tax rates under that bill, together with the
1962 reductions under the investment credit and the revised
depreciation rules, reduce corporate tax liabilities by
1J,..5

billi.on dollars, or also 19 percent.

The combined effect

is thus a 19 percent reduction in income tax liabilities.
1:'1ureover, this reduction of one ... fifth in income tax liabilities -- the largest reduction in our tax history -- is being

- 14 taxpayer's total income.

They thus forget that segments of

the taxpayer's income fall in the preceding brackets, so
that the rate reductions in all these preceding bracket.
of course accumulate to, and thus benefit. the middle

brackets.

The suggestions these groups make would, of

course, radically alter the shape of the tax reduction.
Thus the proposed rate schedule of the HAM (coupled with
its suggestion that the dividend credit be retained) would
substantially decrease the share of tax reduction going to

the groups under $10.000 as compared with the House bill,
would leave the share the same -- about 16 percent -- in

the $10,000 to $20,000 bracket, but would increase it from
15 percent to 24 percent in the $20,000 to $50,000 bracket
and from 12.6 percent to 30.7 percent for those over $50,000.
On the other hand, those witnesses who seek to shift the

reduction to lower brackets are prone to talk in terms of the
greater increases in after-tax income received by the upper
brackets.

But these overlook the fact that almost any change

in tax rates under a progressive system must produee this
result, since such a system taxes incomes more heavily at
the top.

Hence even a small reduction in tax liability will

- 13 from the consumption gear to the investment gear -- are
seldom obvious.

The forces of consumer demand and invest-

ment stimulus are mutually reinforcing, and their interaction will provide our economy with a strength that

neither would offer alone.
This aspect of balance in the House bill i8 a1ao

reflected in the nature of the individual rate reductions.
Here, too, the witnesses before the Senate Finance Committee
have taken polar positions.

One will say it 18 a rich man's

bill, only to be followed by another who asserts just as
forcefully that the middle and upper brackets have been
unfairly treated since a major share of the benefits goe.
to the lower brackets.

These latter witnesses -- some of

whom like to speak of the middle bracket taxpayer

the

"forgotten man" -- also like to stress the tax rates applicable to single persons in the middle brackets, thus overlooking the fact that the rates for married persons -- and

94 percent of taxpayers over $10,000 are married .- are of
course far lower i.n these brackets, since the brackets are

twice as wide and the progression far 1es8.

They a180 point

to the bracket or marginal rates at the.. levels and 8~
titleS make tbem soun~ like effective rates applicable to the

- 12 -

The

balance" of the tax bill lies in this reliance on

both consumer demand and investment incentive to achieve
economic

gro\~h.

The larger share devoted to consumer

demand is sim¥ly a tangible recognition that, if we are to
lift actual output to our present capacity, our most pressing and immediate need is an increase in consumer demand.
It is also a recognition that investment incentives -- such
as the investment credit -- work best when demand is strong.
TIle investment credit and depreciation reform have served

us well -- witness, for example, the railroads or the machine
tool industry -- but their force will become even more evident as demand increases.
The sizable share of tax reduction devoted to investment
incentives in turn represents an awareness that, as our economy moves closer to its present capacity, the maintenance of
the upward drive and an increase in our basic rate of growth

ciepend heavily upon increaSing investment levels.
• •

•

The tandem

re!1ance on bota consumer demand and invesement incentives
rept"esents a belief that: rigid or extreme attitudes are always

suspect in a field as complex as economic growth, and that
niceties

timing

precisely, for example, when to shift

- 11 tailored specially to the invesement sector, will constitute
a significant stimulus to investment.
For business investment, perhaps the most important
effect of these changes lies in the increase in the profitan increase of about 3S percent

ability of investment

in the after-tax rate of return.

For many businesses the

decisive factors determining new investment will include
not only this profitability increase but also the increase
in cash flow resulting from the tax changes.

This may be

the ease for many small and medium-sized corporations which
must rely almost entirely on internal cash flow to support
investment.

These corporations not only receive a larger

percentage reduction in taxes -- 27 percent for those under
$25,000 of income

but are also unaffected by the accelera-

tion of corporate tax payments, which affects only the larger
corporations.

These larger corporations generally have ample

resources to finance their investments or can readily absorb
the relatively small after-tax interest cost which that
acceleration involves.

In addition to the corporate sector,

the 10 million proprietorships and partnerships will receive
important benefits through the 20 percent or
indiv:f.dual income taxes.

reduction in

- 10 has only been about $20 - $25 billion.

When this annual

increase drops to something like $2 billion as it did in
19S9 compared to 1957, we have what is generally recognized
to be a re.cession.

Thus the difference between prosperity

and recession can be a difference of something like $20
bil1:ton in the GNP level.

Clearly then the initial

$8 billion of added consumer spending -- with its larger
impact on GNP
tant

and highly impor-

will be an effective

economic force.
In its lowering of corporate rates -- involving $2.2
•

billion

and in the reduction of income tax rates in the

middle and upper brackets, the bill provides a strong stimuIus to investment.

To this can be added the $2-1/2 billion

accorded in 1962 through the investment credit and depreciation reform -- or a total of about $5 billion.

Moreover,

the provision in the House bill eliminating the reduction
in depreciation basis by the amount of the investment credit
just about doubles the incentive effect of the credit and at
the same time sweeps away the complications which that basia
adjustment nmv- involves.

These changes, which involve a

reliance both on general rate reduction and on approaches

- 9 -

reduction of almost one-fi.fth in their tax is certainly a
significant cut.

But far more important than the immediate

dollar benefits each taxpayer will receive are the indirect
benefits -- in tencs of increased personal income, better
employment opportunities, and greater economic security
that will come as a result of the i.mpact of the tax cut on
the economy.

For an initial increase of over $8 billion in

aggregate consurner demand is a sizable economic lever.

More-

over, this $8 billion .::If initial spending multiplies into
,noLe

and more consumption as the first round of spending

generates a second round, and so on.

The Joint Economic

Committee of Congress has estimated, for example, that a
$10 billion tax reduction in the form suggested by the

President would increase our GNP over the next few years by
about

~40

billlon.

The tax bill now under consideration,

of course, is an $11 billion cut, so this would presumably
have an even greater effect on GNf.

On the basis of this

estin18te, the $8 billion of initial consumer demand could
be expected to add more than $30 billion to GNP, so you can
see that this :'?8 billion tvill have a significant impact on
the economy.

The normal annual GNP increase in recent years

- 8 -

The real difficulty, of course, is that most of the
witnesses are stating positions in terms of extremes.

one approaches the criticisms of the bill from a balance
sheet point of view, balancing pros and cons, the net criticism is very slight indeed.

And far from being merely

fanciful, such a conclusion is, in fact, quite in accord
with reality -- for almost every witness favors this tax
bill if he cannot get his hill.

Clearly, therefore, the tax

bill emerges from all this pulling and hauling as a balanced
bill -- a bill that embodies the wisdom in both approaches
to increased economic activity and greater growth but shuns
the extremes for which the advocates of these approaches have
argued.
Thus the bill, through its net reduction in individual
tax rates, involves an initial increase of more than $8 billion
in consumer spending.

Those who try to minimize the impact

of the tax cut by dividing the total cut by the total number
of taxpayers and then dividing agaiIl to get the average cut
per week or some similar figure are, in effect, looking at
the tax cut through the wrong end of the telescope.
all I think p.~st taxpayers will agree that an average

Firat of

- 7 '1lBtters as more savings, larger cash flow, increased profit-

ability oE investment, higher after-tax rates of return. and
greater encouragement to undertake new projects and develop
new prouucts.

Their stress is thus on direct incentives to

investment -- which, translated into tax rates, means a tax
reduction that emphasizes a very considerable lowering of
corporate tax rates and, for the individual income taxes,
rate cuts concentrated in the brackets above $10,000.
Much of the testimony before the Senate Finance Committee
has been couched in terms of these competing, and
phrased, diametrically opposite points of view.

generally

In thi8 clash

of views, one thing is certainly clear -- the Congress cannot
simultaneously follow both extremes.

Thus, one proposal to

increase personal exemptions to $1,000 would -- all by its.lf ••
cost about $12 billion, which is more than the entire $11 billion program now under consideration.
corporate tax to

Proposals to reduce the

percent would cost $3.5 billion.

A rate

cut that would start at 12 percent on the first $1,000,
some

l~ve

others

suggested, and also rise only to 50 percent, as

t\~ould

suggest, could cost about $13 to $15 billion.

- 6 tax reduction to the individual rates and, in addition, concentrating the reduction as much as possible in the bracket.
below $10,000, either through an increase in personal exemptions or a lowering of bottom bracket rates.

They argue

that since individuals on the average spend about 93 percent
of increased incomes, with the lower brackets at or above
the average, practically the entire tax reduction would thus
go into consumption -- and, given their premise that increased
consumption is the path to increased business activity, bring

the needed stimulus.
But another set of witnesses has advanced a competing
argument.

investment.

For them the key to economic activity is increased

They stress -- and on this there 1s no disagree-

ment -- that our investment in plant and equipment bas lagged
markedly over the past few years.
and

Thus, investment in plant

eqUipment as a proportion of gross national product has

declined from around 8 percent in 1950 to 6.7 percent in 1962.

These witnesses urge that reversal of this trend, by increasing the rate of modernization of plant and equipment as well

as adding to new capacity, will provide the jobs we need.
Increased investnlent, they say, turns predominantly on such

- 5 or private consumers and investors will control how
our increased output is to be used. The Administration, in supporting H. R. 8363, has chosen the free
enteqJJ: :i.se, pl:i.vate economy course. It prefers that
course. This is the course that leaves to private
individual and ~orporate spenders the decision as to
which particular goods and services shall be purchased with the increase in demand that will flow
from the substantial reductions we are recommending
in our harsh tax rates. I feel certain that the
great majority of Americans agree with the Administration's prefe't"ence for the tax reduction, private
economy route to full production and full employment.
'fhe enactment of H. R. 8363 will carry out their
desires."
when we thus turn to the private sector -- and agree in
principle that tax reduction is the better course·-- we find
a difference of opinion, or rather a variety of shades of

opinion. on how best to bring about the needed increase in
economic activity.

There are those who urge that the

CI'UX

of the whole problem is insufficient consumer demand.

For

them the key to greater use of existing capacity, to more
jobs, to more investment, is essentially more dollars leeking
the goods business produces.

Accordingly, for them the 801.

purpose of the tax reduction -- if it 1s to achieve the
needed increase in economic activity -- should be to remedy
this insufficiency of consumer demand by increa8ing con8umer
purchasin~

power.

This means, they say. confining the entire

- 4 -

meet and finance our pressing future needs -- defens., .pace
eXllloration, education, housing. transportation. urban
renewal -- all that our society demands.

Put simply. if

we grow in the next ten years at four percent rather than
three percent, our output at the end of the decade will be
~30

billion higher.
These are the goals.

The task is to achieve them.

is on this question that the Senate Finance Committee in its
hearings on the tax bill has become a sort of economics
seminar. with a very sizable crowd of visiting profesaors.
each with his own plan.

In this economic debate, there are

some who urge that the proper path lies through increased

Federal expenditures.

But the Administration and the House

of Representatives have rejected this course.

Aa Secretary

Dillon stated in his testimony before the Senate Finance
Committee -- and 1 quote:

"Our persisting problem has been insufficient
demand. The Federal Government has the capacity to
meet this problem and since the enactment of the
Employment Act of 1964 it has had a clear responsibility to do so. Two entirely different course are
open. Either additional Government expenditures,
which mean bigger central goverament, or an increa••
in the gro\~h of the private sector, can stimulate
our economy. The choice is whether the Government

- J -

another example, for six years our economy has not been
operating at capacity or close to it.

Our industrial pro-

duction is around 126 percent of the 1957-1959 average, a
record high -- but the average rate of plant utilization is
only about 87 percent, which is well below the 92 percent
rate preferred by business.
The truth is that today our economy falls short of what
~ve

could be producing by over $30 billion a year -- the

increase in the national output or gross national product
we would achieve if ,,,e could reduce unemployment to our

interim goal of four percent.

But there is more to the prob-

lem than this matching of actual output with our present
available capacity.

It will not suffice merely to approach

our full employment goal and then see it move away from UI
again.

Our economy must grow faster than it has been growing

over the long term if, once we close the gap, we are to keep
it closed and at the same time increase our rate of economic

growth.

This is the primary goal of domestic economic

policy -- a significant increase in our long-run rate of
economic growth.

Economists see in this lifting of the entire

economy to new heights the most feasible and adequate way to

- 2 l)ur recent econoi',1ic recovery from the 1960 recession has

been quite satisfactory.

During the 32 months since that

recovery started, we have averaged an annual growth rate
of almost 5-1/2 percent -- a very respectable figure.
put and

emplo~TIent

Out-

are posting new highs, as are a number

of other economic indicators.
TI1ese records are solid accomplishments, but we must be
caJ-'eful to interpret them correctly.
tell us that

ou~

For while these records

pace is up and our country growing, that is

not the crucial fact.

The crucial fact is that our rate of

grmvth is not rapid enough for our needs.

The records

represent recovery irom recession, but recovery alone will
not suffice.

Our needs continue to grow relentlessly -- and

to meet those needs today, and even greater needs tomorrow,
we

must maintain a decisively higher rate of economic growth

than we have had over the past five or six years.

Today, for

example, our economy is supplying almost 70 million jobs, a
record high, but almost 4 mi.llion people are unsuccessfully
seeking jobs.

And the years just ahead will see 'a sharply

grmving need for Dore jobs, as new entrants enlarge the labor
:'orce and

Some

jobs di sappear with technological changes.

.~;;J"i.'l.::KJ

I)'i

'1',;[ H0NORABLE STANLEY S. SURREY

SECRETARY Of THE TREASURY
BEFORE THE CALIFORNIA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
LOS ANGELES, CALIFORNIA
FRIDAY, NOVEMBER 8, 1963, 11:00 A.M. PST
I).S::iISTANT

TIlE TAX BILL AND FEDERAL TA.,{ POLICY
Three major topics stand out in any discussion of the
tax bIll now before the Senate Finance Committee.

These

topics are the rate reductions, the structural changes and
their relationship to the structural changes already made
in the Revenue Act of 1962, and finally, the role of the
tax bill in contributing to a solution to the major economic
problems facing the United States.
topics I intend to talk about today.

Those are the three
I will begin with what,

to almost every taxpayer, is the most interesting part of the
hill -- the rate redu.ctions themselves.
I

Any consideration of the rate reductions should start

Hith the reason for reducing rates in the first place.

The

reason rate reductions were proposed by the Administration
and 8·iopted by the House is to move us closer to our basic
domestic economic goal -- a higher level of employment,
tax revenues and economic activity generally.

TREASURY DEPARTMENT
Washington

FOR RELEASE:

UPON DELIVERY

REMARKS BY THE HONORABLE STANELY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE CALIFORNIA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
LOS ANGELES, CALIFORNIA
FRIDAY, NOVEMBER 8, 1963, 11:00 A.M. PST
THE TAX BILL AND FEDERAL TAX POLICY
Three major topics stand out in any discussion of the tax bill
now before the Senate Finance Committee. These topics are the rate
reductions, the structural changes and their relationship to the
structural changes already made in the Revenue Act of 1962, and
finally, the role of the tax bill in contributing to a solution to
the major economic problems facing the United States. Those are
the three topics I intend to talk about today. I will begin with
what, to almost every taxpayer, is the most interesting part of the
bill -- the rate reductions themselves.
I

Any consideration of the rate reductions should start with the
reason for reducing rates in the first place. The reason rate
reductions were proposed by the Administration and adopted by the
House is to move us closer to our basic domestic economic goal -a higher level of employment, income, profits, tax revenues and
economic activity generally. Our recent economic recovery from the
1960 recession has been quite satisfactory. During the 32 months
since that recovery started, we have averaged an annual growth rate
of almost 5-1/2 percent -- a very respectable figure. Output and
employment are posting new highs, as are a number of other economic
indicators.
These records are solid accomplishments, but we must be careful
to interpret them correctly. For while these records tell us that
Jur pace is up and our country growing, that is not the crucial fact.
rhe crucial fact is that our rate of growth is not rapid enough for
rur needs. The records represent recovery from recession, but
)-1034

- 2 -

recovery alone will not suffice. Our needs continue to grow
relentlessly -- and to meet those needs today, and even greater needs
tomorrow, we must maintain a decisively higher rate of economic
growth than we have had over ~he past five or six years. Today, for
example, our economy is suppl,ing almost 70 million jobs, a record
high, but almost 4 million peo~le are unsuccessfully seeking jobs.
And the years just ahead will see a sharply growing need for more
jobs, as new entrants enlarge the labor force and some jobs
disappear with technological changes. As another example, for six
years our economy has not been operating at capacity or close to it.
Our industrial production is around 126 percent of the 1957-1959
average, a record high -- but the average rate of plant utilization
is only about 87 percent, which is well below the 92 percent rate
preferred by business.
The truth is that today our economy falls short of what we
could be producing by over $30 billion a year -- the increase in the
national output or gross national product we would achieve if we
could reduce unemployment to our interim goal of four percent. But
there is more to the problem than this matching of actual output
with our present available capacity. It will not suffice merely
to approach our full employment goal and then see it move away from
us again. Our economy must grow faster than it has been growing
over the long term if, once we close the gap, we are to keep it
closed and at the same time increase our rate of economic growth.
This is the primary goal of domestic economic policy -- a significant
increase in our long-run rate of economic growth. Economists see
in this lifting of the entire economy to new heights the most
feasible and adequate way to meet and finance our pressing future
needs -- defense, space exploration, education, housing, transportatio
urban renewal -- all that our society demands. Put simply, if we
grow in the next ten years at four percent rather than three percent,
oor output at the end of the decade will be $80 billion higher.
These are the goals. The task is to achieve them. It is on
this question that the Senate Finance Committee in its hearings on
the tax bill has become a sort of economics seminar, with a very
sizable crowd of visiting professors, each with his own plan. In
this economic debate, there are some who urge that the proper path
lies through increased Federal expenditures. But the Administration
and the House of Representatives have rejected this course. As
Secretary Dillon stated in his testimony before the Senate Finance
Committee -- and I quote:
"Our persisting problem has been insufficient
demand. The Federal Government has the capacity to
meet this problem and since the enactment of the
Employment Act of 1964 it has had a clear
responsibility to do so. Two entirely different

- 3 courses areopen. Either additional Government
expenditures, which mean bigger central government,
or an increase in the growth of the private sector,
can stimulate our economy. The choice is whether
the Government or private consumers and investors
will control how our increased output is to be used.
The Administration, in supporting H.R. 8363, has
chosen the free enterprise, private economy course.
It prefers that course. This is the course that
leaves to private individual and corporate spenders
the decision as to which particular goods and
services shall be purchased with the increase in
demand that will flow from the substantial reductions
we are recommending in our harsh tax rates. I feel
certain that the great majority of Americans agree
with the Administration 1 s preference for the tax
reduction, private economy route to full production
and full employment. The enactment of H.R. 8363 will
carry out their desires."
When we thus turn to the private sector -- and agree in
principle that tax reduction is the better course -- we find a
difference of opinion, or rather a variety of shades of opinion,
on how best to bring about the needed increase in economic activity.
There are those who urge that the crux of the whole problem is
insufficient consumer demand. For them the key to greater use of
existing capacity, to more jobs, to more investment, is essentially
more dollars seeking the goods business produces. Accordingly, for
,them the sole purpose of the tax reduction -- if it is to achieve
the needed increase in economic activity -- should be to remedy
this insufficiency of consumer demand by increasing cons~~r purchasi
power. This means, they say, confining the entire tax reduction to
the individual rates and, in addition, concentrating the reduction
as much as possible in the brackets below $10,000, either through
an increase in personal exemptions or a lowering of bottom bracket
rates. They argue that since individuals on the average spend about
93 percent of increased incomes, with the lower brackets at or above
the average, practically the entire tax reduction would thus go
into consumption -- and, given their premise that increased
consumption is the path to increased business activity, bring the
needed stimulus.
But another set of witnesses has advanced a competing argument.
For them the key to economic activity is increased investment.
They stress -- and on this there is no disagreement -- that our
investment in plant and equipment has lagged markedly over the past

- 4 tew years. Thus, investment in plant and equipment as a proportion
of gross national product has declined from around 8 percent in
1950 to 6.7 percent in 1962. These witnesses urge that reversal
of this trend, by increasing the rate of modernization of plant
and equipment as well as adding to new capacity, will provide the
jobs we need. Increased investment, they say, turns predominantly
on such matters as more savings, larger cash flow, increased
profitability of investment, higher after-tax rates of return, and
greater encouragement to undertake new projects and develop new
products. Their stress is thus on direct incentives to investment
which, translated into tax rates, means a tax reduction that
emphasizes a very considerable lowering of corporate tax rates and,
for the individual income taxes, rate cuts concentrated in the
brackets above $10,000.
Much of the testimony before the Senate Finance Committee
has been couched in terms of these competing, and as generally
phrased, diametrically opposite points of view. In this clash
of views, one thing is certainly clear ~- the Congress cannot
simultaneously follow both extremes. Thus, one proposal to increase
personal exemptions to $1,000 would -- all by itself -- cost about
$12 billion, which is more than the entire $11 billion program now
under consideration. Proposals to reduce the corporate tax to
45 percent would cost $3.5 billion. A rate cut that would start
at 12 percent on the first $1,000, as some have suggested, and also
rise only to 50 percent,as others would suggest, could cost about
$13 to $15 billion.
The real difficulty, of course, is that most of the witnesses
are stating positions in terms of extremes. If one approaches
the criticisms of the bill from a balance sheet point of view,
balancing pros and cons, the net criticism is very slight indeed.
And far from being merely fanciful, such a conclusion is, in fact,
quite in accord with reality -- for almost every witness favors
this tax bill if he cannot get his bill. Clearly, therefore, the
tax bill emerges from all this pulling and hauling as a balanced
bill -- a bill that embodies the wisdom in both approaches to
increased economic activity and greater growth but shuns the
extremes for which the advocates of these approaches have argued.
Thus the bill, through its net reduction in individual tax
rates, involves an initial increase of more than $8 billion in
consumer spending. Those who try to minimize the impact of the
tax cut by dividing the total cut by the total number of taxpayers
and then dividing again to get the average cut per week or some
Similar figure are, in effect, looking at the tax cut through the
wrong end of the telescope. First of all I think most taxpayers
will agree that an average reduction of almost one-fifth in their

- 5 -

tax is certainly a significant cut. But far more important than the
immediate dollar benefits each taxpayer will receive are the indirec
benefits -- in terms of increased personal income, better employment
opportunities, and greater economic security -- that will come as a
result of the impact of the tax cut on the economy. For an initial
increase of over $8 billion in aggregate consumer demand is a
sizable economic lever. Moreover, this $8 billion of initial
spending multiplies into more and more consumption as the first rounl
of spending generates a second round, and so on. The Joint Economic
Committee of Congress has estimated, for example, that a $10 billion
tax reduction in the form suggested by the President would increase
our GNP over the next few years by about $40 billion. The tax bill
now under consideration, of course, is an $11 billion cut, so this
would presumably have an even greater effect on GNP. On the basis
of this estimate, the $8 billion of initial consumer demand could
be expected to add more than $30 billion to GNP, so you can see
that this $8 billion will have a significant impact on the economy.
The normal annual GNP increase in recent years has only been about
$20 - $25 billion. When this annual increase drops to something
like $2 billion as it did in 1958 compared to 1957, we have what is
generally recognized to be a recession. Thus the difference
between prosperity and recession can be a difference of something
like $20 billion in the GNP level. Clearly then the initial
$8 billion of added consumer spending -- with its larger impact
on GNP -- will be an effective -- and highly important -- economic
force.
In its lowering of corporate rates -- involving $2.2 billion
and in the reduction of income tax rates in the middle and upper
brackets, the bill provides a strong stimulus to investment. To
this can be added the $2-1/2 billion accorded in 1962 through the
investment credit and depreciation reform -- or a total of about
$5 billion. Moreover, the p~ovision in the House bill eliminating
the reduction in depreciation basis by the amount of the investment
credit just about doubles the incentive effect of the credit and at
the same time sweeps away the complications which that basis
adjustment now involves. These changes, which involve a reliance
both on general rate reduction and on approaches tailored specially
to the investment sector, will constitute a significant stimulus
to investment.
For business investment, perhaps the most important effect of
these changes lies in the increase in the profitability of
investment -- an increase of about 35 percent in the after-tax rate

- 6 -

of return. For many businesses the decisive factors determining new
investment will include not only this profitability increase but
also the increase in cash flow resulting from the tax changes.
This may be the case for many small and medium-sized corporations
which must rely almost entirely on internal cash flow to support
investment. These corporations not only receive a larger percentage
reduction in taxes -- 27 percent for those under $25,000 of income -but are also unaffected by the acceleration of corporate tax payments
which affects only the larger corporations. These larger corporatior
generally have ample resources to finance their investments or can
readily absorb the relatively small after-tax interest cost which
that acceleration involves. In addition to the corporate sector,
the 10 million proprietorships and partnerships will receive
important benefits through the 20 percent or so reduction in individt
income taxes.
The "balance" of the tax bill lies in this reliance on both
consumer demand and investment incentive to achieve economic growth.
The larger share devoted to consumer demand is simply a tangible
recognition that, if we are to lift actual output to our present
capacity, our most pressing and immediate need is an increase in
consumer demand. It is also a recognition that investment
incentives -- such as the investment credit -- work best when demand
is strong. The investment credit and depreciation reform have
served us well -- witness, for example, the railroads or the machine
tool industry -- but their force will become even more evident as
demand increases.
The sizable share of tax reduction devoted to investment
incentives in turn represents an awareness that, as our economy
moves closer to its present capacity, the maintenance of the upward
drive and an increase in our basic rate of growth depend heavily
upon increasing investment levels. The tandem reliance on both
consumer demand and investment incentives represents a belief that
rigid or extreme attitudes are always suspect in a field as complex
as economic growth, and that niceties of timing -- precisely, for
example, when to shift from the consumption gear to the investment
gear -- are seldom obvious. The forces of consumer demand and
investment stimulus are mutually reinforcing, and their interaction
will provide our economy with a strength that neither would offer
alone.
This aspect of balance in the House bill is also reflected in
the nature of the individual rate reductions. Here, too, the
witnesses before the Senate Finance Committee have taken polar
positions. One will say it is a rich man's bill, only to be follow

- 7 by another who asserts just as forcefully that the middle and upper

brackets have been unfairly treated since a major share of the
benefits goes to the lower brackets. These latter witnesses -some of whom like to speak of the middle bracket taxpayer as the
"forgotten man" -- also like to stress the tax rates applicable to
single persons in the middle brackets, thus overlooking the fact
that the rates for married persons -- and 94 percent of taxpayers
over $10,000 are married -- are of course far lower in these
brackets, since the brackets are twice as wide and the progression
far less. They also point to the bracket or marginal rates at
these levels and sometimes make them sound like effective rates
applicable to the taxpayer's total income. They thus forget that
se~ts of the taxpayer's income fall in the preceding brackets, so
that the rate reductions in all these preceding brackets of course
accumulate to, and thus benefit, the middle brackets. The
suggestions these groups make would, of course, radically alter the
shape of the tax reduction. Thus the proposed rate schedule of the
RAM (coupled with its suggestion that the dividend credit be
retained) would substantially decrease the share of tax reduction
going to the groups under $10,000 as compared with the House bill, it
would leave the share the same -- about 16 percent -- in the
$10,000 to $20,000 bracket, but would increase it from 15 percent
to 24 percent in the $20,000 to $50,000 bracket and from 12.6
percent to 30.7 percent for those over $50,000.
On the other hand, those witnesses who seek to shift the

reducti.on to lower brackets are prone to talk in terms of the
greater increases in after-tax income received by the upper brackets.
But these overlook the fact that almost any change in tax rates
under a progressive system must produce this result, since such a
system taxes incomes more heavily at the top. Hence even a small
reduction in tax liability will increase after-tax incomes more in
these brackets.
In point of fact~ the House bill reduces taxes at all levels.
It provides the greatest percentage reduction in the lowest brackets
where the hardship of the present system is evident. In short,
there is in the current tax bill no group of taxpayers which has
been "forgotten" ,nor -- and this is important, given the Treasury
recommendation that capital gain rates not be changed -- any group
which has been too well remembered.
Placed in this perspective, the central aspect of the 1962 and
1963 tax measures is the considerable reduction in the over-all
weight of the income tax. The reductions under the pending tax
bill reduce individual income tax liabilitie~ by about nine billion
dollars, or 19 percent. The changes in corporate tax rates under

- 8 that bill, together with the 1962 reductions under the investment
credit and the revised depreciation rules, reduce corporate tax
liabilities by 4.5 billion dollars, or also 19 percent. The
combined effect is thus a 19 percent reduction in income tax
liabilities. Moreover, this reduction of one-fifth in income tax
liabilities -- the largest reduction in our tax history -- is being
achieved in a balanced fashion that has brought wide support for
the over-all appropriateness of the reductions.
II

Let me turn now to the second significant aspect of these tax
measures, the structural changes contained in the proposed bill,
together with those already enacted in the 1962 Act. The last half
of the 1950's saw a comprehensive examination of national tax policy
conducted by Congressional committees, starting with the study of
the 1955 Subcommittee on Tax Policy of the Joint Economic Committee,
chaired by Congressman Wilbur Mills, and continuing through the
1959 studies of the House Ways and Means Committee, also chaired
by Mr. Mills. To some extent this examination was matched by
mscussion in academic circles. The examination disclosed many
criticisms of the tax structure, centering mainly on the preferences
that favored some taxpayers, the hardships or inequalities faced by
others, and the resulting great disparities in tax burdens. To
this was added a concern over the growing complexity of the tax
laws. Throughout this period these criticisms and concerns remained
at the discussion level and did not arouse broad public consideration
or governmental action. But starting in 1961, as a result of the
high priority President Kennedy has given to changes in tax policy,
these matters have been the subject both of active Governmental
consideration and broad public discussion. This emphasis on tax
policy is bringing major structural changes in the income tax.
The 1962 Act involved significant improvements in tax equity,
accomplished through revenue-raising changes in areas that, while
clearly in need of change, presented complex and thorny problems
difficult of resolution. The mere enumeration of the changes
underscores both the obvious difficulty of the task and the
significant reforms accomplished -- the taxation of mutual savings
banks and savings and loan associations, the taxation of the
underwriting income of mutual fire and casualty companies, the
current taxation of the income of cooperatives, the revision of the
rules involving expense accounts and business gifts, the
elimination of the conversion of ordinary income into capital gain
on sales of depreciable personal property, an effective reporting
system for dividend and interest income, the many changes in the
foreign area, such as the taxation of the current earnings of
foreign tax haven companies, the removal of the tax advant~ge~ of
- reign investment companies and foreign trusts, the restr~ct~ons

- 9 -

on the exemptions for earned income of Americans resident abroad,
the end of the estate tax exemption for foreign real estate.
The present House bill continues the task, moving over
equally difficult terrain -- for example, the elimination of the
dividend credit, the disallowance of deductions for certain State
and local taxes, the curtailment of the exclusion for sick pay,
the floor under the casualty loss deduction, the taxation of
compensation represented by sizable group-term life insurance
policies, the restrictions on the eligibility of executive stock
options, the tightening of the rules governing personal holding
companies, the additional tax on multiple corporations, the change
in the aggregation rules for large oil operations.
These changes embody major improvements in the equity of the
tax system. The Revenue Act of 1962 involved $855 million of
revenue-raising reforms, the House bill involves $1.085 billion -all together about $2 billion in changes increasing the equity of
the tax. This far exceeds anything previously accomplished -- the
total for all the revenue acts since 1940 was scarcely above
$600 million, the total from 1953 to 1954 was less than $200 million.
Nor do the changes in 1962 and 1963 represent reform just for
reform's sake -- the revenue raised by them has been turned back
into rate reductions and investment incentives.
Naturally there are differing views on some of these changes.
Each existing preference has its able defenders and spokesmen, and
the old saying that possession is nine-tenths of the law certainly
refers to legislative contests regarding these preferences.
Despite all this, the course of tax legislation since 1961,
considered in perspective, marks both a reversal of the prior
erosion of the tax base and progress toward elimination of tax
preferences combined with a reduction of high rates.
While these revenue-raising provisions in the House bill,
worked out as they were with considerable debate and thought by
the House Ways and Means Committee, are generally acceptable, there
are ,of course ,some who may disagree. For example, the provision
regarding group life insurance, which includes in an employee's
income the cost of such insurance to the extent the protection
exceeds $30,000, is said to be wrong on the grounds that the employee
does not receive a taxable benefit, and that in any event $30,000
is too low a figure. Yet surely we can all understand that to
have one's life insurance paid for by his employer is an important
benefit, and the larger the insurance policy the greater the benefit.
For this reason, the tax law has always included the cost of
employer-provided life insurance in the employee's income, so that
the group term situation is an historical aberration. The Report
3£ the Hous~ Ways and MeaOS,Committee stresses this:

- 10 " • • . this tax-free status for employer-financed
group term life insurance is inconsistent with the
tax treatment of other types of life insurance
protection furnished employees by their employers.
While this complete exclusion might have been
considered relatively insignificant when tax rates
were low, the present relatively high rates as
well as the growing volume of group term life
insurance now provided makes it particularly
inequitable to continue this complete exclusion.
The employee in such case receives a substantial
economic benefit from this insurance protection
whether or not the policy for a specific year
leads to a payment to his beneficiary. The
provision of this insurance by the employer
relieves the employee of substantial costs of
providing his own insurance protection for his
family which he would otherwise have to provide
out of tax-paid dollars.
The $30,000 figure can hardly be said to be unreasonably low.
Proposals to alter the House bill by basing the excludable
insurance on some mUltiple of salary, such as two or three times
salary, would simply for many companies exclude policies running
up to $300,000 and $400,000 and even to the million dollar level.
Criticism of this provision, moreover, generally overlooks
several important aspects: ~,the taxable cost can easily
be computed from a table, which incidentally is based on "bargain
rates", in the sense that no loading factor is involved; and
~, under this table and the individual income tax rates of
the House bill the employee's tax on this item -- which tax is
the cost to him of the insurance -- still compares very favorably
with what any person, sayan accountant, would have to pay who
purchases his own insurance undE~r a group-term plan.
Another provision which appears to involve some disagreement
Concerns the four percent dividend credit. The House bill
repealed this credit, regarding it both as ineffective to
encourage equity financing and as an undesirable approach to the
problem of double taxation. The Report of House Ways and Means
Committee states:
" . . . the notion that the dividend credit would
encourage equity financing does not seem to be borne
out by the events which have occurred since 1954.
As pointed out to your committee by the Secretary
of the Treasury in the hearings before your committee
on this bill, the ratio of equity to debt financing

- 11 by corporations has not increased despite the
presence of the 4-percent credit.
"The form of the present dividend credit, in
any event, is undesirable since it reduces any
double taxation by a much larger percentage for
the higher income bracket stockholders than it
does for those in the lower bracket. Information
presented by the Secretary of the Treasury to your
committee indicated that the dividend credit, even
combined with the present exclusion, reduces the
extra burden of double taxation by 10.4 percent in
the highest income bracket, while reducing it by
only 4.3 percent for those subject to the first
bracket rate."
It was also pointed out that the proposed reduction from

S2 percent to 48 percent in the corporate tax rate would
effectively eliminate for all taxpayers 7.7 percent of the extra
burden of double taxation, which is as much as the dividend
credit accomplishes, except for those taxpayers above $60,000
of income. It may also be observed that since the corporate tax
cut amounts to $2.2 billion in reduced taxes, the removal of
a dividend credit involving $300 million can hardly be taken as
leaving the bill adverse to investment incentives.
At the same time that it repealed the credit, the House
increased the dividend exclusion from $50 to $100 -- or $200 where
husband and wife both qualify. Let us consider the combined effect
of this change and the elimination of the credit.
First, at present about 88 percent of taxable returns, or
44.8 million returns, involve taxpayers with no dividend income at all
Of the remaining 12 percent of taxable returns (about 6.2
million), the dividends in about one-third, or 1.7 million returns,
are excluded from tax under the present $50 exclusion.
The dividends of another one million returns would be
completely excluded from tax under the $100 exclusion of the
House bill.
The dividends of still another one million returns would
be taxed less than under present law, since for these taxpayers
with incomes up to $16,000 for married persons and dividends up
to about $600 (stock holdings of about $20,000) -- the
additional exclusion is worth more than the four percent
crpdi t.

- 12 This leaves only 2.5 million returns -- 4.9 percent of all
taxable returns -- on which the tax on dividends would be increased.
But on these returns the tax rate reductions, ranging from 15 percent
to 23 percent and applicable to all income -- including dividend
income -- clearly outweigh the loss of a four percent credit on tne
same dividend income. This is simply because four percent is less
than 15 percent or 23 percent. Waile it may happen that a technical
and erroneous quirk of drafting in the present law relating the
retirement income credit to the dividend credit may, on elimination
of the dividend credit, increase the over-all tax slightly in a few
cases -- in which a taxpayer receives the retirement income credit
and has stockholdings, say, of $200,000 for married couples -- yet
even here the final result under the bill is an over-all increase
in after-tax income since the corporate tax reduction will undoubtedl:
result in an increase in dividend payments.
These facts on the effect of the House bill reinforce the sound
arguments for the repeal of the dividend credit advanced in the
House Report. In essence, given the fact that half of all dividends
go to taxpayers above $20,000 and that, starting with the returns
over $50,000 and going up the scale, dividend income on the average
rises from 20 percent to 50 percent of all income -- as compared to
1 percent to 3 percent on returns up to $20,000 -- the real function
of the dividend credit, as Secretary Dillon stated to the Senate
Finance Co~ittee, was to mitigate the severity of top bracket
rates running up to 90 percent and over. The Congress in 1954 did
not feel in a position to cut these high rates directly, but did so
in a roundabout fashion through the dividend credit. Since the House
bill now directly reduces those rates, the dropping of the dividend
credit is an appropriate and necessary companion measure.
In addition to its revenue-raising changes, the House bill
involves the introduction of tax innovations designed to strengthen
the income tax and increase its fairness. Thus the bill provides
for the first time a broad averaging system to meet the problems of
fluctuating income. It will thereby ease the burdens of those taxpayers whose activities -- be they authors, athletes, actors, farmers
loggers, proprietors of small businesses -- generally result in
fluctuating or bunched income. The bill also splits the present 20
percent first bracket of income, $0 - $2,000 for a single person and
$0 - $4,000 for a married person, into four brackets subject to rates
from 14 percent through 17 percent. Since the income of over half
of our taxpayers falls entirely in the present first bracket, this
splitting of that bracket adds significantly to the fairness of the
tax by introducing this differentiation in its application at this
level of income. The introduction of a minimum standard deduction of
$300 for a single person and $100 for a wife or dependent makes it

- 13 possible to provide special relief for those with very low incomes,
relief beyond that which tax reduction itself can accomplish. Up to
now the approach used to achieve this special relief for these group;
has been a raising of exemptions. But since such an approach applie:
to taxpayers at all levels, it fails to concentrate its relief on
the low income recipients and, in this sense, wastes revenue. The
minimum standard deduction involves a revenue loss of $320 million,
almost all of which goes to taxpayers with incomes less than $5,000.
A $100 increase in exemptions would cost $2.6 billion, but 78 percen!
of this would go to incomes over $5,000.
In addition to these innovations, the House bill also e1iminatl
some of the existing restrictive features of the income tax. Exampll
in this area are the additional deduction for employee moving expensl
and the removal of the two percent consolidated returns tax.
These features of the House bill involve $485 million in revenl
loss. Put together with the over a billion dollars of revenue-raising changes, the combination is a substantial step forward in improv:
the income tax structure. Naturally more remains to be done. Thus
the recent legislative events have helped bring into focus some
areas where more analysis is needed. The debate over the proposal
of a five percent floor on personal expenses showed how thorny are
the problems in this area. The debate over the taxation and treatmel
of capital gains, especially those passed on to heirs, revealed some
of the difficulties in that subject. The proposal for an optional
rate scale, with lower rates applied to a broader and Simpler measur,
of a person's taxable income, raises the question whether this is a
feasible path to lessen or eliminate the great disparities in tax
burdens on equal incomes that we know exist under present rates.
The tax bill, and its predecessor in 1962, obviously do not
solve all the outstanding problems of tax policy. But the progress
being made constantly narrows the area of study, leading us inevitab
to the most difficult subjects. The consideration of tax policy
issues that has accompanied the legislative measures of these years
has served to bring these issues beyond the borders of the technical
journals, seminars and learned symposia into the domain of broad pub
discussion. One of the invisible benefits of this legislation will
thus be the attention, both public and legislative, which has been
focused on the entire tax area. Today it is no exaggeration to say
that tax policy has become a matter of urgent national attention. T
fact in itself will make the likelihood of future improvements far
greater than it was before these measures were started. Since th~
hard problems that remain involve social and political judgments, tb
exposure to public debate is essential to their ultimate resolution.

- 14 III
As my final point, I would like to consider the contributions
the proposed changes in tax policy will make to our national problems.
PNsldent Kennedy has said that the tax bill is the most significant
piece of economic legislation in the last fifteen years. The reason
for this is that its enactment is essential to the solution of every
major economic problem which we face today. It is not the sole
solution for these problems -- but it is a necessary ingredient to
their effective solution.
As one example, we have already spoken of our chronic unemployment, our under-utilization of industrial capacity, our low rate of
investment in plant and equipment. A higher level of economic
activity will end these pr~blems, and the tax bill is essential to
our obtaining that higher level. To be sure, some problems of
structural unemployment will require special measures, such as manpmrer retraining and improved education. But all such special
measures will be far more effective in an expanding, flourishing
economy where general employment prospects are strong.

As a second example, for a number of years we have been experiencing chronic budgetary deficits~ These deficits have been caused
by the failure of the economy to achieve levels of economic activity
capable of producing the revenues needed to balance our budgets.
The tax bill, by raising the level of the economy, will permit us to
achieve the increased revenues we need. Expenditure restraint by
itself will not transform chronic deficits into balanced budgets;
indeed, by itself it could lead us to an economic downswing and still
greater budgetary problems. But expenditure restraint accompanied
by a tax reduction will lead us to our goal of a balanced budget in
an expanding economy.
As a third example, the President has stated that the tax bill
is the single most effective measure needed to restore equilihrilDD
to our balance of payments. The increased productivity which the
bill would promote will, with price stability, improve the internation.
C~etitive position of American industry.
The incentives to invest~nt in the tax bill, together with the higher level of activity that
~111 result, will attract to the United States a greater share of
both domestic capital and foreign capital. These results are essentia
to a baSic improvement in our balance of payments position and the
tax bill is an indispensable condition to their achievement.
As a fourth example, our economy must seek to halt the post-

far pattem of recession and inadequate recovery. We may not yet
But with a more buoyant economy we

lave the key to end recessions..

- 15 can keep the recessions shallower and the recoveries longer lasting
and stronger. We would thus avoid the economic waste, the business
dislocations and the human suffering that these jarring economic
swings have meant. Here also, the tax bill is the basic preconditioI
to breaking out of our post-war pattern.
As a fifth example, an economy operating at high levels can
help us solve many of our social problems that are linked to economic
factors. The remedies for racial discrimination in employment
operate far better when jobs are plentiful, so that the gains of one
group do not occur at the expense of another. State and local
governments can best cope with the problems of crowded schools and
hospitals, of inadequate urban transportation, of slum clearance,
when their efforts are fortified by the higher tax revenues they wil:
enjoy in a stronger economy.
In this perspective, it is not surpr~s~ng that a national
consensus, jOined in by business, labor, and the academic world, has
developed in support of the tax bill. The consensus is probably
unique in our tax history. These groups grasp both the far-reaching
importance of the tax bill and the need for prompt action. Enactment of the tax bill at this time, with the economy still on the
recovery Side, will enable us to link the existing economic momentum
with the expansionary thrust of the bill. The time is thus ripe for
the tax bill and the bill is well suited to the time. Its early
enactment will enable our Federal tax policy to make a clearly needel
clearly desirable, and clearly effective contribution to the accompl
ment of our national goals.

000

lb2-day
_ r'.B t llrit~

Price
•

digh

?verage

Listrlct
;let:

jork

,Jili.lactelphia
,;lti veland

r('

rRY DEPARTMENT
IEWSPAPERS ,

November 8,

9, 1963.

RESULTS OF TREASURY'S WEEKLY BILL OFFERING

>epartment announced last evening that the tenders for two series of
series to be an additional issue of the bills dated August 15, 196)
~s to be dated Nove~ber 14, 1963, which were offered on November 4,
Federal Reserve Banks on November 8. Tenders were invited for
thereabouts, of 91-day bills and for $800,000,000, or thereabouts, 0:
~ details of the two series are as follows:
~

91-day Treasury bills
maturing February 13, 1964
Approx. Equiv.
Price
Arumal Rate
99.103 a/
3.549%
99.097 3.572%
99.099
3.565% !/

·
·
·

182-day Treasury bills
maturing May 14, 1964
Approx. Equiv.
Price
Annual Rate
98.150
3.659%
98.135
3.689%
98.141
3.678% !/

~ne tender of $100,000
ount of 9l-day bills bid for at the low price was accepted
ount of 182-day bills bid for at the low price was accepted

IED ?OR AND ACCEPTED BY FEDER.A.L RESERVE DISTRICTS:

Acce,Eted
AE,Elied For
Acce,eted
AEElied For
44,125,000 $ 28,125,000
$
$
8,831,000 $ 2,831,000
1,588,021,000
889,175,000
599,266,000
1,107,366,000
42,383,000
14,383,000
3,983,000
8,983,000
31,726,000
31,726,000
11,796,000
11,796,000
14,964,000
14,964,000
3,536,000
4,396,000
8,166,000
24,109,000
20,363,000
8,166,000
48,900,000
132,427,000
244,107,000
133,400,000
28,898,000 :
13,231,000
34,402,000
14,231,000
6,682,000
16,164,000
8,112,000
19,584,000
10,535,000
25,988,000
26,988,000
11,735,000
7,721,000
10,721,000
2B,127,000
19,707,000
101 z302 zOOO
83.z579.z000
7815822000
94 z159.z 000
$2,199,838,000 $1,300,502,000 £/ $1,421,896,000 $800,226,000 £j
~09,OOO noncompetitive tenders accepted at the average price of 99.09~
~,OOO noncompetitive tenders accepted at the average price of 98.141
me of the same length and for the same amount invested, the return 01
ud provide yields of 3.66%, for the 91-day bills, and 3.81%, for the
Interest rates on bills are quoted in terms of bank discount with t:
to the face amount of the bills payable at maturity rather than the
i and their length in actual number of days related to a 360-day year
Lelds on certificates, notes, and bonds are computed in terms of inunount invested, and relate the number of days remaining in an intere
to the actual number of days in the period, with semiannual compound
le coupon period is involved.

TREASURY DEPARTMENT
November 13, 1963

FOR IMMEDIATE RELEASE
TREASURY

MAP~T

TRANSACTIONS IN OCTOBER

During October 1963, market transactions 1n
direct and guaranteed securities of the government
for Treasury investment and other accounts resulted
1n net purchases by the Treasury Department of

$345,665,650.00.

D-1036

TREASURY DEPARTMENT

November 13, 1963

FOR IMMEDIATE RELEASE
TREASURY

MAP~ET

TRANSACTIONS IN OCTOBER

During October 1963, market t.ransactions in
direct and guaranteed securities of the government
for Treasury investment and other accounts resulted
in net purchases by the Treasury Department of
$345,665,65 0 •00

000

D-1036

- :3 -

and excha.nge tenders will rece! ve equal. treatment.

Cash adjustments will be made

tor differences between the par value of maturing bills accepted in excbanse and
the issue price of the new bills.
'l'be 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

1081

from the sale or other disposition of Treasury bills does not have any spec1al.

treatment, as such, under the Internal Revenue Code of 1954.

The bills are subject

to estate, inberitance , gift or other excise taxes, whether Federal or State, but
are exempt from all taxation now or hereatter imposed on the principal or interest
thereof by any state, or any of the possessions of the United states, or by any
10c&1 taxing authority.

For purposes of ta.xa.tion the amount of 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 of 19M

the amount of discount at which bills issued hereunder a.re sold is Dot considered
to accrue until such bills are sold, redeemed or otherwise disposed ot, and such
bills a.re excluded trom consideration as capital assets.

Accordingly, the owner

of Treasury bills (other tban life insurance companies) issued hereunder need include in his income tax return only the difference between the price paid tor such
billa, whether on original issue or on subsequent purchase, and the amount actuall1
received either upon sale or redemption at Dl&turity during the taxable yea.r tor
which the return is -.de, as ordinary ga1n or 108s •
. Treasury Department Circular Ho. 418 (current revision) and this notice, prescribe the terms of the Treasury bills a.nd govern the conditions of their.issue.
Copies of the circular may be obta.1ned from any Federal Reserve B&Dk or BrUch. .

- 2 -

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 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.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Eanks and Branches, following which public announcement will be made by
the Treasury Department 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, 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
ing until maturity date on
$

IMQ

or less for the

August 2bxj963

Februaw. 1964

, (

days remain-

tDf

) and noncompetitive tenders for

182 -day bills without stated price from anyone

ffif

bidder will be accepted in fUll at the average price (in three decimals) of accepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Rese"~
Banks on

November~ 1963

,in cash or other immediately available funds or

in a like face amount of Treasury bills maturing

November 21, 1963

bif

•

cash

TREASURY DEPARTMENT

Washington
FOR DfMEDIATE RELFASE.

&IX

November 13, 1963

TREASURY' 5 WEEKLY BILL OFFERING

The 'l'reasury Department, by this public notice, invites tenders tor two series

ot Treasury bills to the aggregate amount of .$ 2,000,000,000 , or thereabouts, tor
cash and in exchange for Treasury bills maturing

AI' 11, 1985 , in the 8IIOunt

ot $ 2,101jMl.,OOO , as follows:

UJX

91 -day bills (to ma.turity date) to be issued _1Io_V_S_Mr~!!::2~1~I_l_._S_,

fiOX

in the 8D1Qunt of $1,200,000,000 ,or thereabouts, represent-

ing an additional amount of bills dated Ausut 22, 1985
and to mature
amount of.$

MraaJ7

it&X
2~~tl~~ai~~~ i~ ...

8OO,6'711~ ,
lW

the additional and or1ginal bills U, JI

to be freely interchangeable.
-day bills, for

$ 800,000,000

, or thereabouts, to be dated

Bi&

lIonIIte1' 21, 1963, and to mature

(Ii)

..,. 21, 1966

•

iliO

The bills of both series will be issued on a discount bas1s under competit1ve

and noncompetitive bidding as hereinafter provided, and at maturity their face
amount will be payable without interest.

They will be issued in bearer fora oDlJJ

and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and
$1,000,000 (maturity ve.lue).
'!'enders will be rece!ved at Federal.. Reserve Bank8 and Branches up to the
clOSing hour, one-thirty p.m., Eastern standard t1me,

MoDI., '"

t . 18, 1.a

d&O

Tenders will not be rece1 ved at the 'l'reasury Department, Washington.

Bach tender

must be for an even multiple ot $1,000, and in the case ot competitive tenders the
price offered must be expressed on the basis of 100 , with not more than three

TREASURY DEPARTMENT

November 13, 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
$2 000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing November 21,1963, in the amount of
$2,101,341,000, as follows:
91-day bills (to maturity date) to be issued November 21, 1963,
in the amount of $1,200,000,000, or thereabouts, representing an
additional amount of bills dated August 22, 1963, and to mature
February 20, 1964, originally issued in the amount of $800,672,000
(an additional $100,092,000 was issued October 28, 1963), the
additional and original bills to be freely interchangeable.
l82-day bills, for $800,000,000, or thereabouts, to be dated
November 21, 1963, and to mature May 21, 1964.
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
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
(mat uri ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, November 18, 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
~Sponsible and recognized 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-1037

- 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, in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $ 200,OOOor less for the additional bills dated
Au ust 22 1963
(91-days remaining until maturit¥ date on
Fe~ruar~ 20 1964) and noncompetitive tenders for ~100,OOO
or les8 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 November 21,1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing November 21,1963.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, 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
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 (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

$100 million in the amount of Treasury bills to be
auctioned next week represented a modest precaution
in view of the need to avoid upsetting the present
balanc.lrelation between money market rates of
interest in the United States and those of foreign
countries.

TREASURY DEPARTMENT
-

;

November 13, 1963

FOR IMMEDIATE RELEASE
TREASURY REDUCES

A~OUNT

WEEKLY TREASURY BILLS
The Treasury indicated that its reduction
of $100 million in the amount of Treasury bills
to be auctioned next week represented a

~odest

precaution in view of the need to avoid upsetting
the present balanced relation between money
market rates of interest in the United States and
those of foreign countries.

000
D-1038

FOR RELEASE:

UPON DELIVERY

STATE~mNT BY MERLYN N. TRUED
DEPUTY ASSISTANT SECRETARY OF THE TREASURY
BEFORE SUBCOMMITTEE 4
OF THE HOUSE JUDICIARY COMMITTEE
ON H.J.RES. 658 (SEE AMERICA YEAR)
THURSDAY, NOVEMBER 14, 1963, 10:00 A.M.,EST

I am happy to be here and to support, on behalf of the
Treasury Department, H.J. Resolution 658, authorizing and
requesting the President to proclaim 1964 as "See America
Year." Adoption of this resolution would be desirable for
several reasons, but most importantly, in our view, it would
give further impetus to the "See America Now" program which
the President announced last July 18 along with other measures
to eliminate the balance of payments deficit.

It will enhance

our efforts to make travel at home a more appealing alternative
to travel abroad, and thereby reduce the large drain on our
balance of payments resulting from the ever increasing flow of
American tourists abroad.
As the President pointed out, the dollar outflow from the
United States resulting from travel abroad by Americans is
substantial.

In 1962 Americans spent almost $2.5 billion for

such travel.

This included $1.9 billion for expenditures in

fcreign countries and about $560 million in payments to foreign
carriers for trans-ocean transportation.

These expenditures

were only partially offset by expenditures of foreigners in
this country, which in 1962 amounted to about $1 billion,

including about $120 million for trans-oceanic fares paid to
U.S. carriers.

Thus, the net deficit in our balance of payments

on account of travel was $1.4 billion, which was, of course, an
important part of our overall balance of payments deficit
of $2.2 billion.

The figures available for 1963 indicate that

the deficit on travel account will be even larger.
The table I have distributed shows the rapid growth in
travel expenditures abroad by Americans since 1951.

That table

shows that our total travel expenditures increased almost three
fold from 1951 to 1962.

Our receipts also increased substantially

during this period, but although they doubled our net deficit
increased from $366 million to $1,430 million.
The rise in expenditures by Americans for foreign travel
is, like other consumer expenditures, related to the increase
in our national income during the period.

But a recent study

by the Commerce Department shows that Americans have been spending

an increasing share of their income on foreign travel.
study shows that during the

1951~62

This

period an increase of 10

percent in disposable personal income has been associated on
the average with a nearly 20 percent increase in foreign travel
expenditures.

Obviously, continuation of this relationship would

have an increasingly heavier impact on our balance of payments.

3.
Insofar as we can, by positive steps, make travel i,n the U. s.
more and more attractive, we will tend to redress somewhat these
balance of payments results.
As you are aware, the Administration has an extensive
program to eliminate our balance of pa,ments deficit and a
major part of that program is to make the United States more
competitive in attracting the investments and expenditures of
Americans as well as foreigners.
the

Un~d

The promotion of tourism in

States is also appropriate in this regard.

The success

of the "See America Now" program will primarily depend on the
extent to which the American people are made aware of the
desirability and importance of their looking to the United StateE
for their vacation and travel opportunities.

The lure of

foreign lands is glamorous and well advertised.

For our part,

we should not only become more competitive in this area but also
bring to the attention of Americans the infinite variety of beaut
ful and historic places in the United States which are readily

hand for vacation and other non-business travels.
Adoption by the Congress of this resolution would indicate
its strong support for the objective of the "See America Now·'
program and would thus make a most useful contribution in this
respect.

Consequently, the Treasury Department welcomes the

initiative of Congressman Ullman in introducing this resolution
and strongly urges its adoption.

u.s.

TRAVEL ACCOUNT 1951 - FIRST HALF 1963

(In millions of dollars)
Receiets
Trans-ocean Fare
Travel by
Receipts from
Foreigners
Foreigners
in u.s.

Year

Total
Travel
Receipts

)

EXEenditures
Travel by
Trans-ocean Fare
Payments to
American,
Abroad!
Foreign Carriers

Total
Travel
Payments

NET
TRAVEL

BALANCE

1951
1952
1953

+50
+62
+58

+473
+550
+574

+523
+612
+632

-132
-172
-179

-757
-840
-929

-889
-1,012
-1,108

-366
-400
-476

1954
1955
1956

+61
+64
+63

+595
+654
+705

+656
+718
+768

-183
-201
-238

-1,009
-1,153
-1,275

-1,192
-1,354
-1,513

-536
-636
-745

1957
1958
1959

+84
+89
+90

+785
+825
+902

+869
+914
+992

-261
-320
-380

-1,372
-1,460
-1,610

-1,633
-1,780
-1,990

-764
-866
-998

1960
1961
1962

+110
+112
+117

+887
+900
+921

+997
+1,012
+1,038

-513
-515
-563

-1,745
-1,747
-1,905

-2,258
-2,262
-2,468

-1,261
-1,250
-1,430

+447
+479

+500
+536

-790
-857

-1,077
-1,182

-577
-646

First Half

1962
1963

J}
2/

+53
+57 P

Roughly 80 percent pleasure, family, e:..c. and
Begins new series.
Not seasonally adjusted.

Preliminary

Note:

-287
-325 p

percent business.

In published balance of payments statistics trans-ocean fares are included in transportatior
account.

a,,'IIber W,

The Treaaury Depe.rt.Mnt today aMOUDCe4 the aabMl'1JU,cD aa4 ~
t'i~ree with reapect to the currant otrer1aC ot 3-7/8fI, ~ _ _ o:t

Sen.

C-l965, due May 15, l..965.

Sub8cr1pt1ona IIDCl aJ.lotIMmta were div1ded 'IP'lD8 the .....-..l J'edeal Ielerve DUtr1eta anct the !reaeury u follow:

Federal Ruerve
Dtatrtct

Total Subacr1p-

J1S!!J'!,CSIi;
lleoe1:M,

btoa

1Iev York
Pbl1A4el.PlJ8
CleYeland
RicbDood
A,1ilaata

Chicaao

st. Loui,

NSDD8QOlia
Ken... City
Dal, ••
Sea In.Dc18CO

11 ,665 ,131,000
3S5,766 ,CXlO
920,316,000
695,788 ,000

5,781,021,000
87,890,000

482,321,000
2,lU,757,OOO

",,511,000
SS6,5S7,OOO

"2,M2,COO
267,186 ,000
.as ,578,000
363,180 ,000
1,818,808 ,000

W,81I,000
.,161,000

S7,~,OOO

$20,068,715 ,000
SUbacr1ptiOCLS by 1nVelitor eJas._:

sta1iea, ;polltical aubd1v1aloo1 or 1D..t~t1ee tbereof', pabl1c pena1ao
aDd retll . . . . and other publ1c f'\mda,
1Dtemat1oDal o1'8ln 1 zat1cma 1n which the
tll1tecl statea holda .mherah1p, torei&D
ceatral bank. and f'orelsl states ______ _
Ca-erc1al Bank. (own accouat) _______ _

All

-~~-.-------

_______ ~_~_~~~ __ _

301,910,000
7,953,338,000
7,808,.z2,OOO

$l6,063,870,000
hd.. Rea. 'Banks & Govt. lDv. Accta. ___ _

4,005.0&:5,000

$20,068,715,000

29,,",000
lS! ,6t7 ,000

118 ,717,000
95,1OI,0G0
~,_,OOO

3l,OUa009
.7,976,810 ,000

TREASURY DEPARTMENT

!be !ntasur;y Department today 8DDOUDced the subscription and aUotment

f1pres v1th respect to the current offering of 3-7/8; Treuur7 Iotes ot

Senes C-1965, due May lS, 1965.
Subscriptions and allotments vere divided among the several Peaeral Reael'ft Districts and the Treasury as tollova:
:rec)el'81 Reae1"V'e

Distr1ct
Boston
lev York
Ph1lac1e1ph1a
Cleftland
R1cb111ond

Atlanta
Chicago

st. louis
lUJmeapol1s
Kansas City
Dallas
San Francisco

!reaaur.r
Tbtals

Total SUbscr1p. tiona Received
•
693,098,000
11,665,131,000
355,166,000
920,376,000
495,788,000
492,321,000
2,1ll,757,OOO
442,542,000
267,l66,000
405,578,000
363,180,000
1,818,808,000
37 ,204,000
$20,068,715,000

Subscriptions by investor classes:
States, political subdivisions or instrumentalities thereot, public pension
and retirement and other public funds,
1ntemational organizations in which the
United States holds membership, foreign
central banks and fore1sn States ------- $ 301,910,000
7,953,338,000
Commercial Banks (own account) --------7,808,422,000
All Others ----------------------------$16,063,670,000
Total

Ped. Rea. Banks

Govt. !Dv. Aceta. ----

Grand Total

D-I039

4,005,045,000
$20,068,715,000

Total.

Allotments
• 164,709,000
5,762,021,000
87,9S0,000
232,465,000
133,697,000
144,598,000
~8,357,OOO

138,818,000
92,266,000
126,717,000
95,909,000
430,329,000
31,014,000
$7,978,890,000

IMMEDIATE RELEASE

FRIDAY, NOVEMBER 15,1963

0-1040

The Bureau ot CUeto.. IIIDDUllced todq prel.1Jdnar;r tigure_ shDw1Dg the
quanti Ue. of wheat aDd lII1lled wh.at products authorisecl to be eDtered, or
withdrawn troll warebouse, tor COUUIIPtion UDder the 1mport quotas .,tabl11hed
in the Presidentt , proclallat1on of x., 28, 1941, .. pwt't1ed b1 the PreA4at11
proclamation of April 1), 1942, ud pl'Ov1ded tor in the Taritt Scheclul•• of
the Un1ted Statel, tor the 12 IDODth. COIIIIIeDciDg Mao- 29, 196), as tollow:

TREASURY DEPAR'1HI!2n'
Wuhington, D. C.

DOODIATE RELEASE

D-1040

FR lOAY. NOVEMBER 1'),1963

The Bureau ot CUstoms announced. tad.,. prel.1m1nary ligures shoving the
quantities ot wheat and m1lled wheat products authorized to be entered, or
withdrawn from warehouse, for consumption UJ¥ier the import quotas established
in the President'l proclamation of M.,. 28, 1941, as mod1t1ed b7 the President' 8
proclamation ot April 13, 1942, am provided tor in the Tarift Sched,ues ot
the United States, tor the 12 JDDDths CODlDellcing Mq 29, 196), as tollows:

••
••

••

Wheat

Country

of
Origin
Established ••
Quota

Imports

(Bushels)

••
Milled wheat products
••
•
Imports
: Established :
Quota
:Mq 29, 196), to

•

:~~. 2~! !~g1'oo :

795,000

Canada.

•

795,000

China
Hunga..7
Hong Kong

100

3,815,000
24,000
13,000
13,000
75,000

; NQ~. 2,

1f63

PouDis

),815,000

1,224
6,180

1,000

Australis

Germany
Syria

100
100

5,000
5,000

100
2,000

1,000
1,000
14,000
2,000

1,000

New Zealam

Chile
Netherla..~s

ArgenUna
Italy

100

Cuba
France
Greece

1,000

Max1~o

100

12,000
1,000
1,000
1,000
1,000
1,000

Panama
Uruguay

(Poums)

8,000

J apa.'1
Un! ted Kingdom

Pol&I¥i

•

1.,000

Danzig

1,000
1,000

Sweden
Yugoslavia
Norway

1,000

I sl.aD1 s
Rumania
Guatemala

1,000

Canary

1,000

100
100

B1"azU

Union of Soviet
Socialist Republics

100
100

Belgium

Other foreign countries
01" areas
800,000

-795,000

4,000,000

),822,404

TREASURY DE]>ARnmIT

Washington, D. C.

DOODIATE RELEASE

D-1040

FRIDAY, NOVEMBER 15,1963

The Bureau of Customs announced todq prel.1m1nary figures showing the
quanti ties of wheat and milled wheat products authorized to be entered, or
witMrawn from warehouse, tor consumption UJXler the import quotas established
in the President's proclamation ot Mq 28, 1941, as D:>d1.t1ed by the President' e
proclamation ot April 13, 1942, and provided tor in the Tariff Schedules ot
the United States, for the 12 months CODlDellcing MQ' 29, 1963, as tollows:
••
••

Country
of
Origin

Wbeat

••

Milled wheat products
••
•
•
Imports
Established •
Imports
•• Established ••
Quota
Quota
:Mq
29, 196,3, t,Q
••
:Mq
.Nov. 2~,, i~g!to •
••
•• NQ~. 2, ~63
(Pounts)
•
(Bushels)
•
(Bushels)
Pounds

•

Canada
China
Hungary
Hong Kong
Japan
United Kingdom
Australia
Germany
Syria
New ZealaIXi
Chile
NetherlaIns
Argentina
Italy
Cuba
France
Greece
Mexico
Panama

795,000

100

.3,815,000
24,000
1.3,000
1.3,000
8,000

75,000

3,815,000

1,224
6,180

1,000
5,000

100
100

5,000

1,000
1,000
1,000
14,000

100
2,000

100

2,000

12,000
1,000
1,000
1,000
1,000
1,000

1,000
100

Uruguay
Po1alXl ani Danzig

1.,000

Sweden
Yugoslavia

1,000
1,000

Norvq

1,000

Canary IslaD:is
Rumania
Guatemala

1,000

100
100

BrazU
Union of Soviet
Socialist Republics

Belgium

Other foreign cauntries
or areas

100
100

8CX),OOO

795,000

4,000,000

3,822,404

TREASURI DEPAR'DIDIT
Wuh1qton, D. C.

DDmlIATE RELEASE

D-1040

FR LOAY. NOVEMBER 1'),1963

The Bureau ot CUsto... aDDDUIlced tod.,. prel.1.adnar7 tigures abc»wiDg the
quantities ot wheat and mUled vb.at products authorised to be entered, or
wi tJdrawn from warehou.., tor coD8Wlptlon under the import quotas estabUshed
in the President•• proclMation ot Mil 28, 1941, u JDi1t1ed b7 the President' 8
proclamation ot April 13, 1942, &lid proY1decl tor in the Tar1tt Schedules ot
the United States, tor the 12 IIDDthS CODIIIIeI1CiDg MQ' 29, 196), u tollows:

Wheat

COlUltry

Milled

~at

products

Origin

Established :
Quota

Imports

(Bushel.)

(Bushels)

:V~. 2~: !~~tto:

Canada
China

795,000

•

795,000

Hunga.."7
Hong Kong

Japan

100

Un! ted Kingdom

Australia

Pol.al1d

Swaden

1,000
100

Dansig

Yugoslavia
Ncl"Wl1
Canary IslaD1s

Rumania

Pounds

),815,000
24,000
1),000
1),000
8,000
75,000
1,000

3,815,000

1,224
6,180

5,000
1,000
1,000
1,000
14,000
2,000
12,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000

100
2,000
100

CUba

France
Greece
Maxillo
Panama
Uruguq

(Pounds)

5,000

100
100

Gel"Dll1n7
511'1.
New Zealm:i
Chile
Netherla...ss
ArgenUna
It.al7

•

Established : lJaports
Quota
:M" 29, 196,3, to
; NQ~. 2, ~3

1,000
100
100

Guatamala

BruU
Union ot Soviet
Socialist Republics

100

Belg1U11
Other toreign countries
or areas

100

~QgQ

795,cnJ

4,000,000

3,822,404

-2-

Commodity

••
••

Period ani Quantitl'

•,

Unit

o£

••

:Quantity ;

Import. as ot
Hov. 2. 19,t

Absolute Q1lotas:

Butter substitutes, including
butter oil, containing 4.5%
CalerJiar
or more butterfat ••••••••••••••• Year 1963
Fibers ot cotton processed

1II)S.

from

but not spun •••••••••••••••••••• Sept. 11, 1963

1,000

Pound

Peanuts, shelled or not shelled,
blanched, or otherwise prepared
or preserved (except peanut
12 DDS. from
butter) ••••••••••••••••••••••••• Au~st 1, 1963

1,709,000

Pound

Imports through November 8, 1963.

D-I041

767,900

TREASURY DEPAR'lHmT
Washington

lMlOOIATE RELEASE

FRIDAY, NOVEMBER 15,1963

0-1041

The Bureau of Customs announced todq prel.im1nary figures on imports tor coDsUllption of the following commodities from the beginning ot the respective quota periods
through November 2, 1963:

Commodity

••
••
••

•• Unit

••
Imports
••
ot
••
as ot
:Quantity; Nov. 2. 196]

Period and Quantity

Iltirf-BAte QBot§!:
tresh Or sour •••••••••••• Calendar Year

1,500,000 Gallon

675,~

Whole Milk, fresh or sour ••••••• Calendar Year

3,000,000 Gallon

Cattle, 700 1bs. or more each
Jul1 1, 1963(other than dair,y cows) ••••••• Sept. 30, 1963

120,000 Head

7,946

l2O,ooo

Head

5,1.31

200,000 Head

46,fn/

Cre~

Oct. 1, 1963Dec. 31, 1963
12 mos. from
Cattle less than 200 lbs. each •• April 1, 1963
Fish, fresh or frozen, filleted,
etc., cod, haddock, hake, pollock, cusk, 8lXl rosetish •••••• Calendar Year

24,~4,871

Poum

Quota Filled

Tuna Fish ••••••••••••••••••••••• Calendar Year

63,130,642 Pound

43,462,313

114,000,000 Pound

0
477,395

Whi te or Irish potatoes:
Certified seed •••••••••••••••• 12 DIOs. trom
Other ••••••••••••••••••••••••• Sept. 15, 1963

Knives, forks, and spoons
Nov. 1, 1962with stainless steel haDUes •• Oct. 31, 1963
Nov. 1, 1963Oct. 31, 1964

Imports through ~lovember 8, 1963

45,000,000 Pound

69,000,000 Pieces Quota Fmad
69,000,000 Pieces

9,664,~

TREASURY DEPARnmlT
Wa£hington
IMMEDIATE RELEASE
FRIDAY, NOVEMBER 15,1963

D-1041

The Bureau of Customs announced today preliminary figures on imports for consumption of the following commodities from the beginning of the respective quota periods
through November 2, 1963:

Commodity

Period and Quantity

·•••

Unit
of
;Quantity

·••

Imports
as of
•
; Nov. 2. 1963

rariff-Rate Quotas:
fresh or sour ••••••••••••

Caleniar Year

1,500,000 Gallon

675,220

ihole Milk, fresh or sour •••••••

Calendar Year

3,000,000 Gallon

~ream,

July 1, 1963:attle, 700 1bs. or more each
(other than dairy COl-IS) ••••••• Sept. 30, 1963

120,000 Head

7,946

Oct. 1, 1963Dec. 31, 1963

120,000 Head

5,131

12 mos. from
at tIe less than 200 1bs. each •• April 1, 1963

200,000 Head

46,f:m

ish, fresh or frozen, filleted,
etc., cod, haddock, hake, pollock, cusk, ani rosefish ••••••

Calendar Year

24,874,871 Pound

Quota Filled

rna Fish ••••••••••••••••••••••• Calendar Year

63,130,642 Pound

43,462,313

114,000,000 Pouni
45,000,000 Pound

0
477,395

lite or Irish potatoes:
Certified seed •••••••••••••••• 12 mos. from
Other ••••••••••••••••••••••••• Sept. 15, 1963
Nov. 1, 1962ivas, forks, and spoons
wi th stainless steel harrlles •• Oct. 31, 1963

69,000,000 Pieces

Nov. 1, 1963Oct. 31, 1964

69,000,000 Pieces

Imports through November 8, 1963

Quota Filled
9, 664,4ZflJ

-2-

CODDllOdity

:
••
••

Period arxl Quantit::r

Unit

:Quaptity :

Import. &I ot
Hov. 2. 19.§J

Absolute Quotas:
Butter substitutes, including
butter 011, containing 45%
Calerliar
or more butterfat ••••••••••••••• Year 1963

1,200,000

Pound

Fibers of cotton processed
12 ms. from
but net spun •••••••••••••••••••• sept. ll, 1963

1,000

Poum

Peanuts, shelled or not shelled,
blanched, or otherwise prepared
or preserved (except peanut
12 DDS. from
butter) ••••••••••••••••••••••••• August 1, 1963

1,709,000

Pound

Imports through November 8, 1963.

D-1041

Quota Filled

767,900

TREASURY DEPAR'IMENT

Washington
IMMIDIATE RELEASE

FRIDAY, NOVEMBER 15,1963

D-1042

The Bureau of Customs has announced the following prel.i.m:inary figures
showing the imports for consumption from January 1, 1963, to November 2, 1963,
inclusive, of commodities under quotas established pursuant to the Philippine
Trade Agreement Revision Act of 1955:

Commodity

••
••
Established
Annual
:
•
••
• Quota Quantity

·
·

Unit
of
Quantity
Gross

••
••
••

Imports
as of
November 2. 1963

234,876

Buttons ••••••••••

680,000

Cigars •••••••••••

160,000,000

Number

11,705,857

Coconut oil ••••••

358,400,000

Pound

353,765,26711

Cordage ••••••••••

6,000,000

Pound

4,892,136

Tobacco ••••••••••

5,200,000

Pound

5,163,247

Preliminary, through November S, 1963.

TREASURY DEPAR'1HENT
Washington

IMJm)IATE RELEASE

FRIDAY, NOVEMBER 15,1963

D-I042

The Bureau ot Customs has announced the tollowing prellminar7 figures
showing the imports tor consumption trom Januar;y 1, 1963, to November 2, 1963,
inclusive, ot conmodities under quotas established pursuant to the Philippine
Trade Agreement Revision Act of 1955:

Commodity

••

••
: Established Annual. :

Unit

Quantity

• Q,lota ~antitl
Buttons ••••••••••
680,000

Gross

••

•

.••

IDports
as ot
November 2. 1963

234,fr/6

Cigars •••••••••••

160,000,000

Number

11,705,857

Coconut oil ••••••

358,400,000

Pound

353,765,26i}/

Cordage ••••••••••

6,000,000

Pound

4,892,136

Tobacco ••••••••••

5,200,000

Pound

5,16),247

11 Preliminar.y,

through November 8, 1963.

-2-

COTTON WASTES

(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE

ADVANCED IN VALUE: PrOVided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3116 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Established
Country of Origin

United Kingdom ••••••••••••
Canada ••••••••••••••••••••

France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••

Belgium •••••••••••••••••••
Japan •••••••••••••••••••••

China ••••.••••••..•••.•.••
Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••

Germany •••••••••••••••••••
Italy •••••••••••••••••••••
Other, including the U. S.

TOTAL QOOTA

Established
33-1/3% of
Total Quota

Imports
1/
Sept. 20, 1963,
to NOYember 12, 1963

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263

420,452
239,690
1.37,166

1,441,152

23,5)8

75,807

22,445

1l,249

22,747
14,796
12,853

5,482,509

841,579

l ' Included in total imports, column 2.
~rop~red

Total Imports
Sept. 20, 1963, to
November 12, 1963:

the Bu~enu of Customs.

33,022

25,443
7,088

1,599,886

45,983

TREASURY DEPARTMENT

Washington, D. C.
IMMEDIATE RELEASE

FRIDAY, NOVEMBER 15,1963

0-1043

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, as modified by
the Tariff Schedules of the United States which became effective August 31, 1963.
3/4"

Country of Origin
Egypt and Sudan •••••••••••••
Peru ••••••••••••••••••••••••
India and Pakistan ••••••••••
China •••••.•••••••••••••••••

Mexico ••••••••••••••••••••••
Brazil ••••••••••••••••••••••
Union of Soviet
Socialist Republics •••••••
Argentina •••••••••••••••••••
Haiti •••••••••.•••••••••••••

Ecuador •••••••••••••••••••••

Established Quota

Imports

Country of Origin

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

204,735

Honduras ••••••••••••••••••••
Paraguay ••••••••••••••••••••
Colombia ••••••••••••••••••••

8,883,259
600,000

475,124
5,203
237
9,333

Established Quota

124

Iraq ••••••••••.•••••••••••••

195

British East Africa •••••••••
Indonesia and Netherlands
New Guinea •••••.••••••••••
!/Britlsh W. Indies •••••••••••
Nigeria •••••••••••••••••••••
2/British W~ Africa ••••••••
- Other, including the U.S ••••

2,240

••

11 Except Barbados, Bermuda, Jamaica, Trinidad, and Tobago.

1:.1 Except Nigeria and Ghana.

Cotton 1-1/8 u or more
Established Yearly Quota - 45.656.420 lbs.
Imports August I!

752
871

19-63, to

Staple Length
1-3/8" or more
1-5/32" or more and under
1-3/8" (Tangu1.s)
1-l./S" or more and under

Np'fflD)ber 12,

1963

Allocation

Imports

39,590,778

39.590.778

1,500,000

81.759

71,388
21,321
5,377
16,004

Imports

TREASURY DEE'AR~NT
Washington, D. C.
IMMEDIATE RELEASE

'RIDAY, NOllEMBER 15,1963

D-1043

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, as modified by
the Tariff Schedules of the United States Which became effective August 31, 1963.
under 3/4"
Country of Origin
Egypt and Sudan •••••••••••••
t> eru ••••••••••••••••••••••.•
India and Pakistan ••••••••••
China •••••.•••••••••••••••••
~exico ••••••••••••••••••••••
Brazil ••••••••••••••••••••••
Union of Soviet
Socialist Republics •••••••
Argentina •••••••••••••••••••
Haiti •••••••••.•••••••••••••
Ecuador •••••••••••••••••••••

Established Quota

Imports

783,816
247,952
2,003,483
1.370,191
8,883,259
618,723

204,735

8,883,259
600,000

475,124
5,203
237
9,333

Country of Origin

Established Quota

Honduras ••••••••••••••••••••
Paraguay •••••••.••••••••••••
Colombia •••••••••••••••••••.
Iraq ••••.•••••.•••••.•••••••
British East Africa •••••••••
Indonesia and Netherlands
tJew Guinea •••••.••.•••••••
1/British W. Indies •••••••••••
Nigeria ••••••••••• ~ •••••••••
2/British W. Africa •••• ~ ••••.•
- Other, including the U.S ••••

11 Except Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
1/ Except Nigeria and Ghana.
Cotton 1-1/8" or more
Established Yearly Quota - 45,656,420 lbs.
Imports August 1, 1963, to November 12, 1963
Staple Length
1-3/8" or more
1-5/3211 or more and under
1-3/8" (Tanguis)
L-1/8" or more and under

Allocation
39,590,778

39,590,778

1,500,000

81.~759

Imports

752
871
124
195
2,240
71,388
21,321
5,377
;'6,004

lmpor

-2-

COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN ~\LUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Es ta b I i shed
TOTAL QOOTA

Country of Origin
United Kingdom ••••••••••••
Canada ••••••••••••••••••••

France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••
Japan.....
• •••••••
China..
••••••• • ••••
Egyp t. .

. . •. .•

Cuba......

• •••••••••••

Gc rmany. • •

• •••••••••••

. ..

Italy..... • •••••••••••••
Other, including the U. S.

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263
5,482,509

Included in total imports, column 2.

~repared

the Bureau of Customs.

Total Imports
Sept. 20, 196), to
November 12. 1963:

420,452

2)9,690
1)7,166
1l,249
33,022

Established
33-1/3% of

Total Quota

Imports
Sept. 20, 196),
to NOVember 12,

1,441,152

2),538

75,807

22,445

22,747
14,796
12,853

25,443
7,088

841,579

1,599,886

45,98)

196)

'l'R'EAS'C'RY 1m'.llma:NT
W&Sh~ton,

D. C.

IMMEDIA TE REI.ElSE

FRIDAY, NOVEMBER 15,1963

D-1044

PRELIMINARY DATA. ON IMPORTS FOR CONSUUPTION or UNMA.NUFAC'lURED LEAD AND ZINC CHARCEABLE TO mE QUOu.s ESTABLISID.:D
Ff PRESIDENTIAL PROCLA.YA.1'ION NO. 3257 OF SEPTEMBER 22... 1959", AS MODIFIED BY THE TARIFF SCHEDULES or 'mE
UNITED SUTES, WRICH B.e;CA.ME !;FfECTIVE AUGUST 31, 1963.
QUARTERLY QUOTA. PERIOD -

October 1 -

.:>ecember 31, 1963

IMPORTS _ Octo~er 1 - November 8, 1963 (or as noted)
ITEM 925.01-

ITEM 925.03-

Country

Load-b8arl~reB
and ma.ter
8

PrOduoti01l

Unwrc~t ~

lead wa te

and
scrap

.•

;oua:rterT:Yllilota.
Dutiable

Australia

tead
!
PdUriKK.

11,220,000

.
':QUirterly

\';uota.
Jjuports : Dutiablr lead \

11,220,000

I
I
1

?dUHRi

22,540,000

ITEM 925.04·

ITEM 925.02I

Zino-bearing ores and
materials

lQUil'terly QUota

~OUhd§j

Belgium and

: of zinc and zino dust) and
zino waste and. scrap

·
I

Imports:? ~ ,,0 (":0r~ent!

12,703,206

·;UDWrOught zino (except alloys
:lO."UiiX'terly QUota.

Imports

5,040,000

Canada

13,440,000

958,734-· 15,920,000

Mexioo

16,160,000

Republic of the Congo
(formerly Belgian CODgo)
On. So. Africa

16,160,000

14,880,000

1.4,860,000

YUgosl• ..-la
6,560,000

2,229,229"

.See Part 2, App.Dd~ to Tariff SobedUl•••
•• ~ort. as of Nov~~.r 12, 1963 •
• _ . - . - . , :sJI "DIll:

----.u

7,520,000

',520,000

CD' CUSTCIIe

8,500,106

66,480,000

37,840,000

15,592,649

3,600,000

36,880,000

14,314,390

70,480,000

24,019,060

6,320,000

3,603,024

12.880,000

4,394,968

35,120,000

9,502,429

3,7f!£J,000

3,061,342

5.440,000

1,873,944·.

15.760.000

All o~her foreigB
countries (total)

Imports

5, 040, UOO

Italy

Peru

rpo~l)

Luxemb\U'g (tota1)

Bolbia

By Weight

6.080,000

4,627,752-6,080,000

1.7,840 ,000

17,006,423"

6.080,000

6,090,000

TREAstmT D1l'.AR'lW:NT

Washington, D. C.

IMAEDIA. T!: RELKASl:

FRIDAY, NOVEMBER 15,1963

D-1044

UNMANUFAC'lURED LEAD AND ZINC CHARGEABLE TO THE QUOTAS ESTABLISHED
Ff PRESIDENTIAL PROCLAl.iA.TIClN :NO. 3257 OF SEPTEMBER 22" 1958" AS MODIFED BY THE TARIIT SCHEDULES OF TlIE
UlUTED STA~S, WHIGlI Bl!;CAME LITECTIVE AUGUST 31, 1963.

PRELIMINARY DATA ON IMPORTS FOR CONSUMPTION
QUARTERLY QUOTA PERIOD _
IMPORTS _
ITEM 925.01-

(Jli'

October 1 -

~ecf'..mber

Octoter 1 - November 8, 1963 (or as noted)
ITEM 925.02-

ITIl4 925.03-

:
Country

Lead-bearing ores
and

of
Produotioll

materials

Umrrowtht lead and

lead waSte and scrap

.
':CWLrterIy Glota.

~arter~y-onota

11,220,000

11,220,COO

22,540,000

.
z

ores and
materials

Z1n~bearing

zl..'Uarterly QUota

Import. : Dutlablr lead
?oUDdi)
?ound!)

: Dutiable read

Australia

31, 1963

Imports: Z ~ ;.(' c('ftent
.
PoundS)

Impcrts

;U~ught zino (except alloys
: of zinc and zinc dust) and
zino waste and scrap
:QUaf'terI:T QUota
By Weight

5,040,000

Canada

13 ,440,000

958,734" 15,920 ,CX>O

8,500,106

66,400,000

7.520.000

37,840,000

15,592,649

16,160,000

16.160,000

36.880.000

14,314,380

70,480.000

24,019,(\60

6,320,000

3,603,024

12.880 ,CX>O

4,394,968

35,120,000

9,502,428

3,760,000

3,0f.l,342

5,440,000

1,873.944"

6,080,000

Republic of the Congo
(formerly Belgian Congo)
14,880,000

14,FlSO,OOO
15,76D,OOO

Yugoala... ia
A11 o~her foreign
countries (total)

7,520,000

3,600,000

Mexico

-en. So. Africa

Imocrls

5,04O,vOO

Ita.ly

Peru

(Po~)

12,703,206

Belgium and
Luxemburg (total)
Boli... 1a

ITEM 925.04-

6.560,000

2,229,229--

-See Part 2. Appendix to Tariff Soheclul.ea •

• -lmporta as of November 12, 1963.

6,080,000

4,627,752"
6,080,000

17,840,000

17,006.423··

STATUTORY JEBT LBUTATION

leAs of

October 311 1963 .

U'ashin}tton,

OV. ' 5~

Section ~1 of Second Liberty Bond Act, as amended, provides th.ll the face amount of obligations issued unde! .UII.loril
th.1t Act, olnd the folce olr.lOunt oj ob:i,!:Oltions guaranteed as to t'rincip.li .In.1 interest by the United States (excepr sud. /!u.'.n:~
ub:ir'.ltion" .1" m.I~' be held br the Secretary of the Treasur}'), "Shall nl>t exceed in the alt~egate S28S,C,(lO,OO),()OIl'(Ac 01
June ,0, 1')~'\ Co S. C., tide 31, sec. 7S7b), outstolnding at anyone time. For purposes oi this section tne current rede ~
V,l:UC: of .1n>' ubli~.ltion issued on a discount basis whicn is redeemable prior to maturity at the option of the holder sh.l1
~I.k ..·.: .1" it" 1.ICC .Imount." The Act of Aubu"t ~:', 19(>5 \P.L. HB-I06 both Congress) provides that the above limit.ti.,n shill:'
tempor.uily incrca"ed during the perioJ beginnin~ on Sc?tcmoer I, 1963, and ending on November 30. 1963 to U09,OOO,OOO.O«t.

:c '"

The fo;lowin~ t.lble shows the face amount oi obligations outstanding and the face amouDt which can still be il.1td
under chi s bmit.Hion:
Total iace ... mounr tholt may be outstanding at anyone time
$309,000,000,000
Out~tanJin;.: ohli~ations issued under SeconJ Liberty Bond Act, as amended
,
.
Interest- b eann~:
Treasury bills
$49,720,132,000
Certificates of indebtedness - - - Treasury notes - - - - - - - Bonds·
Treasury - - - - - - - - • Sa\'lntlS (Current redemption value)
United States Retirement Plan bonds
Depositary _ _ _ _ _ _ _ _ _ __
R. E. A. series _ _ _ _ _ _ _ __
Investment series _ _ _ _ _ _ __

15,493,494,000
53,694,595,000

$118,908,221,000

86,438,729,350
48, 686" 814" LJ.7
360,406
98,783,500
25,731,000
3,719,476,000

Certificates of Indebtedness Foreign series
Foreign Currency series
Treasury notes -

396,000,000
30,120,482

Foreign series
Treasury bonds-

163,ll8,258

Foreign Currency serieb
Treasury certificates
Special Funds -

705,021,190
2,500,000

1,294,259,930
2,500,000

5,965,830,386
Treasury notes
2,652,172,000
Treasury bonds - - - - - - - - 34,665,435,000
Certificates of indebtedness

Total interest-bearing _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Matured, interest-ceased _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Bearing no interest:
United States Savings Stamps - - - Excess profits tax refund bonds - - -

52,563,514
691,057
3,036,000,000
128,956,600
125,000,000
3,000,000
10,000,000

Internat'l Monetary Fund notes - - - Internat'l Develop. Ass'n. notes - - Inter-American Develop. Bank notes - Unired Nations Children's Fund bonds_
United Nations Special Fund bonds__
Total
- _ _....c._.......' - - _
Guaranteed obligations (not held by Treasury):
Interest-bearing: Debentures: F. H. A. &; DC Stad. Bds._

3,356 ,211,171

306,O'(6,324,,6B~

704,~80,950

~Iatured, interest-ceased - - - - - -_ _ _ _~6:::2~7.!,.::300~

705,008,250
========:.-._-========:;;.;.

Grand total outstanding _ _ _ _ _ _ _
Balance face amount of obligations issuable under above authority
Reconcilement with Statement of the Public Debt

_...:O=-c;;..to=b:=..:=er=-...3J.~J.......1.9"'-l116:..3~_
(Date)

(Daily Statement of the United States Treasury, _......!OO&;C~toJ:!:WbJ!!~eLlor'---3.Aol.."l-l~9:.t.6..3i1--_)
Outstanding.
(Date)
Total gross public debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Guaranteed obligations not owned by the Treasury _ _ _ _ _ _ _ _ _ _ _ _ _ __
Total gross public debt aDd guaranteed obligations _ _ _ _ _ _ _ _ _ _ _ _ _ __
Deduct - other outstanding public debt obligations not subject to debt limitatioa - - - - -

D-1045

STATUTORY DEBT LIMITATION
As of
October 31, 1963 _
Wa.hin,ton, lOT. 1:5. 1963
SectioD 21 or Second Liberty Bond Act, as amended, provides that the face amount of obligations issued landel aUlnoricy of
dlat Ace, aDd the face amount of obligations guaranteed as to principal <lnd interest by the United Scates (escept suet. guaranteed
oblia_tioal as may be he~d by the Secretary of the "!reasury), "Sba.l1 not exec cd in the a/Flllate $28),OOO,OOJ.OOO (Aclof
Iune)O 19'9; U. S. C., ude 31, sec. 7S7b), outstandlng ae anyone tune. For purposes of thiS secdoD tile current redemption
,aile of' any obligation issued on a discount basis which i:o; redeemable prior to maturity at the option of Ibe holder sbaU be Considered as its face amount." The Act of August n.l9<>.; (P.L. 88·106 88th Congress) provides that the abo'e limitation shall be
tempotadly increased during rhe pcriod beginning on Septt.'mber 1, 1963, and ending on November 30. 1963 to $}09,OOO,OOO,OOO.
The following table shows the face amount of obligations ourstandins and the face amOUDC which can scill be issued
under this limitation:
. .
Total face amount thac may be outstanding at anyone time
$309,000,,000,,000
Outltanding obligations
issued
under
Second
Liberty
Bond
Act,
as
amended
.
Illterelt-bearlng :

Tteasury bills - - - - - - -..
$b9~, 720,132,000
Certificates of indebtedness _ _ _ _

15,,49.3,L,94,ooo
S.3, 69h, 595, 000

Treasury Qotes
Bonds Treasury - - - - - - - _
• SaviOls (Currelu redemption value)
United States Retirement Plan bonds

86,4)8,729,350

48, 686,814, bl7
360,406
98" 783,500
2S,731,000
3,719,476,000

Depositary
R. E. A. seties
Investment series
Certificates of Indebtedness·
Foreign series
Foreign Cw-relll:Y aeries
Tt~asury notes -

396,000,000
.30,120,482

Foreign series
Treasury bond.-

163,118,258

Foreign Currency series
Treasury certificates
Special Funds -

70S ,,021,190

2,,500,000

Certificates of indebtedness - - - Treasury notes _ _ _ _ _ _ _ _

5,965,830,386
2,,6,2,,172,000

34,,665,43$,000

Treasury boads
Total interest-bearing _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Matured, interest-ceased _ _ _ _ _ _ _ _ _ _ _ _ _ __
Beating no interest:

4.3,283,437,,;86
.302,458,312,989

261,800,,525

United States saving. Stamps - - - 52,563,514
Excess profits tax refund bonds - - 691,057
Internat'l Monetary Fund notes - - - 3,036,000,000
Internar'l Develop. Ass'n. notes - - 128,956,600
Inter-American Develop. Bank notes - 125,000,000
United Nations Children's Fund bonds_
3,000,000
United Nations Special Fund bonds ___
10..-,000_......,000
__
Toral _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Guaranteed obligations (not held by Treasury):
Interest-bearing: .
Debentures: F. H. A. && DC Scad. Bds._
7c4,~O,950

_:-:-:-:-:--:-:6:22~7::::-1:::300~_:_=__ _==:7:::0:5~c=O=08='~250
__

Matured,
interest-ceased
, Grand
total
outstanding .._-=-=-=-=-=-=-=-=-=-=-=::Balallce faee amount of obligations issuabie under above authority

October 3l,......1963
Reconcilement with Statement of the Public Debt -~~~~(D~at~a~)
w:~:..._

(Daily Statement of the United States Treasury,

:IIlSCud.ing •

-"OlSlC:Ji!!towbalel,,[r~Jl~L.t-J..L..;9;u.6I.,lJi.-(Date)

Toral sross public debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Guaranteed obligations noc owned by the Treasury _ _ _ _ _ _ _ _ _ _ _ _ __
Total ,ro •• public debt aad guaranteed obligations
"
•
llloer • other outstaadin, public debe obligations Dot subject to debt hmuat&oll _ _ __
I

1045

- 2 -

with the First National City Bank in New York.
with the

u.s.

Mr. Ahern served
~

Army from January 1944 to April 1946.

A
Mr. Ahern,
38, was born in New York City, where he

a~d

~it~Col1~~

received his A.B. and Ph.D. degrees from Columbia

College and Columbia University Graduate School of Economics.
has written a number of financial articles and\holds
honors, including Phi Beta Kappa membership"-i. is

sev~ra1

~lso

He
academic

a member of

the American Finance Association, American Statistical Association
and the National Association of Business Economists.
Mr. Ah!rn is unmarried,. and resides·at

DRAFT

11/14/63
November 14, 1963

FOR IMMEDIATE RELEASE
DANIEL S.

AH~RN

NAMED ASSISTANT TO THE

SECREtARY

OF THE TREASURY

Treasury Secretary Douglas Dillon today announced the appointmen'
of Daniel S. Ahe~n, Vice President of Wellington Management Company,

Philadelphia, Pennsylvania, as Assistant to the Secretary (Debt
Management).

p..

Mr. Ahern succeeds Frank E. Morris, who resigned recently to

'"
join Loomis, Sayles & Company, investment counselors, in Boston.
Mr.

Ah~rn
1\

will aid in developing and coordinating plans and

policies for debt

management~

1ncluding the work of the Office of

Debt Analysis.
For the past two years Mr. Ahern has d;ii5cw:tgd investment
resear'
,
~

as'

'wi"" for the Wellington Management Company, with offices in

Philadelphia.

From June 1951 to November 1961, he was an economist

TREASURY DEPARTMENT

FOR ]MMEDIATE RELEASE
DANIEL S. AHEARN NAMED ASSISTANT
TO THE SECRETARY OF THE TREASURY
Treasury Secretary Douglas Dillon today announced the
appointment of Daniel S. Ahearn, Vice President of
Wellington Management Company, Philadelphia, Pennsylvania,
as Assistant to the Secretary (Debt Management).
Mr. Ahearn succeeds Frank E. Morris, who resigned
recently to join Loomis, Sayles & Company, investment
counselors, in Boston.
Mr. Ahearn will aid in developing and coordinating plans
and policies for debt management.
For the past two years Mr. Ahearn has been active in
investment research for the Wellington Management Company,
with offices in Philadelphia. From June 1951 to November
1961, he was an economist with the First National City Bank
in New York. Mr. Ahearn served with the U. S. Army from
January 1944 to April 1946.
Mr. Ahearn, 38, was born in New York City, where he
received his A.B. and Ph.D. degrees from Columbia College and
Columbia University Graduate School of Economics. He has
written a number of financial articles and is the author of
"Federal Reserve Policy Reappraised, 1951-1959," published
in July of this year. He holds several academic honors,
including Phi Beta Kappa membership and is also a member of
the American Finance Association, American Statistical
Association and the National Association of Business Economists.

000

D-1046

FOR RELEASE:

UPON DELIVERY

STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE SENATE COMMITTEE ON FOREIGN RELATIONS
ON LEGISLATION AFFECTING
THE INTER-AMERICAN DEVELOPMENT BANK
AND
THE INTERNATIONAL DEVELOPMENT ASSOCIATION
NOVEMBER 15, 1963, 10:00 A.M. EST

Mr. Chairman and Members of the Committee:
It is a pleasure to appear before you today in connection
with the participation of the United States in the Inter-American
Development Bank (IDB) and the International Development
Association (IDA).

Important increases in the financial

resources of both of these institutions are urgently required.
The legislation before you would authorize the United States
to subscribe its proportionate share of these increases.
The National Advisory Council on International Monetary
and Financial Problems has considered and reported on these
matters, and copies of its reports are before you.

In both

cases, the Council has strongly recommended early and favorable
action by the Congress.

On August 19, 1963, the House of

Representatives, by a voice vote, passed H.R. 7406, covering
the Inter-American Development Bank request being considered
today.

The International Development Association request was

- 2 -

only recently introduced, and has not yet been taken up in the
House.
INTER-AMERICAN DEVELOPMENT BANK
H.R. 7406 authorizes me, as U. S. Governor of the InterAmerican Development Bank, to vote in favor of an expansion of
the Bank's resources and thereby provide for the continued operation of that institution as a major force in the Alliance for
Progress.
Since the lOB was established at the close of 1959 and began
operating in the fall of 1960, it has assumed an active and increasingly vital role in Latin America's economic and social
development.

Although established prior to such major milestones

of Inter-American cooperation as the Act of Bogota and the Charter
of Punta del Este, the lOB's Charter anticipated the principles
subsequently set forth and now established as basic elements
of the Alliance for Progress.

All of the lDB's activities serve

the accomplishment of the goals of the Alliance, and the lOB - as
the principal financial institution of the Inter-American system has become a central and essential operating element of this great
endeavor

In short, the Inter-American Development Bank has in a vel

- 3 -

become "The Bank of the Alliance" -- breaking the trail and
providing leadership in showing the way to the economic and
social development of this hemisphere.
Structure and U. S. Participation
Let me recall briefly, Mr. Chairman, the structure of
the lOB and the extent of United States participation in
this institution which was established for the purpose of
contributing to "the acceleration of the process of economic
development of the member countries."
The lOB was initially established with an authorized
ordinary capital amounting to $850 million.

In addition,

there was established within the lOB a Fund for Special
Operations, with resources of approximately $150 million.

The

aggregate initial resources of the IDB were thus on the order
of $1 billion, and were further supplemented by entrusting
to the lOB the administration for the United States of the
Social Progress Trust Fund, with $394 million.
Of the authorized ordinary capital of $850 million, it
was arranged that $400 million would be paid in, and of this
latter sum the United States subscribed to $150 million,
while the Latin American members subscribed to $232 million.

- 4 Half of these payments were due in gold or dollars and half
in the currency of the member country.

(Although Cuba was

initially considered a prospective member and was allotted a
share of the capital, Cuba failed to join the lOB and to
subscribe to its capital, and is now excluded from membership.)
Actual payments to the lOB on these subscriptions were made in
three installments completed in October 1962.

All of the

members have met their subscription payments promptly and in
full.
Matters of the ordinary operations of the Bank are
decided by a simple majority vote of the Executive Directors
or of the Governors.

The United States is entitled to cast

42% of the total votes, so that an important vote is always
assured for the U. S. viewpoint.

The Bank's Articles provide

that all decisions relating to the Fund for Special Operations
shall be taken by a two-thirds vote.

Since the United States

casts the same number of votes with respect to the Fund's
operations as it does for the Bank's ordinary operations, the
favorable vote of the United States is required with respect
to operations of the Fund.

- 5 -

That portion of the ordinary capital not required to be
paid in is known as the "callable capital."

The callable

capital was established at $450 million, of which the United
States' share is $200 million and that of the other members
is $232 million.

The callable capital represents a guarantee

of the member governments for the lOB's obligations and thus
permits the lOB to raise funds in the private capital markets.
The IDB has in fact successfully used this authority to raise
funds totalling approximately $100 million in two separate
bond issues.

A first placement of bonds was arranged in

April 1962 in Italy, for $24.2 million equivalent in Italian
lire, at 5 percent and for a 20-year term.

In December of

last year, lOB successfully floated in this country a public
issue consisting of $75 million of 20-year 4-1/4 percent bonds.
The ordinary capital of the Bank can be utilized only
for loans on conventional terms, with credit standards similar
to those of the World Bank.
currency lent.

The loans are repayable in the

They bear interest at 5-3/4 percent, except in

the case of loans made in Italian lire borrowed by the Bank,
which were at 6-3/4 percent.

Maturities range up to 20 years,

- 6 depending on the type of project involved.
The Fund for Special Operations, on the other hand, was
created to make loans on softer terms and generally repayable
in the local currency of the borrower.

These loans were

designed for cases where, for balance of payments reasons,
payment in hard currencies would be difficult or uncertain.
With rare exceptions, they have borne interest at 4% or 4-1/2%,
with maturities of up to 29 years.

While these loans are on

softer repayment terms than those from the ordinary capital,
the same high standards as to projects are enforced.
All payments on loans have been made regularly to the
Bank and none of the loans Inade, either from Ordinary Capital
or from the Fund for Special Operations, is in default.
Of the original resources of the Fund for Special
Operations, the United States contributed 0100 million and
the Latin American members paid in $46 million (half of which,
again, was in the form of gold or dollars and half in their own
currencies).

- 7 To recapitulate, the extent of United States participation to date in providing capital to the Inter-American
Development Bank has involved payments of $250 million
($150 million for ordinary capital and $100 million for the
Fund for Special Operations) and a callable capital sUbscription
of $200 million which will not involve any payment except in
the unlikely event the IDB should ever be unable to meet its
obligations.

In addition, the United States has entrusted

the administration of the $394 million Social Progress Trust
Fund to the IDB.
Proposed Enlargement of Resources of IDB
The Agreement establishing the Inter-American Development
Bank contemplated a future need to enlarge the resources of
the IDB and included specific provisions looking toward such
an enlargement.

It was provided that the callable capital

could be increased after all the original subscriptions had
been paid and that the Fund for Special Operations could be
increased when the Governors deemed it advisable.

In the

spring of 1962, it became clear from the tempo of the IDB's
operations that the question of an increase in the IDB's
capital should be placed under active study.

The Governors

- 8 of the IDB at that time, meeting in Buenos Aires, instructed
the Board of Executive Directors to study the question of
enlarging the resources of the IDB and to submit such proposals as appeared desirable.
The Directors submitted their Report on this matter in
March of this year, together with their recommendations.

The

full text of this Report has been made available as an
Appendix in the Special Report of the National Advisory Council
submitted to you earlier.

At their annual meeting in Caracas,

in April of this year, the Governors of the lOB approved the
proposals of the Executive Directors to enlarge the resources
of the IDB and recommended to each member that it take the
necessary administrative and legal actions to make the proposals
effective as soon as possible.
The proposal now placed before you involves three major
actions:

First, the authorized capital of the lOB would be

increased by $1 billion, entirely in the form of callable
capital available to back-up the lOB's obligations.

Second,

the resources of the Fund for Special Operations would be
increased by $73 million.

Third, the authorized ordinary

capital would be further increased by $300 million to provide
for the possible future admission of new members to the IDB.

- 9 -

The proposed $1 billion increase in the callable capital
would be subscribed by all members in the same proportions as
their present subscriptions bear to the present authorized
ordinary capital of the IDB.

The United States' share of the

increase would thus be $411.8 million.

Authority for this

increase is being requested at this time in order to provide
the Bank with assurance regarding its ability to raise
additional funds in the private capital market.

Members are

to notify the Bank on or before December 31, 1963 of their
agreement to the proposed increase and their intention to
subscribe to their proportionate share.

The actual subscrip-

tions, and appropriations to meet the United States subscription, will not be required until a later stage and it is planned
to phase them in two installments -- one half by the end of
December, 1964 and the other half by the end of 1965.
I wish to emphasize that it is quite unlikely that any
of this increase in our subscription will ever have to be paid
out as an actual cash expenditure of the Treasury.

The

"callable capital" arrangement is similar to our subscription
to the lBRD, which has worked so successfully during the past
15 years, with no defaults, no inability of the IBRD to meet

- 10 its obligations, and no cash transfers required from the Treasury.
We do not anticipate that our experience with the IDB will be any
less satisfactory than it has been with the IBRD.
The proposed increase in the resources of the Fund for Special
Operations represents a 50 percent increase over existing resources of the Fund.

The United States' share of the increase

would be $50 million while the Latin American members will contribute $23 million.

As was the case with the original con-

tributions, the Latin American members will make their contributions to the extent of one-half in gold or dollars and one-half
in their own currencies.

Members are to notify the IDB by the

end of this year of their consent to the increase and intention
to make the necessary payment within 90 days.

Accordingly, subject

to the approval of this authorizing legislation, a $50 million
appropriation is being sought for the current fiscal year to
enable the United States to make its payment.
The $300 million additional increase in the authorized capital
of the IDB would not involve subscriptions by the United States
or other present members of the IDB.

In other words, no auth-

orization or appropriation of funds by the U.S. would be
required.

Rather this proposal looks toward the eventual

- 11 -

eventual admission of newly independent nations of the
Americas, and possibly Canada, as members of the IDB.

the event such additional members are admitted and subscribe
to as much as $220 million, one additional Executive Director
would be elected to represent the new members.

At present

the Board of Executive Directors consists of seven members,
of which one represents the United States.
I should add, with respect to the Fund for Special
Operations, that the proposed increase in resources represents
approximately one additional year's needs for loan operations.
The future of this Fund and its potential need for additional
resources is presently the subject of special study.

The

Directors of the lOB were instructed by the Governors earlier
this year to conduct such a study, looking especially at the
relationship of this Fund, which was designed to make so-called
"soft loans", to the other activities of the IDB.

It has been

the view of some -- and I tend to share this view -- that the
image of the lOB and its operations might be strengthened if
its three existing loan windows could be consolidated into two
windows.

Consideration will therefore be given by the

Executive Directors and the Governors to the advisability in

- 12 the future of limiting the IDB's operations to the existing
ordinary capital or "hard loan window" and one "soft window"
which would combine the operations now conducted through the
Fund for Special Operations and the Social Progress Trust
Fund

much along the lines of the IBRD/IDA arrangements.

Such a consolidation would not, of itself, affect the total
amount of funds needed by the IDB for economic and social
development purposes.

At least as much -- perhaps even more

will be needed than in the past for these purposes.
The Special Report of the National Advisory Council and the
report of the IDB's Executive Directors explain fully the
need for the proposed increase in the resources of the IDB.
This need stems fundamentally from the tasks being assigned
to the IDB within the context of the expanding program of interAmerican economic cooperation, and Latin America's requirements
for external resources to accomplish the goals of the Alliance
for Progress.

The specific amounts involved are derived by

projecting a modest dollar lending rate, from the IDB's own
resources, of $200 million a year, of which $150 million would
be from ordinary capital and $50 million from the Fund for
Special Operations.

On this basis, it is estimated that existing

- 13 lendable dollar resources will have been exhausted some time
during calendar 1965, with respect to ordinary capital, and
by the end of this year, with respect to the Special Fund.

The proposed increases will cover additional loan commitments
at the projected rates through 1967 for the ordinary capital,
and, as 1 have noted, for one additional year (1964) in the
S?ecial Fund.
The lDB's Activities
The lDB has a remarkable record of accomplishment during
the short three year span since it opened its doors for loan
operations.

As of the end of September, it had approved from

its own resources 101 loans for an aggregate value of $417
million and 65 loans from the Social Progress Trust Fund for
$358 million.

In excess of $750 million has thus been put to

work to meet the pressing economic and social needs of Latin
America -- for housing and schools, for water supply and
sanitation facilities, and for the variety of agricultural,
industrial, and public works facilities essential to proper
development and growth.
Of the loans made from its own capital resources, 68
loans for $300 million were financed out of the IDB's ordinary
capital resources, drawing upon the paid-in capital subscriptions

- 14 as well as the resources derived from the two bond issues
last year.

Approximately $54 million of these ordinary capital

loans were made in the Latin American currencies available to
the IDB.

It has made 33 loans for $117 million, including $16

million in Latin American currencies, from the resources of
the Fund for Special Operations, which are now rapidly
approaching exhaustion.
Together with the assistance the IDB has provided to
Latin America through the provision of this loan capital, it
has also given help in the building of developmental institutions.
It has been instrumental in the creation or improvement of
many such institutions -- among them development banks, housing
institutes, savings and loan associations and agrarian credit
organizations.

The IDB has also helped significantly in

promoting the acceptance of the administrative and social
reforms so vital to the success of the Alliance for Progress,
such as the re-structuring of antiquated fiscal, agrarian
and administrative systems.
Of special interest at this time, I should note the
increasing effort being made by the IDB to mobilize resources
and obtain supplementary credits from European countries for

- 15 development projects which it is

helpir~

to finance.

I have

already noted that the IDB placed its first bond issue in
Europe.

It has been very active in bringing Latin America's

needs to the atteation of the European countries and stimulating
their interest in specific project opportunities.

We are

hopeful that the increasing interest in Latin America on the
part of European governments and investors will help broaden
their participation in international development assistance
on suitable terms.
lateral instrument

We have in the IDB an admirable multi\~hich

can assist -- and is exerting itself

to assist -- in bringing about expanded European participation
in the

All~ance

for Progress.
Conclusion

ar. Chairman, the Inter-American Development Bank
established as a tangible institutional symbol of
economic cooperation.

UrtS

inter-Ame~·:i.cap

Events moved rapidly after its

establishment, and multilateral economic and social
cooperation in this hemisphere culminated in President
Kennedy's call in early 1961 for an 1lAlliance for Progress.'
In an unprecedented move shortly thereafter, the nations oi
the Americas committed themselves in the Charter of Punta
del Este to a

sweepin~

program of social reform and a decade

- 16 of economic growth.

Since then, the Inter-American

Development Bank has assumed new stature, in the forefront
of the Alliance, stimulating, encouraging, and leading the
way toward achievement of the Alliance goals.
The realization of the goals of the Alliance is a
formidable task.

The difficulties inevitably encountered in

attempting to bring about fundamental changes in whole
societies are immense.

Certainly, the mere provision of

money from outside sources cannot assure success of the
Alliance.

Fortunately, there is increasing realization through-

out Latin America that the extent of their own efforts will in
the long run determine the success or failure of the Alliance
for Progress and will determine whether the external resources
being made available to them can be successfully utilized.
The Inter-American Bank plays a significant role in shaping
and stimulating the nature of Latin America's own efforts toward
Alliance goals.

Through their own financial participation,

through their presence in the staff and management, and their
decisions in all of its governing bodies, the IDB is available
to the Latin American countries as their own instrument, which

- 17 they themselves can use and direct in the struggle to cast
off the bonds of poverty and ignorance.
The record shows that Latin America is making a substantial and effective use of the IDB as a means of accelerating
social and economic progress, and that the lOB is worthy of
full and continued U. S. support.

I therefore urge the

approval of the bill before you to provide for increased
participation by the United States in the Inter-American
Development Bank.
INTERNATIONAL DEVELOPMENT ASSOCIATION
I would now like to turn to our request for authority
which would permit the United States to participate with
sixteen other economically advanced members of the International
Development Association in an increase of $750 million in the
Association's resources, to be paid in over a three-year period,
beginning in fiscal 1966, at the rate of $250 million a year.
In comparison with the annual payments initially subscribed
to IDA, the present proposal means an increase of two thirds
in the amounts we and these other countries are providing for
use by this effective, multilateral institution.

- 18 Action on this matter is required now, because the
Association will very shortly exhaust its authority to make
credit commitments against its existing subscribed resources.
These present resources are still in the process of being paid
in under a five-year schedule, with the final payment falling
due in November, 1964.

Thus, while IDA currently has funds

with which to make disbursements on commitments already made,
it needs prompt assurance of the future availability of new
funds if it is to continue to make new commitments.

Although

authorization for our participation is required now in order
to permit IDA to continue operations, no appropriation of funds
would be required until fiscal year 1966.
Structure and Operations of IDA
Legislation relating to IDA has not been before this
Committee since 1960, and I would therefore like to review
briefly the nature of the institution and its accomplishments
to date.

IDA came into existence in September 1960, as an

affiliate of the Horld Bank, and is located here in Washington.
Any member country of the Horld Bank may join the Association,
and as of November 8, 1963, 90 of the 101 members of the Bank
were also members of the Association.

IDA has no staff separate

from its parent institution; instead, for reasons both of

- 19 economy and coordination, the regular World Bank staff
performs IDA's loan appraisal and other functions, and IDA
reimburses the Bank for these services.

Similarly, IDA's

Board of Executive Directors, which oversees day-to-day
operations, consists of the World Bank's Executive Directors
serving

officiis.

The senior policy body of IDA, the

Board of Governors, consists of the IBRD Governors of IDA
member countries, also serving

officiis.

IDA's membership is divided into two categories:

the

Part I countries are the economically advanced countries
of the free world and supply the great bulk of the Association's
hard currency resources, while the Part II countries are the
developing nations, which are the recipients of IDA's credits.
Member countries initially subscribed to IDA in approximate
proportion to their subscriptions to the International Bank,
and voting strength is based on the relative size of
subscriptions.

Part I countries are required to pay their

entire initial subscriptions in convertible currencies, whereas
Part II countries are required to pay 10% of their initial
subscriptions in convertible currency and the remaining 90%
in local currency which may not be used outside the member
country without its permission.

Total subscriptions as of

- 20 November 8, 1963, were $984.4 million, of which $766.9 million
was due in convertible currency and $217.5 million in restricted local currency.

Initial subscriptions were made

payable in five annual installments, the fourth of which fell
due on November 8.

The subscription of the United States to

IDA amounts to $320.29 million, on which $258.6 million has
already been paid in.
IDA makes credits for the same general purposes as the
World Bank, but its terms differ sharply from those carried by the
World Bank's loans, which are now at 5-1/2% interest and for
periods up to 25 years.

All IDA credits are made for a term

of 50 years, and bear no interest, but carry a service charge
of 3/4% per annum.

There is a 10-year grace period on repay-

ment of principal; in the next ten years, 1% of principal is
repaid annually; and in the final thirty years, 3% of principal
is repaid annually.
Out of its total lendable resources in hard currency of
just over $750 million, IDA had committed $554 million on 42
credits in 18 countries by October 31, 1963.
of that date were $104 million.

Disbursements as

At the rate of IDA lending

evidenced in FY 1963, the balance of lendable funds would be
exhausted sometime next Spring.

- 21 A major part of IDA's commitments has gone to projects
in Asia and the Middle East.

Latin America has been the next

largest recipient, followed by Africa and Europe.

The

European activities of IDA have been confined exclusively to
Turkey.
Need for Finance on IDA Terms
The external public debt of developing countries more
than doubled between 1955 and 1961.

However, this dramatic

increase was not matched by a comparable increase in the
foreign exchange earnings required to meet this heavier debt
servicing burden.

The developing countries are thus caught in

the dilemma of incurring further debt on conventional terms,
which in most cases would be imprudent in the light of their
over-all debt servicing capacity, or of curtailing sharply
the inflow of external resources, which may slow down or
even reverse the forward motion of their development, with
dangerous political and social consequences, as well as
adverse repercussions on the stability of the international
monetary system.
IDA was established three years ago as one way of
mobilizing the resources of the economically advanced countries

- 22 to alleviate this dangerous situation.

Many of the developed

countries recognize the seriousness of the problem of
accumulation of short-term, high-interest debt by the developing countries.

They are - increasingly - providing funds to

finance development at a cost the developing countries can
afford.

This is the solution we have adopted in our own aid

program, and it is important that we continue to be able to
do this.

One of the most effective ways we can get other

countries to share in this effort is by this proposed increase
in IDA resources, although IDA can only meet a portion of the
demand for development funds on appropriate terms.
Details of the Proposal
In brief outline, the proposal recommended to the IDA
Governors by the Executive Directors in their report of
September 9, 1963, is for an increase of $750 million in the
hard currency resources of the Association, such increase to
be entirely paid in by seventeen Part I countries over a threeyear period commencing in FY 1966.

The Part II countries will

have no part in this increase in capital.

Compared with the

initial subscriptions to the Association, which are being
paid over a five-year period, the new resources represent

- 23 a two-thirds increase in the annual volume of funds being
made available.
Except in the case of Belgium and Luxembourg, the new
resources take the form of additional contributions to IDA,
without voting rights, rather than subscriptions which would
carry voting rights.

The U. S. already enjoys over a quarter

of the total voting power, and this favorable position will
not be significantly changed.

Belgium and Luxembourg, which

have not previously joined IDA, are now doing so, and half
of their participation in the new resources will be considered
as their initial subscriptions with voting rights and the
other half will be on the same non-voting basis as the remaining
participants.
The share of the United States in the new resources is
$312 million, or 41.6% of the $750 million total.

This

represents a slight reduction from our 43% share in the
initial subscriptions to the Association.

There has been a

significant increase in the shares pledged by Canada, France,
Germany, Italy, Japan, and Sweden, while at the same time
there were significant reductions in the shares of the United
Kingdom and the Netherlands.

These changes are a reflection

- 24 -

of changed conditions in the countries concerned since the initial
subscriptions were agreed upon and provide a sounder basis for the
future.

South Africa also reduced its share significantly.

Kuwait,

which was not initially a member of IDA, joined as a Part I country
on September 13, 1962, but is not participating in the new contributions.

The shares of the other Part I countries show only minor

variations from their initial subscriptions.

The attached table

shows amounts and shares of each Part I country's initial subscription and their participation in the proposed new resources.
The understanding among the participating countries provides
that no country's commitment will become effective unless twelve of
the seventeen contributors, representing $600 million of the $750
million total, agree by March 1, 1964, to make their contributions
on the proposed tenms.

By the tenms of the resolution, however, the

Governors of IDA must vote by December 31 of this year to authorize
the Association to accept the resources to be provided by the Part I
members.

Although the Executive Directors may extend either of the

above dates if necessary, the urgent need of IDA for an early assurance of additional funds argues strongly for prompt action within
the specified deadlines, in order to avoid an interruption in the
smooth flow of IDA's credit activities.
The Proposed Legislation
The bill before you would amend the International Development
Association Act in order to provide for three things.

First, it

- 25 would authorize me, as U. S. Governor of IDA, to vote in favor
of an increase in the reSources of the Association.
vote that is required by December 31.

This is the

Second, it would authorize

me to agree, on behalf of the United States, to contribute
$312 million to the Association as the U. S. share of the increase
in resources, and would authorize the appropriation of that sum,
without fiscal year ltmitation.

Finally, it would eltminate

existing language which limits the issuance of non-interest
bearing notes to the amount of the initial subscription of the
United States.

This is necessary to permit the United States

to substitute non-interest bearing notes for the new resources
until IDA actually requires cash for disbursement, and thereby
to minUmize the cost to the Treasury of this contribution.
I wish to re-emphasize that the authority being requested
today for IDA does not carry with it any requirement for an
immediate appropriation, and will not impose any budgetary
burden during the next fiscal year.

No payment is required

until fiscal 1966; an appropriation request will be presented
in January 1965 as part of the 1966 Budget Message.

-26Advantage of IDA to the United States
No discussion of IDA can be complete if it omits
reference to a fundamental fact: IDA, like no other multilateral institution, mobilizes substantial amounts of development funds from the other advanced countries for lending on
terms that are fully adapted to the needs of the developing
countries.

For every dollar the United States has put up of

the initial subscriptions, other Part I countries have put up
$1.32.

For every dollar the United States will put up in

additional resources, other Part I participants will put up
$1.40 and the funds of others will be provided on the same
terms as the U.S. funds.

For some of the smaller countries,

IDA is the only mechanism through which they provide foreign
development assistance, and therefore IDA is the only technique
we have available for getting these countries to share the
aid burden with us.
Mr. Chairman, much of the impetus for the establishment of IDA originally came from the Congress itself and
the Congress has reaffirmed its confidence in the institution through annual appropriations for our initial subscription.

The United

States has in the past assumed

a position of leadership regarding IDA, and has done so

- 27 -

again in playing the major role in obtaining the agreement
of others to this substantial augmentation of the Association's
resources.

Our national interest here coincides with our

international responsibj.lities, for the nations today assisted
by IDA are building the foundations for a fuller participation
in tomorrow's expanding world of international trade.
fore urge that you act favorably on this bill.
Thank you, Mr. Chairman.

I there-

[In millions of

u.s. dollars and percentaged

Initial resources
Country

Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Japan
Kuwait
Luxembourg
Netherlands
Norway
South Africa
Sweden
United KingdoJ:\
United States
Total
Note:

Total

Annual
rate

20 18
5.04

4.04

37.83
8.74
3.83
52.96
52.96
18.16
33.59
3.36

7.57
1.75
.766
10.59
10.59
3.63
6.72
.67

27.74
6.72
10.09
10.09
131.14
320.29

5.55
1.34
2.02

742.72

1.01

Proposed amount of
new resources
Total

Annual
rate

19.80
5.04
16.50
41.70
7.50
2.298
61.872
72.60
30.00
41.25

6.60
1.68
5.50
13.90
2.50
.766
20.624
24.20
10.00
13.75

Percent
share of
initial
resources
2.72
0.67
5.09
1.18
0.52
7.13
7.13
2.45
4.52
0.45

Percent
share of
new
resources
2.64
.67
2.20
5.56
1.00
.31
8.25
9.68
4.00
5.50

26.23
64.06

.75
16.50
6.60
3.99
15.00
96.00
312.00

.25
5.50
2.20
1.33
5.00
32.20
104.00

3.73
0.90
1.36
1.36
17.66
43.12

.10
2.20
.88
.53
2.00
12.88
41.60

1.48,5(»

750 .00

250.00

100.00

:l.02

Detail may not add to totals due to rounding.

-"-,-:"1
~

- 2 -

and the Office of Domestic Gold and Silver operations.
Prior to joining the Treasury in 1962, Mr. Volcker was
associated with the Chase Manhattan Bank of New York, directing
research on domestic financial markets, and banking and financial
institutions.

Before that, he had held a number of positions

with the Federal Reserve Bank of New York.

His work there

included analyses of the Government securities

~.., f,-tJ {(\~......

o.r('. \V.. ".J-'~.,; 9..,....t~. . r)
f. ei Op SA ~4a!'l{e to CSHIH1:i t be 8

transactions)

~r t.Ji

repor t s an d memoran da on

SI2s9

(I"'"

azw

~.~l'

marke~'k ~Ctl1t;

A.i··~1 ~t,. ~ I.), ,~

the,; prepari#i.iiiPcf.

.~~. a....J.\.Lt...-.."
J;,
~ 'lv~~
£..
,-

.SE'.

Born in 1927 in Cape May, New Jersey, Mr. Vo1cker is a

~
1st,
(~~
q

-...."""graduate of Princeton, and has studied at Harvard University,
obtaining his Master's degree there in Political Economy and
Governm~nt.

He has also studied at the London School of Economic
...,-""

During his service with the Federal Reserve-"Bah"k-of NQTe7 York.,

.-- ..

Mr. Vo1cker taught Money and Banking at the New York Institute ot
Finance. /
~

gRAFT ~- - l-ltl-4/63
;'E1.EA~:;:

A.v. ::F;rSPAPEHS
~Ionday, '~o'Jember li3, 1963
:;'(.1R

November 1~, 1963

FQB- .IMMEDIATE RELEASE
PAUL VOLCKER NAMED DEPUTY UNDER SECRETARY
FOR MONETARY AFFAIRS

H: .,

,j"A~""'-~
,- .J..."

.....

Treasury Secretary Douglas Dillon today announced

men;t·oI(7f Paul A.

/ftl

appoint·

Volcker as Deputy Under Secretary of the Treasury

,"-"-"-4'
for Monetary Affairs.

Mr. Vo1cker has been Director of the Office
to

of Financial Analysis since January, 1962 .
~1/

. /1

'I'

Mr. Vo1cker succeedf J. Dewey Daane, who was recently appointl

by President Kennedy to the Board of Governors of the Federal

Re serve Sys tern.

h~(( 'rILf2r-l"d~/p~
Mr. Daane \'vi1l assume his new duties

flllh

·'.mher

at \"lhich time Mr. Volcker's appointment as Deputy Under Secretary

will become effective.

In his new capacity Mr. Vo1cker will act as a general deputy
to the Under Secretary for Monetary Affairs in all aspects of t~

~ .~~~~~.~ ~~Jr~~~~~""'!../
latter' s responsibi1ity~ but with particular emphasis on the work

~,
of the Office of Financial Analysis, the, Office of Debt Mea 6 mil!

TREASURY DEPARTMENT

FOR RELEASE A.M. NEWSPAPERS,
MONDAY, NOVEMBER 18, 1963
PAUL VOLCKER NAMED DEPUTY UNDER SECRETARY
FOR MONETARY AFFAIRS
Treasury Secretary Douglas Dillon today announced his intention
to appoint Paul A. Volcker as Deputy Under Secretary of the Treasury
for Monetary Affairs. Mr. Volcker has been Director of the Treasury's
Office of Financial Analysis since January, 1962.
Mr. Volcker will succeed J. Dewey Daane, who was recently
appointed by President Kennedy to the Board of Governors of the
Federal Reserve System. Mr. Daane will assume his new duties near
the end of November at which time Mr. Volcker's appointment as
Deputy Under Secretary will become effective.
In his new capacity Mr. Volcker will act as a general deputy to
the Under Secretary for Monetary Affairs in all aspects of the
latter's responsibility for foreign and national financial problems,
but with particular emphasis on the work of the Office of Financial
AnalYSis, the Office of Debt Analysis, and the Office of Domestic
Gold and Silver operations.
Prior to joining the Treasury in 1962, Mr. Volcker was associated
with the Chase Manhattan Bank of New York, directing research on
domestic financial markets, and banking and financial institutions.
Before that, he had held a number of positions with the Federal
Reserve Bank of New York. His work there included analyses of the
Government securities market aswell as two years as a trader handling
transactions for Federal Reserve and Treasury accounts. He also for
several years was a member of the Bank's research department, preparing
reports and memoranda on foreign and domestic financial problems.
Born in 1927 in Cape May, New Jer3ey, Mr. Volcker is a graduate
of Princeton, and has studied at Harvard University, obtaining his
Master's degree there in Political Economy and Government. He has
also studied at the London School of Economics.
Mr. Volcker is married to the former Barbara Marie Bahnson.
4621 Chevy Chase
;oulevard, Chevy Chase, Maryland.

'hey nave two children and make their home at

000

-1048

lOR fOOLlSE A.. ... 'fNSPA P'~RS,
1000000ber 16, 1963
hesd!,t, Ik,..-ber 19, 196).
RES'JLT3)" ~'REMHmY'S JEEKLJ BILL OP'FFJlIJfG
the Treasury Depar\Mnt announced 1as\ • .,.Ding that. the . .dere t .. two seri.. 01
TreuV7 b 'Us, one _r1,.. to be aft addit.ional 1sne of the bUle dated A~~~dt 22, U6a
aDl' \he ot,her aer1~. ~ be dat.ed NoftIIber 21, 1963, 1Ih1ch wen ott.reel on tiontlber lJ,
opened at the Federal "-"rft ~'.ank. on Woveaber 18. 'r.ncler..... 1avited tor
$1,200,000.000, or therubou.ts, 01 91-day bU1s and. tor $800,000,000, or t.hereabcN\a,
ot 182-daj bills. The detailJl of t.he two aeries an .. toUowtIl

_1"8

RA»JE 0'

ACCEPT~',n

CQ(PJ."frrm.

BIDS:

3.~~1'

99.111

99.106
99.109

).S29$

).S~"'

of t.he Ulount of 9l-dq bills bid tor at. t.be low prioe _ ....pt,ed
or If,2-dq billa bid tor at. the law price vu aoo.pted

8et: of t.he a.awrt.
TarAL rBi';m:ns

APPLr~D F'O:~

Diat.ri.ct.

I08Gi

• v York
Philadelphia
C1eftland

11.....,.
ltJ.aa\a
CbiGa«O
LcN1s
MiDneapol1s

st.

I.a •• Cit.,.
Dalla·
San Francisco

TOTALS

al
b/

AND ACCEi'TE.D BY FEDUIAL liE:SERVE DISTIUC!S.

~l1ed Far

h1,(£o,Odb

1,651,8)6,000
)4,186,000

21, aw, 000

lS,S19,cxx>
28,)58,000

100ea .
J

~2,OOO.

:,n

12,190,000

741,040,000

19,018,()J()

9,)06,000

26,164,000,

10,297,000
9,l6S,OOO
1,1Sl,000
110,267,000
1),lll,OOO

15,02),000
22,)0),000

267 ~6S,OOO
1n, 784,000
4),95),000)7 ,1422,000

2),759,000
39,255,000

17,7)Q,OOO

40,631,000
101.,)65,000
$2,)20,u)l,OOO

~l1ad'or

1,160,696,000

7,591,000
14,084,000

26,)79,000

18,167,000

73,)86,000

~,612,ooo

S9,169,~

$1,201,)07,OOO!l $1.4)1,)94,000

~
~• •
6)5,9)6,00D
4,)06,000

10,291,010

1,42S,aao
6,7S1,-

50,261,-

11,611, aID

$,691."

10,~,.

9.2b1,11

42.!fS •..,
$800,]oo'.}

Incl\ldea ~1e ,616,000 noncc.petitJ.':e tenders accepted at t.be ....age price of "J~
Incl.... ~1S,968,ooo ~it1.e tenders accepted a.t "be a. . . . . price of 98J50
On • coui>Oft issue or the s .... length a.nd tor the aaae ..,..., inYeated, the "MIl.
t,heee bills would tJrori.de yields of 3.62~, tor U.e 91-day bUle, and 3.1~, t. U
182-day billa. Interest rates on bills are auO't.t!d in tel'lU ot bank diaoou\ titJ:
t.be nturn related to thf.'J face SIIOWlt of the 'bills pqabl.e at. -t.vlt: rat,.bll'ViII
\be 8aOIIIfJt. iJmtsted. and their lengt,h in act.ul nu.ber 01 da;ye related to • )6O-dII
fear. In contraat, yields \Jft certificates, notes, aad boad.a an oc:.puted 18 .,.
or 1nt.eren Oft the aaoant iavested, and relate the m.abar 01 ..,. rau1rd.D&
interest pqlleftt period t.o the b.ctuti flUIIber of dap 1a the per1oci, with ........
ccayoand1Dg 11' aore than "ne coupon ~riod 18 iDYolftCt.

uta

Jr'1 (j

+,1

TREASURY DEPARTMENT

OR RELEASE A. M. NEWSPAPERS,
ues~,

November 19, 1963.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING

The Treasury Department announced last evening that the tenders for two series of
reasury bills, one series to be an additional. issue of the bUls dated August 22, 1963,
nd the other series to be dated November 21, 1963, which were offered on November 13,
ere opened at the Federal Reserve Banks on November 18. Tenders were invi ted for
1,200,000,000, or thereabouts, of 91-day bills and for $800,000,000, or thereabouts,
f 182-day bills. The details of the two series are as follows:
riliGE OF

ACCEPTED

OMPETITIVE BIDS:

High
Low
Average

91-day Treasury bills
maturing February 20, 1964
Approx. Equiv. :
Price
Annual Rate
:
99.111 .
3.517%
•
99.108
).529%
99.109
).524% !I

182-~ Treasury bills
maturing May 211 1964
Approx. Equiv •
Annual Rate
Price
98.156
).~7%
).667%
98.146
98.150
).660% !I

79% of the amount of 91-d~ bills bid for at the low price was accepted
8% of the amount of 182-day bills bid for at the low price was accepted

arAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Applied For
Accepted
: Applied For
Accepted
Boston
$ 41,040,000 $ i5,842,OOO : ~ 12,190,000 $ 5,090,000
New York
1,657,836,000
741,040,000
1,160,696,000
6)5,936,000
Philadelphia
34,186,000
19,018,000:
9,306,000
4,306,000
Cleveland
27,044,000
26,764,000:
10,297,000
10,297,000
Riohmond
15,519,000
15,023,000:
9,365,000
7,425,000
Atlanta
28,358,000
22,)0),000
7,151,000
6,751,000
Chicago
267,465,000
171,784,000:
110,267,000
50,267,000
St. Louis
4),95),000
37,422,000
1),lll,OOO
1l,611,000
Minneapolis
23,759,000
17,734,000:
7,591,000
5,691,000
Kansas City
39,255,000
)4,612,000
14,084,000
10,984,000
Dallas
40,6)1,000
26,)79,000
18,167,000
9,247,000
San Francisco
101,385,000
73,)86,000:
59,169,000
42,695,000
TOTALS
$2,320,4)1,000 $1,201,)07,ooo!l $1,4)1,394,000 $800,300,000
I Inoludes $278,616,000 noncompetitive tenders accepted at the average price of 99.109
I Includes $75,968,000 noncompetitive tenders accepted at the average price of 98.150
I On a coupon issue of the same length and for the same amount invested, the return on
these bills would provide yields of 3.62%, for the 91-day bills, and 3.79%, for 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 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 in terms
of interest on the amount invested, and relate the number of 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 is involved.

£I

D-1049

TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE SENATE FINANCE COMMITTEE
ON THE DEBT LIMIT
MONDAY, NOVEMBER 18, 1963, 10:00 A.M.
At the end of this month, the second temporary extension
in the debt limit since late May of this year will expire.
In the absence of new legislation, the ceiling will revert
from $309 billion to its permanent level of $285 billion.

This

would be more than $23 billion below our latest estimates of
the actual amount of outstanding debt subject to the limit on
November 30.
Consequently, the need to extend the temporary limit
promptly is imperative.

Moreover, the limit must also be

increased to enable us to meet our financial obligations during
the remainder of the fiscal year.

These obligations will

require new debt financing within the first few days of next
month -- financing which will have to be announced before the
end of this month.
Our projected borrowing needs over the remainder of the
fiscal year are illustrated on the attached table.

The second

column shows the estimated size of the debt at semi-monthly

D-1050

- 2 intervals, assuming at each date a cash balance of only
$4.0 billion -- well below the amount we normally maintain,
and equivalent to less than half of our average monthly
expenditures.

Actually, we know that our debt cannot be

adjusted abruptly in response to short-lived, but frequently
very large, swings in receipts and expenditures from one day
to the next, or from week to week, as these estimates assume.
Even with the most careful planning, we must frequently carry
a substantially larger cash balance.

But without any allowance

for that contingency, or for other unforeseen developments, our
debt will reach successively higher peaks of more than
$310 billion in mid-December, nearly $313 billion in March,
and more than $314 billion by June 15.
These figures are consistent with our latest review of the
outlook for both receipts and expenditures.

This review

indicates that our deficit for the current fiscal year should
approximate $9.0 billion, substantially less than the
$11.9 billion estimated last January in the President's budget.
That decided improvement reflects both higher receipts and
smaller expenditures than originally foreseen.
Our current estimates of fiscal year receipts take into
account the impact of the tax program passed by the House of

- 3 Representatives in September and now being considered by your
Committee.

We estimate that this program, with the rate

reductions becoming effective on January 1 of next year, would
entail a net revenue loss of $1.8 billion during fiscal 1964
after allowing for the stimulus to the economy and the larger
base of taxable incomes that would result.

That revenue loss

from the tax program is $900 million smaller than the $2.7 billion
estimated in January, when the program was proposed, because
the rate reductions in the House bill are scheduled to take
effect six months later than originally anticipated.
I should point out that the tax program, because it affects
revenues only with a lag, has very little bearing upon the
amount of our cash needs through mid-March, when borrowing
needs are seasonally high.

It would add approximately $1.6 billion

to our needs by June 15, when the debt will reach its peak for
the year.

The primary effect of the tax bill on fiscal year

1964 revenues would come through the proposed reduction in
withholding rates.
The

revenue outlook has also been improved because

economic activity, profits, and personal income will clearly
be significantly higher in calendar 1963 than we anticipated
at the time of the President's budget message.

These factors

- 4 are the principal determinants of fiscal 1964 revenues, and
we expect the result will be an additional $1 billion in
receipts.

Consequently, total receipts are now projected at

$88.8 billion -- $1.9 billion higher than estimated in January.
Meanwhile, the reductions in appropriations by the
Congress, together with the continuing, intense efforts of the
Administration to achieve every practicable economy within the
framework of Congressional authorizations, are being reflected
in a significantly lower rate of spending than originally
estimated.
programs.

Sizable

savings are spread through a number of

These savings will more than offset increased costs

in two areas -- for interest on the public debt, and for farm
price support programs -- which are expected to exceed earlier
estimates.

As the Director of the Budget will outline in

greater detail, our expenditure estimates in some respects
must still be considered tantative, largely because the Congress
has not yet taken final action on some appropriation bills.
But, there is a clear prospect that total spending in fiscal
1964 can be held to $97.8 billion, or approximately $1 billion
below the figure estimated in January.
The resulting budgetary deficit of $9.0 billion would
actually be less than the $9.2 billion estimated last January
in the absence of any tax reduction.

- 5 -

The debt limit legislation passed by the House on November 7
and now before your Committee provides for an increase in the
temporary ceiling to $315 billion through June 29, 1964.

The

bill then provides that the limit would return to $309 billion
for one day -- June 30 -- before expiring.

As indicated by the

table, this authorization to issue additional debt will meet
our calculated needs through the remainder of the fiscal year
only on the assumption that the cash balance can be maintained
at $4 billion, and only by cutting deeply into the customary
and highly desirable margin for contingencies and flexibility
during our period of peak needs in March and June.
I must point out that, over the past 10 years, the final
estimates of both revenues and expenditures contained in the
January budget document for the fiscal year which is then more
than half completed have each had an average error of

$l~

billion.

The comparable error in the estimates of the net deficit or
surplus has averaged $1.3 billion.

Therefore, I believe that

the $315 billion limit provided by the House bill is the very
minimum that can be accepted.

- 6 It must be recognized that a ceiling so close to our projected
needs entails definite risks, particularly at the time of our
peak requirements next June.

Those risks can be prudently

accepted only because experience during the first quarter of
next year -- particularly in connection with the usual heavy
March corporate profits tax payments -- will provide a basis
for reappraising our needs in ample time to enact appropriate
new legislation, if that should become necessary.

Of course,

if the tax program were not to be enacted by January 1st and
its impact on revenues delayed, the allowance for contingencies
would then be somewhat larger.

However, during the middle of

June -- the period of peak need -- the allowance would still be
below what has always been considered normal in the past.
I must also point out that, because of the extremely large
receipts that flow into the Treasury during the latter half of
June, it will be impracticable to reduce the cash balance on
June 30 to less than $5 billion, which would be necessary to
stay within a $309 billion debt ceiling on that day assuming a
budgetary deficit of $9 billion, as presently estimated.

Including

allowance for the usual retirement of tax anticipation bills during
that period, income substantially exceeds current cash needs.

- 7 These surplus funds are, however, quickly required to meet our
obligations in early July, when receipts are seasonally very
low.

This recurrent pattern means that the cash balance must

temporarily rise over the end of the fiscal year -- to something
like $7 billion -- if we are to avoid changes in the outstanding
debt so large and abrupt as to be seriously disturbing to the
market.

Under these circumstances, the debt limit of $309 billion

provided in the House bill for June 30 will not be adequate
unless the budgetary deficit is reduced substantially below
the $9 billion figure now foreseen.
With this caveat, I believe that the House bill provides
an acceptable debt ceiling for the remainder of the fiscal year.
It is certainly fully expressive of the compelling need and
desire, shared by the Congress and the Administration, to maintain
restraints on expenditures.

In so doing, it does entail risks

in impairing the usual margin for unforeseen contingencies and
flexibility.
Experience has shown us the extra and highly undesirable
costs and difficulties of managing a debt when it is pressing
closely against the ceiling.

It is essential that we maintain

a margin for financing flexibility -- not only to make it possible
to take advantage of favorable financing opportunities when
they present themselves, but also to permit us to allow for a

- 8 -

nonnal range of uncertainty in gauging the response of the
market to our necessarily huge financing operations.

In recent

years, the necessity to maintain a reasonable equilibrium
between the level of short-tenn rates in our market and markets
abroad to minimize disturbing capital flows between countries has
sometimes required a substantial increase in our sales of shorttenn securities on short notice, adding to the need for operating
flexibility.

And, whenever the debt rises very close to the

ceiling, and our financing flexibility is thus exhausted, the
danger arises that planning and executing acquisitions of Treasury
debt for the Federal trust funds, as required by our trustee
function, will be adversely affected by our inability to issue
additional debt to them.
For these reasons, I could not contemplate discharging my
responsibilities for managing the finances of our Government
prudently and economically within a debt ceiling any lower than
that provided in the House bill.

With the understanding that

present estimates indicate the likelihood that it will be
necessary to make the fiscal year 1965 legislation effective
next June 30th rather than July 1st, I recommend enactment of
this bill in its existing form.

You may be assured that the

Executive Branch will strive in every practicable way to realize
a budgetary outcome that will enable us to maintain our debt
within this tight ceiling.

PUBLIC DEBT SUBJECT TO LIMITATION
FISCAL YEAR 1964
(In billions)
Assumes Tax Cut (Effectiye January 1964 - as passed by House)

Operating
Cash Balance
( excluding
free gold)
Actual
June 12, 1963
$4.2
(low balance for June)
June 30
11.1
July 15
July 31
August 15
August 31
September 15
September 30
October 15
October 31

7.7
6.2
5.1
6.1
4.4
8.9
5.1
3.7

Public Debt
Subject to
Limitation

Hormal Al.lOwance
GO Provide F1exi:)i l i ty in Finaneing and for Contingencies

Total Public
Debt L.UlU tation Required
to Provide
Normal A11owanee
,

$305.3
306.1
306.0
305.1
305.0
306.8
307.5
307.0
306.8
306.8

Estimates based on projected actual cash balance
November 15
November 30

3.3
4.2

307.9
308.5

Estimates based on constant minimum operating cash balance of $4.0 billion
December 15
December 31

4.0
4.0

310.7
307.6

$3.0
3.0

$313.7
310.6

January 15, 1964
January 31

4.0
4.0

310.4
309.5

3.0
3.0

313.4
312.5

February 15
February 28

4.0
4.0

310.6
310.1

3.0
3.0

313.6
313.1

March 15
March 31

4.0
4.0

312.9
307.9

3.0
3.0

315.9
310.9

April 15
April 30

4.0
4.0

311.5
310.7

3.0
3.0

314.5
313.7

May 15
May 31

4.0
4.0

310.8
311.4

3.0
3.0

313.8
314.4

June 15
June 30

4.0
4.0

314.2
308.1

3.0
3.0

317.2
311.1

FOR RELEASE:

UPON DELIVERY

STATEMENT OF THE HONORABLE JOHN C. BULLITT
ASSISTANT SECREtARy OF THE TREASURY
BEFORE THE FOREIGN OPERATIONS AND GOVERNMENT
INFORMATION SUBCOMMITTEE OF THE COMMITTEE ON
GOVERNMENT OPERATIONS
ON LOCAL CURRENCY HOLDINGS
NOVEMBER 18, 1963, 10:00 A.M. EST
Mr. Chairman and Members of the Committee:
I am happy to appear before this Committee to discuss
the operations and the policy of the Treasury Department in
dealing with foreign currencies held by the United States
and available for United States uses.
The interest of the Treasury Department in this question
is twofold:
First, Treasury has responsibility for central accounting,
financial reporting and other fiscal operations in connection
with all local currencies received by the United States
Governmen t •
Second, Treasury is interested in the maximum feasible
use of foreign currency receipts to avoid dollar expenditures
abroad.

This interest is in line with the vigorous efforts

which the Administration is making to improve the balance-ofpayments position of the United States.

D-10)1

- 2 I shall devote part of my statement to the balance-ofpayments aspects of the use of our local currency holdings.
It will be helpful, however, to describe first the way in
which our foreign currency holdings arise, Treasury's specific
functions relating to their handling, and the nature of the
limitations affecting their use.
The largest single source of foreign currencies currently
being received for U. S. uses is the sale of agricultural
commodities under Public Law 480, Title I.
clude

or~inary

ItU. S. uses" in-

government operating expenditures; special

programs such as agricultural market development, educational
exchange and scientific research; and sales to American tourists.
FY 1963 receipts from P.L. 480, Title I, amounted to $213 million
out of a total of $484 million generated during that year for U.S.
uses from all sources.

Of the balance, $163 million represented

receipt of principal payments and interest on economic development loans, repayable in local currencies, and $108 million
represented interest on deposits held abroad, proceeds from the
sale of surplus property and other receipts.

Table A (attached)

provides a more detailed breakdown of FY 1963 receipts of local
curreneies by source.
Under present regulations, the Treasury initially takes
custody of practically all foreign currency receipts.

- 3 -

issues transfer authorizations to move foreign currencies
from holding accounts to operating accounts in accord with
relevant legislation and, where appropriate, the terms of
country agreements o

If a problem should arise about the

priority of assignment of local currency receipts to various
U. S. uses, the problem would be resolved by the Bureau of
the Budget in consultation with the agencies concerned.
The Treasury Department consolidates agency estimates
of local currency requirements.

On the basis of these

estimates and supplementary information about possible
changes in requirements and availabilities, the Treasury
annually prepares a list of the countries in which U. S.
holdings are in excess.
For most of the 60 or so currencies held by the U. S.
Government, holdings are much smaller than estimated requirements for a reasonable period in the future.

But in the case

of some countries--between seven and nine in recent years-Treasury has found that holdings exceed two years' prospective
requirements.

In such a case, the currency is likely to be

designated by Treasury as an excess currency unless prospective
changes in U. S. receipts of the currency or the trend of

- 4 U. S. requirements or a rise in prices in the countries
involved suggest that a somewhat larger number of years'
requirements should be allowed for before the currency is
considered "excess".
This determination of excess currencies is made by
the Treasury in cooperation with other agencies, particularly
with the Bureau of the Budget.

Once the list of countries

in which excess currencies are held has been established,
it is used by the Director of the Bureau of the Budget as a
guide for inviting agencies to request special foreign currency
program appropriations.

Such appropriations, when approved

by the Congress, are for expenditures that can be financed
only out of U. S. Government holding of excess currencies.
The exchange rates at which U. S. holdings of local
currencies are sold to government agencies, personnel, or
other authorized purchasers are specified by the Treasury

Department.

This involves no problem in a country with a unitary

exchange rate.

In some countries, however, multiple exchange

rate systems exist, and in these cases the general policy
has been to use the rate at which the currency could be
acquired in the market for the purpose involved.

- 5 -

The Treasury Department designates the depositories
abroad for U. S. Government-owned local currencies and makes
it a practice to utilize branches or subsidiaries of American
banks wherever possible.

It is the policy of the Treasury to

obtain the maximum amount of interest possible on such
deposits consistent with their safety.

The protection of

U.S.-owned foreign currencies is a prime concern of the
Treasury.

The risks that would be involved in some countries

in depositing funds with foreign commercial banks would more
than outweigh any interest that might be collected on the
funds.

In these cases we have followed the practice of

depositing the funds with foreign central banks which we feel
provides the maximum security for the funds since by doing so
we are creating what is tantamount to a Government-toGovernmen t cIa im.
In some foreign countries the payment of interest by
banks on demand deposit balances is prohibited and, therefore,
unless a portion of the funds can be placed on a time basis
it is not possible to collect interest.

If the Government

agency for which the funds are being held expects to disburse
them within a short period of time, the placing of such funds
on a time deposit would not be practicable.

- 6 -

Some foreign governments take the position in negotiating
P.L. 480, Title I, sales agreements that the

proce~ds

shall be

deposited with their central banks even though ahe majority
of the central banks do not pay interest on deposits.

In such

cases, a decision must be made as to how much it is worth to
us to resist this position in view of other objectives we are
seeking in the sales agreements.
We are constantly reviewing the arrangements under which
balances are maintained with banks abroad with a view to
increasing the amount of interest earned.
U. S. disbursing officers of the State Department are
authorized by the Treasury to operate the local accounts in
which the bulk of our local currency is held, and are under
the technical supervision of the Treasury Department.

They

disburse under delegation of authority from the Chief Disbursing Officer of the Treasury Department.

Central summary

accounts of our local currency holdings are maintained by
Treasury, and periodic financial reports are prepared.

The

latest of these is the "Preliminary Report on Foreign
Currencies in the Custody of the United States, Fiscal Year
1963", a copy of which has been provided to the Committee.

- 7 Finally, I should mention that Treasury participates
with other agencies in the inter-agency committee which
formulates U. S. negotiating positions for prospective
Title I sales agreement with foreign countries.
With this brief survey of Treasury's functions completed,
I should like to turn our balance-of-payments position and the
way in which our local currency operations help that position.
The United States has experienced substantial balance-ofpayments deficits in each of the past five years.

From a peak

of $3.9 billion in 1960, the over-all deficit, measured by our
gold sales plus the increase inshort-term liquid liabilities
to foreigners, fell to $2.4 billion in 1961 and to $2.2 billion
in 1962.

While the commercial traae balance ani government

expenditures abroad showed modest improvement, a significant
portion of the progress has been due to special receipts from
inter-governmental transactions, including receipts from the
sale of non-marketable medium-term securities, from advance
payments for military equipment and from debt prepayments.
Moreover, capital outflows remained large.
In the first half of this year, the ba1ance-of-payments
deficit showed a tendency to expand once again, a deterioration

- 8 -

attributable in large part to an increase in long-term capital
outflows from the United States.

Specifically, new issues of

foreign securities in the United States, which had averaged
less than $600 million per year in the period 1959-61, rose to
an annual rate of nearly $2 billion in the first six months of
this year.

On July 18, the President, in a special message to

the Congress, reviewed the Administration's program 1br improving the balance-of-payments position and announced several new
measures for this purpose -- including an Interest Equalization
Tax, designed to increase the cost to foreigners of obtaining
capital in the U. S. market.
Our balance-of-payments position showed a marked improvement in the third quarter of this year, reflecting the measures
announced by the President.

Particularly sharp was the decline

in the outflow of long-term private portfolio capital as a
result of the Interest Equalization Tax proposal.

Purchases

of new foreign issues in the third quarter amounted to about
$175 million as compared with over $500 million in each of
the first two quarters of this year.

Net purchases of out-

standing foreign securities from foreigners declined almost
to zero in the third quarter compared to about $50 million in
each of the first two quarters.

There was also a substantial

- 9 reduction in recorded net short-term capital outflow at least
in part attributable to the rise in the Federal Reserve
discount rate in July.

The rise in the maximum rate which banks

may pay on time deposits of under one year was also a factor.
Primarily as a result of these improvement, our deficit
on regular transactions -. that is, excluding debt prepayments,
sales of special government securities, and other special
transactions, fell from a seasonally adjusted rate of $1.3
billion in the second quarter to somewhat less than $400 million
in the third quarter.

Despite the improvement in the third

quarter, the rate of the deficit for the first three quarters
of the year on an annual basis remained at about the level for
all of last year.
In view of this situation, the need to press ahead in our
efforts to correct our deficit situation is evident.

We are

doing this over a broad field.
Our efforts include the maintenance of domestic price
stability and passage of the pending tax bill.
They include export expansion
through negotiation

of tariff reductions;

through broad facilities for export credit
financing;

- 10 through greater promotion of American products
abroad and active probing for new markets;
through active stimulation of present and potential
American exporters, most recently by the White
House Conference on Export Expansion;
through increased sale abroad of Government
commodity stocks; and
through remedying a situation of ocean freight rate
discrimination against U. S. exports.
They include improving our balance on tourism
through continuing to limit the duty-free Customs
exemption to $100 per person;
through a strengthened program by the United States
Travel Service to increase foreign travel here; and
through a "See America Now" program.
They include a reduction of Federal expenditures of dollars
abroad, recently strengthened through a procedure for special
review and control by the Bureau of the Budget.
For example, net military expenditures of dollars abroad,
which had already declined from $2.7 billion in 1960
to $1.9 billion in 1962, will be reduced further by

- 11 -

more than $300 million by actions to be put into
effect before the end of calendar year 1964.

addition, the Defense Department will continue
arranging offsets through military procurement by
allies in the United States.

Also, programs for

acquisition of strategic materials from foreign
sources will be reduced by over $200 million from
the 1962 level within the next two years.

The

total planned reduction of military dollar expenditures is well over $500 million.
As for the Agency for International Development, a
continuation of tying more than 80 per cent of all
commitments to U. S. goods and services will reduce
dollar outflows in fiscal year 1965 to not over $500
million.

This represents a reduction of $300 million

from the level achieved in fiscal year 1963.
Other departments' and agencies' overseas expenditures will be reduced within the next year by at
least $100 million.
As steps for improving our balance on capital account,
I have already mentioned the Federal Reserve increase in the

- 12 rediscount rate from 3 to 3-1/2 per cent, the higher ceiling
for interest rates payable on time deposits of short maturities
and the proposed Interest Equalization Tax.

The pending tax

reduction bill will increase the attractiveness of direct
investment in the U. S. for both domestic and foreign firms.
A joint program by the Government and financial community is
under way for promoting increased foreign purchases of U. S.
securities and increased borrowing facilities for U. S.
companies abroad o
Prepayments of debt by foreign countries, advance payments
on military purchases here, and the issuance by the Treasury
of medium-term securities to foreign holders of dollars will
continue to give support to our balance-of-payments position.
Finally, the $500 million stand-by credit with the
International Monetary Fund, the access to supplementary
credits from other industrial countries via the Fund, the
reciprocal credit arrangements with foreign central banks,
and the informal but effective joint action with regard to
the London gold market, have helped to eliminate speculative
factors that might disturb the dollar and stimulate gold
outflows.

- 13 The program, which I have summarized, has been effective
in improving our balance-of-payments position, and it has not
interfered with other important policy objectives of the U. S.
The use of our local currency holdings to help our balance of
payments should follow the same pattern.

Such use can be

effective when it reduces the level of our dollar expenditures
abroad below what they would otherwise have been.

It cannot

be expanded indiscriminately, however, without adversely
affecting other of our objectives abroad.
Insofar as our holdings of non-excess local currencies
are authorized for special U. S. programs abroad that would
not be undertaken if we had to finance them with dollars,
their availability for financing normal and essential U. S.
operating expenditures abroad is reduced.
balance-of-payments benefit is lost.

Hence, the potential

This situation can be

aggravated by the procedure of segregating local currencies
for the financing of special programs abroad.

As a result of

such funding, the U. S. Government sometimes finds itself in
a position of buying currencies abroad with dollars in order
to meet regular operating expenditures when it holds the same
currencies in reserve accounts in anticipation of special
program expenditures some time in the future.

- 14 An Administration proposal is now under consideration

by the Congress to correct this situation.

It would provide

that any foreign currencies reserved for specified programs
may be carried by the Treasury in unfunded accounts.

Passage

of this bill will mean that at least $75 million of local
currencies now held in reserved accounts in non-excess
currency countries will become available for meeting current
U. S. Government requirements and will thus postpone, or even
avoid, our need for buying these currencies with dollars in
foreign countries.
The governments of developing countries are generally
interested in restricting the loss of real resources which
is involved when we use our local currencies to acquire goods
and services from them.

Their efforts in this regard reduce

the potential balance-of-payments benefit which we might
otherwise achieve in the short run; but there may be a
compensating balance-of-payments advantage for us over a
longer period.

If the retention of a larger amount of real

resources for their economic development enables them to
achieve a faster rate of growth, they may sooner become
viable economies which can purchase from us on a fully
commercial basis o

- 15 We continually review the possibilities of increasing
the balance-of-payments advantage from the use of our local
currency holdings.

Agencies with personnel overseas endeavor

to assure that personnel requirements for local currencies are
met out of U. S. Government holdings in cases where we have
more than enough to cover agency operating requirements.
We have transferred from a dollar to a local currency
basis the payment of many U. S. Government beneficiaries
living abroad.

This has been the case with beneficiaries

living in India, for example, where our payments amount to
$100,000 annually.

Annual savings in various countries from

tr.is source amount to about $1.2 million.
Increased sales to American tourists seem feasible in
certain countries and we have been increasing our efforts in
this direction.

Unfortunately, the countries in which we hold

excess currencies are not those which attract a large amount
of American tourist do1lars--under $50 million in 1962.

Sales

to tourists benefit our balance of payments, of course, only
insofar as they are made from holdings above those needed for
our regular government operating expenditures abroad.

would obviously not benefit the U. S. balance of payments
if we were to sell to American tourists local currencies

- 16 which we need for current operations of our embassies and
military bases abroad because we would then have to use
dollars to buy these same currencies in foreign countries
to cover our regular government operating needs.
We have explored the legal possibilities of selling
local currencies to private non-profit organizations such
as the Ford Foundation for its program in India.

We do

not believe such sales are authorized under present legislation, but we would certainly take advantage of any
opportunity to sell local currencies in excess of our
regular operating needs for this purpose if we had the
legal authority.
In these and other ways, which the representatives of
other agencies appearing before you will discuss, we can
and will continue to obtain benefit for the U. S. balance
of payments from use of our local currency holdings.
Finally, Mr. Chairman, I would like to provide for
the record certain information which your Committee requested,
namely:
Table B, attached, which shows as of June 30 (and
as of September 30, on a preliminary basis) the total of
Indian rupees held by the U. S. Government for U. S. use.

- 17 A note in the table indicates the estimated number of years'
requirements represented by this balance.
Table C, attached, which lists the purposes for
which U. S.-owned rupees may be used under the P. L. 480
agreements with India.
Thank you, Mr. Chairman.

TABLE A
RECEIPTS OF FOREIGN CURRENCIES FOR U. S. USE
BY MAJOR SOURCES, FISCAL YEAR 1963

(Millions of dollar equivalents)

PRELIMINARY DATA

Total

Total Currencies
in CountrUs
Declared
"Excess It

Sale of agricultural
commodities under
Title I of P.L.480

$ 213

$ 136

$ 77

Principal repayments
on loans

112

Interest on bank
deposits

Recoveries, government
operations in
occupied areas

Lend-lease and surplus
property, drawdowns

U.S. portion of
counterpart deposits

Recoveries, military
assistance to
foreign nations

Informational media
guaranties

Interest on loans

Other

TOTAL

$484

Total Currencies
in Countries
Not Declared
"Excess It

$ 268

$216

TABLE B

U. S.-OWNED INDIAN RUPEES

AVAILABLE FOR U. S. USE
AS OF JUNE 30, 1963*
(Millions of dollars equivalent)
Unrestricted use ••••••••••• 227
Restricted use •••••••••••••

TOTAL

290
Preliminary figures for September 30, 1963 show a total
of $309 million.

NOTE:

The balance of $227 million (rupee equivalent) as of
June 30, 1963, represented approximately 28 years'
estimated requirements for unrestricted uses.

(In

addition to the $227 million, there are $15 million
which could be transferred from Cooley loan use to
unrestricted U. S. use because of not being utilized
within the three-year period stipulated in the
P.L. 480 sales agreement with India.)
The balance of $63 million for restricted use
as of June 30, 1963, represented an estimated six
years' requirements.

In addition, $15 million was

held in AID accounts to help finance the U. S. AID
program in Nepal.

TABLE C
INDIA
P. L. 480, TITLE I, UNITED STATES PROGRAM USES

SECTION
104

ADMINISTERING
AGENCY

PROGRAM TITLE

(a)

Agricultural Market Development

Agriculture

(d)

For AID Program in Nepal

A.I.D.

(f)

Payment of U. S. Obligations Abroad

Various

(h)

International Educational Exchange

State

(i)

Translation of Books and Periodicals

U.S.I.A.

(j)

American-Sponsored Schools and Centers

U.S.I.A.

(k)

Scientific, Medical, Cultural and
Educational Activities

Various

(1)

Buildings for U. S. Government Use

State

(m)

Trade

Commerce

(n)

Acquisition, Indexing and Dissemination of Foreign Publications

Library of Congress

(0)

Assistance to Foreign Countries of
Established Schools, Colleges, and
Universities

(p)

Supporting Workshops & Chairs in
American Studies

(q)

Assistance to meet Emergency Relief )
)
Requirements

(r)

Financing of Audio-Visual Informational and Education Materials

)
)
)
)
)
)
)

)
)
)
)

No active programs
in India

- 3 -

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.
Tbe 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
trom 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 sta.te, 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

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 Circula.r No. 418 (current revision) and this not ice, 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 -

decimals, e. g., 99.925.
be

Fractions may not be used.

It is urged that tenders

made on the printed forms and forwarded in the special envelopes which will

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 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.
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 Department 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, 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 August 2~963
, ( 90
days remain~
ing until maturity date on February 27, 1964
) and noncompetitive tenders for

COO{)(

$ 100,000 or less for the

181 -day bills without stated price from anyone
Cm:)C
~
bidder will be accepted in full at the average price (in three decimals) of ac-

cepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on

I':ovember 29, 1963

COO!)

, in cash or other immediately available funds or

in a like face amount of Treasury bills maturing _N_o_v_e_m_b_e_r1ti!t&t=2:1:1'9t-1_9_6.;...3_ _ •

Cash

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE

November 20, 1963

;00000000000001:8l'oooooooooooeooo

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 $ 2,000,000,000 , or thereabouts, for
~
cash and in exchange for Treasury bills maturing November 29, 1963, in the amount
of $2,101,476,000 ,as follows:
~
90 -day bills (to maturity date) to be issued

in the amount of

$~200,000,OOO

-00

November 29, 1963

fMC

, or thereabouts, represent-

ing an additional amount of bills dated

August 29, 1963

and to mature

February 27, 1964 , originally issued in the
ttl (an addi tiona1 $100 092 000 ,res issued Octob
amount of $ 800,493,000 /, the additional
original bills 28 19

ana

to be freely interchangeable.
181 -day bills, for $ 800,000,000

tlff

November 29, 1963

, or thereabouts, to be dated

,and to mature __Ma_Y::.-2_8~,::-1~9t"'6;-.4____ •

tfif

bffi

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 will be issued in bea.rer 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
clOSing hour, one-thirty p.m., Eastern Standard time, :4onday, November 25, 1963
~
Tenders will not be received at the Treasury Department, Washington. Each tender
must be for an even multiple of $1,000, and 1n the case of competitive tenders the
price offered must be expressed on the basis of 100, with not more than three

TREASURY DEPARTMENT
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
$2,000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing November 29, 1963, in the amount of
$2,101,476,000, as follows:
90-day bills (to maturity date) to be issued November 29, 1963,
in the amount of $1,200,000,000, or thereabouts, representing an
additional amount of bills dated August 29, 1963, and to
mature February 27, 1964, originally issued in the amount of
$800,493,000 (an additional $100,092,000 was issued October 28, 1963)
the additional and original bills to be freely interchangeable.
181 -day bills, for $800,000,000,
or thereabouts, to be dated
November 29, 1963, and to mature May 28, 1964.
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
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 closing hour, one-thirty p.m., Eastern Standard
time, Monday, November 25, 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 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-I052

- 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, 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
August 29, 1963,
(90days remaining until maturit¥ date on
February 27, 1964) and noncompetitive tenders for $ 100,000
or less for the 181 -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 November 29, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing November 29, 1963~ash 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 frcm 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 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 45 4 (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 103s.
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

- 44 should be our formula for maximum progre •• in tbe future.

'Ae have come to the COllclusion -

in business, in finance,

in labor, ia academic circles and in government -- that our

present tax syste.n 1s llolding back

best performance.

tb~ivate

economy from its

We know that the alternative to a changed

tax system is a massive increase in the role of the national
goverllment a.nd its expenditures.

We have ovel"come the biggest obstacle to changing that
system -- the la.ck of any agreement on just how to change it.
The AlDel"ican
wi 11 not

i1&l.SS

people and the members of the U. S. Senate

up this rare opportwli ty. provided by the President

and the House of Representatives, to move forcefully to

solutions of long standing national problems in a manner consonant
wi th au.\" gl'ea. t and true tl~adi tion.

00000

- 43 -

No one could bope to draw & tax Dill taat would . .'lefy
everyone.

The fact that the pre_at bill baa ,aiDed .ucll

broad public support from

many differeat &Zea. ·ake. . .

very optimistic that souad, effective tax le.i81atloa ver,
much aloog the lines of the Bouse bill will .bortly beG... the
law'of the land, despite the existeaee of deteralaed but
limited opposition and saae liagering doubts.
There is iasistent and ever mounting support fro.
diverse sources for this legislation.

Why?

.aD,

BveD out.tudiDC

opponents or skeptics of last spring have beca.e advocate. lbis
fall because favorable business expectatlOD. are DOW baaed, la
part, on its passage.

Wby?

The answer is simple and has been froa the begiRDial.

Ie...

a nation, prefer to rely primarily on a more prosperous aDd
efficient private economy, initiating a larger and larger volu.e
of economic acti vi ty in a free market.

That i8 the formula that

made us the strongest and most productive natlOD

hal

earth and that

- 42 ~).l~:LC

SUPP~'l't

1"01'

the u111 despi te individual

diffel~ences

came

fron suclL v.lricd groups a.s The Chamber of Commerce of the Uni ted

~tates;

The dational

f~l.rmcrs

UniO!l; The AFL-CIOj TIle

~\mericall

Li 10 COllvell tion and :Gi ie Insurance Association of America; The

Amel'ic.tll Texti Ie Ma,lluJactul'ers

Stua.I't

3aullder~

lllst~

tute i Henry Ford, II and

for The Business Commi t tee for Tax Ueduction in

1963; The Illi.c,ois f,iailuf'i.lcturel's Association; and The National

These are only a few of the groups which indicated that, even

if the bill <lid not include tl.le

eSf;entiul, they -..multi sti 11
no weakness or

v~cil1atioil

chan~es

SUPPOl't

"they considered most

its passage.

0:1 t.heir pal·t.

This reflects

It does indicate a

concel'n for tne lla tionai. economy aud the public welfare which
transceLt.ds their individual interests -- an atti tude which reflectl

the

stl'vll~~

sense oi pUbLic responsibili ty of most of those

- 41 -

of Iodopendeut ausiness; The National Association of HolDe Build_rat
The

~h.tional

Lea[t;ue of Insured Savings Associations; The American

Life COllvelltioIl; The Life Insurance Association of America; The
~ational

AssocLttioIl of Retail Grocers; The National Candy

:~'holesahn's

.~8sociation,

Inc.; l'he National Coal Association;

The National Machine Tool Builders' Association; The National Food
Brokers Association: The United States Wholesale Grocers
Association; The !\ssociated Retail Bakers of America; and The

i'iational Assocla.tion of Real Estate Board..q.

Equally impressive has been the consistent pattern of
testimony bef'ore the Senate .finance Commi ttee of those wi tne8sea
who speak ill a representative voice for the important economic
orgallization8 tha.t

mal~e

up our private economy.

Although these

l'epresentatlves have changes to Buggest, most of them make it

clear that if their recommendations are not followed, they would
support the bl11 as 1 t p.l.ssed the House.

These statements of

_ 40 -

consensus that confirmed the soundness of the President'.
eal'lier recommendations.
Seldom in the nation's history have its economic brains
and leadership from diverse pl"ivate sectors developed 8uch

a solid accord ou a key economic issue as that which has
emerged Oil the pI'oposeu Revenue Act of 1963.

Although only a very short time elapsed between the Ways
and Mean.s Comrni ttee clction in l-eporting the tax bill to the House,

and the House passage of that measure by an overwbelming margin,
..lU

impressive number of endorsements of the bill and its general

principles were made during that period.

The endorsements,

urging favorable legislative action on the tax bill, were aade
by organizations representing a broad sampling of the econoaic,

business and financial coma,unity, that included such groups as
The Business Committee for Tax Reduction in 1963; The Chamber of
Commerce of the Ullited States; 'rhe AFL-CIO; The National FederatiO

- 'JJ -

submit

i.lud~~et

for fisc.).l 1965 ..vith a deficit Ieee than $9.2

billion forec;'lst for
~"'(:GJnd

fisc~l

IJ.!~,

despi tE: the fact that the

stage of the t,l-X r€duction will have gone into effect

aad that the revenue loss from t:tx reduction in 1965 -- before
feedback -- will

~ $!:l

hillion breater than in 1964.

Beyond th is evidence of
~overn!Jlent,

c\.

!lC'N atti tude in

the halls of

there i:..\.r8 pTag:ma tic factors that you outside government

may take into

aCCOUH

t .

The Business Conuni ttee for Tax .Reduction 1n

1963 voiced its conclusion "That

<.l.

tax cut would exert strong prell

to achieve i.iCttor conti'c)l of government spending • • • a good way

to encouraGe

stl'Oll~

spending discipline again next year and the

year after is to pass the ta2' uill. ,.

Someone has put it in even

terser terms -- the way to cut taxes and government spending 1.

to cut t.txes.
Despite ;1.11 the persoaalized distortions and critici_. of
the ma.ke-Ill) of tile ta_x bill and the haunting doubts and fear •••

to its current economic timeliness, the months since its
introduction in the House have witnessed the emergence of a

- 33 -

mOilths of the fiscal year 1964 (July through Sept_ber)

expenditures ill the civilia.n sector of the federal budget were
~lO'l

millioll less than the same quarter last year.
~.

This September there were 242 less reiular c1v1lia.n

federal employees

011

the payroll in the Executive branch than 1n

September last year.
6. Chairman Cannon

of the House Appropriations CollUllitt.. haa

observed that new appropriations may aggregate les& than last f.U'
total -- the first time that will have been done in some years.
7. As for the fiscal year 1965 and following years, the

President has assured the Congress that he intenda to maintain a
tight rein all expendi tures and that a substantial part of the tall

revenues from economic expansion will be used to reduce the
budgetary deficit until balance is

reached.

&. On this basis -- and barring an unforeseen alowdowD of the

economy or international contingency -- the Pr. .1dent expect. to

- 37 -

and will soon taper off on space programs, which to"ether with
interest

011

the debt, have accounted for more than 70 percent

of the budgetary irlcrease from fiscal 1961 through fiscal 1964.

2. Since the tax

prog~'am

was Pl'oposed last January the

fiscal 1963 deficit has declined from an estimated $8.8 billion
to an actual $6.2 billion -- and two-thirds of that decline
resulted

[loom

lower expendi tures.

3. In proposing the tax program last January, tbe Pr•• ideat
budgeted less for the civilian sector of the 1964 bUdget(ever,tbill

except defense, space and interest on the deb~than in the
previous yea.r -

only the third time that has been attempte" in

twelve years, during a period in which state and local iOVeI"ameat
spending has grown at a rate averaging more than 15 perc.at a year
in response to popUlation growth and a demand for increased publiC
services.
4. Fiscal 1964 expeuditures are currently eatiaat.d at
~;l

l.'illion bel0·.... Lust

J~ulua.r·.Yts

estimate.

In the first tbrM

- 36 The !touse ul '\.ep:&:est;!il ta t i ves has

emphasized this tie-in

lJetween til.X re<luct:lon, expendi tUl'e control, and balanced budgets
by speciiically including in the tax bill as Section I a
!lec l..tra tiOil oJ pol.Ley which l'eads ;.\,s follows;

"It is the sense of Congress that the tax reduction
provided by this Act through stimulation of the economy,

will, after a

~rief

transitional period, raise (rather

than lower) revenues a.nd that such revenue increases
should first be used to eliminate the deficits in the

administrative budtj;cts and then to reduce the public
debt."
'file President enc.orsed this statement before the House vote.

In fa.ct, a.n ef'fecti ve
cUlder way ..tS

pro~ram

of expendi ture control is well

an. accompaniment to the tax program and convincing

ev ldollce of ta11~i ble ~ccomplishment i~ at hand to give substance

to promises of future restraint.
1.

!\cco.l'tiia o to the ;Jirector of the Budget, the need for

- 35 -

price worth the long-term growth that would re.ult froa reduclDI
tbe restraints the present tax structure plac. . on our private
enterpri ••• y.tem.

~6w'

They r ...mberedl\ the last time a tax reduction was pused

~.re was a recession that led to our largest peacetl. . deficit
in 1959 -- in excess of $12 billion.

They sought to avoid the

.... i ve increases in federal spending which would be required
to offset a recession, thereby deepening our budgetary deficit
OD

a downturn far in excess of that contemplated fro. a tax

cut on the upturn.
Moreover, both the President and the House of Repre.entatlv"
have recognized and accepted the responsibility of aecGapaayiDl
tax reduction with a Dew policy of tighter expenditure control
as the .ureat and quickest way of bringing tbe nation to balaaeecl
budgets and surpluses in a manDer consistent with our natio8&l
needs and responsibilities.

- 34 -

there were seven cash surpluses and four cash deficits for a
net cash surplus of $20 billion.

Since 1957, tbe period of

economic slack, the federal budget has shown a cash deficit iD
five of the last six fiscal years -- a cumulative deficit of
$26 billion.
Clearly, budget defic1ts are most likely to be tran8itiooal
and avoided in the future 1f there is a rapidly expanding eCODQlJ.
That is one of the reasons why the Pres1dent recommended
this tax program and members of the Bouse Ways and Means Committ••
and the full House adopted it.

They believed that the high

income tax rates set in the inflationary times of war and postwar
expansion clearly take too much out of our private economy as it
moves toward a balanced budget and full employment.
They believed that the less than $2 billion the tax prograa
would add to the deficit in this fiscal year, and tbe roughly
$3-1/2 billion that would be added in fiscal

l~ after

account the "feedback" of revenues from the stimulation
of the tax cut, would be a

taklDI U1

- 33 SolLlttO.l to OU1 balance of paYlllents
1

problem.

The enactment

of the proposea tax b.ill is basic to that solution, and each
month is

important.

Finally, Rome people see a grave danGer in enacting a
tax reduction program at a time when there 1s a sizea.ble
0udget deficit, followin; on other years of deficits.

The 'l'reasu17 Department does not like federal budget deflcl tl,
Jut the real question is,) how do we get rid of them~

The pre.ent

program is to reduce tax rates so as to increase the rate of
economic activity, eventually producing higher levels of
1'evenue whi 1e

cOlltrollia~

lncl~eases

in federal expendi tures

to the barest minirnwn.
L.et u...c.; look.

eud of World War II.

the Uni ted States economic history since the

Deficits have been symptoms of econome

sla.ck -- not ilarbiilger~ of prosperity.
from l~41 to lL'5~i -- our time of

Over the 11

fiscal year.

gl'eatest postwar prosperi ty -

- 32 -

the prompt enactment of the tax program prt.aril, for balaoce of
payaenta reasons.
The major challenge on the balance of payments front, at
least at present, is to be found in net outflowa of loog-tera
investment, both direct and portfolio, and the need for increa...
productivity that will make our costs competitive.

Tbe iav••u.a'

lag has played an important part in our balance of payment. delta'.
'or instance. if we compare investment and output fro. 1856

thr~

last year, we find our total output, apart fra. price increa....
rose by a1most 20 percent, while business fixed lnve.tmeat

.b~d

no net gain at allover the level at the beginning of the period.
This lag has much to do with our problem of exce•• ive capital
outflow and with our shrinking share of expanding world . .rket.,
as well as with our problem of slow growth at home.
Until

make investment in the United State. aore attract!"

for both foreign and domestic capital, we CanDot find a lastlD1

- 31 -

unemployment problems within a context of healthier
growth of the private economy.

Otherwise we may

find that massive government spending or spreadthe-work schemes are the only approaches left to us."
That editorial, I believe, clearly points out the fact that
the consequences of the tax cut for unemployment epitomize ita
consequences for our entire domestic economy.
But the economic implications of the tax cut are not limited
to the domestic economy.

It will have a significant effect

our balance of payments as well.

Some are concerned that a tax

cut would worsen our position by expanding our imports.

They

overlook the evidence that passage of the tax bill is the single
most important step which can be taken to improve the long-tera
outlook for our balance of payments -- evidence that bas proapted
the American Bankers Association and leading finanCial spoke...n
such as Allan Sproul, the distinguished former Pre8ident of the
Federal Reserve Bank of New York, and many others to advocate

_ ;3 0 _

This audience need not be told what such a rate would mean in
terms of human misery, in terms of the tremendous waste of
output and potential in our economy.
No

ODe

can tell you exactly when the tax bill, together With

other measures, will bring us to our interim goal of reducing
unemployment to four percent.

But, without the tax cut it i8

difficult to see any possibility of coming anywhere near that
goal for years to come.

In fact, without it, the nation is

more likely to move in the other direction.

That i8 the choice

which has helped to make the tax bill the most important piece
of legislation to come before the Congress in many ,Gare.
As the lead editorial in the current Business Week put it:
"We cannot know all the answers in advance.
must try to see what we can achieve step by step.

We
It

is clear, however, that the tax cut is the first order
of bUSiness.

It is urgent for us to try to solve our

- 29 -

a million more jobs or more each year to provide joba for tboee
idled by technological advance, and substantially more than a .1111.
jobs each year for the increase in the labor foroe whlch we caD
expect shortly as a result of the population surge follo.lnl
World War II.
Today unemployment is a serious problea.

We muat make

every effort possible to keep it fram becomin& a critical probl...
As President Kennedy pointed out, if our economy in the laat two
and one-half years had produced jobs at the same rate

it had

during the two and one-half years previous, unemplo)'1D8nt today
would be eight percent instead of five and one-half percent.
Even that five and one-half percent is much too higb.

P. Gullander, President of the National AssociatioD of

Manufacturers, has estimated that it could go a lot bl,ber thaD
it is now.

His estimate was that, if our eeonaay continues to

produce jobs at the rate of the years since li57 , by li70 our
unemployment rate could be somewhere between 12 and 13 perceDt.

- 28 -

achievement of a higher normal level of

.CoDO~C

activity than

that which has characterized the last six y.are.

As President Kennedy told the AFL-CIO last Friday, the tax
bill is expected to produce between two and three millioD Dew
jobs in addition to those that the economy would produce OD ita
present growth curve.

Some people point to the fact that our

economy is already producing almost a million ne. jobs a year.
Tbat is true, but it isn't enough.

It isn't enough when you

consider that for over seventy months unemployment haa exceeded
five percent and averaged six percent, being nOw .talled at
five and one-half percent.

It isn't enough when you

COD8ide~

that one out of every six workers entering the labor force iD
the year ended last June 30 also entered the
unemployed.

~ank.

of the

It isn't enough when you consider that w. wll1

a million jobs or more to get unemployment down to four perc.at,

- 27 -

believe that tho l\cHninistration has managed to eliminate the
business cycle from the national scene or that the tax bill

That is jus t one more l'eason why the tax cut

'.vi 11 do so.

should be passed as soon as possible.

It is up to us -- and by

us I mean the Congl'ess -- to take this step whether we have a
tax cut which picks up tllis expansion while it is still moving
along and cal'ries it higher and farther to a plateau of full
employment, full utilization of capacity and further growth,

vI'

whether the benefi ts of the tax program contribute to off-

setting the

dl~ag

of an economy slipping into a downturn.

The national economic problems to which this tax bill i8
:.l.ddressed are

IO!l~

rallge.

Much more is at stake than a temporary

economic pich.up or avel'ting or minimizing an early reces.ion.
(lUI'

goal must be a sustained economic expansion at a significantly

hif;'her level over the long-term future.

What 1s at stake i . tb.

- 26 -

Let me discuss a few of the specific doubu of the tu bill
and tell you why the Treasury feels that ita pro.pt enaot.ent
i8 in the national interest.
Some of those with doubt. about the tax bill point to tbe
fact that the economy i8 doing rather well, particularly in
recent months.

Their attitude ••e. . to be that there i8 pleaty

ot time to consider a tax cut -- there ia no real

burry about it.

This attitude, in my opinion, pas.e. up opportunity and
dangerously gamble. with time.

The danger come. a little olo••r

with every passing month.
Por with the beginning of April next year

w. will bave p..._,

the point which will make the current economic eXp&D810D the
longe.t peacetime recovery in this century, with the eol.
exception of the long pullout ot the depreesloD of the 19108.
I am not suggesting that there is any eyldence of a downturn 1.
our present economic picture.

But I am not .anguine enough to

- 25 -

at an unacceptable level, under-utilisation of

indU8~ial

capacity, inadequate growth, and continuing deficits both io
our international balance of payments and our federal budget.

We are Bupporting this bill because we believe ita end
result will be increases in jobs, wages, salarie.,

p~oflt.,

conaumption, investment in the United States, and federal t . .
revenues that an invigorated private economy oan provide.

are for tbis bill because we believe it i8 time to reduc. tbe
conatrainta wbich the wartime rate scbedules in tb. pre.eDt
federal tax system imposed to hold back excessive demand and
inflation.

Now they constitute a drag on our private eooDOaf.

We believe that a top-to-bottom reduction in high ioco.. tax
rates, both individual and corporate, will r.l.... and eacourage
the inherent expansionary forces in our great private ..rket
economy.

We believe that is good for the country and w1ll be

good for the Treasury.

- 23 -

tax reuuction -- almost 20 percent.
aote

011

And to strike a pragmatic

the fea.sibility of getting any tax reduction through, let

me add that it would be extremely difficult to obtain a national
consensus <lnd Congressional enactment

a mixture of invest..ent

and consumer demand incentives substantially different from that
contained in the bill now before the Senate Finance Committee.
Apart from the criticisms and distortions of the actual
incidence of the tax bill

al.~ise primarily

f1 0m
1

011

various groups of taxpayers that

a highly personalized'tJiew. derivative of

the natural reactions or self-interest of an individual or group,
certain questions are frequently raised concerning the effect of
a substantial tax reduction on the general economy and its
desirability at this time.

Most of these doubts arise from the

honest convictions of thoughtful men and women concerning the
welfare of the nation.
respectful

~lnd

They deserve and should receive a

understanding hearing, and honest and direct

- 22 -

techniques and new products are developed and a8 new market. are
opened up, new demand will be created, new investment will be
fostered, and new jobs will be available that would never have
been available otherwise.
There will always, of course, be people who will think a
greater proportion of the tax cut should be devoted to conaumer
demand or a greater portion to investment.

No one can lay claiM

to having struck a "magic balance" on this issue.

The fact,

however, that there seem to be just as many complaining on

ODe

side as there are on the other would suggest that the btll now
being considered strikes a desirable balance.

Furthermore, tb18

balance can be said to reflect the judgment not only of the
Administration, but also of the House Ways and Means Committee}
which deliberated on the matter for the better part of a year. ID
quantitative terms, if the tax measures taken laat year are coa'~
~ith

those proposed in the present bill, both business and

individuals will average just about identical

- 20 -

There is no question then out that more invest.ent is
needed.

For

those

~ho

contend that consumer demand stimulus is

the way to econonlic growth, the worrisome question remains
*hether a tax cut devoted entirely to stimulating consumer
demand would create an adequate level of investment by the
so-ca.lled "dema.nd

llu11" ,nethod.

01' coul'se,

consumer demand which we can expect as

*ill stimulate greater investment.

..l.

the sharp rise in

result of the tax cut

There 1s bound to be a

significant increase in investment \With any sustained increase
in demand.

But, without a direct stimulus to investment as well

a.s to COJlsunaer demand, investment will not be large enough or
quick enough to create the jObS 'lie need, to keep pace .. lth the
conSUIllel' d<.-mand rise

~nd

so reduce the threat 01 inflation, and

finally and most important, to interact with the increase in
consumer demand ill such a fa.shlon as to provide 1'Ia.Ximwa long-

term oonefits to our economy_

- 19 -

1962.

That chart shows -- in real tena8 -- that duriq tboae

years, while Federal purcha.e. of goods and services weat up
more than 13 percent, while atate and local govera.eDt purcha...
went up 28 percent, while consumer expenditures weDt up .ore
than 11 percent and while total GNP weDt up more thaD 16 perceut,
plant and equipment spending actually declined by .ore thaD
one percent.

Thus, it 18 not surprising that while after-tax

profits have risen in absolute terms about 40 perceat during the
recovery -- from $19.2 billion to $26.8 billion -- Mes.rs. Pord
and Saunders could rightly Ca.m8nt:
ttAs a

percent of stOCkholders' equit"

profits of

manufacturing corporations are far below the levels of
1955-67 and earlier post-war periods of prosperity.

fact, after-tax profit as a percent of stockholders'
equi ty for the period lIiDce 1951 1s below the rece.8ioo
level of 1953-54."

- 18 -

our machinery and equipment which is more than ten years old.
Earlier this month Henry Ford II and Stuart T. Saunders,
co-chairmen of the Business

C~uittee

for Tax Reduction in

1963, pointed out in their statement before the Senate Finance
Committee that:

"corporate prof1ts after taxes have gone down,

whether measured as a percent of invested capital, of sales or
of the corporate portiou of gross national product. It

A cOlllpari8OD

of the figures since 1957 on the three major forces in econaaic
growth -- government expenditures, consumer demand, and private
investment -- shows clearly that the investment lag has played
a major role in the failure of the economy to move closer to
full employment.
To highlight this lag Messrs. Ford and Saunders submitted
a chart showing the percent change in real GNP and in major
categories of expenditures for goods and services from 1951 to

- 17 -

Tbis brings me to a final critici . . of tbe corporate rate
reduction that is being beard more frequently now thaD before:
the argument that a corporate cut i8 not needed at all to spur
inve.tment, tbat tbe wbole tax cut should be put into consu.er
demand, and that this would be enougb to raise investment to
desired levels.
There i8 little differeDce of opinion in informed circle.
of the need to increase our level of private invest.ent in plaat
and

equi~nt.

BusineBs fixed investment, which averaged 11

percent of Gross National Product in 1956 and ,1957, has aince
fallen to about nine percent.

In fact, since 1957 the rate of

increase in our stock of business plant and equipment bas risen
by

less than two percent annually -- only half the rate for the

first postwar decade.

It is not surprising that accompanyiog

this trend there bas been a disturbing rise in the proportioo of

- 16 -

the cost of making the payment early.
If the money is on hand, the net loss i8 the interest that
that small portion of the tax bill which represents accelerated
payment would have earned in the three months or
firm would have otherwise had control of it.

that the

In cases where the

small portion representing accelerated payment must be borrowed,
the interest charged on the loan for those few months, less the
amount realized by deducting it for tax purposes, represents the
additional cost of acceleration.

Any businessman should agree that

this is not to be compared to increasing the tax bill by the ..out
of the accelerated payment.

If it were, then it would be accurau

to say that corporations would not benefit from the cut for .everu
years.

Since, however, it clearly is not, there would seem to b.1

basis for reasonable objection to this proposal to accelerate
corporate payments -- particularly when it is coupled with a

posal to reduce corporate tax rates by well over $2 billion a feU.

- 15 to those corporations with annual tax bills of $100,000 or more.
These are the 15,000 or so largest corporations in the country,
and represent less than three percent of all corporationa.

The

acceleration provision brings these companies onto a current
payment schedule over a period of seven years, putting the.
a parity with individual taxpayers by 1970.

It preserve. the

additional cash flow for the"'?,,1 i. smaller corporations who••
sources of credit are most likely to be limited and who .uat
depend mainly on internal financing.

The acceleration is being

carried out in such fashion that no corporation will actually
have to payout more tban at present rates.
is far greater than this would suggest.
acceleration does not require a

But the tax 8av1DI

That is because the

payment, or an additional

payment, but merely requires that a payment be made a tew monto
earlier than it would ordinarily be due anyway.

Tbe net cost W

the corporation is not the size of the pay. .nt, since that .ouU
have been due in any case.

The net cost to the corporation 18

- 14 -

proposed bill would reduce corporate tax.. by aa adG1t1oaal
$2.2 billion a year.

The total effect 01 laat year'. tax

change., together with tbe corporate rate reductloa aDd tbe
proposed broadening of the •• ven percent inve.t.eDt tax

c~edlt

in the proposed bill, would increase the profitabillty of .e.
inve.tment -- on a lO-year &8.et, for inatance -- by about
35 percent.

No one should clai. that th1a $4.6 billion corporate

tax cut i8 an inSignificant incentive or that a tax reduction of
nearly 18 percent for corporations is to be

d1.~

••ed lightly.

One of the commonly voiced critici ... 01 tbe corporate rate
cut ie that because of the acceleration of

co~porate

payments for

the laraer firma, there will be little benefit fro. the tax cut.
Tbe co...nt usually pas.e. over the fact that the rate reductloD
fully preserves the prinCipal benefit fro. corporate tax
reduction -- the increase in rate of return on inv•• taent after
taxes, i.e., profits.

The acceleration, 01 courae. appli . . oal,

- 12 -

In swruuary then, those taxpayers earning $10.000 or 1 •• 8
now pay only 50 percent of the total tax burden, but they will
receive 60 percent of the benefits under the bill.
distribution seems quite proper.

This

There is no question that tax

rates have become too high and that

middl~and upper~income

taxpayers deserve to share fairly in any tax reduction.

But

there should be no quarrel with the simple fact that the taxpayers
at the lower end of the income scale are those most in need of
tax relief.
There is also a tendency to resort to tunnel vision in
appraisal of the proposed changes in corporate taxation.
There should be no cause for complaint from small business
that the tax cut favors the bigger units.

Unincorporated

bUSinesses, which make up the vast majority of firms in the
country, will receive the full benefit of the individual tax
reriuctions.

Small corporations will do even better.

Tbe so-call-

s.l.vi!l~~,

Ttie ta.;...

depen(l~n Ls,

~~'i2

ior instance,

for a married couple with

taking typical itemized deductions, would be

a :J.llu,vUiJ income, :t;82b on a $25,000 iucome, and/

0<1

:;;2,303

11 -

011

::p5(),00J

the presetlt tax

PJ.'0i:S1'essiou --

l.llCome.

It is

impol~tant

to remember that

those three incomes shows an even steeper

f;(~Oln

$1,4bU to $5,22ti to $15,24S.

These figures

cled.rly reflect the long-existing progressive income tax, and

do not

indicat~

that there is any inequity in the present

d1stributioll of benefits of tax reduction in the proposed bill.

'LfS
The pel"Centage tax

PCi..- t,- tJe(~

j,~eduction is I!espectabg 17. 16, and 15 per-

cent.

When we compare the ovelo-all

l.~a te

reduction under the pre.ent

bill with the way the tax burden is now being distributed, we
i i

no tila t tile lowes t

twice

..lS

U.lg

acome gI'oup -- $3,000 and under -- gets

a share in the cut as it has in the burden.

The

top group -- ~5u,OU0 and up -- which carries nine percent of the
p.ceseut

t:'!.:><;

ic'Jl'dC','i,

;~el5

less tlla.n six percent of the cut.

- 10 -

those in the lowest income
eal-nillg $3, UvO or less,

88 pel'cen t;

fOl~

61~OUpS.

The tax cut for those

for instance, averages more than

those earning between $3,000 a.nd $5,000, more

thaa 26 vcrcent; and for those oarning $5,000 to $10,000,
20 pel'ceilt.

This compares to an over-all average individual

tax cut of 18.8 percent.

High-income taxpayers, however, earning

$50,OUO and up, still receive a substantial tax reduction -almost 13 percent.

This disparity in percentage of reduction 1s

as it should be for both reasons of economic policy and equity.
Those taxpayers in the lower brackets are the ones who will be
most likely to

PUSll

t.:..xed away and they

into the spendi!)!,; stl."ea.m the income not
~u'e

the ones who most need relief.

To those who contend that because of this feature this tax
bill favor tile low-income gl'oupS at the expense of those in the
miudle and upper brackets, it should be observed that the dollar
I'eduction in taxes increases somewhat disproportionately
moves up the scale.

8.8

one

- 9 Under the bill the first group will avera,e a tax reduction

of 16.4 percent and the second group an average of 16.1 percent.
Anyone who looks objectively at the figure. should conclude
that the middle-income taxpayer is far from being the "forgotten
a&Il.

Tbis brings me to the final clarification I would like to
.ake in the individual income tax area -- the over-all fairne ••
of the distribution of benefits under the bill.

Depending upon

who is talking, you will hear that too many of the benefite go
to lOW-income taxpayers, or that too many of the benefit. go
to high-income taxpayers.

It should surprise no one that the

stand taksn on this issue often closely

parall.ls~ithe~h•
./

~~Itt

income level of the group which the speaker repre.ents orAia
identified with in terms of economic, political, or organizational
interests.
To the a.Bsertion that this is a "rich man's" tax bill, it
should be observed that the largest percentage reduction goes

- 8-A group, which would get 12 percent of the benefit. under the Boua.
bill, contains only two percentof all taxpayers.

tC'-'ff(~AA

.'JV'

Thus, if the

it~ ~1l~'-~ I\~~ ~ -~ O~~~

./\c;:;::;;~dc: ;:~~J~~~i:;)

Awmber of taxp.,e.s 1ft eaeb of the groupe" the first woald ~
"'tt~ w~ ~~ {l'~{,1 C-L '~L: $O~ ~/~
~ ~
..o&ly half as .\left ae it would QUael" the flotilla 0111 aDd tb•••cond
the

~!LBf:;~O:::::h~~ 'the cue,

there

presumably would be some basis for middle-income taxpayers to
complain of the treatment they would receive.

-~-

Still another complaint that is 80metimes beard i8 that
middle-income taxpayers

the salaried taxpayer earning

$20,000 or so -- is the "forgotten man" in the tax bill.

disagree.

First of all, there is no "forgotten manti in the

tax bill.

Taxpayers earning between $10,000 and $20,000, for

instance, carry about 27 percent of the total income tax
liability under present law.

Correspondingly, they will receive

about 24 percent of the over-all individual tax reduction.

Tbo••

earning between $20,000 and $50,000 a year now carry about
14 percent of the over-all load, and they will receive about
12 percent of the benefits.

Certainly this is equitable enough.

If the tax reduction

were shared out according to the number of taxpayers in each of
these two groups the story would be quite different.

That ia

because the $10,000 to $20,000 income group, which would get
24 percent of the cut under the House bill, contains only
13 percent of all taxpayers, and the $20,000 to $50,000 inco"

-7-

Moreover, the immediate dollar benefit of the tax cut
is not the major benefit from the tax program.

The true yard-

stick will be the increase in personal income, the increase in
employment opportunity -- not only for new and better jobs, but
for advancement on the present job -- which will result from the
invigoration of the private economy and the greater economic
activity which the tax cut will produce.
Estimates by the staff of the Joint Economic Committe. of
the Congress,Bupported by many business and academic economist.)
indicate that the tax cut will eventually increase total
national output by something like $30 billion to $40 billion a
year, providing, in the process, an additional two to three
million jobs.

Furthermore, like the tax cut, this resulting

increase in national income will not be temporary but will
continue year after year, as an added layer on the economiC
cake.

- 6 -

for instance, taking the standard deduction on a $5,000 annual
income would receive a tax cut of $130.

That may not look like

much, but when you consider that their tax bill would be reduced
from $420 to $290 -- a 31 percent cut -- I think you will agree
that this 1s a significant reduction.

Bitter strikes bave been

waged over far less than is involved in this tax cut.

- 5 -

It is significant to note that tbe total of tax refora in tbi.
{;t/
sense in all the revenue acts since 1940 waB/\little .or. tbaD

$600 million.

In other words, tbe total revenue gaiDed fra.

reforms in these two bills alone would be more than thr•• ti...
tbe gains in revenue from reforms in all the tax leglelatlOD of
the previous 20 years including tbe code revision of 1954.

submit -- with the full realization that there is a great deal
still to be done in the area of tax reform -- that tbis ie a verJ
respectable

~chievement.

Another puzzling complaint about the tax bill is that tbe
act~al

tax reduction would only amount to "cigarette money."

Since the total individual income tax burden is being reduced
by one-fifth -- by two-fifths on the average, for taxpayers
see how this can be considered
earning $3,Ouo or less -- I don t
merely "Cigarette money."

A married couple with two dependents,

- 3 -

a ..aoinKful reduction in income tax rat•• -- le. .rall,

it·

a~.

[a~ tbe alngle I80IIt 1aportant tax r.:rora -- Wbiob aboulcl ar ....'

tbe eroslon of tbe tax baae through .pecial privil•••• tbat baa
cbaraoterized tax legislation of the last twenty leare •

But, It

'Pa.44-C
certainly i. a fact that tbe tax bill ... &-portec!l bJ tbe aou••
doe. Dot coatain a8 man)' refor. . eitber in tbe indlYidual
tbe corporate area a. the Pre.ident recQllllencled.

Tba t ia,

bardly 8urprising, .ince it was unlikel, tbat tbe Con.re. . wauld
repeat it. perforaance in passinl the Revenue Act of 1982 by
provldlDK .ignlflcant .tructural chans-. in a1aost
area in wbiob recOBmendatiGD8 were aade.

But tbe

contain. a great maoy structural reforaa --

_ye~J

alDil.

p~....'

bill

.0 ..., in fao' that

tl•• permit. only generaliz.d comment.
la.e are designed to relieve hardships that rea8OD&ble
rate reduction. would not relieve.
iostead of gaining it.

Thes. refol'll8 1088 r.ft._

One exaaple 1s tbe

p~ow1.1oa fo~

• aiaUlUa

standard deduction, a measure designed principally to ainialze

.u..:.~L.l,.:_i '.Jr'

Tl:.i. l·V:; ..J.\.i....~13L:t.

H.t..Nl~Y

h. FO,VLElt,

UNDE~~ SECiU;TA~Y OF THE TREASUHY
~:;}.I."')'...I.. Tht NATFJN,l.L I:-.'l~UST ~Ln. CONFl:aENCl!. BOAHD

"\1' TLL LINKLLJ.\. PLiL... .:\ HafLL, ATLANTA, Gl:.OUGIA
THUIlSDAY, NOVEMBER 21, 1963, 12: 30 P.M. EST

':I'L<: T.l.X Bi 11

in Perspecti v~

For almost a year no., ever since President Ianned1 first
presented his tax proposals to the Congress, tbere has been a
national debate on the tax cut.

A bill, incorporatiDg the

principal features of these proposals and reducing peraonal
and corporate income taxes by a total of '11.1 billion per 18ar,.
passed the House of Representatives in September by a lare.
majority.

Public hearings on the measure before the Senate

Finance Committee are now nearing completion.

The i.aue will

receive even more attention in the weeks ahead, aa befits wbat
may well be the most important domestic economic legislation
of this generation.
If you had been obliged, as I have been, to pay cla.e
attention to Virtually every responsible .tate•• Dt aade GO tbl

JJ-

TREASURY DEPARTMENT
Washington

FOR RELEASE:

UPON DELIVERY

REMARKS OF THE HONORABLE HENRY H. FOWLER,
UNDER SECRETARY OF THE TREASURY
BEFORE THE NATIONAL INDUSTRIAL CONFERENCE BOARD
AT THE DINKLER PLAZA HOTEL, ATLANTA, GEORGIA
THURSDAY, NOVEMBER 21, 1963, 12:30 P.M. EST
The Tax Bill in Perspective

For almost a year now, ever since President Kennedy first
presented his tax proposals to the Congress, there has been a
national debate on the tax cut. A bill, incorporating the principal
features of these proposals and reducing personal and corporate
income taxes by a total of $11.1 billion per year, passed the House
of Representatives in September by a large majority. Public hearings
on the measure before the Senate Finance Committee are now nearing
completion.
The issue will receive even more attention in the weeks
ahead, as befits what may well be the most important domestic
economic legislation of this generation.
If you had been obliged, as I have been, to pay close attention
to virtually every responsible statement made on the subject, I am
confident you would share my impression that no two people see the
tax program the same way.
It is only natural that anyone look at
the tax bill in the light of how it affects him, his interests, and
the particular group or groups to which he belongs. Sometimes,
however, this highly personalized view leads to distortions that
prevent a sound, balanced evaluation of the program.
In order to help put the tax bill in perspective, let us
consider some of the more common distortions or criticisms that are
apt to creep into discussions -- on the way the bill affects the
taxation of individuals, on the way it affects the taxation of
corporations and business, and, finally, on the way it affects our
economy.
One comment on. the individual area that is frequently heard
is that there is not enough "reform" in the tax bill.
It includes
a basic restructuring of our tax system through a meaningful
reduction in income tax rates -- generally agreed to be the single

D-l053

- 2 most important tax reform -- which should arrest the erosion of the
tax base through special privileges that has characterized tax
legislation of the last twenty years. But, it certainly is a fact
that the tax bill as passed by the House does not contain as many
reforms either in the individual or the corporate area as the
President recommended. That is hardly surprising, since it was
unlikely that the Congress would repeat its performance in passing
the Revenue Act of 1962 by providing significant structural changes
in almost every single area in which recommendations were made.
But the present bill contains a great many structural reforms
so many in fact that time permits only generalized comment.
Some are designed to relieve hardships that reasonable rate
reductions would not relieve. These reforms lose revenue instead
of gaining it. One example is the provision for a minimum standard
deduction, a measure designed principally to minimize the burden of
income taxes on families earning less than $3,000 a year. That
provision alone would lose $320 million in revenue, and 85 percent
of that would go to taxpayers earning under $5,000.
An important test of tax reform is the elimination or
reduction of undue tax preferences or special tax privileges. As
these are eliminated or reduced, the tax base is broadened and the
revenue from the existing rate structure is increased presumably
in such a fashion as to make more equitable the distribution of
the tax burden. Let us use that yardstick to see how the proposed
bill stands in terms of classic tax reform.
When you add up all the revenue-raising reforms in the bill
now before the Senate Finance Committee, the total is more than
a billion dollars. When you add to this the more than $800
million of revenue-raising reforms in the Revenue Act of 1962, you
get the very respectable total of almost $2 billion a year. It is
significant to note that the total of tax reform in this sense in
all the revenue acts since 1940 was a little more than $600 million.
In other words, the total revenue gained from reforms in these two
bills alone would be more than three times the gains in revenue from
reforms in all the tax legislation of the previous 20 years
including the code revision of 1954. I submit -- with the full
realization that there is a great deal still to be done in the area
of tax reform -- that this is a very respectable achievement.
Another puzzling complaint about the tax bill is that the
.
actual tax reduction would only amount to " clgarette
money. "
Since the total individual income tax burden is being reduced by
one-fifth -- by two-fifths on the average, for taxpayers earning
$3,000 or less -- I don't see how this can be considered merely

- 3 "cigarette money." A married couple with two dependents, for
instance, taking the standard deduction on a $5,000 annual income
would receive a tax cut of $130. That may not look like much, but
when you consider that their tax bill would be reduced from $420
to $290 -- a 31 percent cut -- I think you will agree that this is
a significant reduction.
Bitter strikes have been waged over far
less than is involved in this tax cut.
Moreover, the immediate dollar benefit of the tax cut is not
the major benefit from the tax program. The true yardstick will
be the increase in personal income, the increase in employment
opportunity -- not only for new and better jobs, but for
advancement on the present job -- which will result from the
invigoration of the private economy and the greater economic
activity which the tax cut will produce.
Estimates by the staff of the Joint Economic Committee of
the Congress, supported by many business and academic economists,
indicate that the tax cut will eventually increase total national
output by something like $30 billion to $40 billion a year,
providing, in the process, an additional two to three million jobs.
Furthermore, like the tax cut, this resulting increase in national
income will not be temporary but will continue year after year, as
an added layer on the economic cake.
Still another complaint that is sometimes heard is that
middle-income taxpayers -- the salaried taxpayer earning $20,000
or so -- is the "forgotten man" in the tax bill.
I disagree.
First of all, there is no "forgotten man" in the tax bill.
Taxpayers earning between $10,000 and $20,000, for instance, carry
about 27 percent of the total income tax liability under present law.
Correspondingly, they will receive about 24 percent of the over-all
individual tax reduction.
Those earning between $20,000 and
$50,000 a year now carry about 14 percent of the over-all load,
and they will receive about 12 percent of the benefits.
Certainly this is equitable enough.
If the tax reduction were
shared out according to the number of taxpayers in each of these
two groups the story would be quite different.
That is because
the $10,000 to $20,000 income group, which would get 24 percent
of the cut under the House bill, contains only 13 percent of all
taxpayers, and the $20,000 to $50,000 income group, which would
get 12 percent of the benefits under the House bill, contains
only two percent of all taxpayers.
Thus, if the taxpayers in these
groups received their share of the total tax cut on a per capita
basis, as some seem to urge~ they would receive only a fraction of
the reduction currently proposed for them.
If that were the case,
there presumably would be some basis for middle-income taxpayers to
complain of the treatment they would receive.

- 4 Under the bill the first group will average a tax reduction of
16.4 percent and the second group an average of 15.1 percent.
Anyone who looks objectively at the figures should conclude that
the middle-income taxpayer is far from being the "forgotten man."
This brings me to the final clarification I would like to
make in the individual income tax area -- the over-all fairness
of the distribution of benefits under the bill. Depending upon
who is talking, you will hear that too many of the benefits go to
low-income taxpayers, or that too many of the benefits go to
high-income taxpayers. It should surprise no one that the stand
taken on this issue often closely parallels the income level of the
group which the speaker represents or groups he is identified with
in terms of economic, political, or organizational interests.
To the assertion that this is a "rich man's "tax bill, it
should be observed that the largest percentage reduction goes to
those in the lowest income groups. The tax cut for those earning
$3,000 or less, for instance, averages more than 38 percent; for
those earning between $3,000 and $5,000, more than 26 percent; and
for those earning $5,000 to $10,000, 20 percent. This compares to
an over-all average individual tax cut of 18.8 pprcent. Highincome taxpayers, however, earning $50,000 and up, still receive
a substantial tax reduction -- almost 13 percent. This disparity
in percentage of reduction is as it should be for both reasons of
economic policy and equity. Those taxpayers in the lower brackets
are the ones who will be most likely to push into the spending
stream the income not taxed away and they are the ones who most
need relief.
To those who contend that because of this feature this tax
bill favo~ the low-income groups at the expense of those in the
middle and upper brackets, it should be observed that the dollar
reduction in taxes increases somewhat disproportionately as one
moves up the scale.
The tax saving, for instance, for a married couple with no
dependents, taking typical itemized deductions, would be $242
on a $10,000 income, $828 on a $25,000 income, and $2,303 on a
$50,000 income. It is important to remember that the present tax
on those three incomes shows an even steeper progression -- from
$1,460 to $5,229 to $15,248. These figures clearly reflect the
long-existing progressive income tax, and do not indicate that
there is any inequity in the present distribution of benefits of
tax reduction in the proposed bill. The percentage tax reduction
is respectively 17, 16, and 15 percent.

- 5 -

When we compare the over-all rate reduction under the present
bill with the way the tax burden is now being distributed, we
find that the lowest income group -- $3,000 and under -- gets
twice as big a share in the cut as it has in the burden. The top
group -- $50,000 and up -- which carries nine percent of the
present tax burden, gets less than six percent of the cut.
In summary then, those taxpayers earning $10,000 or less
now pay only 50 percent of the total tax burden, but they will
receive 60 percent of the benefits under the bill. This
distribution seems quite proper. There is no question that tax
rates have become too high and that middle- and upper-income
taxpayers deserve to share fairly in any tax reduction. But there
should be no quarrel with the simple fact that the taxpayers at the
lower end of the income scale are those most in need of tax relief.
There is also a tendency to resort to tunnel vision in
appraisal of the proposed changes in corporate taxation.
There should be no cause for complaint from small business
that the tax cut favors the bigger units. Unincorporated
businesses, which make up the vast majority of firms in the country,
will receive the full benefit of the individual tax reductions.
Small corporations will do even better. The so-called normal tax
rate on corporate income below $25,000, which affects small firms,
will drop from 30 to 22 percent -- a tax cut of almost 27 percent.
Certainly this compares favorably with the tax treatment accorded
to larger corporations and to the tax treatment accorded individual
taxpayers. Large corporations, of course, will also share in
this reduction in the normal tax, although most of their benefits
will come from the 4-point drop in the over-all corporate rate
from 52 to 48 percent.
This brings me to a second comment that is more frequently
heard concerning the corporate cut -- that it isn't big enough
to provide direct incentives to business and investment. This
Comment ignores last year's reduction in business taxes, to which
the present bill is complementary. Last year's legislation,
which contained the investment credit, coupled with last year's
administrative liberalization of the tax treatment of depreciable
equipment, reduced business tax payments by about $2.5 billion a
year, of which about $2.3 billion goes to corporations. The
proposed bill would reduce corporate taxes by an additional
$2.2 billion a year. The total effect of last year's tax changes,
together with the corporate rate reduction and the proposed
broadening of the seven percent investment tax credit in the
proposed bill, ~ould increase the profitability of new investment

- 6 on a 10-year asset, for instance -- by about 35 percent. No
one should claim that this $4.5 billion corporate tax cut is an
insignificant incentive or that a tax reduction of nearly 18
percent for corporations is to be dismissed lightly.
One of the commonly voiced criticisms of the corporate rate
cut is that because of the acceleration of corporate payments for
the larger firms, there will be little benefit from th~ tax cut.
The comment usually passes over the fact that the rate reduction
fully preserves the principal benefit from corporate tax
reduction -- the increase in rate of return on investment after
taxes, i.e., profits. The acceleration, of course, applies only
to those corporations with annual tax bills of $100,000 or more.
These are the 15,000 or so largest corporations in the country,
and represent less than three percent of all corporations. The
acceleration provision brings these companies onto a current
payment schedule over a period of seven years, putting them on
a parity with individual taxpayers by 1970. It preserves the
additional cash flow for the 550,000 smaller corporations whose
sources of credit are most likely to be limited and who must
depend mainly on internal financing. The acceleration is being
carried out in such fashion that no corporation will actually have
to payout more than at present rates. But the tax saving is
far greater than this would suggest. That is because the
acceleration does not require a ~ payment, or an additional
payment, but merely requires that a payment be made a few months
earlier than it would ordinarily be due anyway. The net cost to
the corporation is not the size of the payment, since that would
have been due in any case. The net cost to the corporation is
the cost of making the payment early.
If the money is on hand, the net loss is the interest that
that small portion of the tax bill which represents accelerated
payment would have earned in the three months or so that the
firm would have otherwise had control of it. In cases where the
small portion representing accelerated payment must be borrowed,
the interest charged on the loan for those few months, less the
amount realized by deducting it for tax purposes, represents the
additional cost of acceleration. Any businessman should agree that
this is not to be compared to increasing the tax bill by the amount
of the accelerated payment. If it were, then it would be accurate
to say that corporations would not benefit from the cut for several
years. Since, however, it clearly is not, there would seem to be
no basis for reasonable objection to this proposal to accelerate
corporate payments -- particularly when it is coupled with a
proposal to reduce corporate tax rates by well over $2 billion
a year.

.. 7 ..

This brings me to a final criticism of the corporate rate
reduction that is being heard more frequently now than before:
the argument that a corporate cut is not needed at all to spur
investment, that the whole tax cut should be put into consumer
demand, and that this would be enough to raise investment to desired
levels.
There is little difference of opinion in informed circles
of the need to increase our level of private investment in plant
and equipment. Business fixed investment, which averaged 11
percent of Gross National Product in 1956 and 1957, has since
fallen to about nine percent. In fact, since 1957 the rate of
increase in our stock of business plant and equipment has risen
by less than two percent annually -- only half the rate for the
first postwar decade. It is not surprising that accompanying this
trend there has been a disturbing rise in the proportion of our
machinery and equipment which is more than ten years old.
Earlier this month Henry Ford II and Stuart T. Saunders,
co-chairmen of the Business Committee for Tax Reduction in 1963,
pointed out in their statement before the Senate Finance
Committee that: "corporate profits after taxes have gone down,
whether measured as a percent of invested capital, of sales or
of the corporate portion of gross national product." A comparison
of the figures since 1957 on the three major forces in economic
growth -- government expenditures, consumer demand, and private
investment -- shows clearly that the investment lag has played
a major role in the failure of the economy to move closer to full
employment.
To highlight this lag Messrs. Ford and Saunders submitted
a chart showing the percent change in real GNP and in major
categories of expenditures for goods and services from 1957 to
1962. That chart shows -- in real terms -- that during those
years, while Federal purchases of goods and services went up more
than 13 percent, while state and local government purchases went
up 28 percent, while consumer expenditures went up more than
17 percent and while total GNP went up more than 16 percent,
plant and equipment spending actually declined by more than one
percent. Thus, it is not surprising that while after-tax
profits have risen in absolute terms about 40 percent during the
recovery -- from $19.2 billion to $26.8 billion -- Messrs. Ford and
Saunders could rightly comment:

- 8 -

"As a percent of stockholders' equity, profits
of manufacturing corporations are far below the levels
of 1955-57 and earlier post-war periods of prosperity.
In fact, after-tax profit as a percent of stockholders'
equity for the period since 1957 is below the
recession level of 1953-54."
There is no question then but that more investment is
needed. For those who contend that consumer demand stimulus is
the way to economic growth, the worrisome question remains
whether a tax cut devoted entirely to stimulating consumer demand
would create an adequate level of investment by the so-called
"demand pull" method. Of course, the sharp rise in consumer
demand which we can expect as a result of the tax cut will stimulate
greater investment. There is bound to be a significant increase in
investment with any sustained increase in demand. But, without
a direct stimulus to investment as well as to consumer demand,
investment will not be large enough or quick enough to create the
jobs we need, to keep pace with the consumer demand rise and so
reduce the threat of inflation, and finally and most important,
to interact with the increase in consumer demand in such a fashion
as to provide maximum long-term benefits to our economy.
This last is a basic and little-understood aspect of the
entire tax program -- that the reaction of consumer demand on
investment and investment on consumer demand will give us a greater
and more balanced -- hence more sustained -- economic stimulus
than would a tax cut entirely devoted either to consumer demand
or to inves~ment.
One of the most important aspects of creating a sustained
economic expansion is the need to utilize the fruits of new
technology in the form of new products or the adaptation of
existing products to new markets. Increasing the profitability
of new investment is the most effective way to make more attractive
the investment decisions which are not being taken today. It
is the most effective way to make today's marginal project the
acceptable venture of tomorrow. It is the most effective way to
maximize the benefits of the tremendous technological, educational,
and human resources of the United States. As new techniques and
new products are developed and as new markets are opened up, new
demand will be created, new investment will be fostered, and new
jobs will be available that would never have been available
otherwise.

- 9 There will always, of course, be people who will think a
greater proportion of the tax cut should be devoted to consumer
demand or a greater portion to investment. No one can lay claim
to having struck a "magic balance"on this issue. The fact,
however, that there seem to be just as many complaining on one
side as there are on the other would suggest that the bill now
being considered strikes a desirable balance. Furthermore, this
balance can be said to reflect the judgment not only of the
Administration, but also of the House Ways and Means Committee
which deliberated on the matter for the better part of a year.' In
quantitative terms, if the tax measures taken last year are
combined with those proposed in the present bill, both business
and individuals will average just about identic~ tax reduction
almost 20 percent.
And to strike a pragmatic note on the
feasibility of getting any tax reduction through, let me
add that it would be extremely difficult to obtain a national
consensus and Congressional enactment of a mixture of investment
and consumer demand incentives substantially different from that
contained in the bill now before the Senate Finance Committee.
Apart from the criticisms and distortions of the actual
incidence of the tax bill on various groups of taxpayers that
arise primarily from a highly personalized view, derivative of
the natural reactions or self-interest of an individual or group,
certain questions are frequently raised concerning the effect of
a substantial tax reduction on the general economy and its
deSirability at this time. Most of these doubts arise from the
honest convictions of thoughtful men and women concerning the
welfare of the nation.
They deserve and should receive a respectful
and understanding hearing, and honest and direct answers. These
doubts, by and large, are not prompted by self-interest; indeed,
just the reverse.
They are held by taxpayers who, like all
taxpayers, would be pleased to contribute less of each year's
income to the tax collector.
But many of these fine people are
not willing to seek a tax reduction for their personal benefit
unless persuaded that it is not at the cost of weakening the
fabric of our national fiscal and financial position.
To these honest doubters let me say that the U. S. Treasury
Department would be the last to espouse a program of tax
reduction if it did not believe that such a course was fiscally
responsible and would result in a sounder financial environment
for the decade of the Sixties. We would not advocate tax
reduction except as a part of and related to a mosaic of national.
policies of expenditure control, debt management and monetary.act~on
designed to enable the nation to meet what ha~e been :he lead:ng
economic and financial problems of the last s~x years. chro~~c
.
unemployment at an unacceptable level, u~der-ut~l~zation o~ ~ndustr~al
capacity, inadequate growth, and continu~ng def~c~ts both ~n our
international balance of payments and our federal budget.

- 10 We are supporting this bill because we believe its end
result will be increases in jobs, wages, salaries, profits,
consumption, investment in the United States, and federal tax
revenues that an invigorated private economy can provide. We are
for this bill because we believe it is time to reduce the
constraints which the wartime rate schedules in the present federal
tax system imposed to hold back excessive demand and inflation.
Now they constitute a drag on our private economy. We believe
that a top-to-bottom reduction in high income tax rates, both
individual and corporate, will release and encourage the inherent
expansionary forces in our great private market economy. He
believe that is good for the country and will be good for the
Treasury.
Let me discuss a few of the specific doubts of the tax bill
and tell you why the Treasury feels that its prompt enactment
is in the national interest.
Some of those with doubts about the tax bill point to the
fact that the economy is doing rather well, particularly in
recent months.
Their attitude seems to be that there is plenty
of time to consider a tax cut -- there is no real hurry about it.
This attitude, in my opinion, passes up opportunity and dangerously
gambles with time.
The danger comes a little closer with every
passing month.
For with the beginning of April next year we will have passed
the point which will make the current economic expansion the
longest peacetime recovery in this century, with the sole
exception of the long pullout of the depression of the 1930s.
I am not suggesting that there is any evidence of a downturn in
our present economic picture.
But I am not sanguine enough to
believe that the Administration has managed to eliminate the
business cycle from the national scene or that the tax bill
will do so.
That is just one more reason why the tax cut should
be passed as soon as possible.
It is up to us -- and by us I mean
the Congress -- to take this step whether we have a tax cut
which picks up this expansion while it is still moving along and
carries it higher and farther to a plateau of full employment,
full utilization of capacity and further growth, or whether the
benefits o'f the tax program contribute to offsetting the drag
of an economy slipping into a downturn.

- 11 -

The national economic problems to which this tax bill is
addressed are long range. Much more is at stake than a temporary
economic pickup or averting or minimizing an early recession. Our
goal must be a sustained economic expansion at a significantly
higher level over the long-term future. What is at stake is the
achievement of a higher normal level of economic activity than
that which has characterized the last six years.
As President Kennedy told the AFL-CIO last Friday, the tax
bill is expected to produce between two and three million new
jobs in addition to those that the economy would produce on its
present growth curve. Some people point to the fact that our
economy is already producing almost a million new jobs a year.
That is true, but it isn't enough. It isn't enough when you
consider that for over seventy months unemployment has exceeded
five percent and averaged six percent, being now stalled at
five and one-half percent. It isn't enough when you consider
that one out of every six workers entering the labor force in
the year ended last June 30 also entered the ranks of the unemployed.
It isn't enough when you consider that we will need a million jobs
or more to get unemployment down to four percent, a million more
jobs or more each year to provide jobs for those idled by
technological advance, and substantially more than a million jobs
each year for the increase in the labor force which we can expect
shortly as a result of the population surge following World War II.
Today unemployment is a serious problem. We must make every
effort possible to keep it from becoming a critical problem.
As President Kennedy pointed out, if our economy in the last two
and one-half years had produced jobs at the same rate as it had
during the two and one-half years previous, unemployment today
would be eight percent instead of five and one-half percent.
Even that five and one-half percent is much too high.
W. P. Gullander, President of the National Association of
Manufacturers, has estimated that it could go a lot higher than
it is now. His estimate was that, if our economy continues to
produce jobs at the rate of the years since 1957, by 1970 our
unemployment rate could be somewhere between 12 and 13 percent.
This audience need not be told what such a rate would mean in
terms of human misery, in terms of the tremendous waste of output
and potential in our economy.
No one can tell
other measures, will
unemployment to four
difficult to see any

you exactly when the tax bill, together with
bring us to our interim goal of reducing
percent. But, without the tax cut it is
possibility of coming anywhere near that

- 12 -

goal for years to come. In fact, without it, the nation is more
likely to move in the other direction. That is the choice which
has helped to make the tax bill the most important piece of
legislation to come before the Congress in many years.
As the lead editorial in the current Business Week put it:
"We cannot know all the answers in advance.
We must try to see what we can achieve step by
step. It is clear, however, that the tax cut is
the first order of business. It is urgent for
us to try to solve our unemployment problems
within a context of healthier growth of the
private economy. Otherwise we may find that
massive govgrnment spending or spread-the-work
schemes are the only approaches left to us."
That editorial, I believe, clearly points out the fact that
the consequences of the tax cut for unemployment epitomize its
consequences for our entire domestic economy.
But the economic implications of the tax cut are not limited
to the domestic economy. It will have a significant effect on
our balance of payments as well. Some are concerned that a tax
cut would worsen our position by expanding our imports. They
overlook the evidence that passage of the tax bill is the single
most important step which can be taken to improve the long-term
outlook for our balance of payments -- evidence that has prompted
the American Bankers Association and leading financial spokesmen
such as Allan Sproul, the distinguished former President of the
Federal Reserve Bank of New York, and many others to advocate the
prompt enactment of the tax program primarily for balance of
payments reasons.
The major challenge on the balance of payments front, at
least at present, is to be found in net outflows of long-term
investment, both direct and portfolio, and the need for increased
productivity that will make our costs competitive. The investment
lag has played an important part in our balance of payments
deficits. For instance, if we compare investment and output from
1956 through last year, we find our total output, apart from price
increases, rose by almost 20 percent, while business fixed
investment showed no net gain at allover the level at the
beginning of the period. This lag has much to do with our problem
of excessive capital outflow and with our shrinking share of
expanding world markets, as well as with our problem of slow
growth at home.

- 13 Until we make investment in the United States more attractive
for both foreign and domestic capital, we cannot find a lasting
solution to our balance of payments problem. The enactment of
the proposed tax bill is basic to that solution, and each month
is important.
Finally, some people see a grave danger in enacting a tax
reduction program at a time when there is a sizable budget deficit,
following on other years of deficits.
The Treasury Department does not like federal budget deficits.
But the real question is, how do we get rid of them? The present
program is to reduce Lax rates so as to increase the rate of
economic activity, eventually producing higher levels of revenue
while controlling increases in federal expenditures to the
barest minimum.
Let us look at the United States economic history since the
end of World War II. Deficits have been symptoms of economic
slack -- not harbingers of prosperity. Over the 11 fiscal years
from 1947 to 1957 -- our time of greatest postwar prosperity -there were seven cash surpluses and four cash deficits for a net
cash surplus of $20 billion. Since 1957, the period of economic
slack, the federal budget has shown a cash deficit in five of the
last six fiscal years -- a cumulative deficit of $26 billion.
Clearly, budget deficits are most likely to be transitional
and avoided in the future if there is a rapidly expanding economy.
That is one of the reasons why the President recommended this
tax program and members of the House Ways and Means Committee and
the full House adopted it. They believed that the high income
tax rates set in the inflationary times of war and postwar
expansion clearly take too much out of our private economy as it
moves toward a balanced budget and full employment.
They believed that the less than $2 billion the tax program
would add to the deficit in this fiscal year, and the roughly $3-1/2
billion that would be added in fiscal 1965, after taking into account
the "feedback" of revenues from the stimulation of the tax cut, would
be a price worth the long-term growth that would result from
reducing the restraints the present tax structure places on our
private enterprise system.
They remembered that the last time a tax reduction was passed up
there was a recession that led to our largest peacetime deficit in
1959 -- in excess of $12 billion. They sought to avoid the massive
increases in federal spending which would be required to offset a
recession, thereby deepening our budgetary deficit on a downturn far
in excess of that contemplated from a tax cut on the upturn.

- 14 Moreover, both the President and the House of Representatives have
recognized and accepted the responsibility of accompanying tax
reduction with a new policy of tighter expenditure control as the
surest and quickest way of bringing the nation to balanced budgets and
surpluses in a manner consistent with our national needs and
responsibilities.
The House of Representatives has emphasized this tie-in between
tax reduction, expenditure control, and balanced budgets by specifically
including in the tax bill as Section I a declaration of policy which
reads as follows:
"I t is the sense of Congress tha t the tax
reduction provided by this Act through stimulation
of the economy, will, after a brief transitional
period, raise (rather than lower) revenues and that
such revenue increases should first be used to
eliminate the deficits in the administrative budgets
and then to reduce the public debt."
The President endorsed this statement before the House vote.
In fact, an effective program of expenditure control is well under
way as an accompaniment to the tax program and convincing evidence of
tangible accomplishment is at hand to give substance to promises of
future restraint.
1. According to the Director of the Budget, the need for
continuing expenditure increases for defense has just about ended and
will soon taper off on space programs, which together with interest on
the debt, accounted for more than 70 percent of the budgetary increase
from fiscal 1961 through fiscal 1964.
2. Since the tax program was proposed last January the fiscal 1963
deficit has declined from an estimated $8.8 billion to an actual $6.2
billion -- and two-thirds of that decline resulted from lower
expend i tures .
3. In proposing the tax program last January, the President
budgeted less for the civilian sector of the 1964 budget (everything
except defense, space and interest on the debt) than in the previous
year -- only the third time that has been attempted in twelve years,
during a period in which state and local government spending has
grown at a rate averaging more than 15 percent a year in response to
population growth and a demand for increased public services.
4. Fiscal 1964 expenditures are currently estimated at $1 billion
below~ast January's estimate. In the first three months of the
fiscal year 1964 (July through September) expenditures in the
civilian sector of the federal budget were $107 million less than the
same quarter last year.

- 15 -

i. This September there were 242 less regular civilian federal
employees on the payroll in the Executive branch than in September
last year.
6. Chairman Cannon of the House Appropriations Committee has
observed that new appropriations may aggregate less than last year's
total -- the first time that will have been done in some years.
7. As for the fiscal year 1965 and following years, the President
has assured the Congress that he intends to maintain a tight rein on
expenditures and that a substantial part of the tax revenues from
economic expansion will be used to reduce the budgetary deficit until
balance is reached.
8. On this basis -- and barring an unforeseen slowdown of the
economy or international contingency -- the President expects to
submit a budget for fiscal 1965 with a deficit less than the $9.2 billion
forecast for fiscal 1964, despite the fact that the second stage of
the tax reduction will have gone into effect and that the revenue loss
fram tax reduction in 1965 -- before feedback -- will be $5 billion
greater than in 1964.
Beyond this evidence of a new attitude in the halls of government,
there are pragmatic factors that you outside government may take into
account. The Business Co~ittee for Tax Reduction in 1963 voiced its
conclusion "That a tax cut would exert strong pressure to achieve
better control of government spending . . • a good way to encourage
strong spending discipline again next year and the year after is to
pass the tax bill." Someone has put it in even terser terms -- the way
to cut taxes and government spending is to cut taxes.
Despite all the personalized distortions and criticisms of the
make-up of the tax bill and the haunting doubts and fears as to its
current economic timeliness, the months since its introduction in the
House have witnessed the emergence of a consensus that confirmed the
soundness of the President's earlier recommendations.
Seldom in the nation's history have its economic brains and
leadership from diverse private sectors developed such a solid accord
on a key economic issue as that which has emerged on the proposed
Revenue Act of 1963.
Although only a very short time elapsed between the Ways and Means
Committee action in reporting the tax bill to the House, and the House
passage of that measure by an overwhelming margin, an impressive number
of endorsements of the bill and its general principles were made during
that period. The endorsements, urging favorable legislative action
on the tax bill, were made by organizations representing a broad sampling

- 16 of the economic, business and financial community, that included such
groups as The Business Committee for Tax Reduction in 1963; The Chamber
of Commerce of the United States; the A~L-CIO; The National Federation
of Independent Business; The National Association of Home Builders·
The National League of Insured Savings Associations; The American Life
Convention;
The Life Insurance Association of America·, The National
. .
Assoc~at~on of Retail Grocers;
The National Candy Wholesalers Association, Inc.;The National Coal Association; The National Machine Tool
Builders' Association; The National Food Brokers Association· The
United States Wholesale Grocers Association; The Associated Retail
Bakers of America; and The National Association of Real Estate Boards.
Equally impressive has been the consistent pattern of testimony
before the Senate Finance Committee of those witnesses who speak in
a representative voice for the important economic organizations that
make up our private economy
Although these representatives have
changes to suggest, most of them make it clear that if their recommendations are not followed, they would support the bill as it passed the
House
These statements of basic support for the bill despite individual
differences came from such varied groups as The Chamber of Commerce
of the United States; The National Farmers Union; The AFL-CIO; The
American Life Convention and Life Insurance Association of America;
The American Textile Manufacturers Institute; Henry Ford, II and
Stuart Saunders for The Business Committee for Ta~ Reduction in 1963;
The Illinois Manufacturers Association; and The National Small Business
Association.
0

These are only a few of the groups which indicated that, even if
the bill did not include the changes they considered most essential,
they would still support its passage. This reflects no weakness or
vacillation on their part. It does indicate a concern for the national
economy and the public welfare which transcends their individual
interests -- an attitude which reflects the strong sense of public
responsibility of most of those testifying before the Senate Finance
Committee
0

No one could hope to draw a tax bill that would satisfy everyone.
The fact that the present bill has gained such broad public su?port
fro,11 so many different areas makes me very optimistic that sound,
effective tax legislation very much along the lines of the House bill
will shortly become the law of the land, despite the existence of
determined b~t limited opposition and some lingering doubts.
There is insistent and ever mounting support from many diverse
sources for this legislation. Why? Even outstanding opponents or
skeptics of last spring have become advocates this fall because
favorable business expectations are now based, in part, on its passage.
~y?

- 17 The answer is simple and has been from the beginning. We, as a
nation, prefer to rely primarily on a more prosperous and efficient
private economy, initiating a larger and larger volume of economic
activity in a free market. That is the formula that has made us the
strongest and most productive nation on earth and that should be our
formula for maximum progress in the future.
We have come to the conclusion -- in business, in finance, in
labor,in academic circles and in government -- that our present tax
system is holding back that private economy from its best performance.
We know that the alternative to a changed tax system is a massive
increase in the role of the national government and its expenditures.
We have overcome the biggest obstacle to changing that system -tffi lack of any agreement on just how to change it.

The American people and the members of the u.s. Senate will not
pass u? this rare opportunity, provided by the President and the House
of Representatives, to move forcefully to solutions of long standing
national problems in a manner consonant with our great and true
tradition.

000

TREASURY DEPARTMENT
Washington

FOR RELEASE ON DELIVERY
STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE
SENATE BANKING AND CURRENCY COMMITTEE
WEDNESDAY, NOVEMBER 20, 1963, 2:30 P. M.
As the officer of our Government who is most directly concerned
with both our foreign and domestic financial situations, I want to
make it clear at the outset of my remarks that the proposed grain
sales to the Soviet Bloc would, in my considered opinion, be in the
best interest of the United States, for three very important reasons:
First, they would improve our balance of international payments
by perhaps as much as 300 million dollars.
Second, they would strengthen our gold position.
Third, they would reduce our heavy expenditures at home for
storing surplus agricultural commodities.
But we shall not obtain these very practical and hard-headed
advantages if the legis lation no,v before you is approved.

For the

projected sales will, in all probability, not take place unless
adequate financing is available to American producers and shippers.
,. Jhile it is by no means certain that the current negotiations
between American grain dealers and the Soviet Union will be successfully concluded, I do not believe that our dealers' hands should be
tied by their inability to provide appropriate financing.
D-I054

I therefore

-2urge rejection of S23l0, which would prohibit the Export-Import Bank,
or any other agency of the United States Government, from financing
commodity sales to the Soviet Bloc, or extending guarantees of :-,rivate
financing.

Such a restriction would seriously reduce, if not eliminate

entirely, any possibility of concluding the substantial sales of
agricultural products to the Bloc that are now being negotiated

and

it would preclude any similar transactions in the future.
As the Committee is aware, serious short-falls in agricultural
out:-,ut in the Soviet Union and the countries

0,°

Eastern Europe have

rrom?ted them to seek substantial amounts oc agricultural corr:modities,
particularly wheat and corn,

~rom

the

~.Jest.

As a result, we have an

0rfortunity to sell some 150 million bushels of wheat to the Soviet
Union and other Eastern European countries, as well as a nurr:ber of
smaller sales of other agricultural commodities to various members
OC

the Bloc.

In my view, we should seize that

oPl~ortunity

because

it is to our advantage.

Such sales would directly benefit our balance of payments.

this committee is well aware, our over-all balance of payments det:"icits
an10unted to $2.4 billion in 1961, and $2.2 billion in 1962.

Although

those de:icits were substantially below those o· ?revious years, the
United ~tates dollar remained under pressure in the exchange markets
o~ the world and the ability o~ our currency to function fully and

- 3 -

effectively as the monetary cornerstone of the international payments
system was impaired.
In the President's message to the Congress of July 18, he spelled
out action on a broad front to correct our payments imbalance.

The

initial results during the third quarter of this year were highly
promising.

During the July-September quarter, our deficit was slashed

far below that of the two previous quarters -- in good measure because
of the proposed Interest Euqalization Tax and firmer short-term interest
rates.
abroad.

These developments reduced the outflow of United States capital
But our payments problem is not solved by any means.

Leaving

aside special government transactions stich as advance debt payments and
the sales of medium term government bonds denominated in foreign currencies, preliminary figures made public by the Department of Commerce
show that our deficit on regular transactions seasonally adjusted ran
at the annual level of $1.6 billion, during the third quarter.

Even

though this is the best quarterly result since the fourth quarter of
1957, when the effects of the Suez crisis were still evident, it is
still much too high for comfort.

Until we can eliminate our balance

of payments deficit entirely, we must seek out and take every practical
step to defend the dollar by improving our payments position.

One such

move would be the sale of grain to the Soviet Bloc.
Of directly related interest is the fact that the Soviet Union
over the years has run deficits in trading with the Free World.

- 4 settle its accounts, the Soviet Union each year sells some $200
million of gold.

Since the Soviet Union is now purchasing unusual

amounts of agricultural commodities abroad, adding further to its
deficit, those gold sales are rising.

As a result, directly or in-

directly, our gold stock position is being improved.
Although my principal concern here today is with our

~a1ance

payments and gold position, I ask the Committee not to overlook other
benefits to our nation from the proposed sales -- particularly the
considerable reduction in budgetary expenditures that would result
from receipts from the sale of wheat in C.C.C. inventories, and from
reductions in storage and other costs involved in carrying Government
inventories.

From the sale of four million tons of wheat, budgetary

expenditures in fiscal 1964 and fiscal 1965 would be reduced by
approximately a quarter of a billion dollars with a corresponding
reduction in our expected budgetary deficit.

Annual storage and

other carrying charges on this amount of wheat run to nearly $40
million.

Since the Department of Agriculture estimates that it is now

likely to take about five years to rollover C.C.C. stocks, this
would mean a $200 million saving over such a period.
I also want to emphasize that the proposed sales would be wholly
commercial in nature, with a decided profit incentive to American
grain dealers.

However, if American dealers are to bid successfully

- 5 -

for this business, they must be able to compete successfully with the
grain suppliers of other Free World nations -- for example, Canada,
which has made arrangements to sell $500 million worth of wheat
and wheat flour to the Soviet Union, as well as Australia, Argentina,
and Mexico, which have made smaller sales arrangements with Bloc
countries.

In comparison, American sales to the Soviet Bloc

excluding the special cases of Poland and Yugoslavia -- have been
made only to Hungary, which has purchased, in three lots, 100,000
tons of corn, valued at $4.5 million covered by an Export-Import
Bank guarantee.

Sale of 200,000 tons of wheat to Hungary (approxi-

mately 7.4 million bushels) has been licensed by the Department of
Commerce, and other sales to the Bloc are in the offing, but the major
transaction would be the sale of more than 150 million bushels of
wheat to the Soviet Union and other Eastern European countries.
If our dealers are to obtain this business, they must be competitive, and one of the most important factors involves the
financing terms.
In this regard, the Soviet Union and its satellites generally
have received from Canada terms which provide for cash payment
of 25 percent prior to shipment of the commodities, with the
balance payable in equal semi-annual installments over an 18-month

-6-

Those are now the cU8tomary commercial term. for I.lel of wheat

period.

to Bloc countries -- and have been made available even to Communist
China.

In some cases --

for example, a recent Canadian wheat

sale co Poland -- three year terms were agreed upon.

I do not view the l8-month terms as unsound or unjustified.

sales to non-communist countries, we have offered government credtt
of up to three
on wheat.

y~8r8

on tobacco, cotton and feed grains, and 2 years

If United Sales grain dealers are to compete for the

Soviet trade succeSSfully, they will in all likelihood find it

necessary to o:'fer reasonably equivalent COlIllTlerc la1 credit.

However,

the evidence is conclusive that United States commAt'cial banks are

not prepared, 80lely on their own, to grant commercial credits to the
Soviet Bloe covering agricultural cotm'!odit ies in the amount and

the time required.

~·or

Therefore. If advantageous United States sales

to the Soviet Bloc are to be concluded, our financial institutions

will need assistance similar to that extended by the Export Credit
Insurance Corporat ion

f Canada, a Goverrunent-owned

corporation, which

guaranteed the credits extended by Canadian banks to finance CanadIa.n
wheat purchases by the Soviet Union.

Sales of commodities by other

Countries to the Conwlluntst Bloc have also involved export cred·it

guarantees by govermnent-owned corrorations.

Such guarantees have

become a normal part o-f trade:1nancing with the Soviet "810<:, a~ wpll

as with rr..any non-cannruni.B t countries.

- 7 What is clearly called for is the guarantees by our Export-Import
Bank of the commercial credits to be extended to cover purchases of
American grain by the Soviet Bloc.

The credit would carry an interest

rate of five percent a year, of which five-eights percent would go to
the Export-Import Bank as a fee.

As for the risk involved, the Soviet

Union has consistently met all commercial credit obligations it has
undertaken fully and promptly.

Its reputation in the commercial credit

field is such that payment on schedule can be expected.

In addition,

of course, failure to honor a commercial obligation "..,ould seriously
impair the ability of the Soviet Union and the countries of Eastern
Europe to continue to obtain the commercial financing they regularly
require from other Free ...Jorld countries.
In conclusion, I want to restate my belief that grain sales to the
Soviet Union and other members of the bloc are in the interest of the
United States.

Payment over an l8-month period is now a normal

commercial practice in the international wheat markets.

Therefore,

to make the offers of grain dealers both realistic and competitive,
Export-Import Bank guarantees are necessary.

Indeed, without Export-

Import Bank guarantees, it is very doubtful that the sales can be
made.

I would, therefore, strongly urge that S23l0 be rejected by

this Committee -- not alone because of the wheat sales nm-1 under
consideration, but because the proposed bill could adversely affect

- 8 a broad range of commercial sales of other products far into the
future.

I would hope that the Export-Import Bank, and the

Administration generally, will retain the flexibility and authority
necessary to facilitate legitimate commercial trade between United
States and the Soviet Bloc whenever our national interest will be

served by such trade.

The proposed wheat sale to the Soviet Bloc

is just such a transaction.

000

- 3 -

exempt from all

t~m.tion

now or hereafter impo13ed on the principal or intere13t

thereof by o.ny state, or any of the possessions of the United States, or by any
local

to..."{in~

authority.

For purposes of taxation the amount of discount at '\oIhich

Treasury '0111s nrc oriGinally sold by the United States is considered to be interest.

Under Section:::; 1S1: (b) and 1221 (5) of the Internal Revenue Code of 1954 the amount
of discount at 'ihich bills issued hercunder are sold is not considered to accrue
until such bills are sold, redeemed or othenrise disposed of, and such bills are
excluded frnnl consideration as capi tal aS13ets.

AccordinGly, the owner of Treasury

bill:::; (other than life insurance companies) issued hereunder need include in his income tr>.x 1'ct.Ul'n only the difference betlTeen the price paid for such bills, vme-Lhcr
on oric:i.nnl

iG~;Lle

or on subsequent. purchase, and the amount actually received either

upon sale or red.emption at maturity during the taxable year for which the return is
llKldc, as

orcltnm~r

[)J.tn or 10813.

'1'reasUl',y Dcpnl'Lmcnt Circular No. 418 (current revision) and this notice, pre:::;cribe the terms of the Treasury bills and Govern the conditions of their issue.
Copies of the

~ircular

m[l.y be ol)tnined from any Federal Reserve Bank or Branch.

- 2 -

of Treasury bills applied for, unless the tenders are accompanied by an express
euaranty of payment by an incorporated bank or trust company.
All bidders are required to agree not to purchase or to sell, or to make any
agreements with respect to the pUl'chase or sale or other disposition of any bills
at a specific rate or price
of this issue~ until after one-thirty p.m., Eastern Standard time, Wednesday,
November 27, 1963
Innnediately after the closine hour, tenders will be opened at the Federal Reserve B8Ilks and Branches, follmfinG v'hich public announcement will be made by the
Treasury Department of the amount and price ranee of accepted bids.

ting tenders vall be advised of the acceptance or rejection thereof.
of the Treasury

eA~rcssly

Those submitThe Secretary

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 m thout stated
~
price from any one bidder vall be accepted in full at the average price (in three
decimals) of accepted competitive bids.

Payment of accepted tenders at the prices

offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on

December 3, 1963 , provided, however, any qualified
~
depositary mIl be pel~tted to mrure payment by credit in its Treasury tax and loan
not more than 50 percent of the amount of
account for/Treasury bills allotted to it for itself and its customers up to any
amount for which it shall be qualified in excess of existing deposits when'so notified, by the Federal Reserve Bank of its District.
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

TH.17J1.sm cr

1)~·I:P.l\HTl illilT

Hnahinc;tol1
November 21, 1963

TREASURY OFFERS $1 BILLION ONE-YEAR BILLS
'rho Tl'ec.::Jt1.l"Y Department, b;l thie publ:i.c notice, invitoe tenders for

or thorcC'bouts, of'
COJ.I1.)ctitive
~er.i.efJ

011(1

363

$ 1,000,000,00

-dn.y Trco.oury bill:.:;, to be iaGuco. on a discotlnt basis under

-XM~-

noncompetltlv:) biddinG an hcrcinn.:L·ter provided.

The bills of this

"h~;l

December 3, 1963
, end ~rlll illL'.ture
November 30, 1964
--------~-------ftff
~
~
·i:.he -fe-cc c;not.mt "rIll be J:l['~. . o.bJ_e ,r:L-i.hOll'L :tntcJ:'c:~L. Thoy vIllI be iSGued in bearer

1.'01 Yl

only, (>lld in den O1i1i nat ::.on3 of

"'ill be elated

:;a, 000,

:;;;j, 000, :;>10, 000, :;;50, 000, :;;100, 000, $500, 000

cnC\, ::iJ.,OOO,OOO (Jjlo.ttu'lt~r vO-luo).

Tondel'S \Till be l'ece.i. 'leu at
hOU-L',

one-thil"t,~r

Fc(leJ.'~1.1 I:c:~el 'Vc n[ln1~G [~nc1

p.N., EO.3tC:i.'n ~..ito.nc1.:.'.l'd tine,

B:L'Ollchea up to the closinG

Wednesday, November 27,1963 •

Tendcrr;

(G(J
1rlll not be rocei ved 4'_t the 'l'reaaury Department, Hachincton.

Each tender must be for

an oven rmJ.-tiple of :~l,000, and in the co-cc of co;n:pet:i. C:tve tender::; the price offered
the 00.::;:i.3 oi' 100, ,rlth not l'lore thon three decj.!Jw.l::;, e. C;., 99.92~
(Notwithstanding the fact that these bills will run for 363 days, t
l"1'("'.C t:tonr.; J:ln~," not be uscu. / It :i.::; tU'ced that t(;nrlcI'~ be maclc on the prtnted form::; and
:.m::;t bc c;::pre::wed

~"o:..~\.rr-x(lcd

D:"'~.llches

011

:tn the opccic·.l envelopc::; lrll'tch lr.U.l bc G1.l.pplj.c<l by Fedel'al l1csel"'Ve 13cnks or

on eppl:tco.tion therefor.

&lll~ill[;

In::;titut,ion::;

c;cne:,.'all~r

rao.y GUO);[i..t tender-a

:l'01'

account of customerG pro-

vided the n£l1ilCS of thc customers are Get l.'o::.'Lh in such tCj,lclers.
institutions

,ri~.l

Other::; than bankinG

not be pCl'.)littcc1 to subni t tencle:rc except fOl' their ovm account.

Tenders lrill be l'eceived 1.nthout deposlt

j,"'l'om

incorporated

bonl~G

and tru::;t companies-

nnd fro;.l l'eoponsibJ.e and recoGnized deo.leI'o in invcetment securities.
othcrs must be c.ccOT,Ipenied

l1~r IH.'.~Tj.lent 0:1.'

Tenders from

2 pel"Ccnt of the face amount

discount rate will be computed on a bank discount basis of 360 days, as 1s
currently the practice on all issues of Treasury bills.)

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE

November 21, 1963

TREASURY OFFERS $1 BILLION ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders
for $1,000,000,000, or thereabouts, of 363-day Treasury bills, to be
issued on a discount basis under competitive and noncompetitive bidding
as hereinafter provided. The bills of this series will be dated
December 3, 1963, and will mature November 30, 1964, when the 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 closing hour, one-thirty p.m., Eastern Standard time, Wednesday,
November 27, 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 decimals,
e. g., 99.925. Fractions may not be used. (Notwithstanding the fact that
these bills will run for 363 days, the discount rate will be computed
on a bank discount basis of 360 days, as is currently the practice on
all issues of Treasury bills.) 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 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 of an incorporated bank
or trust company.
All bidders are required to agree not to purchase or to sell, or
to make any agreements with respect to the purchase or sale or other
disposition of any bills of this issue at a specific rate or price,
until after one-thirty p.m., Eastern Standard time, Wednesday,
November 27, 1963.
D-l055

- 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 Department 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,
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 without stated price from anyone bidder will be accepted in full
at the average price (in three decimals) of accepted competitive bids.
Payment of accepted tenders at the prices offered must be made or
completed at the Federal Reserve Bank in cash or other immediately
available funds on December 3, 1963, provided, however, any qualified
depositary will be permitted to make payment by credit in its Treasury
tax and loan account for not more than 50 percent of the amount of
Treasury bills allotted to it for itself and its customers up to any
amount for which it shall be qualified in excess of existing deposits
when so notified by the Federal Reserve Bank of its District.
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 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 (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

- 2 silver certificates will also appear on the new Federal Reserve notes, but the
new notes will not contain any reference to silver.

Thus, they will not carry

the language: "This Certifies That There Is On Deposit In The Treasury Of The
United States Of America" (above portrait) and "One Dollar In Silver Payable To
The Bearer On Demand" (below the portrait).
Federal Reserve notes have been the basic circulating currency of the
United States for many years, comprising over 85 per cent (more than $30
billion) of the face amount of all currfmcy in circulation today.

They are backed

100 per cent by collateral in the form of gold certificates, U. S. Government
securities, or short-term paper discounted or purchased by the Federal Reserve
Banks.

The Board of Governors of the Federal Reserve System and the Treasury
Department announced today that more than 50 million new $1 Federal Reserve
notes are going into circulation. Issuance of the new $1 notes, aUL'1orized by
Congress last June, began this morning at all 12 Federal Reserve Banks and
their 24 Branches to commercial banks in every part of the country.. This will
make more silver available for coinage purposes and help to meet the increased
demand for currency in connection with pre-Christmas business.
To facilitate the widest possibl'3 distribution, the inittal supply of the
new notes is being distributed through normal commercial banking channels;
none of the first 50 million notes will be available to the public at any of the
Federal Reserve Banks or Branches.
The new $1 Federal Reserve notes closely resemble the present $1 silver
certificates, which ultimately they w JI replace completely. The back of the
new notes and the portrait of George Washington on the face will be exactly
the same as the silver certificates. The main difference will be the addition of
a symbol, appearing to the left of the portrait, identifying the issuing Federal
Res erve Bank, and the wording on

th~

signatures of the Secretary of the

Tre~sury

face of the bill. The notes bear the
and the Treasurer of the United States,

as do Federal Reserve Notes of other denominations.
The new notes will read (above the portrait):
America" and (below the portrait) "Orle Dollar."

"The United States of
The legend ,stating that the

bill .. Is Legal Tender For All Debts I Public and Private I
D-JClS(P

a ppearing on the

TREASURY DEPARTMENT

FOR TIMMEDIATE RELEASE
NEW $1 FEDERAL RESERVE NOTES
NOW BEING DISTRIBUTED
The Board of Governors of the Federal Reserve System and the
Treasury Department announced today that more than 50 million new
$1 Federal Reserve notes are going into circulation. Issuance of
the new $1 notes, authorized by Congress last June, has begun at
all 12 Federal Reserve Banks and their 24 Branches to commercial
banks in every part of the country. This will make more silver
available for coinage purposes and help to meet the increased demand
for currency in connection with pre-Christmas business.
To facilitate the widest possible distribution, the initial supply
of the new notes is being distributed through normal commercial banking
channels; none of the first 50 million notes will be available to the
public at any of the Federal Reserve Banks or Branches.
The new $1 Federal Reserve notes closely resemble the present
$1 silver certificates, which ultimately they will replace completely.
The back of the new notes and the portrait of George Washington on
the face will be exactly the same as the silver certificates. The
main difference will be the addition of a symbol, appearing to the left
of the portrait, identifying the issuing Federal Reserve Bank, and the
wording on the face of the bill. The notes bear the signatures of
the Secretary of the Treasury and the Treasurer of the United States as
do Federal Reserve Notes of other denominations.
The new notes will read (above the portrait): "The United States
of America" and (below the portrait) "One D:)llar." The legend stating
that the bill "Is Legal Tender For All Debts, Public and Private,"
appearing on the silver certificates will also appear on the new
Federal Reserve notes, but the new notes will not contain any reference
to silver. Thus, they will not carry the language: "This Certifies
That There Is On Deposit In The Treasury Of The United States of
America" (above portrait) and "One Dollar In Silver Payable To The
Bearer On Demand" (below the portrait).
Federal Reserve notes have been the basic circulating currency of
the United States for many years, comprising over 85 per cent (more
than $30 billion) of the face amount of all currency in circulation
today. They are backed 100 per cent by collateral in the form of gold
Certificates, U. S. Government securities, or short-term paper discounted
or purchased by the Federal Reserve Banks.
D-I056

... "'1' 26, 1963
RK~;JLTS

JF rIlEASUltI' 5 .cUlLY Bl1J,

! -,'

!'Y.. :iUN(}

!be 1ftull1'7 Depart.... umouaoH tbat. \be M..... t . t.w aerie. of 1'. . . .U17 ~
tJ be an addiUanal 1 __ of t.lMt billa cia. . . A1IIUS\ 29, 196), and. tibe " '•
..nee t,o be dated U..,...cber 29, 196), vh10b . . .
~4OW.Edl_ 20, wn ope • • •
t.aMt FNeral fiaaern Banke an Ikn"IBbeJt 26. T.......... iaftt.ect lor iil,200,OOO,ooo, •
tMNabcNt.s, ot ~ biUs aIId tor .eoo,OOO,OOO, or t.heftaboUt.m~ ot 181-c1q MIla.
!be de..ile 01 the two ..nee an .. t'oU.oal

ot,.... _

OM MI"1~1

RAM]}. or ACC&P"rtJ>
CCJtPl:TITtvs Bln3.

•

t>rice- _r

98.180

9B.173
98.115

42' ot

...,.,.t ot 9o-de,y bUl.e bid for at. t.be low ;rrlce va.a accept-eel
of the aIaOUn~ of 181-dq bills bid far .t. t.he low ;:rioe li&8 accepted

7'l~

TOtAL

the

f~~:~ A~·?LrE.o

DiaW1ot,

rort ArfD ACCE?!"ED Bl rlDERAL

ApPl1 ed For

aonc.
-

York

Phil.delphia

22,376,0x>
1,4$8,061,000
26.4~,ooo

28,S1Q,O'JO

ClAmalancl

18,9b7,OOO
2S, 092, 000

l10hmaBd
At.laD\a

Cbloaco

202,671,000
)2,621&,000
20, 681, 0fX)

st. ~
IUraaeapol1a

, '.... C1.
Dell..

%,)82,000

)),324,000
~'.WJ.rxxJ

Sua P'nDateoo

$1,

1,Oi,ooo

R~~);:RVF.

Dijl'RIGt61

.....pted

!O!!Jl!J4

•

.. 12,)02,0)0

• Applied'2"
12,212,000 I •
19,)02,000
800,661,000. l,2:>.J,u17,000
12,$99,000.
8,7)6,000
28,$10,000 I
9,9ge,O'))
12,~7,OOO a
S,82),ooo
19,674,000 ••
a,lnO,OOO
lS7,SSl,OOO,
176,8)9,000
26,108,000.
ll,h13,OOO
1),940,000.
7,68),Q()()
$4,214,000 I
10,)17,000
17,1&,000.
9,h74,OOO
06
!Q,t ,OQO.
~,J741000

$l,2Ol,lle6,OOO

$l,614,J06,000

S8l,6S7,000

),)78,000

',413,2,62),000
6, 61S,OOO

109,91',000

9,91),000
),283,000

6,S61,CXlO

4,4T1l,OOO

a'I'OOO

$S01,r,oao W

!I' IDoladu ->219,7f.6,OOO IICIftOOIIipIUUq teaMrs aooeptecl U t.M aYer&i8 i:lrioa of

§I

".lJO

~ at. t.he a'Nra~ price of 98.1"
III a 0CMp0I'l t .... of the . . . lenPb aDd tor t.Jle __ a.ount ilmtatecl, tbe rn'" •
the.. bill. woald prori.de l1elda 01 ).;", tor \be ~ bIDs, and
t...
181..., bUla. Iaterest ratas on bUla aJ"'4IJ quoted 1ft tel"!lB of benk diM" ....
ibI ...t,um relatAd to the f . . _ , of tba bUlIJ PlV'able at Ilaturlty ............
the ..,..., 1nvnt.ecl Md thfllil' l.eagt.b in aot.t _H.. or c1qs l'8l.awd \0 a )60 III
~. In ocatrut., 71e1da Oft oerUt1catea, DOt.tIa, &lid banda are o.,.t.ed 18 _ _
or lDt.enst, on the ..,.." 1.rmtetecl, and relater tbe _,ber ot day....m.t • • Sa •
1.nt.eftn PlQllnt. period to tohe ae\ual. ...... of ..,. in tbe period, v1t.h •• pI- d
~ 11 aore than 00i coupon pel1.od 1. lrrn19M.

Inolwle.

$S7.h28,OOO DODIc.petlt,lve tenders

).7",

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE

RESULTS OF TREASURY' S WEEKLY BILL OFFERING
Th. Treaaury Department announced that the tender" tor two series of Treasury bills,
one series to be an additional issue of the billa dated August 29, 1963, and the other
series to b. dated November 29, 1963, which were offered on November 20, were opened at
the Federal Reserve Banks on November 26. Tenders were invited for $1,200,000,000, or
thereabouts, of 90-day bills and for $800,000,000, or thereabouts, of l8l-day bills.
The details of the two series are as follows:
RANGE OF ACCEPTED

CCMPETITIVE BIDS:

High
Low

Average

90-day Treasury bills
maturing February 27, 1964
Approx. Equiv.
Price
Annual Rate
99.134
3.464%
99.128
).488%
99.130
3.480% Y

••

181-day Treasury bills
maturing May 28, 1964
Approx. EqUiv.
Price
Annual Rate
98.180
).620%
98.17)
3.634%
98.175
3.631% !I

42% ot the amount of 90-day bills bid for at the low price was accepted
72% of the amount of

181-d~

bills bid for at the low price was accepted

TOTAL TENDERS APPLIED FOR AND ACCEPI'ED BY FEDERAL RESERVE DISTRICTS:

Accepted
Acce~ted
Al?E1ied For
District
AEElied For
Boston
$ 19,)02,000 $ 12,)02,000
$ 22,376,000 $ 12,212,000
800,661,000
New York
581,657,000
1,250,477,000
1,458,061,000
:
Philadelphia
12,599,000
),)78,000
8,7)8,000
28,434,000
:
28,570,000
Cleveland
9,413,000
9,998,000
28,570,000
2,82),000
12,947,000.
Richmond
5,82),000
18,947,000
19,674,000
6,675,000
8,870,000
Atlanta
25,092,000
109,979,000
157,551,000 :
Chicago
176,839,000
202,671,000
26,108,000
9,913,000
1l,U13,OOO
st. Louis
32,624,000
),28),000
1),940,000
7,68),000
Minneapolis
20,687,000
6,567,000
10,)17,000
54,214,000 •
Kansas City
56,382,000
4,u14,OOO
17,164,000
9,414,000
Dallas
33,)24,000
51,t214~OOO
San Francisco
45 z706.z000 •
95.z 374 z000
59,t 866,z 000
!Y'
$801,678,000
$1,987,034,000 $1,201,)46,000 !I $1,614,308,000
Totals
a/ Includes $219,188,000 noncompetitive tenders accepted at the average price of 99.1)0
§I Includes $57,428,000 noncompetitive tenders accepted at the average price of 98.115
1/ On a coupon issue of the same length and for the same amount invested, the return on
these bills would provide yields of 3.57%, for the 90-day bills, ~d ).16%, for the
1e1-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 amount invested and their length in actual number of days related to a )60-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 nlnnber of days in the period, with semiannual
compounding if more than one coupon period is involved.

·
·

D-1057

TREASURY DEPARTMENT

November 23, 1963
FOR IMMEDIATE RELEASE
TREASURY POSTPONES CLOSING TIME FOR RECEIPr OF
TENDERS FOR WEEKLY BILL OFFERING
The Treasury Department, by this public notice, postpones the
closing hour for the receipt of tenders for the two series of weekly
Treasury bills to be issued Friday, November 29, 1963. The new
closing hour is 12:30 p.m., EASTERN S~DARD TIME, Tuesday, November
26, 1963. The receipt of tenders had previously been scheduled for
1:30 p.m. on Monday, November 25. No other changes are being made
in the terms of the public notice inviting tenders, which was issued
on November 20, 1963.
The Treasury Department is making no change in the terms of the
public notice issued on November 21, 1963, inviting tenders for the
regular monthly offering of 1 billion dollars of one-year bills.
These tenders will be received up to 1:30 p.m., EASTERN STANDARD TIME,
on Wednesday, November 27.

D-1058

- 3 -

and exchange tenders will receive equal treatment.

Cash adjustments will be made

10S8

tram 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 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

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 (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 -

decimals, e. g., 99.925.

Fractions may not be used.

It is urged that 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 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.
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 Department 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, 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 September 5
ing until maturity date on

March

~64

1963

, ( 91

days rema.in-

;(Mk tenders for
) and noncompetitive

$ l~O or less for the

182 -day bills without stated price from anyone
~
bidder will be accepted in full at the average price (in three deci.ma.ls) of accepted competitive bids for the respective issues.

Settlement for accepted ten-

ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on Dece~ber~19S3

, in cash or other immediately available funds or

in a like face amount of Treasury bills maturing

December. 1963

•

Cash

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE,

November 27, 1963

X)'JOOOOOE)(~Jf)0000Dooeoo<"

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, for

** X(&)C

cash and in exchange for Treasury bills maturing December 5, 1963
of $2,101,094,000 ,as follows:
~
91 -day bills (to maturity date) to be issued
~

, in the amount

December 5, 1963

------~~~------

in the amount of $ 1,300,000,000 , or thereabouts, represent-

Y{XJC)t
ing an additional amount of bills dated September 5, 1963

Xf4i)C
and to mature

March 5, 1964
, originally issued in the
oedian additional $100,092,000 was issued October
amount of $801,671,000 I , the additional and original bills 28, 1963

)fM)(

to be freely interchangeable.
182 -day bills, for $ 800,000,000
, or thereabouts, to be dated
~
~
December 5, 1963
, and to mature June 4, 1964
•
----~~~~----

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 will be issued in bearer form only,

Monday, December 2, 1963

Xf&ti

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
/
-

\
,,-, ' -

TREASURY DEPARTMENT
November 27, 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, for cash and in exchange for
Treasury bills maturing December 5,1963, in the amount of
$2,101,094,000, as follows:
9l-day bills (to maturity date) to be issued December 5, 1963, in
the amount of $1,300,000,000, or thereabouts, representing an
additional amount of bills dated September 5, 1963, and to mature
March 5 1964, originally issued in the amount of $801,671,000 ( an
additio~al $100,092,000 was issued October 28, 1963), the additional
and original bills to be freely interchangeable.
182-day bills, for $800,000,000, or thereabouts, to be dated
December 5, 1963, and to mature June 4, 1964.
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
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 closing hour, one-thirty p.m., Eastern Standard
time, Monday, December 2, 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 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-1059

- 2 InunediatelJ a1t8l' the clu:..,111/S how.', tenders will be opened at
the Federal Reserve Banks and Branches, following which public
announcement will be made by the Treasury Depart~ent 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, 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
September 5,1963, ( 9 1 'days remaining until maturit:y date on
March 5, 1964)
and noncompet.itive tenders for ~ 100,000
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 Banks on December 5, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bi lIs maturing December 5,1963. Cash and
exchange tenders will receive equ(J.~ treatment. Cash adjustments
will be made for differences between the par value of maturing
bills accepted in exchal~e 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 authority.
For purposes of taxation the amO'.l'1t of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 45 4 (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, whet.her on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity duping 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

TREASURY DEPARTMENT

November 27, 1963

FOR IMf.1EDIATE REIEASE

TREASURY DECISION ON CHROMIC ACID
UNDER THE ANTIDUMPING ACT

The Treasury Department has determined that chromic acid
from Australia is being, or is likelY to be, sold at less than
fair value within the meaning of the Antidumping Act.
AccordinglY, this case 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 dollar value of imports received during the first 6
months of 1963 was approximatelY $75,000.

TREASURY DEPARTMENT

November 27, 1963

FOR IMMEDIATE REIEASE

TREASURY DECISION ON CHROMIC ACID
UNDER THE ANTIDUMPING ACT

TREASURY DEPARTMENT

November 27, 1963

FOR IMMEDIATE REIEASE
TREASURY DECISION ON FIG PASTE
UNDER THE ANTIDUMPING ACT

The 1reasury Department bas determined that fig paste
from Spain 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 published

in the Federal Register.
The dollar value of imports of the involved merchandise
received during the first 6 months of 1963 was approximately

$75,000.

TREASURY DEPARTMENT

November 27, 1963

FOR IMMEDIATE REIEASE

TREASURY DECISION ON FIG PASTE
UNDER THE ANTIDUMPING ACT

The Treasury Department bas determined that fig paste
from Spain 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 published

in the Federal Register.
The dollar value of imports of the involved merchandise
received during the first 6 months of 1963 was approximately

$75,000.

1",.

10. . . . 27,

'01 ULlASF. •• ft. Mii:".SPAPIiS.

!bv!c!al.

Io.-__r 28,

itESUL1S

1",

TDASUllltS OU-P...A& Btu.. o,natlll

tl,ooo,oao,...

1•• t eftld.ag tbat tile teDder. tor
or "_reabout.., ot )6)-dA;y Tna.U7 bill. t.o be dated De_ber ), 196), aDd t.o - ' Io....ber 30, l~la, whioh veN oft.nd on Io....ber 21, wre opened at tbe ~ ......
Tille Tre.sU17

Baak.

DepartMDt IUlDDUD•••

on ."_ber 27.

Tbe

_tau.

ot thi. ls.ue are aa tollo"••

ToW applied tor - 12,790,001,000
total •••p\ed

ilS6,l$6,ooo ea\eJ"ed 01& •
IIOD.,..,.t1t1.... -'_18 ADd 8 • .,W 1a
f1l11 at
. f t...... prloe . . . . below)

- $l,OOO,2S2,OOO (1Dcludea

,be

..... ot •••pt.ed oa.pttt.1tl.... b1daa (hcep\1a& \w tenden totaU... "3,600,000)

cSs...".t

Hiab

- 96.400

Lew

- 96.)71

•

•••

•

.........

- 96.)80

•

("3:' of

Equl...aleat rate of

approx. ).$10' per - -

3.sm"

3.SfOS

•
•

tba "lIDt bld tor at tbe 1. . prl. . . . . ao_ptM)

}t"ecleral ite. ." .

D1atrio\
BoatoD
lev Ion
PbUadelpbla

Ol.....laud
iUot.oad

To\al

Aep1ied tor
• lU,lOQ,OOO

total

Ao!!p)!cl

•

12,88),000
169.uS,000
2S,02l,OOO

269, m,ooo
70,136,000

110,3)7,000

8O,)SO,OOO

Atlanta
Chloaco

St. LouiMlaaeapoll.

1S,ItOO,OOO
)4S,S2k,aoo

l,)2k,8lh,OOO
60,98),000
2S1,76S,OOO
Wa,8)6,OOO

la,6SO,ooo

)S,STk,OOO

l)O,S6S,OOO

44,28$,000

Ia.... 01\7

:.ua.

39,60),000
16S,SQo,ooo

San li"ftDC1.oo

21O,20S.000

78,1OS.000
)6,)SS,OOO

$2,790,001,000-

Il,OOO,2S2.000

TOTAL

21&,403,000

.,.t

t... ......DO''',

}/ C. • ooltpOD 1 . . . of the _ _ 1eac\h and tor the __ •
lnnnecl, the return OIl
t.be.. bill• .,-ald provide. 71eld ot ).7SS. Iaten8\ ratea OIl bUle Aft ,\lOtad 1.a
tara of baDic dl.eouat 111th tbe NtlJl"D "la'\" to t.be
of t.be ld.ll. pqUlt
at Mtur1tr ratber tbaD the _mat. lD..etecl aacI tbtu 1.lII\h in • •-.1. ..-bel' ot ..,.
rel.at..d too a )6o-dal leAr. In ooat.n8t, 11_1de on oenUl_We,
ead boDd8 III
COIlputed ln t.81'II8 ot 1a\erut OIl tbe aoaat lDftReti, aDd relate tbe maber ot da1I
r_l oi ng in aD 1Dte1"M'\ pa.JMDf. period. to the
D-'-r 01 cla,. 1a t.be perlod,
v1t.h .-t.aumaal coapo"lldlDg 11 .ore than one coupon period 18 lnol:nd.

an_l

TREASURY DEPARTMENT

FOR RELEASE A. M. NE"wSPAPERS,
Thursday, November 28, 1963.

November 27, 1963

RESULTS OF TREASURY'S ONE-YEAR BILL OFFERING
The Treasury Department announced last evening that the tenders for $1,000,000,000,
or thereabouts, of 363-day Treasury bills to be dated December 3, 1963, and to mature
November 30, 1964, which were offered on November 21, were opened at the Federal Reserve
Banks on November 27.
The details of this issue are as follows:
Total applied for - $2,790,001,000
Total accepted
- $1,000,252,000 (includes $156,356,000 entered on a
noncompetitive basis and accepted in
full at the aver~ge price shown below)
Range of accepted competitive bids: (Excepting two tenders totaling $3,600,000)
High
Low
Average

- 96.400 Equivalent rate of discount approx. 3.570% per annum
- 96.371
n
II
n
n
II
3.599% II
n
- 96.380
"
II
II
II
"
3.590% II
II
(43;-t of the amount bid for at the low price was accepted)

Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL

11 On a

Total
Applied for
$ 141,300,000
1,324,814,000
60,983,000
251,765,000
44,856,000
80,350,000
269,922,000
70,138,000
130,565,000
39,603,000
165,500,000
210,205,000
$2 , 790,001,000

Total
Accepted
$ 75,400,000
345,524,000
12,883,000
169,115,000
25,021,000
42,650,000
110,337,000
35,574,000
44,285,000
24,403,000
78,705,000
36,355,000
$1,000,252,000

coupon issue of the same length and for the same amount invested, the return on
these bills would provide a yield of 3.75%. 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 amount invested and their length in actual number of days
related to a 36o-day year. In contrast, yields on certificates, notes, and bonds are
computed in tems of interest on the amount invested, and relate the number of days
remaining in an interest payment period to the actual number of days in the period,
with semiannual compounding i f more than one coupon period is involved.

D-I060

Full text of Press Releases of the United States Department of the Treasury : Volume 139

FRASER