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L'BRARY
pn()M 5030
JUN 1 5 1972
TREASURY DEPARTMENT
LIBRARY
ppnM
~o~o
JUN 1 5 1972
TREASURY DEPARTMENT
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
UNITED STATES FOREIGN·GOLD TRANSACTIONS
FIRST QUARTER 1968
The Treasury announced today that net sales of monetary
gold by the United States to f.oreign countries during the
first quarter of 1968 amounted to approximately $1,309 million.
The largest sales were to the United Kingdom (See Table
1 attached) of approximately $900 million; Italy,$184 million,
and Lebanon,$74 million.
Kingdom include
The transactions with the United
settlements for gold pool operations.
The net drain on United States monetary gold stocks ln
the first quarter due to industrial and artistic demand (net
of inflow from new production and scrap) came to $53 million.
This brought the total net outflow of gold from the gold
stock of the United States in the first quarter of 1968 to
$1,362 million.
Table 2 , attached, shows quarterly sales of gold by the
United States during the first quarter of 1968 to other countries
to enable them to pay the gold portion of their quota increases
ln the International Monetary Fund.
Deposits of like amounts
of gold were made by the IMP with the United States to mitigate
the effects upon the United States gold stock of the quota
lncreases.
F-1267
UNITED STATES NET 1-1OiETARY GOLD TRANSACTIONS WITH
FOREIGN COUlnRIES AND INTEHNATIOIJAL INSTITUTIONS
January 1 - March :31, 1968
(In millions of dollal's at $35 per fine tro;y ounce)
NeGative figures represent net sales by the
United States: positJve fiGUres, net purchases
Western Eurone
Bclgiun
-25.0
Ireland
-12.4
Italy
-184.0
Netherlands
-48.5
Switzerland
-25.0
United Kingdom
-899.6
Yugoslavia
-0.9
Total
-1,195.5
Canada
+50.0
Latin~America
Bolivia
Chile
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Total
-0.1
-1.1
-0.1
-0.1
-20.0
*
-0.1
-0.1
*
-21.7
Aq;L~
Afghanistan
Ceylon
Indonesia
Iraq
Jordan
Korea
Lebanon
Malaysia
Pakistan
Philippines
-2.3
-0.1
-0.3
-14.1
-6.0
-6.5
-73.5
~:~
-0.1
-30.0
Sin~apore
-Q.l
Syr~a
Total
Africa
Burundi
Liberia
Rwanda
Somalia
Sudan
Tunisia
Total
-141.6
*
-0.1
*
-0.1
-0.2
-0.2
-0.6
Total
-1 , 309.3
Domestic Tra~sactions
-52.5
Total Gold Outflow
-1,361.8
*Under $50,000.
Figures may not add to totals because of rounding.
TABLE 1
TABLE 2
UNITED STATES MONETARY GOLD TRANSACTIONS
WITH FOREIGN COUNTRIES
MITIGATED THROUGH SPECIAL DEPOSITS BY THE IMF
(Millions of U.S.$)
January 1 - March :31, 1968
Latin America
\
Chile
Dorni:lican Repo
Total
Asia
Jordan
Malaysia
Total
-1.4
Africa
Ivory Coast
-0.2
Total
IMF Deposit
-0.2
-1 • .3
-8.2
+8.2
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
$2,700,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing
June 13, 1968,
in the amount of
$2,600,476,000, as follows:
91-day bills (to matur1ty date) to be 1ssued
in the amount of $1,600,000,000, or thereabouts,
additional amount of bills dated March 14, 1968,
mature September 12,1968priginally issued in the
$1,000,290,000, the add1t10nal and original bills
interchangeable.
June 13, 1968,
representing an
and to
amount of
to be freely
182-day bills, for $1,]00,000,000, or thereabouts, to be dated
June 13, 1968,
and to mature Dece~ber 12, 19680
The bills of both series will be Issued on a discount basi3 under
competitive and r.~ncompetitive bidding RS 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 closln~ hour, one-th1rty p.m., Eastern Daylight Saving
time, Monday, JUDe 10, 19680
~enders 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 ~ffered 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 p.~velopes which will be supplied by Federal
Reserve Banks or Branchen on application therefor.
Banking institutions generally may subm1t tenders for account of
customers provided the names of the customers are set forth 1n such
tenders. Others than bank1ng institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without depos1t ~rom incorporated banks and trust companies and from
respons1ble and recognized dealers in investment securities. Tenders
from others muot be accompanied by paym~nt of 2 percent of the face
amount of Trea3urJ bills applied for, unless the tenders are
accompan1ed by an express guaranty of payment by an incorporated bank
or trust company.
F-1268
- 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
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on June 13, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing June 13, 19680
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 Departme~t 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 froll
any Federal Reserve Bank or Branch.
000
l
June 6, 1968
FOR IMMEDIATE RELEASE
STATEMENT BY SECRETARY OF THE TREASURY HENRY H. FOWLER
This is a dark hour for Mrs. Kennedy and her
children, and for the nation Senator Robert
Kennedy served.
I have one special hope, and that is that
all Americans will avoid making Mrs. Kennedy's
burden heavier than it already is -- that they
will scrupulously respect her right, and that of
her family, to the privacy of their sorrow.
000
UNrllU
Sf.'~"~S SAViNijS iU)NU~ ISSUED AUD (.,UEfi{I';u TIJf.OUGIl
May 31,
(Dolt or amounts in mlilion. - rauRded .nd wi" not necessarily add to toto")
OESCRIPTION
IMTUREO
SNit's A-1935 thru 0-1941
Serif's F' Illld G-1941 thru 1952
Series J Hnd K-19S2 thru 1955
AMOUNT ISluro.!!
AMOUNT
"&:O££M£O
!J
AMOUNT
OUTSTANDING
1968
Y
% OuTSTANDING
OF AMOUNT ISSUED
.14
4,996
29,474
3,125
7
46
31
1,644
7,274
11,737
13,593
10,4'93
h,565
4,165
4,198
4,064
3,500
3,029
3,145
3,496
3,481
3,555
3,377
3,093
2,845
2,600
2,h7 6
2,352
2,215
2,276
12.18
11.99
11.77
12.)6
13.89
17.27
20.35
22.28
23.66
24.81
24.82
25.47
27.45
29.09
30.47
31.56
33 .. 37
37.00
38.h9
41.51
44.83
46.07
50.22
50.55
2,080
1,976
1,Soh
58
713
228
991
1,566
1,917
1,693
953
1,064
1,203
1,260
1,155
1,000
1,075
1,323
1,428
1,558
1,S57
1,549
1,671
1,627
1,757
1,911
1,892
2,296
2,253
2,281
2,711
3,131
772
-72
155,456
111,706
43,750
28.14
5,485
6,645
3,068
1,275
2,417
5,369
44.07
80.80
12,129
4,343
7,786
64.19
167,585
116,049
51,536
30.75
597
440
157
37,680
168,182
37,595
116,489
154,084
51,693
51,777
5,(0)
29,,21
3,1,6
.16
.98
UNMATURED
Series E!J:
1,872
8,26,
13,30)
15,510
12,166
1941
1942
UN3
1944
1945
1946
1947
Hl48
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
"S18
5,22a
5,400
5,32$
4,655
4,029
4,220
4,819
4,909
5,113
4,934
4,642
4,516
4,227
4,233
h,26)
4,107
h,572
h,457
4,361
4,686
4,635
831
641
1960
1961
1962
1963
1964
1965
1966
1967
19G8
Unclassified
Total Series E
Series H (1952 thru May, 1959) 2/
H (June, 1959 thru 1968)
Total Series H
Total Series E and H
Series J and K
(1956
thru 1957)
{TotOI matured
All Series
Total unmatured
Grand Total
205,861
2,205
52.30
57.85
67.55
92.90
-
~
84
nclurlt's accrucd discount.
;urrcnt rerirmption value.
It option of owner bonds ,"?Y be held and will earn interest for additional periods after original maturity dales.
"eludes matured bonds whIch have not been presented for redemption.
For", PD 3812 - TREASURY DEPARTMENT - Bureau of the Public Dobt
26.30
.22
30.74
25.15
TREASURY DEPARTMENT'
FOR RELEASE 6: 30 P.M.,
Monday, June 10, 1968.
RESULTS OF TREASURY 1 S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
bills, one series to be an additional issue of the bills dated March 14, 1968, and the
other series to be dated June 13, 1968, which were offered on June 5, 1968, were
opened at the Federal Reserve Banks today. Tenders were invited for $1,600,000,000,
or thereabouts, of 91-day bills and for $1,100,000,000, or thereabouts, of 182-day
bills. The details of the two series are as follows:
RANGE OF ACCEPrED
COMPETITIVE BIDS:
High
Low
Average
91-day Treasury bills
maturing September 12, 1968
Approx. Equiv.
Price
Annual Rate
98.569 ~
5.661%
98.552
5.728%
98.556
5.713%
182-day Treasury bills
maturing December 12, 1968
Approx. Equiv.
Price
Annual Rate
97.088
5.760%
97.067
5.802%
97.073
5.790%
Y
~
Excepting 5 tenders totaling $500,000
69% of the amount of 91-day bills bid for at the low price was accepted
47% of the amount of 182-day bills bid for at the low price was accepted
TOTAL TENDERS APPLlED FOR AND ACCEPrED BY FEDERAL RESERVE DISTRICTS:
£I
~
II
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
ApElied For
20,826,000
<$
1,774,081,000
28,070,000
48,321,000
15,689,000
43,336,000
372,211,000
43,127,000
21,642}000
43,832,000
23,598,000
193,390,000
AcceEted
10,826,000
<$
1,095,211,000
21,070,000
40,321,000
14,689,000
36,336,000
191,231,000
33,424,000
19,565,000
37,832,000
15,598,000
84,269,000
TOTAffi
$2,628,123,000
$1,600,372,000
EI
AEElied For
3,143,000
$
1,326,213,000
19,637,000
31,865,000
6,038,000
29,821,000
328,059,000
23,699,000
16,064,000
20,183,000
17,828,000
218,513,000
AcceEted
2,143,000
$
819,563,000
11,637,000
18,815,000
4,038,000
18,994,000
117,559,000
13,999,000
14,064,000
13,183,000
9,828,000
56,313,000
$2,041,063,000
$1,100,136,000 ~
Includes $ 277,907,000 noncompetitive tenders accepted at the average price of 98.556
Includes $ 130,718,000 noncompetitive tenders accepted at the average price of 97.073
These rates are on a bank discount basis. The equivalent coupon issue yields are
5.88% for the 91-day bills, and 6.05 %for the 182-day bills.
F-1269
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
UNITED STATES AND ICELAND TO
DISCUSS TAX TREATY
The United States and Iceland will begin discussions in
mid-July on a proposed income tax treaty between the two
countries.
Representatives of the two governments are
expected to meet for these talks in Washington.
The proposed treaty is intended to avoid double taxation
and otherwise assist individuals and companies in one country
engaged in trade or investment in the other.
It will be
concerned with the tax treatment of trading and other business
enterprises, investment income and income from services.
There is presently no tax treaty between the two
countries.
In general, it is expected that the proposed tax treaty
will be along the lines of those with other Western European
countries, taking into account the "model" tax treaty
developed by the Organization for Economic Cooperation and
Development.
Persons wishing to comment or submit information concerning
the proposed treaty are requested to do so before July 5, 1968.
Their comments or information should be sent to Assistant
Secretary of the Treasury Stanley S. Surrey, Tneasury Department,
Washington, D. C. 20220
F-l270
•
THE SECRETARY OF THE TREASURY
.:.:...... ::
WASHINGTON
0-:·
JON 61968
Dear Mr. Chairman:
The public hearings on trade matters which have been
launched by the Committee on Ways and Means will have a
most significant bearing on the course of the United. States
policy, not only in the trade area but in the field of international finance as well.
We must not swerve from the path of progressive
liberalization in international trade that this country
commenced in the 1930's and has followed for over two
decades since World War II. To change our course now could
mean the start of a movement back to restrictionism in international financial policy. The international monetary
system would soon feel the effects of such a return. Continued liberalization of trade is the only correct course
for sound economic growth in an interdependent world. It
is essential if, in the United States, we are to build a
healthier trade surplus: the surplus we must have to
achieve a sustainable balance of payments equilibrium.
Approval of President Johnson's proposals extending
the trade agreement authority under the Trade Expansion Act
of 1968 (H.R. 17551) is important not only to provide the
necessary legislative authority in this area but also as
an expression of Congressional support for the post-war
trade policy from which the whole world has prospered.
This policy has fostered a growth in free world exports
from less than $50 billion in 1946 to more than $190 billion in 1967. It was accompanied by the highest growth
rates the industrial world ever experienced; it created
new hope for lesser developed areas.
On the other hand, enactment of proposals for the
unilateral imposition of import quotas would not only be
a severe setback to the kind of trade policy that strengthens the United States and the free world economy, but
quotas would seriously aggravate our balance of payments
- 2 program. Let me indicate briefly why, in my judgment,
resort to restrictive trade measures such as unilaterally
imposed quotas would be a setback to the effort to improve
our position on the 'international trade account.
A country with exports of about $32 billion, which
accounts for at least one of every six dollars shipped anywhere in the world, is uniquely vulnerable to the adverse
effects of a quota war. And a quota war is precisely what
wide use of import quotas would create. To instigate such
a war would be folly, since the United States would be
bound to.end up as a loser. The use of import quotas may,
at timesias allowed under GATT, make temporary sense for
some trade deficit countries; it has no place in the policy
of a major trading country such as ours. What is more, if
sustainable equilibriwn in our international accounts is to
be achieved, in great part through an improved trade account,
a restrictive trading policy would destroy the climate which
is a precondition to such growth.
More detailed views of mine on the adverse effects on
the United States stemming from the imposition of import
quotas are contained in the attached letter (Annex 1) which
I sent to Senator Russell B. Long, Chairman of the Senate
Finance Committee, on October 18, 1967.
A substantial trade surplus is the keystone of a sound
international financial position for the United States and
the dollar. Our substantial trade surplus during the postwar period has been the major sustaining element in our
balance of payments picture.
It has provided the financial
means for carrying out our international responsibilities
the defense of freedom, the promotion of world trade, and
the encouragement of economic growth in the developing
:ountries supported by a convertible dollar of constant
gold value.
During the last six months there was a sharp decline
in our trade surplus -- from an annual rate of $4.2 billion
in the first three quarters of last year, to an annual rate
of $400 million in the first quarter of this year. The rise
in imports that caused this decline was due in p~rt to
special circumstances.
It was due mainly, however, to the
absence of adequate fiscal restraint in the form of a tax
increase and expenditure control and the conjunction of a
highly stimulative deficit in our federal budget with a
- 3 period of rapidly expanding economic activity, which has
characterized the last ten months. Had the pace of the
United States economy permitted us to maintain a trade surplus of the proportions that characterized every quarter in
the last three years, up until the fourth quarter of last
year, our 1968 first quarter balance of payments would have
been in surplus. This situation is one of the most important reasons for prompt approval of the Conference
Report now pending before both Houses of the Congress.
These fi~st quarter balance of trade results point
to the importance of an extensive follow-through on those
features of the President's balance of payments action
program which affect, directly or indirectly, the restoration of a healthy trade surplus. In addition to the taxexpenditure bill which has been so high on this Committee's
agenda, these actions include:
restoration of wage-price stability,
avoidance of work stoppages or threat of
stoppages that encourage imports and reduce
exports,
a new consciousness and energy on the part
of management and labor to produce and sell
for export,
enactment of the new Export Expansion Credit
proposals pending before the Congress, and
a fresh look at certain features of the GATT,
with the object of removing disadvantages to
our trade.
The positive action program designed to bring our
balance of payments close to equilibrium is described in
some detail in the Treasury Department's recent publication, "Maintaining the Strength of the United States
Dollar in a Strong Free World Economy". I have referred
to this report frequently before your Committee. The
subject matter of Chapter IV, "An Intensified Effort to
Achieve and Maintain Healthy U.s. Trade Surplus", is
particularly pertinent to the hearings now being held by
your Committee. Let me touch on some of these points.
- 4 Sound fiscal and monetary management of the U. S.
economy, designed to keep it competitive and stable, is
crucially important to the U. S. trade balance. Excessive
increases inincome-- especially when we have full employment -- will be quickly translated into higher prices, and
into capacity bottlenecks, with a resulting surge in
imports and slowdown in exports. The prompt enactment of
the President's tax increase program -- coupled with the
expenditure reduction program -- is the single most important and indispensable step this nation can take now to
improve our balance of payments and protect the dollar and
the internatio,nal monetary system. It also lays the
groundwo~k for future improvement.
Business and labor share an important responsibility
to improve our competitive position and build on our trade
surplus. As we pointed out in the Treasury report, two important areas here are:
keeping wage demands and price decisions
consistent with national productivity
performance; and
avoiding work stoppages, or the threat of
work stoppages, in industries vulnerable
to import or export competititon at a time
when our balance of payments position is
under pressure.
For the long term, we need to develop a systematic
program to expand our exports. The energy and imagination
which labor and management can bring to this task are badly
needed.
In the field of export financing and export promotion we have made a start. The Department of Commerce
and the Export-Import Bank have certain legislative requests before the Congress. HR 16162 -- the Export Expansion Facility Bill -- would help develop new markets for
U. S. goods and services. There is also a five-year
Commerce Department program for increasing its export
promotion activities. Appropriations have been requested
for this. In addition, the Export-Import Bank has liberalized its rediscount facility and the Export Expansion
Facility will permit increased flexibility in the exporter
credit program and in the guarantee and insurance programs
of the Export-Import Bank and the Foreign Credit Insurance
Association.
- 5 The success of our own export expansion program
depends to a great degree not only on a competitively
strong U. S. economy, but on continuing efforts to keep
world markets open. Directly related to these efforts is
the maintenance of a liberal trading policy by the United
States. In harmony with our efforts to expand world trade
in general and U. S. exports in particular, the Contracting
Parties to the General Agreement on Tariffs and Trade
(GATT) have launched a work program which recognizes the
importance of moving forward in liberalizing international
trading arrangements.
A GATT group is now completing an inventory of non~
tariff barriers to trade. The United States has long felt
that these impediments to our exports pose a continued
threat to the growth of world trade. We must seek not
only to reduce and remove these non-tariff barriers but
to remain alert to oppose the establishment of new ones.
I should mention one area of particular concern. The
rules of the GATT permit the rebate of certain indirect
taxes when goods are exported, as well as the imposition
of these taxes on imported goods. But comparable action is
not permitted with respect to direct taxes. The United
States does not question a country's chbice of a tax
system but we are concerned that the present GATT rules
create an unwarranted advantage to those countries which,
unlike the United States, utilize extensive indirect
taxation. These rules reflect the underlying assumption
that indirect taxes are wholly passed on to consumers,
while direct taxes are wholly absorbed by producers.
When the GATT rules were drawn up
more than two
decades ago -- the question of border tax adjustments did
not appear to be a matter of major concern. Levels of Indirect taxation were much lower; the overly simple and
sweeping assumptions about tax shifting were generally
considered acceptable.
Times have changed. Many economists and businessmen
now question the validity of these underlying assumptions o
There has been a general growth in the use of indirect
taxes, with a series of upward changes in border tax
adjustments. Further, a variety of new changes in indirect
- 6 tax systems are contemplated by various European countries.
Accordingly, very careful attention must now be given to
rules and practices which are prejudicial to our trading
interests.
In this context, the United States Government has been
conSUlting in the OECD on the question of border tax adjustments and has recently concluded a discussion on the trade
effects of the German shift to a "value added" system of
taxation. In addition, the United States requested the
Contracting Parties to examine the provisions of the GATT
which deal with this complex issue of border tax adjustments. A GATT Working Party is now actively involved in
an exploration of this complex issue. We believe there is
a growing awareness abroad of our serious concern that the
present GATT rules work to the disadvantage of our trade.
However, this is a contentious issue and obtaining agreement
on changes in the rules will be difficult.
Before concluding, I should mention two important laws
affecting our imports which the Treasury Department is
responsible for administering. The first of these is the
antidumping law, the second is the countervailing duty law.
nDurnping" occurs typically when a foreign firm seals
its products at a lower price in the United States than in
the home market. If domestic producers are injured as a
result, special antidumping duties, measured by the price
differential, are assessed in addition to normal customs
duties, upon the imported goods involved. The Treasury
Department is responsible, under the antidumping law, for
determining whether there is a price differential. Since
1954, the Tariff Commission has been responsible for
determining whether there is injury to domestic producers.
Attached as Annex 2 is a statistical record of the
dumping cases processed from 1955 through 1967. During
this period, there were 12 findings of dumping, resulting
in the assessing of dumping duties.
In addition, there
were 89 cases which resulted in price revision or a
termination of sales. This latter category is significant.
In these cases, when it appeared from Treasury's investigation that sales might be taking place at less than fair
value, the exporter either terminated the sales completely
- 7 -
or revised his prices. Ordinarily, this would mean there
was no object in sending the case to the Tariff Commission for determination as to injury; the dumping had been
stopped and the objectives of the antidumping law had
been achieved. Acco~dingly, such cases have ordinarily
been closed out forthwith to the satisfaction of the U. s.
industry complainants. However, despite the price revision,
a number of cases have been sent to the Tariff Commission
for an injury determination.
The U. S. countervailing duty law requires the
Secretary of the Treasury to impose countervailing duties
in cases where'dutiable goods imported into the Unit~d
. States benefit from a subsidy. The amount of the countervailing duty is equivalent to the amount of the subsidy.
The countervailing duty is in addition to the normal
customs duties assessed upon importation.
At the present time there are 13 countervailing duty
orders outstanding. Three of these were issued in the
past month. Annex 2 also contains a statistical statement
of countervailing duty cases processed from 1934 to 1968,
together with a listing of the orders currently outstanding.
Further, in terms of my Department's responsibility
for the administration of customs laws, we fully support
the provision in the Bill for elimination of the America
Selling Price system. Over the years ASP has proven to be
administratively burdensome for the Bureau of Customs.
Its removal would facilitate the administration of the
customs laws.
Finally, I must emphasize the fact that our leadership in the movement toward freer world trade and payments
has created new opportunities for us. Although there have
been problems at times, our strength has been our ability
to press forward and out of the wealth of an expanding
u. s. economy, bring forth the greatest strides in world
trade and development in recorded history. The successful
c~nclusion of the Kennedy Round negotiations is a good
- 8 example of how a dynamic and forward-looking policy brings
benefits to all the world -- to us and our trading partners
alike. Continued cqoperation can only mean progress in
dealing with our problems. A retreat to protectionism by
the United states would be certain to bring forth the same
response abroad, and the abrupt termination of the benefits
we all have enjoyed. I believe there is sufficient realization on the part of our trading partners of the problems
created by some of their policies and practices to warrant
the conclusion that they are prepared to work with us on
these problems to arrive at mutually acceptable solutions.
Fundamental -to""this a.ttitude is their desire to be confident
that the ·U.S. Government will continue and further its efforts
to create an international environment conducive to the expansion of world trade.
I want to be equally emphatic in underscoring our
intent to act forcefully to see to it that the obstacles
which now work against our trade are eliminated.
President Johnson, in his message to the Congress on the
Trade Expansion Act of 1968, underlined that "other
nations must join with us to put an end to non-tariff
barriers".
Trade
1S
a two-way street.
Sincerely yours,
H~H.~
Henry H. Fowler
The Honorable
Wilbur D. Mills
Chairman, HOuse Ways and
Means Committee
House of Representatives
Washington, D. C. 20515
Attachments
Annex 1 - Letter to Senator
Russell B. Long, dated 10/18/67
Annex 2~ Record of Antidumping
and Countervailing Duty Cases
COpy
ANl'-mX 1
THE SECHETARY OF THE 'TREASURY
WASHINGTON
Oct III 1967
Dear Nr. Chairm"u:
I am \o7riti.ng to you to e):press my judgment tlw.t the
recently proposed import quot~ bills J if enacted, \'iould
worsen our balnnce-of-payments problem, already 8ggravnted
by the Vietnam conflict.
During th~ post-war period, our subEtantinl trodc
surplus h~s been the ruajor susi~~ining element in our
bal.nnce-of""paYiil';ntB picture. Thin trade surplus hnD
provided the financial Ji1~ClnS for carrying on n~cc5r.nry
military, economic, and di.plcmatic Dctivities th~:,ou8hout
tha ll]orld "lith 0 convertible dollar of constant gold
value. E9CClUGC of this trads sUi."plus, 'H~ have not hi.1Q
to resort to the restrictions on p~rsonal freedom of
travel ebroad or on direct inveotr!l~nt abroad which so
many countries have us~d. I shudder to conteroplcte uhnt
\-,ould have hDppcned to our balClllce-of"payments position
and our gold reserves in the absence of this strong plus
factor in our ptlyn:ents situation.
A country with a large trade surplus is uniqt1~ly
vulnerable to the ~dverse effects of a quota war and
that is l'lhat wide use of import quotas would create.
To incite such a war would be a fool's gama since the
u. s. l-7ould be bound to end up as a loser. The broad
use of import quotas may, at times, make temporary sense
for inward-looking trade deficit countries; but it has
no place in the policy of a major trade surplus country
such as ours.
Import quotas would probably reverse the continued
recovery of our trad~ balance upon which the solution to
our balance-of-pnyments problem so heavily depends.
- 2 ..
They \vould do this by causing a loss of U. S. exports that
would almost certainly exceed any reduction in U. S. imports
that they would produce.
There are three reasons for anticipating 8 sub~tdntidl
adverse effect on our e;:ports as a result of '·::i.d~spre2.d
impor.:ition of import quotas. Thes0 may be referred to as
the "feedback" effect, the "rc tt).li.:Jtion" effect and the
"competitive loss" effect. Let me describe cnch of these,
in tt1rn.
ir:1port, \'7C put dollars in th0
hands of foreign countries \7hich are likely to use the
bulk of them dir€::ctly or indirectly eith0T to purchase
u. S. goode, U. s. se:cvlces or U. s. long-term investm2nts.
!££.c1baSk Ef.fec!.
"]hen
"7e
Experience suggests that for each $1 billion reduction
in our merchandise ir::ports, \vC \'7i11 lose some1'7hat over half
a billion dollars of exports. Other items in our balanceof-payments accounts \7i1l also change; but I am speaking
of the observable statistical relationship bebleen our
merchandise imports and c::port!i ovel- a period of ye8Ts.
If foreign2rs enrn less from us because of quota
barriers which WQ erect a~ainst th2ir goods, we can surely
anticipate that their purchases of our goods will decline
£Y£!l in the abs£!l£e of r£t21~rJ:ory action, CJgainst our
goods. But there will certainly be such action--and this
leads me to the second adverse effect that the proposed
quotas \07ou1d have on our exports.
£eta1iatiop Effect. President Kennedy in his Balance of
Payments Hessage to the House of Representatives on
February 6, 1961, warned:
"A return to protectionism is not a solution.
Such a course would provoke retaliation; and the
balance of trade, ,·,hieh is nOi'l substantially in our
favor, could be turned against us \l1ith disastrous
effects to the dollar."
- 3 President Johnson in his Balance of Payments Report
to the Congress on February 10, 1965, emphasized our
obligation to avoid "beggar they neighbor" restrictions
on trade.
start dm-m the quota path, there t'li11 be
yetaliatory action abroad and our trade surplus position
will suffer.
If
l'7e
The six Co~~on Market countries have already given
a veiled warning that they would retaliate. I do not
think they are bluffing. The Commission ~1hich is the
executive arm of tbe European Coa~unity is reported to
have already undertaken a study of possible retaliatory
action. A Coin:nission recom...rnendation along this line to
the COlTh"Uunity' s Council of l-iinisters would cCl.-tainly
receive very careful consideration.
Other countries '-1ould follm'7 suit. I understand the
Australian Government has estimated that the proposed
quotas '-7ould apply to 60% of Australia' s exports to us.
I hardly think that country, or other countries in
comparable situations, would remain passive in th~ face
of U. S. quota limitations affecting so 1erge a portion
of eA~orts to us.
Let me add that foreign countries have a variety of
devices "lith l'7hich they coul d retaliate againth the proposed
U. S. quotas. These include not only counterquotas but
also administrative devices such as licensing requirements
which are not so obvious but "lhich could be quite effective
in reducing their imports from the U. S. There is no doubt
in my mind that these instruments would be brought into
play lvithin a short time after action by the U. S. along
the lines of the proposed legislation.
In addition, then. to the ~dverse "feedback" effect
on our exports resulting from a quota-induced reduction
- 4 in our imports, there "7ould be a decline in out' ezports
due to torc1P;!l rctQ.li,2tj.on. Loss of U. S. exports due
to th~S2 tv]O 1'O:1son8 alone might \K~ 11 exceed any recipction
in our imports resulting from the propos-3d quotas. But
the obov~ losses would be supplem2nted due to a third
adverse effect resulting from imposition of import quotas .
..(:~-petit.ive I~s Egfect. Imposition of the propo!'>ed quotas,
by curtailing co;npctition from foreigner's, ~'70uld cncourCl8c
higher domestic prices for va:-ious ma.tcrials and cO:7lponents
which ~ntcr cur export products. As a re$ult, our exportG
would tend to be less competitive in foreign markets, and
lJe could c~;pzct foreigners to buy less of them for this
reason.
In August I testified before th~ House Hays lmd l-1ecr1.lS
Committee on the President's fiscal program. In that
testimony I emphasized the importance of keeping our
exports compc::titive over the longer run and pointed out
that the requested trlx increace lloulc1 contribute to this
end. Maintaining an open cconomy--that is, one free fronl
widespread quotas and other barriers to trade--also contributes to this end. We cannot hope to produce in a
highly protected dOIT'.estic market and sell successfully
in highly competitiv~ international markets.
I have ~escribed above .thre~ adverse effects that the
proposed import quotas "lould have on U. s. exports. I
cannot predict exactly what their ~rnbined effect ,·]ould
mean in terms of dollar loss of U. S. exports for each
dollar reduction in U. S. imports brought about by the
proposed quotas. But my judg~~nt is that the ratio would
be considerably greater than one for one--that is, more
than one dollar's loss of exports for every dollnr reduction
of i~ports. In surumary, the proposed quotas would hurt our
trade balance and, therefore, our balance of paYlj!~nts.
The approach under our balance-of-payments program
has been in exactly the opposite direction--namely, to
- 5 achieve an expansion of exports that "7ould outstrip the
rise in our imports. In short, ue 2re striving for a
balance-of-payments solution in the context of a healthy,
expanding international econowy such as has b~en developing
in the las~ decade or bqo. The proposed le3islation,
by contrast, would foster a retreat to protected markets
which could easily become cumulative. Protectionism is
like inflation. There is never enough of it for the firm
whose costs are seriously out of line.
Any adverse effects of increased imports on particular
firms or individuals are not remedied from the national
point of view by transferring the disruption to firms and
workers engaged in exporting. Adverse effects, in nny
event, arc likely to be temporary in a period of healthy
domestic grOvth 2nd near capacity utilization of domestic
resources. We are not facing a period of mass unemplo}~ent
and Im1 rates of plant capacity utilization such as featured
the 1930's. The Administration's policy has been directed
more and more firmly to"Hards the maintenance of a full
employment, non-inflationary economy in "'hich international
trade in both directions plays an important role.
Enactment of th2 proposed bills would bring to an end
an era of progressive liberalization in international
trade--an era l'lhich has l'7itnessecl the highest grm'lth rate
that the industrialized area of the ,,,orld has ever e~perienccd.
The U. S. has played a leading role in this lib~ralization
process. In addition to completing successfully the Kennedy
Round of trade negotiations, the U. S. and other Free \.]orld
countries have recently agreed on a facility for supplementing
existing international reserve assets, as needed, in order
that a shortage of such reserves will not impede the continued
gr~wth of world trade.
Our best interests at home and abroad would suffer
1f the U. S. were suddenly to forsake its role in the
- 6 expanding Free World economy for the illusory benefits
of an 1.mport quota system.
Sincerely yours,
Henry H. FO:-J1er
The Honorable
Russell B. Long
Chairman
Senate Finance Committee
Washington, D. C. 20510
ANNEX 2
RECO;lD_ OF ANTIDUNi?n~G AND COUN'i'EI~VA!Ln~G DUTY C6SE~
DUHPING
*
----------C~~SES
Cases processed January 1, 1955
No
•
pr~ce
throu~h D~cember
31, 1967
d"lficrlffi_natlon
• i
"
371
230
Pr.ice revision aT tC1"minntion of snles
89
No injury
40
Findings of dumping
12
COill1TE.IZVA II.. I=F=,G-:::..D. ;:;"UT:.::..::.,.x--:C: .:.p.: .: .S;,.:;.E;.,;:;.S
CaGes processed
t~y
1, 1934 to May 31, 1968
191
countervailing duty order£)
Orders currently in effect (8
30
cou~trics)
13
,Qu1"rent ord.£!"s:
.Country
?yoduct (Dnd year)
Australia
Canada
(sugar content of certain articles 1923; butter - 1928)
(cheese - 1940 and 1953)
Cuba
(cordage - 1954)
Denmark
(butter - 1935)
France
(canned tomato paste - 1968)
Great Britain
(spirits - 1914;
Ireland
(spirits - 1935)
Italy
sug~r
- 1938)
(transmission tcmers - 1967; canned
tomatoes and canned tomato concentra
1968; wire m~sh - 1968)
From Janucry 1, 1934 (at which tUle d2tailed r~cGrds on the Anti
dumping Act were begun to be kept) until December 31, 1967, there
"1ere 496 cases processed. A finding of dt.L"nping "ms mnde in 19 of
these cases. Records of cases prior to 1955 -- when the responsibi
ity for making injury determinations was first und8rtDken by the
Tariff Co~niszion -- are not conlplcte as to the reasons for the
*
detl!fmtnaLlons.
TREASURY
C~PARTMENT
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
$ 2,700,000,000,or thereabouts, for c~sh and in exchange for
Treasury bills maturing June 20, 1968,
in the amount of
$ 2,606,310,000, as follows:
9~day
bills (to maturity date) to be issued
in the amount of $1,600,000,000, or· thereabouts,
additional amount of bills dated March 21, 1968,
mature September 19,1968,originally issued in the
$ 1,000,051,000,the additional and original bills
interchangeable.
June 20, 1968,
representing an
and to
amount of
to be freely
182-day bills, for $1,100,000,000, or thereabouts, to be dated
June 20, 1968,
anQ to mature December 19, 19680
The bills'of bot~ series will be issued on a discount basis unuer
competitive and nonco~etitive bidding as hereinafter provided, and at
maturity their face amount will be payable w1.thout 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, June 17, 19680
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. Tendero
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.
F-1271
- 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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on June 20, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing June·20, 19680
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 fi~
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
June
13, 1968
FOR IMMEDIA'T'E RELEASE
TREASURY MARKET TRANSACTIONS IN MAY
During May 1968, market transactions in
direct and guaranteed securities of the ('overnment
investment accounts resulted in net purchases by
the ~reasury Department of $388 ,966 ,000.00.
000
F-1272
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
REMARKS BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE
THE MUNICIPAL FORUM OF NEW YORK
IN NEW YORK CITY
THURSDAY, JUNE 13, 1968, 1:00 P.M., EDT
TAX TRENDS AND BOND FINANCING
This title -- Tax Trends and Bond Financing
is so
broad that to finish within a reasonable time we will have
to set some limits.
We may also want to consider some
other types of financing before we finish.
Of course the tax trend that has overriding significance for bond financing is the emerging tax increaseexpenditure control bill.
I need not tell this informed
audience how crucial this measure is for our economic and
financial stability at home and abroad.
You have expressed
the same opinion many times over and your words are carrying
weight with the Congress.
I must leave to my associates
in the Treasury, who deal each day with movements in the
financial markets, the task of assessing more closely the
direct impact of this legislation on the bond market and
bond prices.
I do gather that they, as well as you, should
find that predicting the future for the bond world should be
F-1273
- 2 -
immeasurably easier once the task does not also require
predicting whether the tax bill does or doesn't pass.
I would like, therefore, to leave this general tax
development, crucial as it is, and turn to some particular
subjects.
State and Local Financing
Many of you are involved in State and local bond
financing, and there are some interesting current tax trends
regarding that financing.
Of
cou~se
one always hesitates to
enter into a discussion in this field because it has, shall
I say, such a high emotional potential for many people.
It
possesses the sensitivity and doctrinal content that are
always involved in relationships between the Federal Government and local governments.
And yet these very characteris-
tics demand that any problems arising in this field should
be approached with careful thought and analysis.
We are all aware of the importance to State and local
governments of the stability of the municipal bond market.
Given this importance, it is an interesting fact, to say the
least, that it is the Treasury Department in the last few
years which has had to undertake the responsibility of
- 3 protecting that market from instabilities being generated
by State and local governments themselves.
Arbitrage Bonds
This story starts with arbitrage bonds.
city needs a $10 million sewer improvement.
Suppose a
A municipal
officer with a head for figures plans a $100 million 30-year
serial bond issue, at 5
perc~nt.
Ten million of this issue
will be used to build the sewers and $90 million will be
invested in 6 percent
u.
S. Treasury bonds.
The Federal
bonds, and the interest to be earned, will be pledged to
secure the municipal issue.
He calculates that the higher
interest rate available on the Federal bonds will enable
the city to cover the $10 million for the sewers, so that
they will be built without costing the city one cent
the
arbitrage between the two interest rates is buying the
sewers.
Next, this municipal officer decides simply to
issue another $100 million bond issue, invest all of it in
Federal bonds, and use the interest differential to help
defray operating expenses of the city.
And then he wonders,
why stop at $100 million -- why not go on issuing more and
more municipal bonds just as fast as he can buy up Federal
bonds 1
- 4 This may seem fantastic -- but it was very real for
the United States Treasury in 1965 when we started to
receive requests for rulings on precisely these types of
municipal issues -- requests that wanted us to rule that
the interest on these muncipa1 issues was tax exempt.
A
favorable ruling would clearly have created havoc in the
municipal bond market, for the only limit on the amount of
such municipal arbitrage bonds that could be issued would
be the amount of Federal bonds available.
On the printed
paper, these were validly issued local government obligations -- and a superficial reading of the Internal Revenue
Code would warrant a ruling favorable to tax exemption.
But the printed paper disclosed more.
It guaranteed
the holders of the bonds that the proceeds would be kept
invested in Federal securities, so that essentially a person buying the municipal bond was buying an interest in the
Federal bonds.
Now this is certainly a curious and round-
about way for one to buy a Federal bond.
An analysis of
the transaction thus showed that the bond issued by the
local government was simply a conduit to investment in the
Federal obligation.
The Treasury thought that a bond
- 5 serving such a conduit purpose, though issued by a local
government, was not the kind of obligation granted a taxexempt status under the Internal Revenue Code.
Accordingly,
it refused to rule on these requests.
State and municipal finance officers and the investment
banking community breathed a sigh of relief at this action.
While not applauding the Treasury for facing the issue
squarely and taking this position
that might be too much
to ask -- they did not criticize the legal analysis of the
tax law that underlay the decision.
Industrial Development Bonds
But while this threat to the municipal market was being
ended, another was gaining importance -- in the form of the
industrial development bond.
For years some States and
local governments had been issuing bonds and making the proceeds available to private business concerns locating in the
area involved to build industrial plants. The concerns
would then buy or lease the plants from the governmental
unit involved.
The bonds were secured by the rentals or
installment sale payments obtained from these concerns.
The
business concerns were thus able to secure financing at the
- 6 -
lower tax-exempt interest rates in place of the higher rates
that would obtain on their own taxable obligations.
And the
arrangement could be nicely wrapped up and tied with the
ribbon of a favorable Internal Revenue Service ruling -for the Service from the start had been granting these
rulings, and had issued a public ruling in 1954.
All concerned were relatively slow to recognize the
potential -- and the dangers -- in these arrangements.
For
years both the total annual amount issued, the amounts of
the individual issues, and the size of the business concerns
benefited were relatively small.
But then, as interest
rates on corporate bonds and other corporate borrowings
increased, the use of the industrial development bond began
to skyrocket.
Enabling legislation was passed in State after
State, and major industrial concerns began to turn to these
bonds as a routine method of corporate finance.
Issues of
over $50 million and even $100 million became almost casual
affairs on the bond calendars of 1967 and 1968.
The reported
volume of new issues in 1967 was about $1-1/2 billion and
the estimated figure for 1968 was over $2 billion, compared
with $500 million in 1966 and less than $100 million in 1962.
- 7 -
Once the potential for this massive expansion into the
traditional areas of corporate financing was thus exploited,
the dangers began to be understood.
Municipal officials
responsible for financing the traditional functions of
cities found that the competition of these industrial bonds
was forcing the interest rates on the regular municipal bonds
to higher levels.
A special committee of the Investment
Bankers Association concluded that the increase in industrial
development bond financing in 1967 had forced municipal bond
rates to rise by generally one-quarter of a percentage point.
Industrial expansion was proceeding at a lower financing
cost to our major companies, but that lower cost had become
an added burden to every city that wanted to finance its
schools, its police and fire departments, and its water and
sewage facilities.
And so, every time a major industrial
company shaved a couple of points off its financing costs,
some city was shaving some policemen and teachers off of
its rolls.
It was becoming clear that the municipal bond
market could not handle the enormous expansion of State and
local bond issues that was occurring under this explosive
use of industrial development bonds.
- 8 That bond explosion was also having its effect on
Treasury revenues.
Under projected rates of growth, the
Treasury would by 1970 be losing revenue at the rate of
$200 million a year.
This loss would rise rapidly as the
volume of outstanding issues accumulated, so that it was
estimated that five years later, in 1975, the annual loss
would be $1-1/2 billion.
I might say I have seen statements
that since regular corporate bonds are predominantly purchased by State and local government retirement funds,
private pension funds, mutual savings banks and life insurance companies, with zero or low Federal tax rates, then a
substitution of tax-exempt industrial development bonds for
taxable corporate bonds to finance industrial expansion cannot cost much revenue.
But this analysis misses the point
that tax-exempt bonds are purchased by a different group,
primarily commercial banks and higher bracket individuals.
Expanded purchases of tax-exempt industrial development bonds
by these taxpaying buyers means a switch £y them from some
taxable investment, taxable at their top marginal rates which
average
about 40 percent, to a tax-exempt investment.
And
that switch, from a 40 percent tax rate to a zero tax-exempt
- 9 rate, must mean a revenue loss to the Federal Government.*
These developments forced a critical re-examination by
the Treasury of the status of these bonds.
In this re-exam-
ination it became apparent that the bonds were in essence
simply another variation of the conduit transaction that had
characterized the arbitrage bonds.
The holder of an indus-
trial development bond secured by the obligation of a U. S.
Steel company or a Litton Industries company, or whatever
industrial company is involved, is simply investing in that
company and not in the governmental unit involved.
The
* The
fact that without an industrial development bond in
the picture a U. S. Steel company would issue a taxable
bond which would be purchased by a pension trust or State
retirement fund, so that no income tax is due the Federal
Government, does not prove that the substitution of a taxexempt bond merely means for the Treasury the substitution
of one non-revenue producing transaction for another. The
crucial fact -- and the one that creates the revenue loss
when the industrial development bond route is used -- is
that the buyer of that bond, say a commercial bank, must
give up some taxable investment (be it a business loan or
another security) to have the funds to purchase the taxexempt bond.
Of course, if the project financed by the industrial bond
produces profits for the business concern it will produce
taxes for the Treasury. But in a full-employment economy)
an alternative use of the savings involved would also have
produced profits to be taxed.
- 10 Securities and Exchange Commission in effect so described
the situation in a proposed Regulation issued earlier this
year.
Again, this is a curious and roundabout way to invest
in a corporation.
And it is equally curious to find towns
with a relative handful of residents issuing obligations
whose face amount is in the millions.
It became apparent to the Treasury that these financing arrangements rested entirely on the Internal Revenue
Service rulings which they were receiving, but that those
rulings could not legally stand consistent with the Treasury
adverse position on arbitrage bonds and with the SEC position.
Since it was an error in Treasury interpretation
that had led to the use of these bonds, a legal and moral
responsibility rested upon the Treasury to correct that
mistake.
At about the time the Treasury was reaching this
view, various State and local government organizations had
become alarmed at the adverse effects of these bonds on
their regular issues and inquired of the Treasury if it
legally could alter its ruling policy.
It was also becoming apparent that there was a moral
issue present for the States and local governments themselves.
- 11 -
They had always urged the vital importance of the tax-exempt
status of their bonds to their fiscal position and their
status as independent entities in a Federal system.
Yet in
the industrial development bond transaction they were handing over this vital tax-exempt status to private business
concerns and allowing those concerns to cover their own
obligations with a tax-exempt cloak.
It is one thing for
a local government to say that its functioning depends on
its ability to sell obligations that are tax exempt.
But
it is another thing for States and localities to compete
with each other to the point where any industrial concern
desiring a new plant would know that wherever it chose to
locate it could arrange an industrial development bond deal.
We can return later to the legal and moral issues involved
in this transfer of a tax-exempt or tax-preferred status
by its intended beneficiary to another entity.
Against this background, last March the Treasury
announced its intention prospectively to alter its ruling
position, and then issued proposed Regulations taxing the
interest on future issues of industrial development bonds.
- 12 The next few months were quite turbulent.
The Treasury's
legal position was criticized by some as being unwarranted
and erroneous -- yet none of these critics have challenged
the arbitrage bond ruling or have attempted to distinguish
it.
Others claimed the Treasury's action was motivated
solely by a desire to find an entering wedge to undermine
the doctrine of tax exemption.
These critics were effec-
tively answered in a courageous and perceptive statement by
the National Association of Counties, who saw that the effort
to end the abuses of these industrial development bonds was
an effort to prevent a distortion of the tax-exempt doctrine
that would lead to its erosion.
Let me quote from that
statement:
"We now find that the only way we can preserve
the financial integrity of state and local governments is by supporting national action that preserves
our immunity for genuine governmental purposes and
surrenders that immunity for those cases where our
cities and counties are forced by economic pressures
to allow this immunity to be used by private individuals for the purpose of making private profits at
public expense •• , ,"
The issues were further clouded by the fact that other
financing advantages for the private concerns involved had
become associated with the industrial bond transaction, and
- 13 these advantages came to be considered by some as attributes
of industrial bonds themselves.
Thus, industrial bond
financing involved 100 percent financing as compared with
lower percentages under traditional mortgages.
Also, the
industrial bond lease kept the lease rental obligation off
of the corporate balance sheet, in contrast to the traditional bond.
But more perceptive -- or more objective --
investment counselors saw that these advantages could as
readily be associated with taxable financing
0
Out of this turbulence has come Congressional action
which would end the major abuses in this area.
Under the
Conference Report on the tax bill, the use of tax-exempt
industrial development bonds for private industrial or commercial pursuits would be confined to issues below a million
dollars.
This type of financing would also be permitted for
activities associated with traditional municipal functions
and with such activities as private housing, college dormitories and hospitals.
The legislation may have its
complexities -- but any correction of an abuse unfortunately
involves complexities.
The abuse is never meekly surrendered,
but instead a stubborn rear-guard action forces complexity at
the jagged edges of the compromises that mark the engagement.
- 14 Local governments which formerly could sign blank
checks against the Federal Treasury and then turn them over
to private concerns to fill in any amounts those concerns
desired will thus be limited to filling the blanks with a
one million dollar figure.
Of course the ability to issue
blank checks good up to one million dollars is still a nice
thing in this world.
It is also quite a wasteful process --
for in every case it would be far cheaper for us in the
Treasury if, instead of issuing these tax-exempt industrial
bonds, a municipality would simply telephone us and ask us
to pay over to the concern involved the amount of the interest differential between a taxable bond and the tax-exempt
industrial bond.
For on each million dollar industrial bond
the Treasury will lose more in taxes than the private concern
will gain in interest saved.*
The payment by the Federal
* This point seems to escape many people. The important
factor bearing on the wastefulness of this method of benefiting the private concern is that the benefit to the concern is limited to the interest differential (reduced by
48 percent because of the deductibility of interest under
the corporate income tax), whereas the Federal revenue loss
is attributable to the fact that income tax on the entire
interest on a taxable obligation is lost when a tax-exempt
bond is issued instead. The measure of this loss depends
on the marginal rate of the buyer of the tax-exempt bond,
who must forego a taxable investment (not necessarily a
taxable corporate bond) to be able to buy the tax-exempt
bond.
- 15 Government of an interest subsidy would thus be a more
sensible arrangement.
And this subsidy could quite easily
be linked with freedom of choice and initiative by a municipality -- the same freedom that ljes in the blank check
of the industrial development bond.
As this chapter in industrial financing draws to a
close, we find that some of its lessons are quite relevant
to other problems now beginning to emerge.
One principal
lesson is that the State and local tax-exempt market is
relatively inelastic.
That market is much narrower than
the taxable bond market because of its dependence upon
investors who are in relatively high income tax brackets.
A sudden rapid increase in the volume of new issues corning
on the tax-exempt market will send interest rates rising on
all new tax exempts, regardless of the type or character of
the new issues.
With this in mind, let us consider what the
immediate future can involve for this market.
New Financing Technigues Needed for Public Projects
We see on every side insistent increased demands for
Federal financial assistance to aid States and localities
in obtaining facilities for anti-pollution purposes, low-
- 16 -
income housing, urban development, mass transit, education,
airports, and on and on.
Suppose that this assistance is
given for each project in the form of an initial capital
grant to supplement State or local funds on some matching
formula basis.
Presumably the State or local funds will
be obtained through issuing tax-exempt securities.
This
can mean tens of billions of dollars added to the municipal
bond market and therefore an inevitable increase in taxexempt interest rates.
Under this method of financing, the
volume of tax-exempt bonds issued in connection with such
direct Federal assistance programs could easily equal the
total volume of tax-exempt bonds issued for all purposes
over the next few years.
Let us go a step further.
Federal budgets will be
tight over the years ahead -- even with a tax increase and
any slow-down in Vietnam spending
would swell their totals.
and such lump-sum grants
Yet it is urged on all sides that
these urban and other local facility needs must not be postponed.
Suppose, to make the Federal assistance money go
further and thus permit more of these projects to be started
at once, the Federal Government turns from the capital grant
- 17 approach to a system of paying part of the debt service
of a bond issued by the locality to meet the cost of the
project.
The Federal share of the debt service -- as
respects both principal and interest -- would be paid
periodically over the life of that bond.
What should be the tax status of the interest on that
bond?
Clearly a bond whose interest and principal are in
large part being paid by the Federal Government can hardly
be said to be a local government obligation entitled by
tradition or doctrine to a tax-exempt status.
Also, such
a method of financing would be more costly to the Federal
Government than the capital grant approach.
The entire
cost of the project would be represented by a tax-exempt
bond, whereas under the capital grant approach the Federal
share would have been raised by issuing taxable Federal
obligations to cover that grant. This substitution pro tanto
of a tax-exempt local government obligation for a taxable
Federal obligation would mean a loss of tax revenue to the
Federal Government.
Given these problems with tax-exempt financing, suppose
there is substituted a taxable local bond for the tax-exempt
- 18 bond, and the Federal Government guarantees the same share
of principal and interest.
But any local government involved
would then quickly -- and properly -- claim that this change
would be costly to it, since a taxable obligation would have
to command a higher interest rate.
To meet this difficulty,
suppose the Federal Government says it will use the tax
revenue gained through the taxable status to pay to the
local government in interest subsidy that would bring the
interest cost to it to a level comparable with the interest
rate on a tax-exempt bond.
So here we would be -- a taxable local issue; part of
the principal and interest (in the proportion equal to what
a capital grant would have involved) paid periodically by
the Federal Government; and interest subsidy to the local
government to keep its cost below (or not higher than) taxexempt financing; a project started that would otherwise
have been postponed until Federal grant money could become
available; and no increase in cost to the Federal Government.
It all adds up to a new type of joint venture by the Feder&
and State and local governments for these social projects,
with a new method of financing that benefits both Governments.
- 19 Is there anything wrong with this approach?
We cannot
find it, and therefore this method of financing has been
presented by the Administration to the Congress as a way
to start an increased number of anti-pollution projects.
Yet some State and local organizations, joined by some
investment bankers, see problems.
two-bond approach
They suggest a different,
in this anti-pollution situation -- a
taxable bond issued by the local government for the Federal
share and paid off by Federal funds, and a tax-exempt bond
issued by the local government for its share.
Let us look at this solution.
It would cost the Federal
Government more than the capital grant approach, since the
interest rate on the local taxable obligation will be higher
than the rate at which the Federal Government could have
borrowed directly to cover the capital grant.
And it would
cost the Federal Government more than the single taxable
bond approach, since tax revenue is lost on the tax-exempt
bond.
It would also cost the local government more -- for
we believe that an objective investment counselor called in
to advise the local government would have to say that the
two-bond approach, because of the effect of the enlarged
- 20 volume of these new tax-exempt issues on the interest rates
for tax-exempt issues generally, would cost the local government more on its overall borrowings than would the issuance
of a taxable bond after the interest subsidy.
In other
words, a Mayor faced with paying for both a new school and
a new anti-pollution project would save his community money
by choosing the taxable bond for the anti-pollution project
rather than the two-bond approach for that project.
On what ground then should one urge the more costly
two-bond approach rather than our suggestion of a single
taxable bond?
Some might say that philosophically the
local government should not be issuing a taxable bond
yet why under the two-bond approach is a taxable bond for
half the amount philosophically valid?
Some might say that
the local government will have to meet certain conditions
if it goes the taxable route -- yet those conditions will
be inevitably present even under the capital grant approach
or the two-bond approach.
Some might see a possible legal
problem with local interest rate or debt ceilings under the
taxable route -- yet the two-bond approach could not help
if there really were a problem, for it also involves taxable
- 21 financing.
Some might see a precedent involving the tradi-
tional tax-exempt status -- yet the option would always be
there to choose the capital grant approach and tax-exempt
financing when grant money became available.
Some might
see a shift from the type of investment banking house which
might handle a local tax-exempt bond to another type if the
bond is taxable
yet such a concern, understandable as it
may be in human or business terms, should not decide a
matter of national interest.
There is thus a need for careful consideration of
financing techniques for these social projects.
Without
the use of new and imaginative methods, the traditional
tax-exempt market can be flooded.
While tax exemption
would be underscored, the tax-exempt rates themselves would
be driven higher and higher and local government costs would
rise accordingly.
With new techniques, such as the proposed
joint financing venture for anti-pollution facilities, a
method becomes available to local governments to insulate
their traditional bond market from the effect of the large
increases in borrowing required, and still even in these new
areas preserve the freedom to issue a tax-exempt bond when
- 22 Federal capital grant funds become available, if a local
government so desired.
I have presented this description of the proposed
joint financing venture in the hope of encouraging discussion and analysis.
In keeping with the seriousness of the
social problems involved, that analysis must be careful and
unemotional.
For a Mayor or county
official seeking advice
on the financing of public projects is certainly entitled
to ask that he be given an objective, hard-headed financial
appraisal of the alternatives at hand.
For some advisors
there may be elements of philosophy and the pattern of
traditional marketing practices in the advice to be given.
But the local officials are entitled to know precisely what
weight is being given to these elements in the advice, in
relation to the dollars and cents under the cost-benefit
calculations for his community.
Some Distortions Under Private Financing Techniques
Let me turn to another lesson from the chapter on industrial development bond financing.
This is the lesson that
a tax benefit -- here the traditional tax-exempt status of
local government bonds -- adopted to serve certain governmental goals can quickly become distorted when the intended
- 23 beneficiary of that benefit is tempted to enter into arrangements to pass the benefit on to others not within the
intended group.
Unfortunately, parallels to this distortion
can be seen in other financing techniques.
Let us consider
two illustrations.
Tax-Exempt Organization Borrowing to Acquire Businesses
For a number of years some tax-exempt charitable organizations have been acquiring businesses through the financing
technique of having the purchase price paid out of the
profits of the acquired business
the sellers of the business.
in effect borrowing from
There is thus no risk to the
tax-exempt organization and since that organization can pay
a higher price than a taxable purchaser, the private seller
can have a substantial gain.
Unfortunately, the Supreme
Court upheld this arrangement in the Clay Brown decision
in 1965 and accorded capital gain treatment to the seller.
Legislation is now pending to remedy the situation, by
\
removing the tax-exempt status from the profits obtained by
the exempt organization through this financing technique.
The abuse in this situation involves the transfer by the
tax-exempt organization to the seller of a portion of the
- 24 benefits of that tax-exempt status.
The transaction is
thus a clear distortion of the purposes behind the allowance
of a tax-exempt status to charitable organizations.
Leasing of Aircraft and Other Assets
Recently a number of investment syndicates have been
formed by high-bracket taxpayers to buy an airplane and then
lease the plane to an airline.
The investors provide about
20 percent or so of the total cost and borrow the balance on
a non-recourse basis, with the plane and the rents due under
the lease pledge to secure repayment of the borrowed funds.
The rents generally equal the debt service plus certain
fixed expenses of the syndicate, so that little or no cash
flow is available to be distributed to the members of the
syndicate.
The syndicate borrows the remaining 80 percent
of the cost of the plane at current interest rates, let us
say somewhat over 6 percent.
The interest equivalent to
the lessee airline of the rental arrangement comes to a
rate of about 4 percent of the entire cost of the plane.
The residual value of the plane is speculative at best.
Now what is the point of a transaction that involves
an investment of 20 percent of an asset for no cash flow
- 25 -
in return; and also i.nvolves borrowing amounts at over 6
percent to, in effect, lend out at about 4 percent?
There
clearly is no economic point at all.
But there is a "tax
method" in this "economic madness."
The 20 percent invest-
ment by the syndicate members enables them to claim the
depreciation deduction and investment credit for the entire
cost of the plane.
By offsetting that deduction against
income taxable in the 60 or 70 percent brackets, and utilizing
the investment credit, they obtain back both their investment and a handsome profit.
What about the
le~see
airline?
It is able in effect
to get the equipment at a lower intrrest cost than it
could obtain if it borrowed directly.
This comes about
because the syndicate members can make better use of the
tax benefits involved.
Thus, even if the airline pays tax
at the full corporate rate of 48 percent (probably unlikely),
its tax rate is still less than that of the syndicate
investors, and the depreciation deduction therefore returns
more tax dollars to the investors than it would to the airline.
This return from the difference in tax brackets can
be enhanced by structuring the rental schedule so as to time
- 26 the airline's rent deduction in relation to the syndicate's
depreciation deduction to yield the largest tax savings.
The investors also claim an investment credit based on the
plane's purchase price.
Presumably, this credit would have
been of little or no value to the airline because it either
has no tax liability or is over its limit on the credit.
This credit and perhaps some part of the increased depreciation benefit are then passed through to the airline in
the form of lower rent -- in effect a lower borrowing cost
to the airline.
The result is that the airline has sold its investment
credit and depreciation deduction to higher bracket taxpayers who can better use them.
The syndicate thus is
formed to purchase tax benefits rather than to purchase
and lease capital goods for the production of income.
The
amount which the airline can obtain on this sale of tax
benefits depends upon the difference between its tax bracket.
and the buyer's tax brackets.
The greater the difference,
the better the bargain that can be struck -- for the larger
are the tax revenues to be taken from the Treasury and
divided between the parties.
- 27 -
Without the tax system the transaction would not occur,
for the only return offered the syndicate is the tax profit
that the investors realize by offsetting tax benefits
against high bracket income.
Thus the tax system itself
provides the profit, and neither the rent under the lease
nor any other business aspect of the lease has induced the
investment.
Rather, the tax, system -- the prospect of
shifting tax benefits from the airline to a group of higher
bracket taxpayers -- is the sole motivating force.
And the
profit provided by the tax system increases as the tax
bracket of the investors increases.
The greatest profits
go to those who would otherwise pay taxes at the highest
rates
which is just the opposite of the way one would
expect a progressive income tax to function.
But a real question emerges whether our income tax
system does function this way -- whether the transaction
would be sustained by the courts under existing tax provisions.
Conclusion
The lesson here is much the same as that for arbitrage
bonds and industrial development bonds.
Congress enacts
- 28 -
legislation intended to provide a particular tax benefit
or tax result for a designated group in order to accomplish a rational purpose -- a tax-exempt interest status
to municipal bonds to assist localities financially and to
achieve a Federal-local relationship which both levels of
government consider desirable for reasons apart from
strictly financial considerations; a tax-exempt status to
charitable organizations to encourage philanthropy in the
United States; depreciation deductions that are as appropriate as possible to the measure of taxable income;
investment credits to achieve an increase in industrial
modernization and expansion.
But there are those outside
the group intended to be benefited waiting to seize on
every such tax benefit to see how its operative mechanics
may be distorted to achieve advantages wholly foreign to
the purpose behind the benefit.
If not checked in time these distortions begin to
assert a legitimacy of their own
rights against the Treasury.
to assert tax squatters'
It is then said that admini-
strative action cannot be taken to dislodge them, and a
legislative command is required.
Sometimes the Revenue
- 29 -
Service itself grants a cloak of legitimacy through favorable rulings in the early stages of the transactions before
their structure and scope have been clearly analyzed and
appreciated.
Then when it has become clear to all that the
distortion has created a major problem, it is said that the
administrative error cannot be corrected by the administrators who made it.
Indeed, many of the tax preferences that today create
severe unfairness in our tax system and permit many
individuals and corporations to escape their share of the
tax burden were never legislated at all by the Congress.
Instead, their beginnings lie in a Treasury Regulation or
administrative ruling, ill-considered or ill-conceived at
the time or -- to be more charitable, because every tax
policy official wonders what mistakes his successors will
charge against him -- handed down to meet a legitimate problem
and then in turn itself distorted.
The fact that many of
these tax preferences carry this bar sinister in their
heritage does not, of course, make their present beneficiaries any the less forceful in defending their tax advantages.
- 30 And so another lesson emerges from these illustrations -.
vigilance, skill and imagination in tax administration can
be a powerful force in the maintenance of equity in the tax
system.
It can likewise be a powerful force to protect
legislators from having to grapple years later with difficult
legislative issues which they had no hand in creating.
But these lessons are not only for the education of
Treasury and Revenue Service administrators.
As we noted
earlier, when distortions are permitted to flourish and correction later comes, the solutions can be complex and reach
into transactions quite some distance from the core of the
abuses.
The readjustments can thus be far more painful than
would have been any self-denial at the start when the distortions first became tempting.
A financial community that
is alert to recognize distortion and is willing to give
proper guidance to administrators to prevent it, can do much
to protect both the tax system and the functioning of proper
financing methods.
The best guardians of a fair tax system
can be those whose skills and experience are capable of providing the first warnings of impending dangers.
You as well
- 31 as the Treasury and the Revenue Service thus share the
responsibility for maintaining a rational relationship
between tax trends and financing methods.
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
SUNDAY, JUNE 16, 1968
REMARKS OF THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETARY OF THE TREASURY
AT THE DEDICATION OF THE HOME OF ALBERT GALLATIN
AS A NATIONAL lANDMARK
GENEVA, PENNSYLVANIA
SUNDAY, JUNE 16, 1968,2:30 P.M., E.D.T.
I am honored and delighted to participate in this
dedication ceremony at "Friendship Hill," the home of
Albert Gallatin.
I have personally repeated one of the relatively
unusual experiences of this early American statesman:
Like Gallatin, I came to the Treasury from the House of
Representatives. I must quickly add, however, that unlike
Gallatin, my departure from the Congress resulted from the
decision of my constituents, rather than the President's
summons to serve in the Treasury.
Again like Gallatin, I began my service in the Treasury
in a time of peace, but continued on during a period when the
nation and its finances became burdened with the many difficulties of war. Secretary Gallatin, in 1812, like Secretary
Fowler at the present day, had to modify the financial
policies of peace to serve the exigencies of war.
There is, of course, a vast difference in the character
of the situation that Gallatin faced and the problems that
have confronted us in recent years. Yet I cannot easily say
that our difficulties were any greater than his. In many ways
our situation is more intricate and complex, but it is also
true that we have been able to face the problems as the
strongest financial power in the world, while Gallatin had to
wrestle with the finances of a fledgling and underdeveloped
nation.
F-1274
- 2 -
As in Gallatin's day, the Treasury has been forced by
circumstances to urge the adoption of temporary measures to
increase Federal revenues, as well as the rigorous control
of Federal expenditures. In this process, we have spent much
of our time with two of Gallatin's legislative progeny. It
is not very well known that Gallatin was largely responsible
for the creation of the Congressional process of detailed
appropriations, and also for the establishment of the Ways
and Means Committee of the House of Representatives. Both
institutions continue today as vital factors in the operations
of our Federal Gov~rnment -- a fact which Secretary Fowler
and I have come to appreciate as keenly as any two men in this
country.
Perhaps Gallatin's most. fundamental endeavor in the
realm of public finance was his effort to rationalize the
fiscal operations of the Federal Government and to establish
comprehensive Congressional control over those operations.
These objectives motivated his initiatives in the area of
appropriations, as well as much of his activity as Secretary
of the Treasury.
A century and a half later, the Congress and the country
are engaged in a similar effort -- to make sense out of the
Federal budget and establish a rational set of priorities -witness the surtax and expenditure control bill upon which
the Congress will vote next week.
Even more today than in Gallatin's time, this effort
must concern not only the financiers, for it reaches to the
very roots of our national and international order. Federal
budget decisions directly involve, for example:
the health of the United States economy,
including the availability of jobs and
the levels of prices and wages, and thus
the daily lives of all of our people.
the directions that we take in domestic
affairs, and our rate of progress in
meeting the many urgent needs of our
society.
- 3 -
the state of the world economy, in which
the United States economy is such an
influential factor.
the directions taken in our political,
military, and economic foreign policies
around the world.
To illustrate this, I need only to point to some of the
reasons why the President and his Administration, as well as
most of the Nation's leading economists, businessmen, financiers, and farm and labor leaders, have called for enactment
of the proposed ten percent income surtax. Certainly this
is a matter of providing an urgently needed increase in
Federal revenues at this time., but the issue does not end
there:
The tax increase is needed to restrain
inflation, which eats away cruelly at
the living standard of the poor, the
elderly, and those with fixed incomes.
It is needed to avoid further "tight
money" and increases in interest rates
which choke off needed credit for home
building, for small business, and for
the operations of our state and local
governments.
It is needed to keep our products competitive in domestic and world markets,
and thus to preserve and expand employment
opportunities for our workers.
It is needed to help meet our balance of
payments problem, to preserve confidence
in the dollar and in the entire international monetary system in which the
dollar is the kingpin. If the system
collapsed, grave dangers would confront the
flow of international trade and investment
from which the nations of the Free World
have benefited so greatly in the past two
decades.
- 4 I hope that next week, after these many months of
debate, the Congress will approve the surtax bill. No one
enjoys paying higher taxes, but in this instance, like old
age, the alternative is far worse.
The difficulty of the decision provides a reminder of
the critical role of Federal fiscal policy in shaping the
world in which we live. Albert Gallatin should long be
honored for his early recognition of this fact and his
lasting contributions to our Nation's system of public
finance.
000
TREASURY DEPARTMENT
'R RELEASE 6: 30 P.M.,
IDClay, June 17, 1968 •
RESULTS OF TREASURY J S WEEKLY BILL OFFERING
The Treasury Departnent announced that the tenders for two series of Treasury
.Hs, one series to be an additional issue cf the bills dated March 21, 1968, and the
ther series to be dated June 20, 1968, which were offered on June 12, 1968, were opened
, the Federal Reser.re Banks today. Tenders were invited for $1,600,000,000, or therelouts, of 91-day bills and for $1,100,000,000, or thereabouts, of 182-day bills. The
tails of the two series are as follows:
JfGE OF ACCEPl'ED
lMPETITIVE BIOO:
High
Low
Average
91-day Treasury bills
maturing September 19, 1968
Approx. Equiv.
Price
Annual Rate
98.595
5.558%
98.584
5.602~
98.590
5.578~
~/
182-day Treasury bills
maturing December 19, 1968
Approx. Equiv.
Price
Annual Rate
97.170
5.598~
97.142
5.653~
97.152
5.633';
Y
6~
of the amount of 91-day bills bid for at the low price was accepted
94~ of the amount ~f 182-day bills bid for at the low price was accepted
)TAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRIC'IS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
I811as
San Francisco
TOmS
AcceEted
APE lied For
$ 15,341,000 $ 15,341,000
1,112,769,000
1,776,769,000
16,222,000
28,222,000
46,661,000
46,661,000
17,029,000
19,529,000
36,042,000
46,070,000
147,993,000
372,093,000
56,941,000
66,761,000
21,044,000
22,294,000
31,099,000
40,099,000
17,856,000
27,856,000
81,101,000
128,050,000
$2,589,745,000
~lied
For
~
2,872,000
1,363,095,000
16,434,000
28,027,000
9,216,000
34,872,000
277,557,000
49,241,000
21,722,000
20,108,000
17,764,000
127,027 J OOO
$1,600,098,000 ~/ $1,967,935,000
AcceEted
$
2,872,000
768,595,000
8,434,000
28,027,000
8,716,000
25,622,000
89,037,000
41,921,000
20,692,000
15,748,000
8,764,000
81,827,000
$1,100,255,000 ~/
Includes $283,964,000 noncompetitive tenders accepted at the average price of 98.590
Includes $142,208,000 noncompetitive tenders accepted at the average price of 97.152
1bese rates are on a bank. discount basis. The equivalent coupon issue yields are
5.74i tor the 91-day bills, and 5.88~ for the l82-day bills .
..1"175
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY FOR MONETARY AFFAIRS
DEPARTMENT OF THE UNITED STATES TREASURY
AT THE SIXTH INTERNATIONAL PROGRAM
OF THE
INSTITUTO DE ESTUDIOS SUPERIORES DE LA EMPRESA
UNlVERSIDAD DE NAVARRA
BARCELONA, SPAIN
MONDAY, JUNE 17, 1968, 11:00 A.M. (BARCELONA TIME)
INTERNATIONAL INVESTMENT
AND THE INTERNATIONAL MONETARY SYSTEM
This lecture is divided into three parts -- not mutually
exclusive -- in which I consider:
1. Cyclical or short-term balance of payments adjustment,
with particular reference to the United States.
2. Secular or longer-term problems of the United States
international payments position, with particular
reference to the scope for capital investment.
3. The relationship between adequate growth in
international reserves and international investment.
First, let us look at the short-run balance of payments
adjustment problem. This is the area on which most current
attention centers. Here, I believe, two important points
should be made.
Point 1 is a very simple one. Every major payments
imbalance has two sides. If one abstracts from the input of
new monetary reserves into the world's monetary system, the
deficit of one country or group of countries will have its
Counterpart in the surplus of another country or group of
countries. Adjustments, therefore, must be made and permitted
by both groups -- deficit countries and surplus countries -- to
eliminate their respective imbalances, if a healthy world
economy is to be maintained.
F-1276
- 2 Point 2 is that the adjustment process in today's world
is a more complex process than it was in the earlier years
of this century,and, in many cases, adjustment cannot be
achieved satisfactorily solely by the application of broad
and general economic policies. ' There are two primary reasons
for this.
One is that the sharp deflationary policies are no longer
acceptable -- either on political or economic grounds. Even
assuming that sharp deflation may conceivably cure a payments
deficit, it may so depress the deficit country's economy that
it is unacceptable as a domestic policy and has adverse
economic effects on the country's trading partners and,
consequently, is unacceptable to them also. It is now generally
recognized that deflation was carried too far by some major
countries in the 1920's and early 1930's. And it is now
recognized that this resulted not only in reduced growth in
deficit countries but in the world as a whole. Such a policy
is not acceptable today in any country or in the world.
The second reason is that -- at least in many cases -broad and general deflationary policies can not completely
cure a deficit, because important elements in the imbalance
are not much affected by such policies. I want to make quite
clear that proper fiscal and monetary policies are still the
most important elements in achieving both domestic and
international payments stability. My point is that, in the
modern world, they often need supplementary help to achieve
balance of payments equilibrium. In other words, these
policies are vital but not necessarily sufficient to do the
job.
Let me illustrate by considering the United States. In
the United States, general fiscal and monetary restraints
appear to have much greater impact on the balance of payments
when their effect is to dampen a cyclical boom than when they
are applied to stimulate an economy which has much unused
capacity. Imports appear to be much more sensitive to a rise
in GNP at a rate exceeding 6 percent in monetary terms and much
less sensitive when GNP is growing more slowly. Exports show
less sensitivity to the domestic growth rate, appearing to be
mainly unfluenced in the short-run by the level of activity
in foreign markets
o
- 3 In the United States, general policies of fiscal and
monetary restraint are badly needed on both domestic and
external grounds. Since late last year, monetary policy has
moved, by successive stages, to a much more restraining posture.
The accompanying fiscal restrai~t has, unfortunately, been
conspicuoUS by its absence. But there is now reasonable
certainty that the long-sought Congressional approval of a tax
increase and expenditure cuts will soon be forthcoming. The
favorable impact of the scheduled fiscal measures on the
domestic economy and our balance of payments should be clearly
registered during the second half of this year -- and in 1969.
From a domestic standpoint, the fiscal restraint will be
welcome, indeed. In the first quarter of this year, GNP grew
at an unsustainably rapid annual rate of 10 percent. Too
much of this fast advance is being reflected in rising costs
and prices. Fiscal restraint will hold the advance of the
economy to a much safer, less inflationary, pace. Without
fiscal restraint, the Federal budget deficit on the new,
unified basis would exceed $20 billion next fiscal year -for the second time in a row. With fiscal restraint, the
deficit will shrink rapidly.
The U. S. economy and the financial markets have been
under considerable strain. For example, unemployment rates,
while still too high for some disadvantaged groups, are very
low by historical standards in some key categories. In the
financial markets, some interest rates have reached levels
not experienced in the United States for many decades. In
such a situation, the persistence of large federal budget
deficits is clearly inappropriate, and the long-sought
application of fiscal restraint will place the economy's
advance on a much sounder basis.
We are in the process of learning how to use fiscal policy
more effectively. It is already evident that the use of
fiscal policy must allow for political tolerances that can
seriously affect both the scope and timing of fiscal action.
It is a powerful tool of cyclical policy but not, perhaps,
as flexible as may have been assumed by some. This seems to
be particularly true when it is to be applied as a restraining
factor rather than a stimulus.
- 4 Over the longer run, the effects of general economic
policies certainly will be felt in the trend of costs and prices.
The competitive position may be impaired in a lasting way if
costs and prices rise faster than in competing areas.
Controlling inflation for some .countries seems to be as difficult
as dieting. Progress is painful and slow, a brief lapse can
quickly lose the progress made by long periods of discipline.
For other countries, the reverse seems to be true. They put
on weight only by gross indulgence and quickly drop it by a
return to a normal diet.
Something like this distinction seems to prevail in the
balance of payments field. We have had some persistent
deficit countries that have had recurrent inflationary problems,
and we have had persistent surplus countries.
Important as fiscal and monetary policies are to promote
sustainable economic growth with price stability and to help
achieve balance of payments equilibrium, there are some
important aspects of the U.S. deficit that are not influenced
much by such policies. Thus, we have turned to some selective
measures. Similarly, surplus countries have found it necessary
to employ new and selective measures to help their adjustment.
Let me cite three important areas where general policies
have little or no effect on payments imbalances -- military
expenditures, tourism, and some capital flows.
The gross foreign exchange costs of U.S. military
expenditures now run about $4.5 billion a year. Even
abstracting from Vietnam, these gross foreign exchange costs -incurred largely as the United States' contribution to the
corrunon defense of the Free World -- run approximately $3 billion
per year. On a net basis -- after allowance for sales of
military equipment to our allies and other neutralizing
measures and not counting Vietnam -- they have run between
$1.5 and $2 billion per year.
This heavy drain on our balance of payments is in no
sense susceptible to reduction through the application of
general fiscal and monetary policies. Nor is it influenced
by selective economic policies. Here the solution must be
found in international cooperation. Thus, in the NATO Alliance,
for example, the principle that foreign exchange costs of
corrunon security should be effectively neutralized needs to be
implemented in more effective ways.
- 5 Our gross expenditures on tourism (including fares to
foreign carriers) were about $4 billion in 1967, and our net
outpayments, after allowing for tourist receipts, were around
$2 billion o The foreign expenditures of our tourists have been
rising at an average rate of n~arly 10 percent a year for the
past ten years. This steeply rising trend is related to the
growing number of people with higher monetary incomes and to
various other causes and would not be appreciably reduced by
a slowdown in the general rate of economic expansion in the
economy. Here we have used some mild special measures, but
look over the long pull toward increasing our tourist receipts
rather than reducing our tourist expenditures.
A third important factor is the flow of capital investment
from the United States to industrialized countries in
Europe, Japan, and elsewhere. Earlier in this century,
economists thought of capital investment as flowing from
advanced countries to developing countries, largely in the
form of goods, rather than money. But, today, we have a
tendency for capital to flow in growing volume to Western
Europe, without a corresponding outflow of goods and services
from the United States.
We have tried to deal with this area through some selective
devices -- the Interest Equalization Tax and the Department
of Commerce program on direct investment, and the Federal
Reserve programs dealing with banks and nonbank financial
institutions.
On the whole, these programs have worked well -- they
have not stopped capital outflow; that was not their purpose.
They have, however, reduced the rate of increase and, thereby,
reduced the problem for the time being. They also have had
the positive effect of stimulating the growth of European
capital markets, which now provide more funds for foreign
borrowers than they did in the past.
It is hard to say whether or not the selective U.S.
programs have had the tendency to raise interest rates abroad.
This is partly because European countries, in the past two
years or so, have been running economies with some slack, and
their domestic monetary policies have tended to ease -- which
is responsible conduct for surplus countries. It is partly
because selective policies followed by European central banks
have diverted funds from capital inflow back toward international money markets. These steps have eased liquidity and
tended to lower interest rates in international markets without
- 6 -
further easing in domestic markets. They probably have led
to some domestic borrowers going abroad for funds and perhaps
have diverted some short-term funds into long-term capital market
channels.
II.
I turn now to the second area I wish to discuss -- the
longer term aspect of the U.S. international payments position.
Here I want to take two perspectives -- a very broad and longterm one for the period 1941 through 1967, and a more detailed
and medium-term one for the last six years, 1961 - 1967.
In the broad and long-term overview I combine all of the
balance of payments flows into three broad accounts. First,
is the trade and service account. Here I exclude military
transactions and investment income, but I include exports
financed by Government and pensions and remittances. Second,
is the capital account which includes capital outflows, net
capital transactions of foreigners and errors and omissions
and also includes income flows -- -normally included in the
service account -- repatriated earnings on investments and loans,
both private and Government, and fees and royalties. Third, is
the Government and military account which includes sales of
military goods and services and Government loan repayments -in other words, it is net.
For the 17 years from 1941 through 1957, the United
States had a cumulative surplus on trade and service account
of $85 billion, or $5 billion per year. Capital and income
investments in that period gave us a plus of $17 billion, or
$1 billion per year, on the average. On Government and military
account we had a cumulative deficit of $112 billion, or
$6.6 billion per year, on the average. Between 1946 and 1957,
we extended economic assistance in grants and loans of $42
billion net.
The net effect of these results was a cumulative deficit
in our payments balance of less than $10 billion, or an
annual average of less than $600 million. And we gained gold
reserves -- at the close of 1957 our gold reserve was larger
than at the beginning of 19410 We financed our small deficit
completely -- and more -- by increasing our dollar liabilities
to foreign official and private holders.
Throughout this period, the U. S. was in fundamental surplus,
but, through its deliberate policy of massive untied grant and
loan assistance and its absorption of most of the costs of
insuring Free World security, we incurred minor balance of
payments deficits.
- 7 -
This was enlightened policy -- it encouraged world trade
and economic growth. But it had two unfortunate results. It
was carried on too long after basic conditions had changed.
The deficits got larger and had to be financed both with
increased dollar outflows and a reduction of $11 billion in
our gold reserves from 1958 through 1967. Also, it got some
of the rest of the world -- particularly Western Europe -into the bad habit of enjoying chronic surpluses, even after
Europe's reserves had been rebuilt. The net result was that
both the U.S. and the world got worried about the American
deficits, but it took some time for worry to be expressed
about the big European surpluses.
From 1958 through 1967, the U.S. had a cumulative deficit
of $27 billion, or $2.7 billion annual average -- more than
four times the average of the previous 17 years. The
Government and military account deficit was reduced to $5.5
billion per year, on the average. That is still a big figure;
after mid-1965, it was, of course, affected by Vietnam.
On capital account we stayed about the same -- $1 billion
surplus per year on the average. Capital outflows -- direct
investment, portfolio and bank loans -- rose sharply; enough
so that the steadily rising income [actor just about -- not
quite -- kept it in about the same position as in the previous
17 years. But this occurred only after the outflow had been
somewhat contained and only after various special transactions.
The big difference is found in the trade and service
account. The surplus dropped sharply -- to less than
$2 billion per year, on the average. Exports grew, but,
particularly in later years -- imports grew faster. And we
had a rapidly increasing deficit on tourist account.
Now, let us take another fix -- medium-term on the U.S.
balance of payments. Table A (attached) gives somewhat mc're
detail for the years 1961 and 1967 and shows the net change
between them. The data are arranged in somewhat more
conventional fashion, with the top half of the table showing
essentially the current account and the bottom half the
capital flows.
I want to concentrate first on lines 2 through 5 -net investment income, net services (other than military),
net military account and Government grants and credits.
- 8 Government grants and credits, net (line 5) grew from
$2.8 billion to $4.3 billion over the six years. But almost
half of the increase was mainly statistical -- there were big
debt prepayments in 1961 and virtually none in 1967.
Adjusting for this, the adverse change was about $762 million
or 22 percent. Items in this account include, among others,
AID disbursements and drawdowns of Export-Import Bank credits.
Some $400 million of the increase is represented by ExportImport Bank loans outstanding. A very large part of the AID
disbursements were transferred in kind, in the form of goods
and services, thus equalling and offsetting a corresponding
amount of exports.
The services account (line 3) which excludes investment
income and fees and royalties, but includes pensions and
remittances, shows a net outpayment of $1.5 billion in 1961
and $2.6 billion in 1967, an adverse change of $1.1 billion Or
73 percent. This account is heavily influenced by tourist
expenditures, which, as noted earlier, cost us, net, in 1967
about $2 billion.
The third account, net investment income (line 2)
includes fees and royalties, but also net outpayments of
interest and other income to foreigners on their private and
public investments in the U.S. Here the figures are positive
and the trend advantageous to the U. S. In 1961, the net
receipts were $3.4 billion, and in 1967, they were $5.6 billion,
a gain of 66 per~ent.
The military account, net, (line 4) shows a deterioration
of $700 million over the six years -- from an outflow of
$2.6 billion in 1961 to one of $3.3 billion in 1967.
The bottom half of the table shows capital flows.
Line 7 shows the capital flows net of "official capital
inflow," and line 8 includes such capital inflow. The
difference represents mainly investment of official reserves
in non-liquid form in the UoS. Part of this figure reflects
military neutralization financial transactions, part
represents the pull of high interest rates on such investments.
Even excluding these investments, it is evident that there was
some reduction in capital outflow from 1961 to 1967, reflecting
primarily selective capital measures -- the Interest
Equalization Tax and the direct investment and financial
institutions control programs of the Department of Commerce
and the Federal Reserve.
- 9 -
Finally, the first line in the table shows the trade
account and its deterioration between 1961 and 1967. Now, let
us pull some conclusions out of these figures.
(1) The ~ise in investment income more than offset the
declines in non-military services and Government grants
and capital, if allowance is made for the special debt
prepayments of 1961. These three accounts combined
showed a 'net gain of $400 million from 1961 to 1967.
Certainly it is not unduly optimistic to expect further
improvements over the future.
(2) It also is not unduly optimistic to conclude that the
net military account should improve over the next few
years. Gross expenditures should be reduced when peace
comes to Vietnam. And net outflow should be reduced as
we and our allies move forward to implement the accepted
principle that foreign exchange costs of common defense
efforts should be neutralized.
(3) Real effort must be made to improve the trade account.
Gains here can be translated into rising capital
exports -- deterioration in the trade account almost
automatically leads to capital curbs.
(4) Capital inflow from abroad can be an important factor
in contributing to balance of payments equilibrium
for the United States and in permitting additional
capital exports from the U.S. The role of the U.S.
as a fina~cial intermediary needs further exploration.
The detailed examination of the recent six-year period
tends to confirm the broad conclusion to be drawn from the
long-term picture. The U.S. payments position is strong
when its trade position is strong. Without a trade position
stronger than that of 1967, the United States would have no
margin of real resources to use in net capital exports.
III.
I come now to the last part of my remarks -- the relationship
between the growth of international reserves and the flow of
international investment over the longer run.
In a sense, one may think of countries as investing part of
their national savings in reserves, when they acquire growing
amounts of gold and foreign exchange. Resources in goods or
securities are being spent to acquire reserves rather than
investments abroad or a larger volume of imports.
- 10 Almost continuously since 1950 the industrial countries
of Continental Western Europe have invested substantial amounts
in additions to their reserves o Between 1950 and 1967 the
European Community countries added an average of $103 billion
to their reserves annuallyo This is equivalent to 92 percent
of the growth in world reserves in that periodo Between
1961 and 1967, additions to reserves by this group of countries
averaged $104 billion, or about 1 percent of the average
increase in their combined Gross National Product.
But even with the investment of considerable amounts in
reserves, reserve growth in the European industrial countries
in the last ten years has fallen short of expansion in their
international tradeo And since 1962, in these countries,
reserves have declined in relation to GNPo
These facts give rise to several interesting questions o
What has determined the proportion of the current account
surpluses going into reserves as against capital investment
in other countries? Will there be continuing need for reserve
additions in Europe at about the previous rate, or at some
lower rate? Are the Common Market countries now finding
alternative uses for their foreign exchange receipts in
capital outflow and will they in the future channel smaller
amounts into additions to reserves? If SOg what does this
signify as to the future pattern of international investment?
A look at what has been happening in the EC countries
is instructive
I have attached a table to these remarks
showing current surpluses, net capital flow, and overall
balances of payments in recent years, 1961-67
The table
also shows the percentage increase in official reserves in
each of the years 1961-670
0
0
Apart from 1962, when a high level of debt prepayments
combined with a declining current account surplus to hold
down the increase, the annual rise in official reserves of
these countries ranged but narrowly between $103 billion and
$109 billion
These fairly regular increases in reserves
were achieved in a period when the current account position
varied by some $4-1/2 billion, and the capital account balances
by about the same amount
o
o
- 11 The table seems to indicate a relative preference for
reserve increases as against capital exports --investments
even in the face of some capital inflows that were represented
as unwelcome o Note that the period 1961-65 was characterized
by persistent net capital inflows -- moderate in 1961-63 and
substantial in 1964-650
In 1966-67 there was a marked shift -- the Six invested
substantially more abroad than they received in capital
inf1owo The turnabont in the period was due to the convergence
of a number of factorso Undoubtedly the most important was
the series of measures taken to slow down capital outflows
from the U. So The period since mid-l963 and particularly
since the February 1965 program of the United States has been
one of increasingly stronger actions of this typeo A related
development has been the rapid growth of the Euro-bond market
from about $005 billion as re~ently as 1963 to $2 billion plus
last year. While the identity of purchasers of securities in
that market remains veiled, indications are that residents of
the Common Market became substantial investors in these
securities during the period o Another factor, of course, has
been the change in relationships between U. S. and European
interest rates o Finally, the change in the pattern of payments
surpluses within the Six may have contributed to the emergence
as a net capital exportero The principal development in this
respect has been the erosion of the surpluses in Germany and
Italy, both of which have demonstrated a praiseworthy propensity
to export capital even in the face of some handicapso
The development in recent years of large European sources
of capital for international investment is gratifyingo It is
one of the most promising signs that progress is being made in
achieving a be~:ter adjustment in one asppct of the problem of
international adjustment -- namely, the relationship between
current and capital accountso
As already noted, 1967 was a year of abnormally large
current account surplus for the Continental European countries.
What will happen when the current account returns to a lower
level, as it must do if the United Kingdom and the United States
are to improve their own current account totals? Will Europe
continue to export capital and permit reserve growth to skrink,
or vice versa? The answer to this question will determine how
international investment is to be financed in the future, and
may indeed affect the actual physical volume of investment
0
- 12 However, if Europe countinues as a capital exporter,
as we hope, even in the face of a declining current account
surplus, we should come a long way toward a much better
adjusted pattern of international paymentso Moreover, this
would have been achieved with a minimum amount of frictional
strain on the individual economies or slowdown of world
investment
0
In the absence of new reserve creation, this could mean
a substantial decline in the past rate of reserve accumulation
on the Continento It is important that such a leveling off
in reserve growth not lead to an excess of caution in monetary
and economic policies. Fortunately, the new facility for
creating Special Drawing Rights can counter such tendencies,
and makes possible both a continued upward movement of
European reserves, as well as a continuation of European foreign
investment
0
To the extent that reserves of the European countries
rise as a result of their own allocations of newly-created
Special Drawing Rights, they will receive credits on the books
of the International Monetary Fund without having exported
goods and services or imported caDital to acquire these reserves,
These reserves can remain passive or can be used o It is largely
through the channel of monetary policy, interest rates, and a
generally better environment for investment that the new
Special Drawing Rights should over time exert their influence,
insofar as these reserves are created for countries persistently
in equilibrium or surplus
0
Countries with a tendency towards a deficit are likely to
borrow capital or reserves from abroad o The provision of
Special Drawing Rights reduces the need to borrow reserves. To
this extent, it should moderate one form of international
borrowing
Allocations of Special Drawing Rights would substitute
for borrowing and this should decrease demands that might
otherwise fall upon international money and capital marketso
0
Thus, whether looked at from the aspect of surplus
countries or deficit countries, the provision of an adequate
growth of reserves through Special Drawing Rights should over
time act as a stimulus to the level of international and
domestic investment
It should help to avoid, or mitigate,
tendencies to competitive escalation of interest rates that
might otherwise occur as countries seek to build up or protect
their reserves, when there is no way to increase the reserves of
the world as a wholeo
0
- 13 We have found that there has been a substantial shift
of the sources of international capital investment from the
United States to the EC countries of Europe, corresponding
to the shift in the current account surplus, since 1961. At
the same time the EC countries have continued to add substantially
to their reserves out of the proceeds of the current surplus
We now hopefully expect some decline in the abnormally large
trade surplus in Continental Europe, and a recovery of trading
position on the part of the United Kingdom and the United Stateso
It will be most constructive if the EC countries can accept
adjustment in current account while maintaining the outflow of
capitalo This would bring all the major countries much closer
to equilibrium and it would demonstrate a proper and positive
functioning of the adjustment processo
0
The need for further reserve gains can be supplied by
activating the special Drawing Rights facility, without needing
to invest current foreign exchange in reserves.
I suggest
to the benefit
countries such
continued flow
to the rest of
that this could be a pattern of progress,
of the world as a whole and especially to
as Spain, which have a vital interest in the
of investment funds from the surplus countries
the world o
000
Attachment:
Tables A and B
- 14 Table
j\
selected Groupings of Items from U.S. Balance of Payments
1961 and 1967
($ mil.)
Current Account (incl. U.S. Gov't capital
outflow)
1. Trade Balance
Chu~
5,444
3,1C3
-1, %1
3,397
5 ,632
12,235
2.
Net investment income
3.
Net other non-military services
-1,475
-2,554
-1,079
4.
Net military (cash receipts basis)
-2,564-
-3,271
-707
-2,981
-4,319
-1,338
417
1,048
1631
-2,805
-4,257
-1,452
-4,054
-5,129
-1,075
Scheduled repayments (excl.mil.
credits)
553
866
1313
Advance repayments
696
6
-690
Subtotal (items 2-5)
-3,447
-4,450
-1 ,003
Total
il,997
-967
-2,964
Private u.s. and Foreign Capital
(incl.errors & omissions)
-4,462
-4,235
1 227
Special u.s. Gov't liabilities
other than military advance
payments
Net (excl. ll official foreign
capital inflowll)
"
95
I 353
I
258
-4,367
-3,882
1
485
Expenditures
Military cash receipts (incl.
mil.adv.payments & repayments
on mil. credits)
5.
Government grants and capital, net
Gross outflows
Capital Flows (excl.U.S.Gov't
capital outflow)
6.
7.
8.
Official foreign capital inflow
Net capital outf1ow
-4 ,367
-2 ,608
Liquidity Balance
-2,370
-3,575
t) ,274
il,274
11. 75.1-
-
- J ,205
Table B
BALANCE OF PAYMENTS OF THE EC COUNTRIES, 1961-67
(Billions of Dollars)
1961
1962
1963
1964
1965.
1966
1967*
Average
1961-67
Current Account Balance
+2.4
+0.8
-0.2
+0.5
+1.3
+2.1
+4.2
+1.6
Capital Account Balance*·
+0.4
+0.3
+0.6
+1.6
+1.1
-0.6
-2.7
+0.1
Overall Balance
+2.8
+1.1
+0.4
+2 .. 1
+2.4
+1.5
+1.5
+1.7
1.9
0.6
1.3
1.8
1.5
1.1
1.4
1.4
-0.4
-0.3
-1.2
0.2
0.7
0.1
0.1
-0.1
1.2
0.8
0.4
0.2
0.3
13.1
3.8
6.8
6.9
4.1
Overall Surplus Used to:
( i)
Increase Net Official Reserves
(ii)
Increase Net Commercial Bank
Foreign Assets
Prepay Official Debt
(iii)
Memorandum Item:
Percentage Change in
Net Official Reserves
Note:
Components may not add to totals because of
8.5
0.4
5.3
6.9
~ounding.
*Partially estimated.
**Includes errors and omissions and net settlements by France on account of Overseas Franc Area.
Souroes:
IMF and OECD statistics, adapted.
t-'
lJ1
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
REMARKS BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE
COMPUTERS AND TAXES CONFERENCE
OF THE
NATIONAL LAW CENTER, GEORGE WASHINGTON UNIVERSITY
STATLER-HILTON HOTEL, WASHINGTON, D. C.
JUNE 18, 1968, 12: 15 P. H. EDT
A COMPUTER STUDY OF TAX DEPRECIATION POLICY
(j
Brief Historical Background
The Treasury Department in its tax activities has been
steadily expanding the use of computer technology.
Over the years speakers from the Internal Revenue
Service have discussed with you in considerable detail the
use of computer technology for handling upwards of 100 million taxpayer accounts and for matching tax returns with
information documents.
The computer is also being extensively used to develop
estimates of the characteristics of our taxpaying population,
which estimates must necessarily be an important background
to tax policy decisions.
At one level this has meant a
mechanization of the process of developing Statistics of
Income.
F-1277
At another level, it has involved the creation of
- 2 models to simulate the taxpaying population under alternative tax laws
0
On
a previous occasion I discussed with
you our individual income tax model, which provides a
flexible tool of analysiS for investigating how tax burdens
would be altered throughout the whole population of taxpayers under alternative changes in the tax law.
Similar
tax models have been created for the estate tax population
and the corporation
ta~
population. They have been of great
assistance in our research on tax policy issues.
In another area we have become more deeply involved
in the use of econometric models for forecasting the aggregate economy.
Many of you are generally aware of the work
done in this field as it has been carried forward through
successively complex models, such as the Brookings-SSRC
model.
Our experience to date indicates the desirability
of developing a family of relatively smaller models each
designed to answer specific policy questions.
If econometric models are to be used for policy making,
they must. have the capability of providing results quickly
for a variety of policy inputs and for changes in exogenous
variables.
They also must be designed to produce quarterly
data since policy positions must be reviewed and formulated
- 3 -
more frequently than once a year.
Under these circumstances, very large econometric
models which run into 100 equations or so appear to involve
quite substantial technological problems in providing the
necessary flexibility.
Also, policy makers do tend to
focus on a relatively limited set of variables that might
be important to a particular policy problem, and we believe
that somewhat smaller models adapted to specific problems
seem to offer a greater prospect of providing the flexibility and the short turn-around time necessary for practical
policy making.
Thus, in a particular situation where deci-
sions about the investment credit might be pertinent, a
model involving rather specific investment behavioral equations may be necessary.
In other situations, a model which
treats investment as largely exogenous might be quite satisfactory.
All of these areas emphasize in one way or another some
aspects of the aggregate economy, and it is this mUltiplicity
of circumstances in the real world that drives us to using
computers.
Depreciation Study
General Summary
I would like to talk today primarily about a use of
- 4 computer technology to investigate in detail a more specific kind of tax policy issue, namely, depreciation for
tax purposes.
We are now preparing for publication later
this year our three-year study of this subject.
This study is of particular interest for several
reasons.
The subject matter itself, tax depreciation,
has been a remarkably persistent discussion topic in tax
policy.
The methodology of the study represented, for us,
a new kind of application of the computer.
Finally, we
think the study reaches a clear conclusion, something that
cannot always be said about research.
We can pick up the perpetual debate on depreciation
as of 1962.
In that year the Treasury announced its depre-
ciation guidelines, which provided suggested depreciation
lives for business assets grouped into about 75 classes.
These lives were considerably shorter than the lives most
business firms had been taking for tax purposes under prior
administrative practices and procedures.
Anot~er
part of the Treasury announcement in 1962 was
the reserve ratio test, an administrative technique to
determine that the tax life used by the taxpayer, even if
it came from the depreciation guidelines, was realistic
- 5 for him,
--
that is, generally corresponded to his actual
replacement cycle.
At all times during the Treasury consideration of
this matter, the necessity for realism in tax depreciation
write-offs was always insisted upon for the long run.
Nevertheless, in 1962 a three-year moratorium on the application of the reserve ratio was provided, and in 1965 a
tapered application of the reserve ratio test was allowed.
In effect, taxpayers were given the temporary opportunity
to lower their taxes by using the shorter guideline lives
without a full application of the reserve ratio test.
This
opportunity was in the longer run conditioned on their using
these tax savings, and the savings from the investment
credit, also adopted in 1962, to increase their rate of
modernization and thereby come into conformity with guideline lives.
These lives were never intended to be provided
or available to taxpayers without the guid pro guo of those
taxpayers keeping actual replacement cycles commensurately
short or reducing them accordingly.
intended to be realistic.
Tax depreciation was
The reserve ratio test was
designed to achieve this end, while avoiding the administrative difficulties prevalent prior to 1962.
- 6 -
In the last six years discussion about depreciation
has focused on the Treasury's emphasis on realism in
depreciation as implemented by the reserve ratio test.
On
one hand, that test was criticized as inefficient and
capricious in its results.
On the other hand, it was
argued that in principle realism should not be a standard
and that the guideline depreciation lives ought to be available to a taxpayer even if his own actual replacement cycle
was considerably longer.
This two-handed assertion deserved serious investigation.
A project was developed within Treasury to investigate
this issue and in particular to focus on two basic questions:
First, does the need for tax equity and neutrality
between similarly situated taxpayers justify a serious
effort to keep depreciation deductions realistic?
Second, is the reserve ratio test an efficient indicator of the realism of the depreciation life for a
particular taxpayer?
This study was carried out by Richard Pollock of the
Treasury's Office of Tax Analysis with the assistance in
model design of the Consad Research Corporation of
and New York.
Pittsbur~
The study is now complete and will be published
- 7 later this year as another in the series of Treasury Tax
Policy Research Studies.
The study -- in summary -- confirmed the expectations
and analysis behind the original 1962 depreciation reform.
The answers that were reached on the above two questions
are:
(1)
Realistic tax depreciation is important from
an equity point of view, in that a tax depreciation
policy which does not insist on linking tax lives to
actual replacement lives would result in an intolerable
cost in terms of inequities between similarly situated
taxpayers.
This clearly suggests that the tax depre-
ciation provisions of the Code should not be utilized
for implementing tax incentive programs, since unrealistic depreciation would in turn result in the creation
of unrealistic taxable income measurements.*
* We may note, as an aside, that this undesirability of the
use of the depreciation deduction for investment incentive
purposes does not mean that a tax system cannot involve
such inaentives if they are thought desirable. Under our
present rules, the investment credit operates as an inducement to modernization and expansion of machinery and
equipment. The difference in effect and operation of such
a device from the use of depreciation policy to.the same end
is clear. The investment credit does give Taxpayer A who
has purchased a new machine a tax rate lower than that of
Taxpayer B who has not purchased a new machine, and it does
so because it is designed to serve the national goal of
- 8 (2)
The existing reserve ratio test does serve
as a fair and efficient administrative technique to
enforce the correspondence between actual depreciation
lives and tax depreciation lives which is necessary for
the realistic and meaningful determination of taxable
income.
The study disclosed some relatively minor
situations where this would not be the case, and these
are now being remedied as a result of the study.
The Conceptual Issues
Tax depreciation attempts to reach the same goal which
good accounting depreciation seeks, namely, a reasonable
and realistic distinction between the return of capital and
the return on capital, so that income of a year can be meaningfully described.
If, over the life of an asset, the
excess of receipts over operating costs that is generated
covers no more than the initial capital cost, then the asset
Continuation of Footnote from Page 7:
expanding and modernizing our productive capacity through
new ma~hines. If Taxpayer B purchases a new machine, he
also would get the credit. Unrealistic depreciation, however, would mean that if both taxpayers had bought new
machines and both had the same actual replacement cycles -and thus'had equally contributed to that national goal -still Taxpayer A by using an unrealistic shorter tax life
would pay lower taxes than Taxpayer B. Or, if both are
using the same tax life, but Taxpayer A's actual replacement
life is longer than that but Taxpayer B's is the same as the
tax life, then here also Taxpayer A would be receiving a
lower tax rate without any larger contribution to the natio~l
goal.
- 9 -
has not generated net income.
But more detail is necessary.
Both tax depreciation
and accounting depreciation must spread the charge for
depreciation over a number of years.
Very clearly, a tax-
payer obtains an advantage if he can obtain his depreciation
deductions, that is, his tax-free income from the asset
early in time rather than later.
The reason for this is
at the heart of the tax depreciation issue:
time is money.
Obviously, you would not lend somebody a dollar today
as a business arrangement if he promised to return only the
same amount to you one year from now.
an arm's length, interest-free loan.
You would not make
In effect, early
depreciation -- depreciation that is more rapid than realistic depreciation -- is like an interest-free loan from the
government.
As the result of being able to pay lower taxes
in the early years of the asset's use in return for paying
more taxes in the later years, the taxpayer taking depreciation early will have more funds available to him to invest
in his business without any interest charge for those funds.
A taxpayer who actually replaces his equipment on a
IO-year cycle would get the advantage of early depreciation
if, say, a 7-year tax life was available to him without
regard to that replacement cycle.
He would have an artificial,
- 10 tax-generated financial advantage over another taxpayer who
replaces on a la-year cycle and uses a tax life of 10 years.
But how much better off would he be?
The measurement
of this advantage over the long run under each of the many
options for calculating depreciation and the different ways
of measuring profits and effective tax rates is one main
objective of the depreciation study.
Assume for the moment that these two taxpayers with
10-year actual lives are using straight-line depreciation
and have a before-tax internal rate of return of 15 percent.
In the case of the taxpayer who is conforming, i.e.,
actual 10-year life equal to lO-year tax life, his after-tax
rate of return will be 7.3 percent.
But the taxpayer who
is using the 7-year tax life would thereby increase that
7.3 percent after-tax rate of return to 8.5 percent, a 16
percent increase in the after-tax rate of return.
The percentage increase in the after-tax rate of return
resulting from a shortening of the appropriate tax life will
vary with'the circumstances.
The greater the shortening,
the larger the resulting percentage increase in the after-tax
rate of return.
The change illustrated here was a 30 percent
reduction from 10 years to 7 years.
While illustrative, it
- 11 -
might be considered fairly representative of the difference
in lives that would develop between identical taxpayers in
a system of arbitrary depreciation lives unrelated to actual
lives.
This analysis of the point that the timing of depreciation deductions can make an important difference in tax
payments, and hence in financial consequences, is standard
in the economic literature.
The analysis is typically
worked out, however, in terms of simple models of one asset
which
entail~
only a few desk calculations.
The more import-
ant conceptual issue that we needed to explore is how much
of a difference in after-tax profits the timing of depreciation would make, in the long run, in typically complex
business situations if the taxpayer's tax depreciation differed significantly from his actual replacement cycle.
In
the long run is this advantage largely washed out as taxpayers
go through later years with largely depreciated assets?
Closely related to this question is the question of how
will we in fact know whether the tax life and actual life
match or not.
The reserve ratio test was designed to answer
this question and to give us this information.
That test has
been criticized, however, on the grounds that in typically
complex business situations involving things like irregular
- 12 growth, retirement dispersion, and the like, the test will
give a large number of wrong signals and assert that a taxpayer is failing the test when actually his replacement
cycle does in fact match his tax life.
It was also argued
that on occasion the reserve ratio test would pass a taxpayer when in reality he should have failed the test.
The exploration of these assertions -- the testing of
the reserve ratio test itself -- is the other main objective
of the depreciation study.
The Computer Study of Depreciation
The focus, then, of both of these issues comes down to:
"How will things work out in typically complex business situations in the long run?"
To investigate these issues, we
had Consad Research Corporation design a business simulation
model.
It was designed to describe the experience of a busi-
ness firm over a p,eriod of 50 years..
The program was struc-
tured to pei:mit the introdlJC t: ion of a large number of
characteristics of this business firm, so as to give us
some confidence that we had investigated our basic questions
in all kinds of complex business situations.
The program calculated and printed out the actual reserve
ratio for the firm year by year in a form that would indicate
- 13 whether it passed or failed the reserve ratio test.
It
also printed out the yearly profitability of the firm on
a before-tax and after-tax basis on a variety of profitability measures.
The study consisted of multiple runs of the model in
differing situations to answer the two questions cited
earlier:
Does the absence of realism in depreciation tax
lives generate serious inequities between taxpayers, and
does the reserve ratio test accurately test the realism of
a taxpayer's depreciation tax life?
Some descriptive detail on the business simulation is
here appropriate to determine whether it captured the complexity of the real world.
Our business is first assumed to use a tax life equal
to the actual life of the asset, and then the tax life can
be set shorter than the actual life.
assume some retirement dispersion.
Also, we have to
While, say, 10 years may
be the average life, there may be only 30 percent or 40 percent of the assets -- say, machine tools -- acquired in any
year which actually drop out after a 10-year period, with
the other machine tools dropping out sooner or later than
10 years depending upon the nature of the retirement dispersion assumed.
It is also necessary to assume various growth
- 14 rates and growth patterns, and to assume various levels of
estimated and realized salvage.
This information is required to simulate over time the
depreciation base of a firm.
But in the complex reality of
the tax system there are many ways to compute the depreciation deduction from this base.
There are approximately eight different depreciation
strategies involving different mixes of write-off and asset
grouping techniques that can be used by the taxpayer.
The
taxpayer could use item accounting, which is the form that
usually shows up in illustrations, together with either the
straight-line or double declining balance methods of writeoff.
Or he could use closed-end multi-asset accounting,
with straight line, double declining balance, or sum-of-theyears digits methods of write-off.
Or, he could use open-end
multi-asset accounting, with anyone of the same three general
write-off patterns.
The model also needed to be endowed with assumptions that
would permit it to generate a gross income against which to
use the depreciation deductions.
The particularly important
set of assumptions here was a set which described alternative
ways in which the productivity of each asset declined or
remained stable during its useful life.
Other assumptions
specified debt-equity ratios, the cost of capital, and the like.
- 15
Such was the analytic model.
Let me turn now to the
answers that this model gave to our two qain questions,
starting with the question of the reliability of the reserve
ratio test.
Use of Computer Model to Test Validity
of Reserve Ratio Test
•
Feasibility of the Test
The feasibility of the reserve ratio test can be evaluated in terms of the number of, or the absence of, unwarranted
failures -- that is, a failing under the reserve ratio test
by a simulated taxpayer whose tax life is in fact equal to
his actual life, i.e., a conforming taxpayer, and therefore
one who should not have failed the test.
should not permit
payers.
~nwarranted
Similarly the test
passes for non-conforming tax-
If a comparison of the actual reserve ratio with
the permissible reserve ratio generated over the period of
simulation for any defined
lnv~stme~t
situation
does not
reveal any unwarranted failures, and few unwarranted passes,
the reserve ratio test can be deemed to be a feasible and
workable test, assuming that the range in variety of investment situations examined has been sufficiently wide and
diverse to make that examination really meaningful.
One issue investigated therefore was whether a taxpayer
whose replacement cycle corresponded to his tax life for
- 16 depreciation would pass the reserve ratio test through all
of the 50-year simulation period without suffering
~
unwarranted failure.
The rather mechanical and straightforward comparison
of the array of actual and permissible reserve ratios in
a particular simulated business investment situation could
be obtained under the model as many times as was needed to
investigate the possibility of unwarranted failures being
generated by some combination of assumed real investment
characteristics. For example, the assumed retirement dispersion and the assumed degree of irregularity in the growth
pattern could be changed, alone or together, to determine
if either one alone or in operation with the other could in
fact generate unwarranted failures, as some of the critics
of the reserve ratio test have maintained.
Once the assump-
tions were changed and fed into the computer, a new array of
actual and permissible reserve ratios would become available,
thus permitting a new comparison.
These comparisons were
also varied to determine if there was some interaction
between the length of actual life and the degree of retirement dispersion and degree of irregularity in growth
pattern.
All these comparisons showed that unwarranted failures
of the reserve ratio test never occurred after the build-Up
- 17 period of a closed-end multi-asset account.
That test
proved throughout all of the comparisons to be a reliable
indicator of whether tax lives were conforming to actual
lives.
Failures did occur when an apparently "conforming taxpayer" was uSing the open-end SYD method of depreciation.
The factor here that triggers a failure of the reserve ratio
test is that depreciation has been excessive because of a
defect of this grouping method rather than because of an_
incorrect tax life.
The reserve ratio failure is in fact
warranted, because the grouping method provides excessive
depreciation even when the tax life is correct. We are
considering this problem, but as it stands at the moment,
the benefits of the new guideline lives are being denied
to any taxpayer using either the straight-line or SYD openend methods, so that this aspect of the reserve ratio test
is irrelevant to the operation of the guidelines.
Additional Information Relevant to the
Operation of the Reserve Ratio Test
A point that deserves comment here is that under present
rules the reserve ratio test is structured to provide a leeway of about 20 percent.
This means that a taxpayer does
not fail the test until his reserve ratio exceeds the value
- 18 that it would be expected to have if the actual life was
20 percent longer than the tax life being used.
As a
consequence, if a taxpayer uses a lO-year tax life, the
question arises whether he could deliberately and consistently take advantage of the 20 percent leeway by purposely
keeping his replacement cycle at 12 years and still pass
the test.
The study indicated that in such cases it would
be quite possible that the reserve ratio test would be
failed.
However, the failure would not be unwarranted since
the taxpayer was in fact not conforming; i.e., he did in
fact have an actual life which was 20 percent longer than
his tax life.' This means simply that the leeway should be
used for its intended purpose of taking care of mechanical
or random variations in the data, rather than being regarded
as an invitation to stretch non-conformity as far as possible.
If a taxpayer doesn't abuse this leeway provision and
instead uses a tax life approximately equal to his actual
life, then the study shows he would not have
to~ry
about
suffering an unwarranted failure of the reserve ratio test
even under some of the more severe combinations of irregular
growth and retirement dispersion.
The leeway here serves
its intended purpose of protecting the conforming taxpayer
from an unwarranted failure.
And the actual simulations
- 19 indicated not only that unwarranted failures do not occur,
but also that the conforming taxpayer has an average margin
of passage of the test which even exceeds the average leeway
by an appreciable amount.
Finally, as respects the validity of the reserve ratio
test, the study showed that a non-conforming taxpayer whose
tax life is more than 20 percent shorter than his replacement cycle will rarely pass the reserve ratio test -- that
is, the test essentially does not permit unwarranted passes.
Use of Computer Model to Investigate
the Equity Issue
Extension of Single Asset Analysis to a
Multi-asset Growth Situation
We saw that in a simple 10-year life single asset situation the reduction of the tax life from 10 years to 7 years
could increase the after-tax internal rate of return from
7.3 percent to 8.5 percent (assuming that the before-tax
rate of return was 15 percent).
This improvement in the
rate of return is related only to this single asset, and
would occur if the firm acquired the asset and bought no
other asset either before or after this particular asset was
retired.
- 20 -
Our problem here, again, was how does this single asset
analysis work out in the long run in complex business situations?
Many people approaching the depreciation issue
have intuitively assumed that in the long run a taxpayer
who uses up his depreciation rapidly will have to pay the
piper.
His depreciation basis will largely be gone and his
depreciation deductions will quickly decline.
These people
therefore conclude that in the long run the tax advantage
of rapid depreciation cannot be very great.
Whether it is
or not -- whether this intuitive assumption is really correct -- is the question we wanted to investigate in a systematic and thorough way.
The heart of a long run analysis of this question must
be situations involving multiple assets plus growth.
One can obtain some feel for the impact of growth by
considering our simple example in the context of a multiasset growth situation.
That is, assume that one taxpayer
has a stock of IO-year assets whose total amount was growing at about 5 percent a year.
Assume also that he was
depreciating these assets at the appropriate IO-year life
and using straight-line depreciation.
This conforming tax-
payer's actual reserve ratio at the end of ,any year after
the build-up period would be 51 percent (the build-up period
- 21 refers to the first replacement cycle, when those machines
bought initially would be expected to need replacement).
That is, 51 percent of the taxpayer's total asset cost -his depreciation base -- at any time would be represented
by the accumulated depreciation deductions that had been
taken on the asse.ts on hand.
By way of contrast, take a taxpayer in an identical
asset situation -- namely, a stock of lO-year assets growing about 5 percent a year -- but assume that this taxpayer
is using a 7-year tax life for these assets, on the straightline method.
After the build-up period, his actual reserve
ratio will be 65 percent at the end of any particular year.
The difference in reserve ratio in these two cases amounts
to 14 percentage points.
Ever: hefore the rate of return implications in the two
situations are discussed, the continuing benefits going to
the taxpayer using the 7-year tax life are obvious.
The
14 percentage point difference in the actual reserve ratios
means tha·t the taxpayer using the 7-year tax life has
recovered that additional amount of capital tax free.
For
him, the capital cost represented by his depreciation base
is 65 percent recovered, while the depreciation base and
related capital of the conforming taxpayer are only 51
- 22 -
percent recovered at any given time.
An additional tax-
free recovery of capital amounting to 14 percent·of one's
capital cost is significant on its face.
With approximately
a 50 percent corporate income tax rate the cumulative tax
savings resulting from the rapid depreciation and consequent
faster tax-free recovery of capital amount to about 7 percent of the capital cost.
We can see in this multi-asset growth situation a new
factor -- a permanence to the advantage that persists over
the life of the business.
In the single-asset case the
tax-free recovery created in the early years of the asset's
life must be repaid in the later years.
thus in essence a loan
~-
The recovery is
which is interest-free and hence
an advantage -- but this. loan will have to be repaid later
in the lif2 of an asset as depreciation deductions decline.
But in the multi-asset case, especially with growth, the
tax-free recovery and additional capitalare in effect perma·
nent, as long as the stock of assets remains at least the
same size or grows.
The loan description does not really
fit this permanent addition to capital, unless one wants to
call it a "permanent loan".
The explanation of this effect is straightforward:
The
pattern observed for the single asset case still persists for
- 23 any single asset in the multi-asset situation.
However,
in the multi-asset situation at any given time there are
always at least as many assets in their loan creation stage
as there are assets in their loan repayment stage.
And in
a growth situation the assets in their loan creation stage
outnumber the assets in their loan repayment stage.
Thus,
the more growth there is the larger this permanent tax-free
recovery, expressed as a percentage of the firm's investment
in depreciable assets.
It is obvious from this illustration that a relatively
small amount of non-conformity has produced a relatively
large advantage to the non-conforming taxpayer.
This, on
its face, suggests the need to enforce a rather close conformity by all taxpayers between tax lives and actual lives.
The 7 percent advantage illustrated in this particular
example is by no means an extreme case.
While we cannot
here review the full array of results obtained in the study,
in many cases the percentage was considerably higher.
Even if one is not concerned with the horizontal equity
effects of such large permanent tax-free recoveries of
capital accruing to some taxpayers while they are not accruing
to others, the revenue effects for the Government should be a
concern.
Viewed from the aspect of Government revenues, that
- 24 permanent tax-free recovery is a permanent grant -- or loan
if one prefers that term -- out of Government revenues.
The
larger the tax-free grant going to some taxpayers, the less
money a given tax rate structure is going to produce for the
Government. This means that other taxpayers have to pay more
taxes or the Government has to borrow more money.
Tax Advantage Expressed in Terms of Effective Tax Rates
It would be helpful in placing this advantage of rapid
depreciation in perspective if we could express the recovery
of capital cost in terms of its impact on effective tax rates. *
* It
may be helpful here to describe generally the methodology
used in the study to develop the impact on effective tax
rates. To do so we will first have to consider the effect on
after-tax profit rates or rates of return. In the simple
single asset case, we made assumptions about profitability
and cash flow. Once such a rate of return assumption was
explicit, it was then possible to calculate a stream of
before-tax cash flow and a description of how the more rapid
depreciation deduction and the applicable tax rate affected
the after-tax rate of return. Let us turn now to the matter
of after-tax profit rates in the multi-asset case.
At this point it is important to note that tax rates measured
in the usual accounting sense are not helpful to determine
the measure of this tax advantage obtained by the non-conforming taxpayer. According to the books of account, corporations
pay in tax 48 percent of their taxable income (before credits).
If one relates the total tax payment to the taxable income,
as determined by whatever tax depreciation is used, then, of
course, there would be no difference in tax rates so expressed
- 2S -
Continuation of Footnote:
between our two taxpayers -- for each the tax rate is 48 percent. But this identity in tax rates as so described obviously
obscures the fact that the two taxpayers who are identical
except for the tax lives that they use, will actually be
reporting different taxable incomes because of differing
depreciation deductions. As an aside, as the Treasury has
pointed out before, this effect of current accounting practice
to make it appear that every corporation pays a 48 percent
rate of tax when in fact corporations are actually paying at
vastly different -- and often quite lower -- effective rates
in terms of their actual profits, as a result of a variety of
tax preferences, has become a serious obstacle to an awareness
of the actual structure of our tax system.
To get away from this inadequacy of accounting practice to furnish realistic effective rates for purposes of comparison, it
is necessary first to ascertain the before-tax and after-tax
cash flows and from these to determine profit rates.
Before-tax cash flow is the total amount of cash available to
the firm, after all the out-of-pocket expenses have been paid.
(Thus, in conventional accounting terms, it is the sum of
before-tax profits plus any allowance for depreciation; sometimes this total is referred to as quasi-rents.)
To determine after-tax cash flow we must calculate each year
the depreciation deduction, and then by subtracting this deduction from before-tax cash flow we can derive the taxable income.
Given this stream of taxable income over each of the years
being simulated, together with the selected tax rate, enables
us to determine the annual tax payments to be made. We then
subtract those payments from taxable income to obtain the
after-tax cash flow available to the firm. Any changes in
tax depreciation will, of course, change the taxable income
and thus the resulting after-tax cash flow. There can therefore be as many different kinds of time streams for after-tax
cash flow as there are for depreciation deductions, namely,
about eight.
From this information we have cash flows for taxpayers who are
identical except for their using different depreciation lives
- 26 -
for tax purposes. From these cash flows we want to calculate for each taxpayer a profit rate before and after tax.
The difference between the profit rate after tax for any
taxpayer and his profit rate before tax would be his effective tax rate.
Profit rates can be calculated from cash flows in different
ways, and the study involves all the commonly used methods
of determining profit rates. One of the important methods
used in the study involves a comparison of before-tax and
after-tax internal rates of return. An internal rate of
return can be defined as that rate of discount which sets
some stream of cash flow over time equal to some fixed
amount of dollars at some starting point. As a start this
concept is most easily considered in terms of a single asset.
That is, assume an asset which costs a dollar and which generates or throws off a certain amount of cash
flow before tax
-over a IO-year period of time. Some discount factor, such as
15 percent for instance, might be the internal rate of return
before tax which sets that before-tax stream of cash flow
equal to the one dollar initial acquisition cost.
Suppose that the same calculation applied to the cash flow
after tax, determined by using actual taxes paid, shows that
the internal rate of return after-tax was 7.8 percent. Since
7.8 percent is exactly 52 percent of the before-tax internal
rate of return of 15 percent, the calculation indicates that
the taxpayer has paid an effective tax rate of 48 percent.
Put differently, his before-tax rate of return was reduced by
48 percent as a consequence of the tax payment. Thus a comparison of before-tax rates of return with after-tax rates of
return determined by actual tax payments made, enables us to
derive the actual effective rates of tax for the varying
depreciation situations.
A taxpayer using a depreciation tax life shorter than the
actual life will find less difference between his before and
after-tax rates of return, i.e., he will have a lower effective tax rate than will the conforming taxpayer. This difference in the effective tax rates of these two taxpayers is the
measure of the tax advantage that would go to the non-conforming taxpayer, in the absence of the enforcement of a link
between tax lives and actual lives, and hence is the measure
of tax inequity in non-conforming depreciation.
- 27 -
The model indicates that over the long run, as well as
the short run, the use of non-conforming tax lives can have
a large impact on effective tax rates.
Very commonly the
opportunity to use a tax life shorter by 30 percent than
the actual life will produce an effective tax rate, on the
income from the assets, which is lower by as much as 15 percent.
Thus, a 48 percent effective income tax rate can be
reduced to a 41 percent effective rate.
Or, put another way,
the use of the shorter tax life means in effect a doubling
of the investment credit for the non-conforming taxpayer.
If realism in depreciation tax lives is not enforced,
it will not be at all uncommon that one taxpayer will be
replacing at the guideline tax life but a competitor will
be using a tax life only 70 percent as long as his actual
life.
If so, the benefit that would be conferred on the
non-conforming taxpayer would be a reduction in its corporate tax rate on the profit from the assets twice as large
as the tax rate reduction granted all corporations in the
1964 Act.
The study examined this difference in effective tax
rates in a wide variety of situations. *
* The
Some range of
study also tested the difference on the basis of alternative definitions of profitability. Some businessmen for
example calculate the profitability of an investment in
- 28 -
difference was apparent, but the basic pattern was quite
clear.
Very rarely did 30 percent non-conformity produce
a tax benefit as small as a reduction of 5 percent of the
tax, and under some combinations of fact situations and
profitability definitions the difference was over 20 percent -- which would mean a tax rate of 38 percent.
Thus, non-conformity in depreciation lives does not
catch
~
with itself.
The intuitive assumptions described
earlier about the long-run effects are not valid.
Instead,
such non-conformity in realistic business situations is a
continuing source of different tax treatment and the differences do not wash out over time.
These calculations regarding
effective tax rates described those rates over a 50-year
period.
The study thus furnishes a measure of the tax advantage
derived over the long run by using tax lives at variance with
actual lives and thus securing rapid depreciation.
Moreover,
it permits this measure to be expressed in terms of effective
income tax rates on the profits earned by the assets involved.
Continuation of Footnote from Page 27:
terms of the number of years it will take for the cash throwoff to equal the capital outlay. Effective tax rates were
also computed by comparing this profitability measure, called
the pay-off period, on a before and after-tax basis.
- 29 This enables us to describe the advantage in terms of subjecting one taxpayer to a 48 percent tax rate, and another
to a 41 percent tax rate, and still another to a lower rate,
and so on.
No one has advocated that we draw up a corporate
tax rate schedule which would so capriciously subject identical taxpayers to such differences in tax rates.
The study
shows that this would be the actual, albeit hidden, result
of permitting non-conformity in depreciation tax lives.
There appears to be no reason to support the discriminatory reduction of taxes for particular taxpayers by such
large amounts.
Since we have better ways of implementing
fiscal policy, tax depreciation policy should not vary with
business cycles.
A fair measure of taxable income in a recession is a
fair measure in an inflation, as well as being a fair measure
when the economy is in equilibrium.
Conclusion
Future Study and Use of the Depreciation Study Computer Model
It can be a great advantage for an income tax structure
to have a rational method of handling depreciation that provides both great flexibility to taxpayers in choosing tax
lives that they consider realistic, under their attitudes as
- 30 to asset use and obsolescence, and a reliable objective
technique by which taxpayers and administrators may measure
the conformity of those lives to the actual replacement
policies of the taxpayer so that enforcement of realistic
depreciation can be readily secured.
This study points to
the conclusion that the guideline life approach coupled with
the reserve ratio test are techniques which meet these
standards for a rational depreciation policy.
It must be noted that this study -- as do the guideline
lives and the reserve ratio test to which this study relates
deals with depreciable lives.
The study does not tell us
whether, in a given situation, accelerated depreciation or
straight-line depreciation more properly measures the allocation of depreciation deductions over the tax life.
It
would be helpful to continue this research in the depreciation
area by studying certain aspects of these accelerated methods.
For example, is accelerated depreciation a proper method in
a lease situation, in which the taxpayer has himself chosen
a stream of receipts to provide a recovery of capital whose
timing is clearly at variance with the timing of capital recovery which the accelerated methods presuppose?
- 31 This brief review of the Treasury depreciation study
may help to indicate something of the diversity and the
complexity involved in quantifying some of the issues being
discussed in the tax depreciation field.
The data that I
have referred to today, and even the data that are summarized in the depreciation study itself, are only examples of
the types of quantifications that can be produced by this
model of business behavior and the computer program which
implements that model.
After the study is published, we would appreciate any
evaluation of the methodology or of the particular conclusions drawn from the results presented in the study.
The
detailed study, when it is available, will provide quite
specific explanations which other researchers can use to
extend the analysis.
The tax depreciation area is one of
the more technical and involved areas that policy officials,
tax analysts and practitioners have to deal with.
Research
and analysis will continue -- and the model could be made
available for those interested in the depreciation area.
We feel that this study is a suitable guide for policy making
at this time.
It will have served an equally important pur-
pose if it raises the level of the dialogue in this difficult
analytic and policy area.
- 32 We should always strive to pinpoint the crucial questions in policy areas by scraping away the slogans and
mythology which can so completely obscure the essentials of
the issues.
It is our hope that this particular tax policy
research study will help to define the real issues in the
depreciation area as well as to supply, at least partially,
an adequate answer to those issues.
The very effort of pro-
viding more quantitative and objective answers to difficult
but necessary questions may assist or stimulate others in
providing even better answers.
The quality of the answers,
as in the case of the Treasury Tax Policy Research Studies,
should be judged on the basis of the acceptability of the
research methodology and the adequacy of the analysis rather
than the support they provide to any preconceived positions,
including those of the Treasury Department.
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY I S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$2,700,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing
June 27, 1968,
in the 8Jlk)unt of
$2,610,998,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of it, 600,000,000, or thereabouts,
additional amount of bills dated March 28, 1968,
mature SeEtember 26,1968,orIglnally issued in the
$1,000,527,000 51 the addItional and original bills
interchangeable.
June 27, 1968,
representing an
and to
amount of
to be freely
182-day billS, for $1,100,000,000, or thereabouts, to be dated
June 27, 1968,
and to mature December 26, 1968~
The bills o~ both series will be issued on a discount basis under
competitive and noncompetitive biddIng as hereinafter provided, and at
maturity their fare amount wIll be payable without interest. They
will be issued in bearer form only, and In deno~nations of $1,000,
$5,000, $10,000, $50,000, $100,000, $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
time, Monday ~ June 24, 19680
Tenders will not be
received at the T~easury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price cffered must be expressed on the basis of 100.
with not more than three deCimals, e. g., 99.925. Fractions may not
be used. It 1s urged that tenders be made on the printed forms and
forwarded in the spec1al envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
up
Bank1ng institutions generally may submit tenders for account of
customers provided the names of the customers are set forth 1n 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.
F-1278
- 2 Immediately after the closing hour, tenders will be opened at t~
Federal Reserve Banks and Branches, following which public announce·
ment 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 Treasu~
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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on June 27, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing June 27, 19680
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 frool
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
June 19, 1968
FOR IMMEDIATE RELEASE
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury billa to the aggregate amount of
$1,500,000,000, or thereabouts, for cash and 1n exchange for
Treasury bills maturing June 30, 1968,
in the amount of
$ 1,500,552,000, as follows:
273-day bills (to maturity date) to be issued
in the amount of $ 500,000,000,
or thereabouts,
additional amount of billa dated March 31, 1968,
mature March 31,1969,
originally issued in the
$ 1,000,119,000,the additional and original bills
interchangeable.
July 1, 1968,
representing an
and to
amount of
to be freely
365-day bills, for $ 1,000,000,000, or thereabouts, to be dated
June 30, 1968,
and to mature June 30, 1969.
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
(maturl ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Standard
time, Tuesday, June 25, 1968.
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. (Notwithstanding the fact that the one-year bills will
run for 365 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 o )
It is urged that tenders be made on the
printed forms and forwarded in the special envelopes which will be
suppliea by Federal Reserve Banks or Branches on application therefor
up
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
F-1279
- 2 -
~esponSlble and recognized dealers in investment securities.
Tenders
rom others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accotmpanied by an express guaranty of payment by an incorporated bank
or rust 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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on July 1, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing June 30,1968.
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
TREASURY DEPARTMENT
June 21, 1968
FOR IMMEDIATE RELEASE
STATEMENT BY SECRETARY OF THE TREASURY HENRY H. FOWLER
I congratulate the ~~mbers of the Congress who have
demonstrated both a high sense of fiscal responsibility and
real political courage in voting to accept the Conference
Report.
They have done what had to be
interest: made clear to the world
will take the steps needed to keep
order, protect our economic future
dollar, both at home and abroad.
done in the national
that the United States
its financial house in
and strengthen the
The decisive vote increasing taxes and decreasing
projected public expenditures -- both unpopular measures
in an election year -- should go far to sustain confidence
in the dollar, the economy on which it is based, and our
system of government.
This vote was a momentous decision -- to pay our nation's
bills and order our economic and financial affairs in such
a manner as to reduce sharply the twin deficits in our
federal budget and in our international balance of payments.
I believe that this action will make possible and
probable a return to balance in our federal budget, in
our international payments, and in our economy during the
fiscal year 1969 which starts July 1.
This vote is the one action which does most to protect
and strength~-the financial system of the free world. At
home, it will aid the forces of financial stability and
help fight those of inflation, which does its greatest
harm among the poor, the elderly, and those living on fixed
incomes.
F-1280
- 2 What was at issue was nothing less than a test of
representative government in the vital but too little
understood world of economic affairs. It has resulted in
proof that the processes of the democratic system of the
United States can work to follow a course which, distasteful
though it may be at the moment, is the only one which can
prevent great future harm to the nation.
It took courage and foresight for President Johnson to
initiate these tax proposals and to insist month after month
that they be adopted.
It took a high sense of public responsibility for
leaders of the business and financial community to put the
public weal above short-run personal and corporate
interest and urge that their taxes be increased in the
national interest.
It took the give and take that characterizes our system
of separation of powers with its checks and balances,
particularly in fiscal affairs, to arrive at a package that
fully satisfied none but was acceptable to all -- to the
Administration and both Houses of the Congress -- the
Tax-writing committees and the Appropriations committees
and the responsible leadership of both political parties as
represented in the Congress.
The Members who voted to accept this Conference Report
acted in the philosophy of Edmund Burke, who said that he
would rather displease his constituents than harm them.
In this situation, however, it was a case of displeasing
some of the constituents rather than harming all of them.
It took courage for them to act on this conviction.
And that courage should and will be valued at home and
throughout the world.
000
TREASURY DEPARTMENT
Washington
FOR P.M. RELEASE
Sunday, June 23, 1968
REMARKS BY THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETARY OF THE TREASURY
BEFORE THE GRADUATING ClASS OF THE
MLAMI-JACOBS JUNIOR COLLEGE OF BUSINESS
DAYTON, OHIO
SUNDAY, JUNE 23, 1968, 2:30 P.M. EDT
MACRO-LEADERSHIP
The question of leadership has intrigued me for some
time.
When I last dealt with this issue more than two
years ago, I advanced the thesis that, in the last analysis,
leadership was an "attitude of mind."
I said:
"No matter what programs of specialized
training and generalized experience any of us
can devise, there must be the willingness by some
individuals to accept the risks that are the inevitable companions of leadership,lI
Today, I still hold this to be true.
However, the inter-
vening events since my last discussion have made me wonder
about the "attitude of mind" of those who seek sound leadership.
By this I mean, how many of us fully understand the
problems and responsibilities of leadership and the proper
- 2 role we should play in this setting?
I believe this is a more vital and timely question now,
perhaps, than in any other period in recent history.
It is vital and timely, because today the normal methods
by which our society accepts or rejects leadership have come
under serious and dangerous attack.
The events of this year
are a sad illustration:
We have witnessed the tragic assassinations of
two of our prominent leaders, Senator Robert F.
Kennedy and the Rev. Martin Luther King.
We have witnessed sharply increasing militancy,
strife and violence on the campus, in our cities
and among our races.
And we have witnessed a rising number of strikes
and protests -- some fraught with blood -- in our
country, in European nations and elsewhere.
Are We Sick?
The question is often asked, and understandably so:
Are we a sick society?
I don't believe that our society is sick.
perplexed.
I think it is
We are living in a condition in which man has
probably never lived before -- one where we are enormously
- 3 rich.
We are an extremely affluent nation, with the exception
of some that the affluence has passed by.
I think we are
struggling to find the answers to many questions of how to
live with this great wealth.
issues:
It involves a whole gamut of
The people who have been passed by; the orientation
of our educational system; our system of taxation; and our
relationships with the rest of the world.
I look at it not as a sick society, but a society that
is dynamically groping for answers.
groping that I deplore.
There are things in the
I deplore the violence and blatant
disrespect for the law.
My definition of a sick society, however, is a society
that is apathetic -- one that just doesn't care, has no ideas
and does not try to get any.
God knows we have
ideas~
We
are assaulted with ideas and the conflicts of ideas from all
sides and this is not my definition of a sick society.
It is a definition of a society that is very troubled.
It is troubled with questions that it is trying to meet -definitely trying to meet.
The greatest sign of hope is that
weare actually engaging in the struggle.
There is one aspect of this struggle that has concerned
me deeply.
leadership.
It is an apparent breakdown in our concept of
- 4 In bygone days people believed in their leaders, and
felt they knew what was best.
Now, more and more people
think they know better than their leaders and go a major
step farther by taking matters into their own hands.
This is why I thought it would be useful this afternoon
to talk with you about leadership.
I firmly believe that our
welfare as a people and as a nation is vitally linked to a
much better understanding and appreciation of the question
of leadership.
Different ttmes and different issues call for different
leaders.
I would like to examine with you today some of the
issues -- domestic and international -- that confront us, and then
perhaps we can better ascertain the qualities of leadership
that you graduates will need to develop as you assume your
place in the conduct of the affairs of this nation.
Domestic Issues
On the domestic side, my good friend, Dr. Charles Schultze,
has recently detailed, in another commencement address,
incidentally, some of the most perplexing domestic issues that
he sees confronting the nation.
I know that you have all
been admonished not to crib and not to-plagiarize, and I want
to assure you that I have Charlie's permission to quote from
7~
- 5 his remarks.
•
Dr. Schultze was an outstanding Director of the
Bureau of the Budget for three years.
every reason to trust his judgment.
From experience I have
Here is what he has to
say about some of our domestic issues.
"The major social programs of the Federal Government
have a number of characteristics which, taken altogher,
distinguish them sharply from most of the activities the
Federal Government has undertaken in the past.
"In the first place, attacking the problem involved in
the inner city -- poverty -- civil rights -- complex requires
not a single policy instrument, but many.
Education, jobs,
housing, health, transportation, law enforcement are all
involved.
The success of compensatory education, for example,
is not unrelated to the availability of jobs for the parents
of school children or the prospect of jobs for high school
graduates.
The effective delivery of medical services in the
inner city is related in part to the training and use of
inner city residents and sub-professional medical personnel.
Water pollution abatement in a river basin brings in the Corps
of Engineers, the Interior Department, the Department of
Agriculture and the Public Health Service.
Assistance to
accelerate the development of economically depressed areas
involves investment planning by a host of Federal agencies.
- 6 -
More generally, the interdependence of programs requires the
concerted action of many government departments and agencies,
each of whom, organizationally, is
independen~
of the other.
"Second, in its newer social programs the Federal
Government is directly involved in program decisions at the
local level in thousands of individual communities throughout
the nation.
spot.
Decisions have to be made in the field --- on the
Unlike the more traditional programs -- Defense,
agricultural price supports, veterans' benefits, and the
like -- policy coordination at the Washington level, difficult
as that is, is no longer enough.
"Third, all of the newer Federal social programs are
joint ventures with State, county and city governments -in some cases with all of them at the same time.
In any
program involving both education and health -- for example,
a Head Start program including medical examinations for the
children -- it is necessary to involve at least two Federal
Departments, the local sch30l board, the State controlled
public health service, the city welfare department, and the
local community action agency.
- 7 )-..
,
,
!
"Deal ing with this incredib le array of different
political jurisdictions, and different but co-equal agencies
within the same jurisdiction poses tremendous problems at
every level of decision making.
Much of the difficulty
is inherent in a Federal system in which a mUltiplicity of
governments is encouraged.
But much of it also inheres in
the functional organization of the Federal Government itself.
Combining different functional components into a single
program package is difficult enough when it must be done
in Washington among Cabinet Departments.
But when it must
be done in thousands of communities among co-equal departments of a number of political jurisdictions, the difficulties
increase by orders of magnitude."
Dr. Schultze then proceeds to argue that "the Federal
Government needs to develop a regional structure -- a
regional presence as a government."
superb
I believe that this
analysis of the issues gives us some clue as to the
type of domestic leadership that we will need in the years
ahead.
International Issues
Now let's turn to the international field.
Dr. Schultze
has advanced the argument that the Federal Government needs a
regional structure in order to attack our domestic problems
- 8 -
on a more rational and comprehensive basis.
I believe that
as a nation we are gradually coming to the conclusion that
regional development is also the answer to one of our most
perplexing international issues -- the problem of the
developing nations.
The technical revolution which has characterized the
development of the Western economies for the past century
has increasingly demanded ever larger markets for efficient
functioning.
In the West, the result has been increasingly
inter-dependent economies and larger markets which have
become more and more intolerant of political and cultural
restraints.
To some extent the same process is now occurring
in the Soviet Bloc countries.
But in the underdeveloped
world of Asia and Africa, where the need for modern economic
development is urgent, the trend for the past two decades has
been towards political fragmentation.
If we accept, as given, the political boundaries of
tcday's world -- if we also accept, as given, the economic
imperative for developing markets and trading areas with the
depth and breadth to support modern economies, then it seems
we are faced with a conundrum.
- 9 -
A striking example is Southeast Asia.
With the nations
of the region turning their attention to economic development,
the obvious course for development is apparent.
South
Vietnam, North Vietnam, Laos, Cambodia, Thailand, and Burma
are all connected in one way or another with the vast Mekong
River system.
Up to now this river has been literally
untouched; not a bridge has been thrown across
i~banks.
Its potential for the development of power, irrigation, and
transportation systems would seem to be a basic requirement
for any sort of balanced economic development in this area.
But obviously the solutionm this problem is made more
difficult by political subdivisions which, however, represent
real boundaries between ancient and sometimes hostile peoples.
The Problem of Development
The problem is to develop the Mekong through a regional
plan which minimizes the inefficiency inherent in narrow
political divisions without eliminating all possibility of
progress by ignoring national tradition and pride.
This will
require a rare combination of specialized expertise and
political experience.
- 10 It would also be most difficult to build a viable system
of higher education in Southeast Asia unless it is developed
on some sort of regional concept.
to do this job in any other way.
It may even be impossible
In all probability the
development of road and rail system, and quite possibly the
practical problem of developing the $vings and raising the
capital which will be required to finance these projects,
will be possible only through regional cooperation.
What is obvious in Southeast Asia is almost equally
apparent in other areas.
The Indus basin project in India
and Pakistan demonstrates that this sort of problem can be
solved in the most difficult circumstances, given a
constructive attitude, enormous technical skill, and a
generous measure of hard work.
Africa, the Middle East, and
Latin America offer many other examples.
In each case the
problem and the solution may be apparent to the economist,
though not nearly so clear to the politician.
Even Europe,
with its close economic ties and its relatively common
historical traditions, is experiencing severe difficulties
in establishing a common market and trading organization.
How much more difficult is the problem among the new states
who so jealously guard their recently acquired
independence~
- 11 -
The world has been groping toward a tentative solution
to these problems by moving in the direction of regional
organizations -- a concept which this nation has steadily
encouraged.
A striking example of this regional approach
is the recent creation of regional development banks.
There has been an Inter-American Development Bank since
1959, an African Development Bank since 1963, and an Asian
Development Bank since 1966.
I have had a close personal
association with all these institutions, and I can only
confess that my hopes are high for all of them.
But the
challenges of leadership that they pose are formidable.
Similarities of The Problems
It is rather amazing to discover as we examine these
domestic and international problems that face us the similarities that exist between the two sets of issues.
If the
issues are similar, it is probably logical to conclude that
the leadership demands required to confront our domestic and
international problems are not too different.
I have become increasingly reluctant to lecture anyone
on the course that he should follow or the way he should lead
his life.
So today, you must not expect and I will not
volunteer a precise definition of how you should prepare
yourself to attack the issues I have detailed if you have an
- 12 inclination to do so.
I will however tell you that I hope at least some of you
will be impelled to take the risks that are the inevitable
companions of leadership.
If you do decide to take the plunge into the broad world
of public affairs, if you do decide that you would like to
attack the extraordinary complex issues that confront us at
home and abroad, I can promise you probably a dangerous, but
assuredly, an exciting and challenging life.
It is one thing to develop micro-leadership, leaders
in small highly developed areas.
I would be the first to
agree that the country needs these leaders desperately.
However, I can only repeat my hope that Some at least in this
aldience will turn their attention to the areas of macroleadership.
I can assure you of one thing:
it is much more
of an exhilarating experience than taking over the Dean's
office or occupying dormitories.
000
TRE,L\SUR.Y DEP,L\RTt"iENT
HASHI!'\GTO\l
RE~,\RKS OF THO(JAS VI, \'!OL FE
01 RECTOR" OFFI CE OF DOi"lESTI C GOLD }JJ\JD SILVER OPERL\T I G~;S
BEFORE
TH~:
A.HER1 CA"J METAL rvARKET GOLD SFMI f\;j~,R
ROOSEVELT HOTEL, f\;E\/ YORK
t~Of\JDAY, JUNE 24 1968) 1: 15 P. r,1.
EDT
TODAY I ft1'1 GOING TO TALK ABOUT THE DOtAESTI C GOLD
lREASURY
REGUU\TIOr\~S
t;lv6.F~:<ET A"~D
THE
GQVERNHJG THE PRODUCTIOi(. HOLDING" PND USE Of GOLD
BY f\J'lER I CANS FOR I NDUSTRI AL AJ\JD ART I 5T I C PURPOSES.
fIRST,
I ','/OULD LIKE
TO GIVE A VERY BRIEF REVIEi'! Of HO','{ THE CONTR.OLS ON T!-iE USE OF GOLD
CA1'-£ ,L\BOUT J THEN Dr SCUSS SOi\'lE o;:c
YEARS \-IITH
M~D
P!"RTICUL!\~(
Tr-:~
jvjORE H"iPORTf-tH CH,t,J'\GC:S OVER THE
EHi='HASIS O:\j THE EVENTS SINCE LAST j'.'/\f)CH.
GOLD POLIC1ES
WILL BE KEPT IN MIND.
ACT OF
19 ~~ .
DISC:USSIG--l"
n,--[ -I-o:;::r)
Ti\_I'.
__ l J
;~E RE:TE'y')'i;--.n
GI\!~S
I ":.,;i(\:)-'-~·:-'
,'"
__
l..),
THe:
PART OF THAT ACT;
SECF~ET.~.RY
r::-":J,--,,-,',-=--i)
L..J ......-......;
'"
I '- ..~
FOR -n-,E
PU:-<?~)SES
OF T:-iI S
OF THE TR=:ASURY j\'JTHORITY TO ~'F;.=:~C;::,I2E
INCONSISTENT "11Th TH:= PURPOSES OF THE ACT.'
JUST FOR TrlE RECORD .. 'fH::::
PURPOSES OF THE ACT,. ,"'S STATED I N THE PREP'!!,3LE,. f\RE TO PROTECT THE
CURRENCY SYSTEH OF
TH~
UNI TED ST AlES
A~JD
TO PROVJ DE FOR THE BETTER
USE OF THE f'<\ONETARY GOLD STOCK OF THE UNiTED STATES - /1. DEFINITION
WHICH OBVIOUSLY GIVES THE POUCY .MPJ(ERS A GOOD DEAL OF TERF:.ITORY IN
Wr/l CH TO OPERATE.
FOLLOvIl NG TI-{E ENACTt1cNT OF Tric GOLD RESERVE ACT A SET OF REGULATIONS
vJP6 ISSUED \off-HCt-! IN SUSSTAf\lCE RENL\1NED flluCH THE SAFE FOR Tr~E l~cXT
YEARS - UNTIL lVARCH OF TH!S YEAR.
STA'!D~)OINT
N·m
HELD
THE T\,!O KEY
PROVI.:;IOl'~S
31.t
FROM TilE
OF THE DOJ'.'ESTIC ECONO~~'{ I/!ERE (1) THAT GOLD COULD BE PRIV/\lELY
USED O\lLY F-OR RECOGNIZED INDUSTRlfL, PROF"fSSIONf-lL OR ARTISTIC
PURPOSES AS j\lJTHORI Zl-:D BY TREJ\SURY L 1 CEI\lSE J-IND, (2) TH/\T T~E U. S.
TREASURY VIAS PREP,c"t~ED TO BUY FROt'i J\ND SELL GJLD TO Ll CE~ISE[~S f~T
A~
)35
OUi\JCE.
vIE NEED NO-: Hr=.r-<E GO TNTO TrlE RJ'>.TH[R C()'';:PLEX REt5Q:·lS FOR THE OR.I G] j\~f\l
THIi~:<'
ENf\CTjvEJ.n OF THE GOLD R[SlRVE f\CT,. ',[HICH I
SITUATrO~J.
RELEV;:\j\!CE TO TH::: PRESEt,rr
VkiICH IS STILL RAISED
GOLD RESERVE
IN THE
;.\cr A\!D
FEDE:.F~j\!_
GE:J~ERALLY,
A~D
C()~)RTS
FF~O,'I\
BUT LIUST TO DJSPOS~ OF O~E POHH
TH'c TO TH-:c, THe: CCt<SlI
TrlE REC;ULA.TIC:'~5
BUS~~~ES3
rUT!():\j[~LITY Of~
ISSUED IJi'.JD=P, IT
H;\V~~
TH=
8E:-::'N r'\~'FI R;\!,,=D
AT 1;--1:: HI GHEST LEVel.
SPc~'CJ~;JC
LICt::N.3E:::S ARF
N:'::C::-:SS.;~,RY
TO CO dUST A.SOUT .DN'/THI:':G \'iITH COl_D.
Siv1ALL
Hf-VE ONLY p, LU"IITH)
OF SO,",e OF
T~iE
3UR[)~~~!:;
OF
TO ;.\COUI:<.c,
I-n ,'E\/c Rl
TH~SE
Pi
rJR:)c,~
R~()UIFC)·'Ei'~TS
~'!':~l_T,
TRE,L\T I
Te ReLIEVe:
/,'m TO
- 3 SCPJlP
DEALE~S
FOR U:-:i[RS OF GOLD
It~
9,tL\LL
.t~iOLH-,JTS.
Or~E
TI/'IC ,!:IS vlELL /'>5 VISITATION
BY TREASURY AUDITORS.
Sn1ILA~
FOR
REQU'l r~[D
HOI'fEVER" THESE PER5·0\b PJ\!D FU'YS
ARE SUB\.iF.CT TO QUh\!TITATIV-t:: LItvjITATIO,\6 ON -fHE
HOLD AT A'\J.Y
~~OT
I N THE liNT TED STATES, SPEC I Fl C Ll CCNSfS ARE
A:'.I.oU:~T
OF GOLD THEY CJ'lN
I-}~D EXAJ"lINATIO~
OF RECORDS
A?v.~
REASOi'-JS, NO S::;JEClfIC LICENSES
REQUI RED FOR GOLD IN ITS NATURAL STATE PROVI DED I TIS NOT fIlE ... T~D OR
TREATED.
W1THIN CERT;\IN
TRPNSACTIONS IN GOLD
LH~ITATIO~S
COI~S
FASRICATED GOLD AND
DO'~lCSTIC
OF NUJ' lISHr'\TIC VALUE ARE ALSO EXE:J'iPT F'RO,"1
v
THE SPECIFIC LICENSING REQUIRE:I"'ENTS.
HO\'!EYER, ALL Jr.'PORTS OF GO!...D COINS
REQUI RE A U ([J'-lSE J'.ND LI CcNSES A,PE' I SSUED ONLY \-<IHEN THE COIr'! HAS fj[EN
ISSUED FOR
CIRCll~ATION
\'/ITllIN THE COUNTRY OF ISSUE N,!D IS D=F.r<ED TO
IN THIS BR.IEF REVI[\.·!
Or~
T;--{E
HISTm~Y
OF THE GOLD REGUL/\TIU,lS" IT IS
Hv1PORT,'VH TO COi'-JSIDr:R TrlE VERY SLJSST,LJHIAL G-;,c\NGE TH;;,T
IN TH[ P.'<JVATE SUPPLY J'.J\!D
PAST TH I RTY YEARS.
DEi'·'<.,!~:\jC
FOR GOLD
DO~/::STIC
l'lIS
COI~~TP:T
OCCUR-R.:::::D
O\"ER. THE
'I'!HEN THE GOLD RESER\1E F,CT 't'!/IS PASSED, f.J''iU IND:=F.D
U. S. GOLD PRODUCTIO!"j TOTALED OVER 32
T01JlL N::::T
n:
H~S
CO',i.v':::RClf\,L USE
t'-iILLIU~
OUF~U'-lG
OU,:CES,
(O,'··.?f'\~~ED
l'IlTH
THIS PER10D OF CLOSE TO ZERO.
GOLD AT THE $35 FIXED PRICE 1',j EFr:-ECT SET A,
rLr:);)~ 0,''\
THE GOLD F'RICE
r-~
,_-
_~'
•
_.
L~
_
OUl\lCES
\~HILE
IN H-![
1950 I S THE TREASURY BECAr<E A RES I DU/\L SUPPLIER RATHER
THE INDUSTRIAL
cor~SU,\'\PTION
OF GOLD ROSE
STE/I.L~~IL.Y.
LATE
TH,t~.~J
BUY[R
OF GOL.D IN THE OOiJESTIC /V1r\RKET" ,liND SINCE THEN THE GAr BEl1dEEN DOI'v'ESTlC
SUPPLY .AND DEfvI.t'ND HI'S VJI DEi'lED.
THERE HAVE BEEN RELAT I VELY FEll; S I Gi'H FI C[,NT CHAf'\GES I N THE GOLD
REGULAlIO"~S
OVER THE YEARS.
EARLY IN Tf--:E POST-t'/AR PERIOD CONTROLS ON
THE EXPORT 0[= GOLD ItIERE TIGHTENED PROHIBITED IN
1947 -
T~IE
f\ND BY THE EARLY
EXPORT OF FINE GOLD VIAS
1950'S H1E EXPORT A1\IO IMPORT OF
GOLD VIRTUALLY CEASED EXCEPT" OF COURSE., FOR ,'viONETN<.Y PljRPOSES.
ALTHOUGH HOLDERS OF GOLD LICENSES VIERE FR.EE TO IiviPORT GOLD FROivl A8RO.£lD/
THERE VU\S NO INCENTIVE TO DO THIS BEU\USE OF THE: REUl,TlVELY
TREASURY PRICE.
TI-\E U\ST
GIj"i\~Gf~
IN
T~E
REGULATIOi'\S OF
FAVORj\c~U:-
CO~JS[QUEi'!CE
1934 THKOUGH 1967.
TIERED GOI_O SYSTEH 81' AGREEHC:NT In Tf-! TH::':: t'IOi'.)E:TL'RY AUTH()KI TI CS OF
ML\JOR H'-lDUSTRIAL.N/\TIOi··lS IN t",t.. ?-CH OF THIS YEAR.
AS r'\ RcSt}L.T OF T:-i1S
FIRST) THE TRE/:S URY CEASED !\LL FURCH:\SES
BEEN
FRc~
SEV~N
TO SELL
n~=I~
,... .. rr-
r-'~ ~.
L)
PROD~CT
- 5 CERTIFIED pS FRm'1 U.S. NATURAL [lEPOSnS.
P.S /'\ PRACTICI'.L r,t!'-\TTER)
IT
IS U\lLI KEL Y THAT MUCH OF OUR GOLD OUTPUT V/I LL BE EXPORTED BECAUSE vII TH
THE TREASURY NO LONGER l\ RESIDUAL SUPPLIER, THE
TO BE A SH!\DE HI GHE R
LNDER THE
THf\t~
DO~/IESTIC
PRICE TENDS
I N THE. t·1,l\RKET AS ROAD.
NEV~ ;:\R~PNGE~!ENTS
I TIS CLXAR THJ-\T FOR I NDUSTRI P,L
THE LNITED STATES 'til LL BE A SUBSTANTIAL NET UvlPORTER OF GOLD.
MlNUAL
D:J~STIC
GOLD PR.ODIJCTION STILL. UNDER 2 MILLION OUNCES
PLX~POSES
"!JTH
A~D
INDUSTRIAL ca'JSU~'1;:>TION IN EXCESS OF 6 l\iILLIO~~ OLNCES, THE 4 TO 5 MILLIOi~
OlNCE SHORTFALL 'tJIlL HAVE TO COt'<=:
FRO~-1
FOREIGN SOURCES.
NO.'!, I \-JOULD LIKE TO BRIEFLY REVID·: THE (.JORE IHPORTN'-lT
PURPOSES FI RST CP}'<E H-.1TO 3L: Ii'~G - AT LEAST 'lJI TH Ii~ THE
US.
OTHER
I REc/\LL 0.\j THAT DAY R:::CElvrr--.:s l\
rL~~'\jD
':!::R:: EQU,l\LLY IiJ
T:'~E
SC:Etv'lII~C;LY
H~i'/IJRY
ENDLF.:~;S
CH.~·J'\G:::S
or
1~0S T
T>iAT
OF
SUCC~SSlOi\J O~-:
0,08:<. ps TO V;;-\O SUYS GOLD 1i\1 THE UNITE[)
- 6 -AUTHORIZATION TO CERTAIN LICENSEES TO SUY
THIS AUTHORITY VIAS NECESSARY I f
A~D
SELL SEi·lI-PROCE::SSED GOLD.
THA~
FOR NO OTHER REASON
TO ACC:Oi-F')[}/\I[
REFINERS NJD FABRI CJ\TORS OF GOLD PRODUCTS V/HO ACQUI Rc SEHI-PROCESSED
GOLD IN ONE
FOR(~
A\lD SELL IT IN
A~OTHER
FORt'-1 STILL SuBJECT TO THE GOLD
REGUL)\TIONS.
PRIO~ TO IVIARC1-l 1811-1 THERE VIERE OVER 200 TREASU?-Y GOLD
LICENSES THAT
PER~~ITTED
THE HOLDER TO BUY JlND SELL GOLD.
:tIITH VERY
FEVJ EXCEPTl ONS, H0:fEVER, THESE LI CENSES V/ERf rELD BY SJViPLL SCRAP
DEALERS ','/HO 'tiERE C3VIOLfSLY IN NO POSITION TO CONDUCT A LARGE SCALE
TRt1DING OPERJ\TIQj-,! - AT LEAST FOR THE FOR.ESEEA3L.J:: FVTURE -. AND NO>JE OF
THESE LI CENSEES PRIOR -CO t~tPRCH 18TH HtD J'IJ\JY APPRECIJ\SLE VOLUty'~ OF
THE tHNT HAD H/\\mLED ThE GRE;::"T SULK OF
BUSINC:SS IN Fli',lE GOLD.
H,c,NDLED BY THE jv1,HlT.
A C.6P.b..CITY TO
Cor-'~?ET I TORS
THIS l,'lf\S CLEARLY NOT A
ACQUIR~
j-\f\jD SELL
FI~~c
I N A NIJ":3ER 'JF PRODUCTS
GOLD IN
I:n
DESIK'c,BL~
QU!"~TITY
\,-JERE ACTUA.LLY
I1~CC(c~~S
TY A GOOD t1t;\!'( OF 1 HE
..
:-. \ '/ =,
-'
'"
1 . - T' ,,.-..
,,_: - ; ...!. ~
,',::
I-n~c
SI1Ut'-.TIO;'-l
DESPERf-'\TE BUYERS.
I ~< C;'..J:3 -~- ::-( I /'- ~ GO ~_ D
TH~
~-.
~
- -
...
"
U':GL Y
-7-
~q
.
\_'
NE\1 ENGl.A'\lD.I THE CENTR>\L MIDI,'!EST) A\JD C/\LIFORJ,:U,.
THESE LI CENSES HAS BEEN I SSUED FOR A
TE~t\PORARY
AS A START, E/\CH OF
TRI AL PERIOD INTENDED
TO EXTEND JUST BEYO"lD THE SEMI -t-'NNUf-L REPORT I f--:G DATE OF JLNE
RE~UI
SHOULD POINT OUT THAT EACH TREASURY GOLD LICENSEE IS
30.
I
RED TO
SIJSf'UT TO TfiE TREASURY SEt-,n -pNNUAL REPORTS OF HI S OP[f0'\TIONS COVERING
THE
J,6NUPRY-JUN~
AI'-.JD JULY-DECEjv1BER PERIODS FOR E}'I,CH YEAR.
REPORTS THE LICENSEE MUST .. A"'liJI'lG OTHER
INFOR~ATION ..
IN THESE
STATl HI5 GOLD
INVENTORY Af THE 8:::GINNING A\JD END OF EACH PERIOD) HO'.'I t·\UCi-I GOLD H:=:
ACQUIRED, viHERE HE ACQUI R::D IT J
00 SO, Had ('-:lUCri GOLD
PRIVATE TRADING
~'fAS
FlJ~CTIO:~
HQ',; f'1UCH V//"S USED pND J F .!\UTHORIZED TO
SOLD N,lD \'/HO IT \-1/\5 SOLD TO.
IS
~\E'>!.1
BEEN ISSUED Ii'>i AR3 n-.~RY N<OIJNTS.
THe: INITIAl_ SHORT
Tr>/I""I~IG
I "'AU I, -
LICE!\lSES
H,~\/E
THESE AR8I TRj\RY LI CEtlSE F I GU;~cS
ABOUT THE PRI VATE GOLD flv:-\R.f([T TH!\f\l \'!E DO TGDf-W.
:e
0 ·-j- l-H-
TE~\1
BECAUSE THE
\/OLU""C("'I0'--J
V'
i'e r-,
.~0
j,e::.1 BY T"'-.1e::. vrr)IOUP''''
J
IN T!iE ti\Ef'...:'H U<E, THe:
'TCC::Nr-I'--C::C:
L_
,_I J,-,~_-'
I\~,.IJ
r'_
-IHCL~_,.
sr-L'r-_-
- 8 .ALLO'wl\t\:CE rOR A REflSCN/\3LE I NVEiHORY
THE LICENSING SYSTEJ'-1 IS ftN
p~F!J'~n--;-t:0
I;{;i/\T IS NOT
>
ACCU~-1ULATION
U~JDEf.~
OF GOLf) u"mCU\TED TO THE
BUSlr'lESS OPERATIC0JS OF THE LICENSEE OR Ii": EXCESS OF THE ,4'OUi'H NfE[)ED
TO EFFICIENTLY
CO'~DUCT
TO THOSE vlHO PERFOR!"l
CONSU/ERS IN THE
,tJ.,
HIS ,BUSINESS.
TH=: S/V'::c GENERl\L RULE \'!ILL_ J\PPLY
GOLD DEALING FU\lCTION SE-r.iEEN SUPPLIERS ,t,ND
~/v"-\R;(ET.
CLEARLY SO'll;=: IN'IErnORY IS
EFFICIENTLY CONDUCT ANY DEALER OPER)\TION.
REASC{,~l\f:>,LE
f-iUST BEAR A
RcLATIO\lSHIP TO THE
CARRIED ON BY THE LICEI\!SFD DE,Il-LER.
OPERATIONS HAVE
BEEJ~
~:EEDED
TO
HU,ffVER) THIS INVENTORY
VOUj~/iE
OF
BUYIl~G
fiND SEl_LING
AFTER THE fv'iID-YEA2 REPOt:;.TS eN
RECEIVED FRO:"1 LI CENSED GOl [) TR,."D=P-S
J\j\;D
PROPERLY
DEALERS \'/I TH APPROPR I ATE.:. /\LLO.'!,!\NCE FOR SDEC I AI__ C1 ~~CIJ/;ST ,C'NCES T:-I,.'\T
BE
H~VOLVED
EXPEr~IUKE
INDEED.
_
l ,,~IJ,
R FQU'D~"
t-:~Y
IN pf.Je-ICLlL;-'\R CJ'SES.
T:--IUS FJ'..R THE 1\1::::\'J PRIVATE GOLD t·1.';PXET IS ~'!O:':;KIi'!G V=:RY l:fELL
THE
f'.}~=RI C~~\!
AT DDIr,-c
r-.. '_r~.J
I
GOLD PRODUCER IS t\S FREE TO SEU_ }-iI S PF'-JDUCT AS
-J,
LJ
I\,,-\!
Cc::-',p,6;=?c
F/\VO~~.3LY
'.il TH TnOSE
Qj
'-"-i.,
- 9 CUR.P,=~NT n~C!~D
AND FI Nf\LLY" A FEt·! v10RDS ON THE
OF GOLD BY NlcRIC.Ar-.J INDUSTR.U\L USERS.
1200
I NDI VI DU/-\LS
~Nn
THE TREJ.\SUKY HAS LICd'lSED ,t130UT
N~D/OR
FI P.f'lIS TO PROCESS, DE.l\L IN j
INDUSTPI P.L fND ARTl s-,-r C PURPOS[S.
I t'! THf Cm,;SU!-:?T I 0[\1
Vi)\XH-~UIY1 N'DUf~T
THE
USE:: GOLD FOR
GO~D
OF
,l\UTH0RI ZED
TO BE HELD AT THE PRESENT TIrIE J:'~DfR ALL OF THESE LI CCNS[S TAKEN /'.5 A
WHOLE IS ABOUT li-l/2 rvlILLIOi'\) OU\lCES.
LICENSEES HOLD AT pNY
O~~E
IN PRACTICF:, OF- COURSE" FE\;: OF THE
Tli'-'E THE 1'-1.AX1MU>1 ,l'/"iOUNT /\UTHORIZcD.
BASED Oi'-!
REPORTS SUm'll TTED TO THE TREASURY EARLY TH I S YEAR., TREA5 UF2.Y GOLD U CENSEES
HEl_D IN INVENTORY ,~~OUT
3 r·u LL ION
OUi\jCc:S OF GOLD ON D2.CEi'BER
31, 1967"
tN I NCR[ASE· OF Oi--JL Y 200 J 000 OU'-!CES FRO'I! THE PR:=:VT OUS YE,L\R EJ,J[).
INDUSTRY t :/S
HO:IEVER, IT SHOULD BE N01ED TH/\T Trie:
SP,4CE
I
L=\/cLI:\=~ O~_'T
TrlH~<
~'~I
IL
!',T
1/'""\1
/;~~~Q
1=("}\~CEIV,-\3L'Y
PF<Or.J~CT
f-~C:~f\lIVC:LY
::\:~i"J
I O;'J5
~I ~,~N
HTG:-l
DECLlr"1~~\~.':
OUI TE
"
RA.1~
CJ\/~_L~ T~;E
OF Ii\lCREf\SE
f:"C~~E~~:::/~-=;Lf~
,
- 10 THAT DE}!;'>JDS FOR GOLD BY INDUSTRY I
;"T LEAST OVER
TH~
1'£XT FE}!
YEA~S,
\-IILL BE SU3STA"HIALLY LESS -IHf'i\l f/.IGHT E'>E. EXPECTED Ol,j THE Bf\SIS OF
TRENDS INTI-IE RECEi\lT PAST.
o ----- 0
TREASURY DEPARTMENT
Washington
,.,OR RELEASE UPON DELIVERY
TUESDAY, JUNE 25, 1968
:lliMARK5 OF THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETA1{Y OF Ttl'S
T~ASURY
BEFORE THE T(l.1N HALL OF CALIFORNIA,
TO BE HELD AT THE BILTMORE HOTEL,
LOS ANGELES, CALIFORNIA,
TUESDAY, JUNE 25, 1968, at 12:30 p.m.
THE BATTLE FOR RESOURCES --
DIPLOMACY
V~RSUS
DOMESTICITY
On April 26, Dr. Otto Eckstein, Professor of Economics
at Harvard University made a statement before the American
Statistical Association that intrigupd me enormously.
Dr.
Ecks tein was attempting to analyze the potpntial claiTlE
on the Ff\deral budget uver thl' n€'xt twu years under various
sets of
~conornic
assumptions.
With his permission. I will
today try to add a political dimension to his remarks.
For ye>aY's I have bemoaned rhr> demise of "political
~c(jnomy."
~cl)nomis
I have argued tha t po Ii t ica 1 scient is ts and
ts havf> s uf fered from the die hotomy that deve loped
early in this century.
So by adding a political dimension
to Otto's remarks, I will be practicing what I have preached,
and hopefully will be contributing to an analysis of an issue
F-1281
2
that can we 11 be the subject of furious debate in this nation
in the immediate future.
Now just what did Dr. Eckstein say?
He introduced his
theme with this statement:
"Recent studies have assumed that
the crisis in the Federal budget will
come to a quick end once the Viptnam
war is over.
The war is costing close
to $30 billion.
If $20 billion of
budget resources could be released,
there should be ample room for substantial increases in social spending,
as well as tax reductions for increased
private consumption and investment.
With a normal Federal revenue growth of
over $10 billion a year, one would hope
that the Federal budget would be in
much less of a squeeze than today.
"This cheerful prospect could
easily dim over the next several years."
3
He then made these points.
1.
It will be extremely difficult to get defense
spending down in
2.
th~
near future.
Traditional civilian government programs will cost
more as population grows and the demand for services
3.
increasp~.
Much of the revenue growth that we can expect in a
growing economy must be used to reduce our current budget
deficits.
I agree with the conclusions that Dr. Eckstein has reach0d
and I would like to comment briefly on each of the
points.
thn~e
If the Defense Department is to maintain its current
mission in the world -- a mission that is definpd by our
diplomatic obj(lctives -- I would serious ly doubt that any
Riz~able
reduction can be made in
forespeab12 future.
th~
defense budget in the
Our experience in Korea indicates that
the cessation of hostilities do(\s not mean that we can -pull
our troops back home and
forg~t
in South2ast Asia can be even
tion we faced in Korea.
about the area.
mor~
retir~
pl~}sition
diCficult than thp situa-
There is no heavily
parallel behind which we can
Our
r~inforced
with comparative
17th
s~curity.
4
We have been fighting this war on a very, very lean
budget.
There is no evidence that we have piled up surplus
stocks in ordnance, ammunition, aircraft, or naval vessels.
On the contrary, I would estimate that a cessation of
t"i"·s~-ilities
would result in great pressures to rebuild
stocks in military supplies and aJuipment to a more acceptable
level.
Simil'l!' pressures might be expected to increase
detense expenditures for research and development and to
improve uur readiness posture and strategic capability.
Thef2 kinds of expenditures are alrf'ady beginning to move up
again after being cut back earlier.
One way of looking at the situation is as follows.
In
fiscal year 1965 our spending for defense and international
affairs~s
running at a rate of about $54 billion a year.
By fiscal 1970 inflation will have added about
to,those basic costs, or about
$9~
billion.
l5~20
percent
Thus a 1965
effort would cost about $63 billion in fiscal 1970.
We are
currently spending at the rate of roughly $28 billion a year
in Southeast Asia in activities directly related to the
Vietnamese engagement.
While it is not completely accurate
to add this total cost to the $63 billion base I referred to,
5
it at least gives us the basis of comparison.
It indicates
that in fiscal 1970 we would be spending about $91 billion
a year if Vietnam expenditures continued at their present
level and we maintained the same force readiness, strategic
capability, r&d expenditures, and international affairs
expenditures that prevailed in 1965.
Or, to work around
another way, the figures would indicate that the Defense
Department this fiscal year is spending, in terms of real
resources, 10-15 percent less on all requirements, except
Vietnam, than it was spending in ll,,65 -- roughly the equivalent of
$46~
billion against a
$49~
billion level prevailing
at that time, while expenditures on international affairs
and finance are also, in the same terms, down by one-quarter
to one-half billion dollars.
I can only conclude that if the State Department maintains
its current diplomatic objectives and if the Department of
Defense defines its mission relative to these objectives as
it did in 1965, then there is not much opportunity for
substantial budget cutting in this area in the foreseeable
future.
6
The second point that Dr. Ecks tein makes 1s also
unques tionably true.
Government
grows.
IlUSt
The traditional operations of this
almost of necessity grow as the country
The volume of mail to be delivered grows at the
rate of three billion pieces a year; the number of income
tax returns to be processed rises at the rate of three
million a year; the number of visits to our
parks and our national forests increases at the rate of
20 million or more a year.
I do not believe that there is
any disagreement that the traditional services of the
Government must grow in
a
growing country.
Back in 1961
Mr. Maurice Stans estimated that a rate of growth of $2\
to $3 billion a year in the Federal budget was probably
necessary to keep up with the growth of the country.
Dr. Eckstein pointed out that the normal growth in our
revenues which we can expec t in a growing economy would be
needed in the immediate future to reduce the Federal deficits
we have been running.
ible.
This statement is surely incontrovert-
Demands for capital in this nation and in the world
are enormous and I cannot see how we can contemplate
orderly capital markets or price stability if the Federal
Government is forced to borrow to meet deficits in excess
of $20 billion a year.
7
Dr. Eckstein uses this line of reasoning to support
his argument for a tax increase and rigid controls over
military and old-line civilian government expenditures.
In my opinion his analysis points up an even more pervasive
issue
the coming struggle over the budget
have put it, diplomacy versus domesticity.
or as I
Let me say at
this point that in the coming struggle I will be an interested bystander.
on January 20.
My ten years of public service will end
Therefore, as I now attempt to add a
political factor to the economic calculus that Dr. Eckstein
has described, it can be assumed that I will be reasonably
impartial.
I foresee an intense struggle between those advocating
diplomatic objectives and those arguing for domestic requirements for the next four years.
that struggle less acrimonious.
A tax increase will help to make
Tough-minded expenditure
control will help to produce the same result.
But I can
only conclude that neither will be sufficient to head off
a conflict.
As we move from economics into the area of politics,
I would like to comment briefly first on the diplomatic
arguments.
I see no reason to apologize for the diplomatic
8
objectives of the United States for the past twenty-three
years.
In fact, I would venture to predict that many of us
will look back on these years as a time of shining
idealism -- our golden years.
Under the shie ld of our
defense establishment, the Free World has achieved a huge
growth in world trade, a free flow of funds between nations,
an unparalleled expansion of tourism, and truly remarkable
achievements in the development of areas which had known
only poverty, ignorance, and disease throughout recorded
history.
I am not going to throw any rocks today at the
Department of State or the Department of Defense.
In his analysis, however. it seems to me that Dr.
Eckstein has left out some very potent changes that have
occurred in this nation in the past four years which lend
credence to my contention that a fierce battle for budget
resources will be waged.
These changes were initiated by
the extraordinary man who helped start my public career and
whom I have served with affection for almost five years
Lyndon Baines Johnson.
In 1965 the Congress enacted a land-
mark bill to provide Federal assistance to elementary and
secondary education.
In that year it also passed the legis-
lation establishing medicare and medical aid.
In those two
pieces of legis lation the country es tablished enormous potentia]
claims on its revenues, claims that were backed up by a
9
knowledgeable and forceful political clientele.
Almost for
the first time in the history of the Republic we created a
strong political challenge to the allocations of resources
for the defense of the nation.
Let me illustrate my point.
There are 22 thousand
school districts in the United States.
Almost without exception
every district would spend more if their budgets would allow.
I need not remind you of the political muscle that millions
of parents, teachers, and school administrators can swing
in this nation.
The passion for education has characterized
our national history.
For the first time elementary and
secondary educatiun now has a claim on our Federal
rev~nues,
and I would estimate that the claimants will be after us
with the ferocity of a tiger.
These programs are probably
seriously under-funded at the moment, and given any letup in
Vietnam, the demands will be clamorous and insistent -- no
matter which political party is in power.
This nation has been one of the last of the great
industrial nations to move to a system of health insurance.
There is no need for me to elaborate on the costs -- present
and potential.
There is no need for me to dwell on the
history of other nations and the response to these demands
10
for medical care.
Suffice it to say that here again we have
opened the doors of the Federal Treasury to huge damands.
I would estimate that no political party, and no Presiden
can reverse or even slow down appreciably the demands that
will come from the country in the areas of education and
health.
While education and health will, in my opinion, prove
to be the most politically potent claims on our resources in
the years immediately ahead, let me list a few other
clai~
with enormous political muscle.
The problems of our cities have unquestionably grown to
almost intolerable proportions -- pollution, transportation,
adequate housing -- and the whole gamut of problems associated
with the ghettos.
are staggering.
the
curr~nt
The costs associated with these projects
In one area alone -- housing -- to move from
level of about 1,400,000 starts a year to a
2,600, 000 rate which is widely advocated at the moment, would
place at least an additional $20 billion strain on our credit
markets annually, and unquestionably an additional strain on
our Federal budgetary resources.
The other issues which I
have mentioned -- pollution, urban transportation, and the
problems of the ghetto -- fall roughly into the same category
as housing.
Financing these programs will be a great additiM
11
burdp.n on our capital markets and on state and local government tax
r~vcnups.
In addition,
unles~
I am sadly mistaken,
they are going to produce a sizeable claim on our
Fed~ral
tax revenues.
The programs I have just mentioned will not lack in
political appeal and can also prove to be an effective
challenge to the claims on our resources generated by Defense
and State.
None of us relishes the prospect of a China armed
with ballistic missiles aimed at this city without an effective
deterrent -- even if the cost is
none of us relishes the idea of
hu~e.
re~ting
But on the other hand,
securely
b~hind
an
antiballistic missile system if we are slowly choking to death
in a polluted atmosphere.
in which
w~aker
adventur~rs
nations.
None of us looks forward to a world
can prey with some degree of impunity on
But I think that most of us would like to
get to work without sp9nding our days in endless traffic jams.
The possibility of Communist probin~ and troublemaking in
Europe resulting from a draw down of our NATO f,)rces is not
pl~asant
to contemplate but
J
on the other hand, the civil
disturbances we have had in the past year in our cities are
very real and very close indeed.
12
As if the battle for the allocation of domestic resources
were not serious enough, our diplomacy faces a severe
chal~np
in its claims on the foreign exchange which this nation can
earn.
There is not sufficient time today to deal with the
history of the United States balance of payments for the past
seventeen years.
In addition, I am certain that the news
stories which have run since last November 18 -- the date of
the British devaluation -- have brought home to all of you
the severity of the problem that the nation faces.
Over the past seventeen years three factors have enabled
this nation to pursue its diplomatic and militarydbjectives
with certain immunity from balance of payments consequences.
From about 1950 on we had enormous reserves which we were
perfectly willing to run down -- at least until about 1960.
We had a very large trade surplus.
And finally, there was
a willingness -- even an eagerness -- in the first part of
the period for other nations to hold additional amounts of
dollars in their reserves.
The next President of the United
States will probably not have these three factors working
for him.
13
He will probably be forced to conserve our
reserves and fight to maintain or improve our trade balance
as well as face a world increasingly reluctant to hold
additional dollars.
Today the- foreign exchange cost of keeping our troops
deployed around the world is running in excess of $3 billion
a year.
It has become increasingly evident that our diplomatic
aims must compete with the thousands of American travelers who
use foreign exchange, not dollars, in their wanderings, with
American corporations that need foreign exchange for foreign
inv~stment
programs and American banks and other lending
institutions anxious to hold on to their share of the international markets.
I can ruefully tell you from personal
experience that the American traveler is a formidable political
opponent -- rising up in outrage when anyone makes a modest
attempt to hold down his spending outside the United States.
While not so numerous and possibly not so vocal, I can assure
you that the restraints placed on foreign investment and
foreign lending are distasteful to the American business and
financial community.
Thus I can only conclude that diplomacy
is facing three powerful antagonists who will try to get their
share of the foreign exchange earnings of this nation.
14
In 1960, as be was preparing to leave office, President
Eisenhower had this to say about the military-industrial
complex and its potential threat ,to the United States.
"In the counc i Is of government,
we must guard against the acquisition
of unwarranted influence, whether
sought or unsought, by the militaryindustrial complex.
The potential
for the disastrous rise of misplaced
power exists and will persist. 1f
At the time President Eisenhower made that statement, I
was a freshman Congressman, but it made eminently good sense to
Even a freshman Congressman could see that there was no
effective challenge to defense and diplomacy in the allocation
of our national resources.
Agriculture and public works at
that period of time constituted a minor challenge but their
potential for expansion was severely limited.
Today I would
guess that President Eisenhower takes some comfort in the
fact that the military-industrial complex does not go unchallenged in this nation.
15
If one accepts my thesis that a battle for the allocation of resources is shaping up in this nation, then it is
logical to ask, "Are our institutions of government sufficiently viable to assess the hard fiscal choices that lie
ahead and to arrive at rational conclusions?"
There has been abroad in the land in recent months a
tendency towards despair.
Some have argued that there is no
way to reverse or even to blunt the power of the"militaryindustrial complex.
Others have argued that a polarization
of our society -- between the affluent and the indigent and
between white and black -- is inevitable.
Still others have
argued that the plight of our cities is hopeless
that we
are slowly sinking beneath traffic jams, pollution, and
violence.
Whencne analyzes many of the causes for despair, it is
amazing to discover how frequently the despair occurs because
of a conviction that the necessary resources will not be
forthcoming.
Educators are convinced that a truly massive
infusion of funds can correct the dreadful imbalance between
schools in the ghettos and schools in suburbia.
Sociologists
are convinced that some plan such as the negative income tax
16
can halt the flood of disadvantaged Negroes from tht=' south
to the northern cities -- at a cost of from $11 billion up.
City planners are convinced that
th~ scanda1o~s
housing of
th.? ghettos is npedless -- if we will pay th~ cost.
portation experts say that traffic jams can be
Trans-
eliminat~d
just give them the resources for adequatp- mass transit
systems.
Police officers contend that violence can be
contained and order restored -- if they have the funds for
an adequate force.
But nearly without exception all
thes~
elements of society despair of convincing the country that
these demands should be met with adequately funded programs.
If
ther~
is any justification for all
th;?r~
then perhaps
is
~ome
thi~
despair,
logical reason for the revolutionnr
desire tc tear down our institutions. to flout our governmP.nt
Dnd its laws, and in the final analysis to resort to
I perscnally S2e no reasnn to
In
th,~
viol~ncp.
d~spair.
pas t ninety days the natiun has faced and actt?d
on two issues that were in my opinion almost the ultimat~
test OI r-:!pr~sentative governmP.nt -- the Fair Housing Act and
th0 Tax Bill.
Both is~ues wer~ stark -- reasonable men could
not dispute the validity of
required
th\~
th~
arguments.
But both is~ues
absolute maximum in political courage.
A nation
17
that has the sheer guts to face down these two explosive
issues at this moment in time would seem to be prepared to
take on the dreadful array of issues which still confront us.
Mr. Sam Rayburn used to say, "It takes a very smart man
working very hard to hurt this great country very much."
This is a comforting philosophy, but as I looked back over
ten years of wrestling with issues, I became increasingly
concerned that in thf? struggle the essential fabric of the
nation was bping torn -- perhaps we
w~r~
hurting the country.
I was haunted by the fears expressed by many in 1964 that tax
reduction might be good for the country at that time, but that
we would not have the courage to raise taxes if we got into
trouble.
However, a nation that can say to the black man, "Your
dollar is as good as the white man's," and a nation that can
discipline itself financially, certainly has the moral fibre,
the intelligence, and the institutions to take on the impending
"Battle for Resources" and come up with rational answers.
000
TREASURY DEPARTMENT
-•
~LEASE
6:30 P.M.,
lJ June 24, 1968.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
1he Treasury Department announced that the tenders for two series of Treasury
" o~ series to be an additional issue of the bills dated March 28, 1968, and the
, series to be dated June 27, 1968, which were offered on June 19, 1968, were opened
e Federal Reserve Banks today. Tenders were invited for $1,600,000,000, or there-
.S,
of.91-day bills and for $1,100,000,000, or thereabouts, of' 182-day bills.
The
.ls of the two series are as follows:
: OF ACCEPTED
:TITIVE BIDS:
High
Low
Average
91-day Treasury bills
maturing September 26, 1968
Approx. Equiv.
Price
Annual Rate
98.690
5.182J
98.649
5.345~
98.676
5.238~
182-day Treaasury bills
maturing December 26, 1968
Approx. Equiv.
Price
Annual Rate
97.250 ijJ
5.~
97.205
5.52~
97.227
5.485~ Y
a/ Excepting one tender for $725,000
5'1~ of the amount of 91-day bills bid for at the low price was accepted
2~ of the amount of l82-day bills bid for at the low price was accepted
, TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
itr1ct
lton
York
.l.ade1phia
!veland
:bmom
r
anta
.cage
Louis
lDeapolis
ISIs City
las
I .FraDcisco
'roTALS
AEE.1ied For
$ 5,952,000
1,318,198,000
13,923,000
31,956,000
7,442,000
33,477,000
359,383,000
25,881,000
19,914,000
22,961,000
17,643,000
106,464,000
Acce]2ted
$
5,952,000
770,838,000
10,923,000
23,956,000
7,442,000
22,477,000
141,383,000
19,381,000
19,914,000
22,961,000
8,913,000
46,164,000
$1,600,084,000 ~ $1,963,194,000
$1,100,304,000
A;E;E1ied For
Acce;2ted
$ 21,279,000 $ 11,279,000
1,092,234,000
1,604,484,000
24,880,000
24,880,000
33,228,000
33,228,000
15,702,000
15,702,000
45,282,000
45,282,000
162,093,000
377,093,000
44,352,000
43,352,000
24,235,000
24,235,000
36,997,000
36,997,000
15,212,000
22,212,000
95,590,000
125,590,000
$2,375,334,000
£I
,eludes $280,610,000 noncompetitive tenders accepted at the average price ot 98.676
,eludes $152,982,000 noncompetitive tenders accepted at the average price of 97.227
ese rates are on a bank discount basis. The equivalent coupon issue yields are
38~tor the 91-day bills, and 5.72~ for the 182-day bills.
TREASURY DEPAR.-MENT
~
6:30 P.M.,
:day, June 25, 1968.
RESULTS OF TREASURY'S MONTID..Y BILL OFFERING
'n:Ie Treasury Departm"..!nt announced tb.A.t the tenders for two series of Treasury
.s, one series to be an additional issue of the bills dated March 31, 1968, and the
!r series to be dated June 30, 1968, which 'Were offered on June 19, 1968, were
Jed at the Federal Reser-11'e Banks today. ~nders were invited for $500,000,000,
~reabouts, of 273-day b~lls and for $1,000,000,000, or thereabouts, of 50S-day
Ls. The details of the two series are as follows:
lE OF ACCEPTED
273-day Treasury bills
?ETITIVE BIDS: _ _ma_t__
ur_~_'ng"""'-_Mar"'-7c_h_:3_1.....
, ~1~9_6~9_
Approx. Equiv.
Price
Annual Rate
95.678
5.69§J
High
95.624
5.77110
Low
95.643
Average
5. 745~
1./
365-day Treasury bills
maturing June 30, 1969
Price
94.206 ~l
94.172
94.189
Approx. Equiv.
Annual Ra. te
5.715~
5. 748~
5.731~
Y
af Excepting 1 tender of $600,000
'9'4~ of the amount of 273-day bills bid for at the low price was accepted
9~ of the amount of 365-day bills bid for at the low price was accepted
~
TENDERS APPLIED FOR AND ACCEPl'ED BY
lstrict
oston
ew York
RESERVE DISTRICTS:
Applied For
AcceEted
ApElied For
AcceEted
$
$
$
$
tlanta
hlcago
t. Louis
.inneapolis
ansas City
allas
an Francisc'J
151,000
868,173,000
4,682,000
3,565,000
665,000
11,557,000
128,133,000
1:3,792,000
8,225,000
3,8 74,000
11,300,000
145 z811 z 000
ro'.D\LS
$1,199,928,000
hUadelphia
leveland
ichmond
~~ERAL
151,000
370,993,000
1,682,000
565,000
665,000
757,000
48,133,000
7,792,000
3,165,000
2,614,000
5,300,000
58 z 211 z000
10,169,000
1,664,419,000
11,770,000
34,234,000
1,531,000
17,926,000
221,351,000
19,676,000
12,652,000
6,871,000
11,532,000
191 z 3661. 000
$ 500,028,000 ~/ $2,203,497,000
169,000
793,784,000
3,770,000
4,034,000
1,531,000
2,826,000
82,306,000
6,576,000
1,652,000
3,976,000
1,532,000
97 Z8661.0OO
$1,000,022,000
£./
Includes $15,505,000 noncompetitive tenders accepted at the average price of 95.643
Includes $38,909,000 noncompetitive tenders accepted at the average price of 94.189
'1bese rates are on a bank discount basis. '!be equivalent coupon issue yields are
6.03~tor the 273-day bills, and 6.08~ far the 365-day bills.
STATEMENT BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TtF'.ASURY
BEFORE THE
SENATE FINANCE COMMI'ITEE
ON
H. R. 16241
TUESDAY, JUNE 25, 1968, 10:00 A.M.
Thank you for giving me the opportunity to discuss with you
H. R. 16241, a bill containing a portion of the Administration's
recommendations for dealing with our foreign travel payments deficit.
These recommendations are a part of the overall program set forth
by the President in his January 1st Message on balance of payments.
Before discussing the details of this legislation and our recommendatio~s
in this area, let me place this measure in perspective
by reviewing with you our overall balance of payments program and
how it is progressing.
I.
The Balance of Payments Program.
I think it unnecessary to detail the conditions which led to
the President's balance of pa.:yments message.
You are all familiar,
I am sure, with the fact that our balance of payments deficit for the
F-1284
- 2 -
year 1967 was almost $3.6 billion, and in the final quarter of the
year exceeded $1.8 billion, which would represent a deficit of over
$7 billion on an annual basis.
These deficits, together with the
devaluation and difficulties of the British pound, the other reserre
currency, have led to intense gold speculation and doubt about the
survival of the international monetary system as we know it.
On
January 1st, President Johnson set forth an Action Program
to deal with our balance of payments problem, as a national and
international responsibility of the highest priority.
This pro-
gram stressed, as the first order of business, the urgent need for
enactment of a tax surcharge which, coupled with expenditure controls,
would help to stem the inflationary pressures threatening both our
economic prosperity and our trade surplus.
This fiscal package, nOW
happily becoming law this week, is the keystone of our program to
correct the balance of payments p ro91em.
- 3 In any discussions of the balance of payments problem, we
cannot overlook the other features of the President's "first line
of defense of the dollar."
It is of unquestioned importance that
business and labor work together to make effective the voluntary
program of wage-price restraint and to prevent work stoppages
that will adversely affect our foreign trade.
In addition, the President's program called for a number of
both temporary and long-range measures directed at the improvement
of specific sectors of our international payments accounts.
These specific measures included a five-part program designed to
achieve near equilibrium in our balance of payments deficit this
year by calling upon each major segment of our economy importantly
involved in the balance of payments to make a contribution to
savings target.
th~
This program asked:
-- American business to reduce its outlays for direct investment
abroad by $1 billion, under a new mandatory program to be administered
by the Commerce Department;
- 4 -- Banks and other financial institutions to reduce foreign
lending by $500 million, through a tightening of the voluntary restndm
program administered by the Federal Reserve Board;
-- The American people to reduce their overseas travel
expend1tu~8
by $500 million, on the basis of the President's request for volunt~
deferral of nonessential travel plus legislation to help achieve a
reduction in travel expenditures by those who do travel;
-- Government to reduce or offset its expenditures overseas by $5OC
million, through specific action programs assigned to the Secretaries
of State, Treasury, and Derense and the Director of the Budget; and
-- For prompt cooperative action through consultations with our
trading partners to minimize disadvantages to our trade, or appropriate
legislative measures, to realize a $500 million improvement in our
tr~e
surplus.
It is the travel portion of this immediate direct action prog~~
at this time requires legislation.
In the other sectors, the measu~s
- 5 Thus, for business, the mandatory restraints on direct investment have been in operation under Commerce Department regulations
since January 1st and have, during the first quarter of 1968, already had a sizeable favorable impact on our balance of payments.
For banking, the Federal Reserve Board restraints on foreign
lending were, similarly, issued and effective on January 1st.
Major
progress has already been made toward achievement of the goal under
this program, with a decline of about $350 million (seasonally
adjusted) during the first quarter of this year in commercial bank
claims on foreigners.
The government has taken action on each of the three
specific steps to reduce expenditures abroad listed by the President
in his January 1st Message:
- 6 -- Discussions with a number of countries in both Europe and
Asia to find various ways to reduce the foreign exchange costs of
maintaining our troops abroad are already well underway.
-- An initial program for a 12 percent reduction of overseas staffs by the end of 1969, together with a further tightening
of Government travel abroad, was put into effect on March 30; and
a second-stage effort to achieve even further reductions, primarily
in the larger overseas missions, is underway.
-- The Department of Defense is examining a series of
possible specific measures to reduce further the foreign exchange
impact of personal spending by U.S. military personnel and their
dependents in Europe, which are importantly related·to ciVilian
tourist travel.
In addition, the President, on January 11, directed AID to
reduce overseas expenditures in 1968 by a minimum of $100 million
below the 1967 level.
- 7 For trade, the President's Special Trade Representative,
Ambassador Roth, has headed an effort by many of our overseas
missions to explore actively with our major trading partners
possible immediate as well as longer-term cooperative actions to
contribute toward improvement in our trade surplus.
Ambassador
Roth has reported on these discussions in the current hearings
before the House Ways and Means Committee.
A Working Party in the GATT has been instituted at U.S.
initiative and is now engaged in an examination of existing provisions dealing with border-tax adjustments and their effects on
trade, looking to the development of a program designed to remove
or minimize any significant disadvantage to U.S. trade that results
from the existing GATT provisions and the tax systems of our principal
trading partners.
In other words, action on each of these parts of the President's
balance of payments program is well underway.
The one remaining
- 8 aspect of the program is the travel area where the goal is to reduce
H. R. 16241 represents
the balance of payments deficit by $500 million.
a beginning -- modest as it may be -- of the action required to effect
an immediate reduction in the outflow of dollars.
A long-range pro-
gram of a different direction, to increase foreign travel to the U.S.,
is already well underway, having as its cornerstone the recommendations
of a Task Force headed by Ambassador McKinney.
I should like to file
a copy of the Report of that Task Force which undertook this work
early this year and submitted its report to the President on February
1968.
II.
The Continuing Need for a Full Implementation
of the January 1 Program.
Events since the beginning of the year have confirmed that
the President's full Action Program is needed to help bring our
balance of payments to equilibrium, to maintain confidence in the
dollar, and to stabilize the international monetary system.
15
- 9 Our balance of payments deficit, sorely affected by the fall-off
in our trade surplus, ran at too high a rate in the first quarter.
The first-quarter results released on May
14
show a liquidity
deficit of $600 million, seasonally adjusted, equivalent to an
annual rate of
$2.4
billion.
This does show, I am happy to say, a quick and quite SUbstantial
recovery from the extremely high and totally unsustainable rate of
deficit which we suffered in the last three months of last year.
However, continued effort is necessary to advance us further
toward our vital goal of sustainable equilibrium.
Although we made
notable gains in the first quarter, these were mainly due to a
number of factors in our capital accounts.
These included:
(1) A sharp reduction in bank lending and large
sales of special corporate bonds to foreigners, in connection with
the Federal Reserve and
(2)
Corr~erce
programs;
Foreign net purchases of U.S. corporate stocks which
amounted to about
$215
willian, approximately maintaining the
- 10 same post-war record rate averaged during the last half
of 1967; and
(3)
One large known transaction, classified as foreign
direct investment in the United States, involving an inflow
of slightly over $200 million.
We certainly CBmlot rely only on im.prGYement in
the capital accounts to restore equilibrium in.our baJ.a.nce of
payments -- we must look to the achievement and maintenance of a
substantial merchandise trade surplus as an essential cornerstone
of our balance of payments.
However, during March, in particular,
and for the first quarter of this year, as a whole, our performance
on trade account has been very poor -- reflecting the crucial importance
of the tax increase-expenditure reduction measure to curb domestic
inflationary pressures and the excessive increase in imports that
- 11 characteristically accompanies an excessive rate of growth in our
economy.
Our trade surplus for the first quarter fell to an annual
rate, after seasonal adjustment, of only slightly over $400 million -compared with a $1.3 billion annual rate based on the final quarter
of 1967, and a $4.2 billion annual rate based on the three preceding·
quarters of last year.
On other fronts also, events during the interim since January 1st,
have further underlined the reality of the threat to our dollar which
was feared at the beginning of the year.
From February 7 to March 20,
1968, we experienced a period of intense speculation in the foreign exchange and gold markets of the world.
During this period, the Treasury
Department transferred a total of $1-1/2 billion in gold to thp
Exchange Stabilization Fund in order to replenish its working
balances and complete the settlement of the United States' share
of the losses experienced by the gold pool.
- 12 -
These gold losses clearly indicated the concern held
by foreigners as to this country's persistent balance of
payments deficit.
The situation threatened to bring about
serious difficulties for the world's entire
~inancial
structure,
with accelerating interest rates and the choking off of credit
availabilities beginning to spread from the international
money markets into domestic markets.
The impact of this monetary crisis was felt not only by
bankers and finance ministries of the world.
traveler also was directly affected.
The American
For example, over the
period of March 14 through March 18, many American travelers
experienced considerable difficulty spending or converting
their dollars at the hotels,
restaurant~
and banks of Europe.
When they were pennitted to convert , it was frequently at a
large discount.
only --
Thus, some American travelers were getting
- 13 94 cents for a dollar in Paris
96 cents for a dollar in Italy
80 cents for a dollar in Germany
I would venture to say that these Americans who experienced the direct
effect of a lack of confidence in the dollar would welcome, if not
insist upon, immediate measures to insure that their dollars are not
so threatened again.
Fortunately, as a result of the meeting, on March 16-17, of the
gold pool central bank governors in Washington, decisions were made
and action was taken to restore order to the financial markets.
How-
ever, the cost of those six weeks of speculative activity in terms
of our loss of gold and in terms of the strain on the international
monetary system was severe.
The steps that have been taken --
while representing an effective solution for the immediate problem -- will not guarantee against a repeat performance in the
future.
We can only protect against further attacks on the
dollar -- and, through it, the world monetary system -- by striking
at the root of the problem -- the persistent imbalance fn world payments, wi t1; a deficit in tLe United States
BEd
a surplus in Europe.
- 14 III.
Foreign Travel and the U. S. Balance of Payments.
Foreign travel expenditures are a major contributor to the
balance of payments deficit and a comprehensive program to close the
deficit would be incomplete and out of balance were travel omitted.
In 1967
alon~,
a record humber of Americans traveling outside the
United States spent $4-3/4 billion, an increase of 17 percent over
the previous year.
These expenditures involved a foreign exchange
cost of $4 billion. Receipts from foreign visitors to the U. S.
came to only $1.9 billion leaving a deficit of about $2.1 billion.
In fact, for the period 1961 through 1967, the total foreign
payments for international travel (about $21 billion) were nearly as
great as the total foreign eXChange costs ($22.9 billion) of our
military expenditures abroad, including the foreign exchange costs
of the war in Southeast Asia.
In other words, the balance of pay-
ments costs of our foreign travel have been equivalent to the balance
of payments costs of our national security to the extent it depends
upon the operations or presence of our military forces outside the
United States.
- 15 We hear a great deal in some quarters about ending the war in
southeast Asia or bringing United States military forces home as a
means of reducing our balance of payments deficit.
We also hear a
great deal about reducing our forces in Western Europe because of
their foreign exchange costs.
issues.
I am not here today to debate these
I am here to say that the government which adopts a program
of doing whatever it can, consistent with national security, to reduce
or neutralize the foreign exchange costs of our military operations
overseas, must similarly tackle the problem of travel expenditures
when our balance of payments is still in a serious state of chronic
deficit.
The net foreign exchange impact of this level of foreign travel
spending can be measured by offsetting against it the spending in
the U. S. by foreign travelers.
For the same 1961 through 1967
period, the net deficit in foreign exchange payments arising from
tourism amounted to a little over $11 billion, as compared to about
- 16 $17.4 billion net foreign exchange deficit for military expenditures
abroad after offsetting the foreign purchases of military equipment
in the U.S.
Moreover, unless effective measures are undertaken, the
situation with regard to travel can only get worse in the future.
In this regard, the Chase Manhattan Bank recently published
in its June,
1968, "Business in Brief" a suunnary review of how
travel figures in the United States Balance of Payments.
This
sUIDIDary states, "Travel is a fast growing element in United States
international financial accounts.
Outlays far exceed receipts,
helping to create payments deficits." The bank points out that
foreign travel is among the major causes of dollar outflows; the
$4 billion of foreign travel payments in 1967 being almost as large
as military spending of
$4.3 billion.
The bank presentation also calls attention to the fact that
expenditures abroad by Americans and expenditures in the United
States by foreigners have both been increasing, and indeed the latter
rate of increase on a much smaller base has been somewhat greater.
- 11 The important point clearly indicated by these figures however is
that "if recent rates of growth in travel persist, the dollar gap
between outlays and receipts will continue to widen."
Thus the bank
summary shows that under a continuation of growth patterns that
have been exhibited in the past few years, the $2 billion of deficit
in 1961 will widen to $3 billion by 1915.
other estimates, taking
into account the greatly increased travel which will flow from the
new hugh passenger "air-busses," place the travel deficit in 1915
at much higher figures.
All of the economic and social forces at play within our
economy will inevitably lead to more Americans traveling abroad
in the future and spending more.
First, it is anticipated that
disposable income will increase year by year.
Thus, even if the
percentage of disposaDle income which is spent on foreign travel
remains constant, the year-Dy-year increase in disposable income
will automatically lead to a year-by-year increase in amounts spent
on foreign travel.
- 18 -
In fact, however, it is reasonable to expect that the percentage of disposable income spent on foreign travel will also
increase, thereby further increasing the foreign travel payments.
One factor which leads to this conclusion is the rising level of
~uca.
tion in this country which should lead to more and more people
wanting to travel to foreign countries for its educational value.
Second, as per capita income rises, a larger percentage
is ava1lable
for less-essential spending which would undoubtedly include travel.
Furthermore, the anticipated introduction of airplanes with much
larger capacities brings the prospect of lower air fares which
should encourage more people to travel abroad.
In other words, the economic and social trends in this country
can lead to no other conclusion than that our foreign travel payments
will increase year by year.
This situation, present and future,
presents a problem that cannot be dismissed or laughed off or put
under the rug.
- 19 The lopg-term solution to moderating our travel deficit lies
in a strong program to encourage travel by foreigners to the United
states.
A Task Force under Ambassador McKinney has examined ways
to achieve this goal and has made a series of recommendations, some
of which are already in effect.
This represents a significant step
towards a long-term solution.
It cannot be expected, however, that travel by foreigners to
the United states will serve to moderate suffiCiently the projected
United states foreign payments
ab~oad,
at least over the near fUture
while the recommendations of the Travel Task Force are being put
into effect and their results assessed.
The major problem is that
the present disposable income base from which travel by foreigners
can be financed is much smaller than the United states disposable
income base from which our foreign travel is financed.
Moreover,
there are fewer Europeans than Americans with sufficient income
to finance travel overseas.
- 20 -
If one looks at the principal travel expenditure potential as
located in people with incomes over $10,000, there are about five
times as many of these travel spenders in the U. S. as there are
in the principal countries of Western Europe.
Mo:eover, for 1965, U. S. disposable income was about
$470
bil-
lion while the disposable income of the major Western European
countries was around $2'75 billion.
Thus, even though some Europeans
may put a heavier emphasis on travel in their budget priorities
than do .funericans,
ann
even if there were an immediate significant
increase in the percentage of disposable income spent by Europeans
in travel to the U. S., the absolute dollar gap between their
spen~
in the U. S. and our spending abroad could still grow over the short
run.
Therefore, remedial measures of a less pleasant and a more
restraining nature are necessary.
- 21 The travel program which we proposed to the House Ways
and Means Committee contained three elements:
1.
Permanent elimination of the exemption of international
flights from the 5 percent tax on airline tickets.
2.
Permanent reductions in the duty-free allowance for
arti cles brought into the United States by returning travelers
and for gifts sent by mail.
3. A temporary tax based on expenditures made by travelers abroad.
The bill before you, H. R. 16241, essentially carries out
the first two of these recommendations but contains no provisions
regarding the third.
Our total travel program was estimated to yield an improvement in
our travel deficit of $500 million.
The legislation before you, it is
estimated, will improve our balance of payments position by $140 million,
less than a third of the needed $500 million.
there has been
DO
As I have already indicated,
lessening in the need for a savings nearer the proposed
- 22 -
$500 million level.
Therefore, I urge your Committee to add to H.R.
16211
a tax, along the genera.l1ines we have proposed, to restrain spending in
connection with foreign travel.
More specifically, we propose that a progressive tax be
imposed on foreign travel expenditures.
Under the rate schedule, the
first $15.00 per-day of expenditures (computed on an average basis over
the entire trip) would be exempt from tax; the total of expenditures in
excess of that basic exemption would be taxed at a 30 percent
rate.
The tax is structured in this manner in order to achieve
the necessary balance of payments effect by encouraging travelers to
keep their spending to a modest level rather than to cancel their trips.
In this way it offers the greatest opportunity for foreign exchange
savings with the minimum interference with travel.
This proposal differs in only one major respect from that
presented to the Ways and Means ComIni ttee.
which~
Under our original proposal,
only the first $7.00 of average daily expenditures would have been
- 23 completely exempt from tax; the next $8.00 would have been taxed at a
15 percent rate and the excess at the 30 percent rate.
Thus, while
practically all travelers would have been subject to at least some tax,
it would have been very modest for those who traveled modestly and
generally would not have required people to cancel their trips.
Nevertheless, some of those who commented on our original
proposal indicated that even a modest tax would force cancellation
of some desirable trips, especially those made by students
and others on very strict budgets.
As revised, our proposal
would avoid this possibility in that a student or other traveler
could completely avoid the expenditure tax by keeping his average
daily expenditures below $15.00.
This level of daily expenditures
would seem completely realistic, especially for the type of
trips taken by students and others traveling on modest budgets.
Moreover, the elimination of one of the tax brackets will
simplify the tax computation.
- 24 It has been suggested that the per diem exemption be replaced
by a flat per-trip or per-year exemption.
presents certain problems.
This alternative
First, it would graduate the
degree of spending restraint by the length of the trip, and, by
so doing, would favor shorter trips over longer trips.
The avail-
able statistics show that in income groups below $20,000 the total
expenditures per trip are relatively the same, but the less
affluent spend less per day and stay longer.
This latter group
is heavily weighted with students, teachers, and individuals
visiting foreign relatives, all of whom are likely to need extended
trips in order to meet their objectives.
A per diem exclusion
reco~ul
this trend by allowing a basic exemption based on the number of days of i
Thus, even those whose travel objectives
re~uire
a trip of above
ave~e
will be able to take the trip at a modest spending level without undue
concern for the tax.
A flat exemption per trip would, on the other
hand, favor those who take shorter trips by allowing them a higher averBf
- 25 per-day rate of expenditures subject to the exemption.
This group consists
generally of the more affluent, where the so-called big spending is
more liRely.
Furthermore, if the exemption were on a per-trip basis, it would
unfairly favor frequent short trips over a single trip 8f the same
total duration.
For example, a
perso~
who took four 20-day trips
would be entitled to four times the amount of exemption as a person
who took one SO-day trip.
Again, in this respect, a per-trip exemption
would favor the wealthy who are more able to take many trips
~broad.
If some provision were added to limit the multiple trip problem,
such as no more
th~n
one exemption per year, an undesirable degree of
rigidity would be interjected into the tax structure.
For example, a busir.ess-
man may honestly believe that he is going to take only one trip during a
year and, accordingly, use up his whole exemption on that trip_
If
a business emergency were to require a second trip, each dollar
would be subject to the full 30 percent tax no matter how modest the
- 26 spending by the individual.
burden.
This could result in an unreasonable
Thus, we recommend retaining the per-diem approach.
By structuring the tax in the manner we have, there is no
necessity for providing a list of exemptions for specific types of
travel which might be considered especially important, either from
a business or a cultural standpoint.
Instead, the traveler can avoid or
minimize the impact of the tax by keeping his spending to a modest level.
It would seem clear that specific exemptions are undesirable as they
require arbitrary distinctions and administrative complexities.
On the other hand, our proposal does draw a distinction
between individuals who are traveling and those who have
essentially shifted their residence abroad.
The tax would not
apply to this latter category,which includes businessmen transferred abroad for a substantial period and students and teachers
who are either studying or teaching abroad.
In these situations,
the individual is likely to have SUbstantial expenses in setting
up his household with the result that the imposition of a tax
- 27 migtt cause considerable hardship.
These exemptions, as well
as the other details of our proposal, are explained in the attached
technical explanation.
We estimate that the balance of payments savings from this
expenditure tax would be about $115 to
$140
million per year.
This travel tax has been criticized on several different levels
and, at the risk of appearing defensive, I would like to catalogue
these criticisms and give you the other side.
This seems particularly
required in view of the general lack of balance in the testimony
which has been presented to date.
There are those who argue that there is no balance of payments
problem.
I have already discussed this in some detail and am sure
you are as well aware as I am that this is just not the fact.
In this regard, it has been contended that we have overstated
the travel deficit by not including the purchase of airplanes by
foreign airlines as an offsetting expenditure in the U. S.
First,
- 28 certainly not all foreign airplanes are used solely to transport
travelers to and from the United States.
Second, moving airplane
sales from the trade account to the travel account will not alter
the overa.l.l balance of payments deficit or the fact that Americans
spend about $4 billion each year in connection with foreign- travel -which is almost 10 percent of this country's total foreign payments.
Thus, a mere bookkeeping change will not eliminate the immediate
need for reducing our foreign travel payments.
It has frequently been stated that the travel tax would interfere
with the inalienable right to travel.
While the value of travel is
unquestionable, the fact nevertheless remains that a family must
btidget for its travel outlays and so must the
nation budget its
international expenditures to the foreign exchange available.
As
I have already indicated, we have structured the travel tax to accomplish
this national budgeting with as little interference with travel plans
- 29 as possible.
The bulk of the foreign exchange savings will come from reduced
spending while on a trip, and not through cancellation of the trip.
Other critics claim that an affirmative program restraining our travel
expenditures abroad will be ineffective because of the retaliation it will
evoke.
An area of retaliation frequently pointed to by these critics is
a reduction in foreign orders for United States aircraft.
ination does not lend credence to this fear.
Close exam-
The travel program is
specifically designed to have the least impact on the number of people
traveling abroad.
This effect should be even more pronounced with our
proposed modification in that there would be no expenditure tax impesed -and, therefore, no motive to cancel the trip -- where spending is below
$15 per day.
The tax should thus have the least effect on the airline
business, and therefore on aircraft orders, of any form of restraint
on travel expenditures.
The next group of critics focuses directly on the structure of
the travel tax and takesthe position that it is unworkable, unenforceable,
Unfair and ill-conceived -- to say the least.
- 30 They say that the tax will fall heavily on teachers, students, and
other low income people; that it will have little
effect on "jet-
setters;" that it will involve mountains of red tape; and that it
will encour,age Prohibition-type evasion.
The proposed tax clearly cannot be faulted on equity grounds.
The
tax is progressive according to expenditures, which, after all, is the
factor contributing to the balance of payments problem.
It is designed so that one traveling modestly will incur little or
no tax.
On the other hand, the 30 percent rate on expenditures over
$15 per day is a significant continuing
de~errent
to marginal expenditures
even by the most affluent traveler.
A substantial tax on tickets, such as 30 percent, or a tax on each
trav~J
in a fixed amount, or a tax graduated by the number of days of travel would far
equally on the modest traveler and on the lavish traveler.
Such taxes
would therefore represent a far greater proportion of the expenditures
of the less affluent and would be no continuing deterrent to the more
affluent.
In other words, they would be grossly ineqUitable.
As to enforcement, just as one can argue that
t~ere
are ways to evade the
travel tax, one can argue that there are ways to evade the income tax -and some people try it.
Out of 10:) million returns filed in t:be
United states, however, and out of
3 !Ilillion returns examined, there
were about 1,000 fraud indict!Ilent-=: last year.
This clearly demon-
strates that the great mass of American taxpayers accept their
responsibility to pay taxes -- if not happily, at least honestly.
'There is no reaS-:ll:' to l:>elieve th"= travel tax Iw'.lld not be accepted
in the
s~e
~..lch
B.
of
way.
of the cr-iticisI!l based on. complexity and eve.sian involves
misconceytion of the tax.
a[~:r
expenditures.
The tax does not involve the itemization
Therefore the picture presented by some cr-itics
of European hotel clerks busily grinding out
would not materialize.
~ount
$3
receipts for- $25 suites
The tax is based on the difference between the
of money and traveler's checks a traveler leavGs the United
S~ates with and the amount le~ ifhen he ret~rns.
exte!lt of the computation for most travelers.
TI:ds "Ifill be the
For t1:.ose '\{ho use
crec..:t cards and personal checks, these amounts would be added.
But no one need carry pencils and pads -- or take his accountant -.
with him on his trip to Europe.
The final level
of criticism is that, even accepting the
need for a travel tax and the structure of this proposal, it cannot
do the joo of effecting the anticipated balance of payments savings.
These critics point to the fact that the tax is applicable only
to travelers outside the Western Hemisphere and, moreover, that
large groups of such travelers, such as businessmen, persons
viSiting relatives in Europe, teachers and students, will travel
to Europe despite the tax. They claim that it will have no effect
on the wealthy.
They therefore contend that
the oase on which
the tax can operate is only vacation travel outside the Western
Hemisphere oy middle income people and that a oase so limited is
insufficient to yield the balance of payments savings we are seeking.
This criticism ignores the structure of the tax.
The tax
indeed assumes that most travelers to Europe will not cancel
their trips.
On
the other hand, it is fair to assume that all
types of travelers will respond in same degree to the tax, either
- 33 by keeping their spending below the exemption level, by shortening
their stay by a few days, or by eliminating some marginal expenses.
Indeed, a traveler contemplating spending $25 a day could absorb
the entire tax, including the ticket tax, by cutting only 4 days
from a 30~day trip.
If
the $25 a day traveler wanted to s~end nis
full 30 days in Europe, he could offset the tax by reducing his
expenditures to about $22 a day.
It is therefore reasonable
to believe that travelers of all types will examine their spending
plans with the tax in mind.
On this basis, a $115 to $140 million balance
of payments savings out of the almost
$1. 5 billion in contemplated
travel exponditures for travel outside the Western Hemisphere
seems clearly
at~~ainable.
It is also reasonable to e:-..--pect that thi,;- would be a real savings
and not produce just a transfer of the tr3.vel to countries in the
Westen. HeLlisph2r>?
'There may, of course, be a certain nu..'TI.oer cf
travele:r.s ,.,The w~ll revise their plans.
eXis~ing
But it is clear that the
tourist fa:! iIi ties in the l-lestern HpP"isphere )utside of
the United states will not accommodate a large e.,"!}ount of addi tioc13.1 tourism.
- 34In other words, the tax is designed to meet equitably the need
for temporary restraint on foreign travel spending, with due regard
to the varying types of travelers.
Its mechanics for the vast
majority of travelers are uncomplicated and can be readily understood and satisfied.
The tax, thus, offers an essential and feasible
bridge to the time when our longer-range programs to increase
tourism to the United States take hold.
If no measure is enacted to deal directly with expenditures by
U. S. travelers, the overall improvement required in our balance
of payments position can be achieved only if other sectors of the
economy contribute more than their fair share.
- 35 Thus, I consider the foreign travel tax today, as I did on
February 5, as essential part of our balance of payments program.
The confidence of the rest of the world in our dollar depends, in
part, upon the resolve we demonstrate to put our financial house in
order.
The bill before you today is a step in the right direction
as well as a solid structural revision in our tax and Customs law8.
But the dramatic demonstration of our resolve and a sizable reduction
in our travel deficit rests upon the absent portion of the Administration's
program -- the foreign travel tax.
III.
1.
Ticket Tax.
Substance of H. R. 16241
Present law impos es a 5 percent tax on the
amount paid for an airline ticket purchased in the United States.
International flights are, however, exempt from this tax.
This
_ 36 _
exemption was enacted in
1947
for the purpose of stimulating overseas tra~
by Arneri cans and thereby to increase the flow of dollars to Europe.
Cl>vioo
tLis exemption is no longer justified and this bill eliminates it by perma.
nently extending the existing air ticket tax to all amounts paid for a.ir
transportation where the tickets are purchased within the United States.
The bill, in addition, eliminates most of the present exemptions from
the ticket tax.
The basic domestic airline ticket tax is in the nature of
a user charge in that the revenues derived from it are considered as payments in return for the activities of the Federal Aviation Administration
in providing services principally concerned with air navigation and sa.fety.
Viewed this way, exemptions from the tax are unjustified.
Therefore,
exemptions previously accorded state and local governments, colleges and
universities, and U.S. government travelers have been eliminated as a permanent structural improvement in the law.
These entities certainly have
no less an interest in the safety of their employees who travel by air than
do other employers.
Equally, t~ey have no less a..'1 obligation to help meet
the costs of insuring this safety.
- 37 The changes made by the bill in the existing air transportation
tax would apply to amounts paid for tickets sold on or after 10 days
after enactment of the bill for transportation which begins on or
after that date.
It is estimated that this tax will improve our
balance of payments by $50 million per year and raise $95 million
in revenue each year.
We are in basic agreement with the provisions in the bill as
they affect the ticket tax.*
* The Treasury Department suggests two changes in the ticket
tax provisions of H. R. 16241:
(1) The House bill, while eliminating most exemptions,
retains the present exemption for do~estic flights by small aircraft on nonestablished lines (sec. 4263(d)). The retention of
this exemption is inconsistent with the user charge nature of the
domestic ticket tax and it is recommended that it be deleted.
(?) The Treasury Department recommends excluding from the
ticket tax flights completely within Puerto Hico (or, consistently,
within one of t~e possessions) in that this is more in the nature
of ~~ internal matter of concern to Puerto Rico under its Commonwealth status.
- 38 -
2.
Customs Measures
a.
Balance of Payments Impact of Present $100 Duty-Free
Tourist Exemption
The estimated value of articles acquired abroad and brought
into thG United States during
1967 by United States residents
returning from countries other than Mexico and Canada, and the
Caribbean area totaled approximately $200 million.
Of this amount,
$100 million was brought in under the pre sent $100 c1l.stoms dutyfree exemption cranted to returning residents.
A substantial reduc-
tion in this duty-free exemption would achieve a significant reduction in the value of articles brought illto the United States by
returning Uniteu States residentso
b.
Balance of PaymHnts Inpact of $10 Sift Exemption for
Parcels Arrivins; bX Fail
•
An estimated 11 million packaGes arriving by mail during 1967
were admitted duty free under the existing exemption for gifts valued
at less than $10.
In addition J many other parcels presently being
admitted without payment of duty would have duty owing if there were
adequate customs manpower
avail~ble
to assess the duty.
The elimination
- 39 -
of the $10 gift exemption, and a more intensive processing by
Customs of package s arriving from abroad by mail would bring about
a decline in the shipment of such parcels to the United Stateso
Since many such parcels are purchased by United states residents,
this would result in a significant balance of payments saving.
c.
Reduction of Returning Resident Exemption
I.
Introduction
I have set forth below, for purposes of convenience and of
clarity, a table indicating customs exemptions for returning residents:
(1) under present law; (2) under H. R. 16241; and (3) under the proposal that I am now about to make to you.
During the rest of my
statement, you may find it useful to refer back to this table.
- 40 -
RETURN:lliG RESIDENT EXEMPTION
Location
Present Law
Treasury Proposal
House Action
Temporary (until
Permanent
Permanent
10/15/69)
10/15/69)
Canada & Mexico
Temporary (until
$100
$100
$100
$100
$100
Caribbean Area
100
10
50
100
100
Virgin Islands,
American Samoa
and Guam
200
100
200
200
200
Elsewhere
100
10
50
10
50
- 41 -
II.
House Action
In order to reduce foreign expenditure s by returning United
States residents and thereby achieve a balance of payments savings,
we had proposed legislation to the House of Representatives which
would permanently reduce the present $100 duty-free exemption granted
·to returning United States re sidents to $10 for persons returning
from countries other than Canada, Mexico and the Caribbean area.
The House agreed that a reduction to the $10 level was presently
warranted in view of the current United States balance of payments
problems.
However, the House concluded that on a permanent basis,
commencing in October, 1969, the United States should adopt an exemption of $50, which is the exemption which the Organization for
Economic Cooperation and Development has recommended that all
countries grant to their returning residents.
III.
Proposed
A.
Chan~s
in House Action
Exemption for Canada and Mexico
The House left a permanent exemption for Canada and Mexico
of $100.
We basically agree with this decision because of the special
relationship between the United States and those countries.
_
B.
~2
-
Exemption for Caribbean
The House reduced the exemption proposed by the Treasury
for persons returning from the Caribbean area, from $100 to $10
on a temporary basis, and provided that it would be established
at $50 on a permanent basis.
I believe the Senate will wish to
,weigh carefully the desirab11i ty of a $10 exemption for the
Caribbean area, even on B temporary basis.
~ll
islands are
lar~ly
The economies of these
dependent on United States tourism and
a drastic reduction in the eustoms exemption will adversely affect
their economies and their overall trade with the United States.
Moreover, we have a special relationship with the Caribbean area
similar to that which exists with our contiguous neighbors of
Canada and Mexico and this me.kes it reasonable for all these areas
to be given the same treatment.
We propose, in short, that the
exemption for residents returning from the Caribbean area be retained at the present $100 level.
- 43 -
C.
Exemption for Virgin Islands, Guam and American Samoa
The House bill provides that the present $200 exemption for
residents returning from the Virgin Islands and certain other United
states insular possessions be temporarily reduced to $100 and returned
to the present $200 ~xemption level in October,1969.
In order not to disadvantage the Virgin Islands economy, it
would be desirable to continue the $100 differential in customs exemptions between the Virgin Islands and the Caribbean areao
Following
this approach we recommend that the exemption for the Virgin Islands
be retained at the present $200 level permanently.
D.
Summary of Proposed Changes
In summary, with regard to returning United States residents,
we propose that the present $100 exemption be retained for the
Caribbean area as well as for Canada and Mexico.
For United States
residents returning from the Virgin Islands, and certain other United
States insular possessions, the present $200 exemption should be
retained permanently.
For returning residents from other areas of
the world, the present $100 exemption should be reduced to $10 now,
but increased on a permanent basis to $50 in October, 1969, as in
the House bill.
- 44 -
d.
Modification of Gift Exemption for Parcels Arriving
by Mail
We also proposed, and the House Report concurs, that the
$10 duty-free gift provision for articles arriving in the mail
from abroad should be reduced
-'-0
$1.
administratively under existing law.
This will be accomplished
No change is proposed in the
$50 gift exemption applicable to gift parcels arriving from the
United States servicenen serving in co:mbat zones.
do
Moreover, we
not plan to make a change in the $10 gift exemption level for
servicemen in non-combat zones.
e.
Modification of Duty Assessment Procedures
In order to ndnimize the increased customs workload implicit
in the changes described above, we recommend simplification of
duty assessment procedures applicable to returning United States
residents and to certain non-commercial mail parcels.
I.
House Act ion
The House bill provides that for returning United States
re sidents a 10 percent flat rate of d\.:ty should be assessed on the
fair retail value of all dutiable articles
accomp~nying
arriving
travelers, provided their aggregate value, exclusive of any duty-free
articles, does not exceed $500 wholesale.
-- 45 -
The flat 10 percent rate of duty would also be applied on
the fair retail value of non-commercial importations of dutiable
articles, arriving by mail, express, and other means of transportation, which are valued at more than $10 retail but not over
$250 wholesale, exclusive of duty-free articles.
A $1 charge
_would be made on dutiable non-commercial parcels arriving by mail
\~lued
at between $1 and $10~
II.
Proposed Changes in House Action
We believe the following modifications of these simplified
duty assessment procedures are desirable in order to foreclose
their becoming a possible avenue for substantial importations of
high duty itemso
The intent of these modifications is to circum-
scribe the situations where the simplified procedures may be used.
A.
Ceiling on Use of Flat Rate by Arriving Travelers
10
General
The flat 10 percent rate would not apply if the
aggregate retail value of articles brought in by returning
residents exceeds $100.
Under this proposal, the flat rate
would not be applicable to persons arriving from areas
benefi ting from an exemption of $100 or more.
Under the
Treasury proposal, these areas are Canada, Mexico, the
Caribbean Islands area, and the Virgin Islands and certain
other United states insular possessions.
- 46 -
2.
Operation of Flat Rate
This is how the flat rate will work.
If the tourist has more
than $100 worth of purchases with him, the flat rate will not be
applicable to any of his purchases, and he will have to pay duty on
the dutiable articles at the Tariff Schedule rates, due allowance
.being made for the duty-free exemption to which he is entitled.
m
totaling the tourist's purchases to determine whether the $100
ceiling has been exceeded, all dutiable articles would be counted,
including those articles falling within the tourist exemption.
If the purchases of the returning resident do not exceed the $100
ceiling, when calculated in this manner, he will pay duty at the
flat 10 percent rate on all his dutiable purchases, due allowance
being made for his duty-free exemption.
The same basic rule would apply in cases where the returning
resident exemption becomes $50 permanently.
- 47 -
In other words, the flat rate would continue to apply to dutiable
purchases between $50 and $100.
~De
If the dutiable purchases exceed
$100 ceiling, then all purchases above the $50 exemption become subject
to duty at the Tariff Schedule rates.
B.
Applicability of Flat Rate for Noncommercial Shipments
1.
Increase in Flat Rate
Fer noncommercial articles arriving in the mail or by other
means of transportation, we propose that the flat rate of duty be
increased from 10 percent, as provided in the House bill, to 15 percent.
In the absence of such increase, travelers desiring to avoid the
impact previously described of the $100 tourist ceiling on the use
of the flat rate, would be tempted to arrange for some of their
purchases to be separately shipped.
The increase proposed would help
to discourage such separate shipments.
2.
Ceiling on Use of Flat Rate
The flat 15 percent rate for noncommercial mail parcels would not
apply to shipments exceeding $50 in retail value.
Where the $50
limitation is exceeded, the Tariff Schedule rates would be applicable
to all dutiable items in the parcel.
3. Charge on Small Value Parcels
To coincide with the 15 percent flat rate, we propose that the
charge on dutiable parcels valued at $10 or less
- 48 -
retail, be increased from $1 to $1.50.
Artieles valued at $1 or
less, would continue to be free of any duty or charge.
f.
Resulting Balance of Payments Savings
It is estimated that implementation of all of the above
recommendations will achieve a balance of payments savings of about
,$100 million during the first year after enactment.
This saving
would be reduced to $75 million, on an annual basis, after October
1969
when the basic tourist exemption is scheduled, under the House bill,
to be increased from $10 to $50.
g.
Increased Administrative Costs for Customs and Post Office
Department
Implementation of the above measures will entail increased
administrative costs for the Customs Service, and also for the
Post Office Department to the extent its expense in collecting the
duty on parcels arriving by mail cannot be covered by postal handling
charges because of the ceiling set under the Universal Festal Union
Convention.
Their ability to execute these measures is dependent upon
adequate increased appropriations to implement the changes.
However,
I should point out that any increased cost will be offset by significantl
increased revenues.
- 49 IV.
Conclusion
In conclusion, I urge that this Committee take immediate
and affirmative action to narrow the balance of payments deficit
in our foreign travel account.
The first step is to approve,
subject to the revisions we have recommended, the extension of
the air ticket tax and the customs measures included in H.R. 16241.
The second is to add to this bill
the tax we have proposed to
encourage restraint in foreign travel spending.
In this form,
H.R. 16241 would represent a balanced and effective program for
dealing with the important balance of payments problem in the travel
area.
Solution of this problem, in turn, is critical if we are
to improve our overall balance of payments deficit -- an improvement that is so necessary to maintain strength and confidence in
the dollar.
- 49 IV.
Conclusion
In conclusion, I urge that this Committee take immediate
and affirmative action to narrow the balance of payments deficit
in our foreign travel account.
The first step is to approve,
subject to the revisions we have recommended, the extension of
the air ticket tax
~~d
the customs measures included in H.R. 16241.
The second is to add to this bill
the tax we have proposed to
encourage restraint in foreign travel spending.
In this form,
H.R. 16241 would represent a balanced and effective program for
dealing with the important balance of payments problem in the travel
area.
Solution of this problem, in turn, is critical if we are
to improve our overall balance of payments deficit -- an improvement that is so necessary to maintain strength and confidence in
the dollar.
TECHNICAL EArpLANATION
FOREIGN TRAVEL TAX
The following is a technical explanation of the Treasury Department's
proposed foreign travel (expenditure) tax.
In General.--Under this proposal, a temporary tax would be imposed
on certain expenditures in connection with a trip outside the nontaxable
area (generally the Western Hemisphere and possessions of the United
States) by a United States person.
The tax base would include both expendi-
tures made by him and those made by another United States person on his
behalf.
The tax schedule would be as follows:
The first $15 of daily
expenditures (computed on the basis of an average over the whole trip)
would be exempt from tax.
All expenditures over this level would be taxed
at a 30 percent rate.
The cost of sea or air transportation to and from the traveler's
foreign destination would be taxed at a
5 percent rate--either as part
of the expanded air transportation tax proposed by H.R. 16241, or as
part of the expenditure tax.
In addition, all air transportation while
abroad would be taxed at a 5 percent rate, either under H.R. 16241, or,
if that is not applicable, as a part of the expenditure tax but at a
5 percent rate.
The use of the lower ticket tax rate removes the
possibility of hardship in the case of persons whose purposes
of travel can only be accomplished with numerous flights and frequent
- 2 -
stopovers, as, for example, symphony orchestras on tour.
The use of
this rate also eliminates the possibility of discrimination between
int~European
trips (where the flights tend to be short and therefore
relatively inexpensive) and trips in other parts of the world where
flights tend to be longer and therefore more expensive.
The application of the rate schedule in the case of families
trave~
together is discussed in a subsequent part of this memorandum.
United states Person. -- The tax applies to expenditures made in
connection with a taxable trip of a United states person.
Except as
noted below, the traveler would be liable for the tax on all expenditures
in connection with his trip, which he himself makes or which are made
on hi s behalf by another U. s. per son.
Amount s paid direct ly by an
employer for meals and lodging of an employee while on a taxable trip
would be taxable foreign travel expenditures of the employee as would
the expenditures made directly by the employee (whether or not reimbursed).
If a student travels abroad during the summer on funds given to him by
his parents, he is taxable on the expenditures of his trip, whether he
pays them or whether his father pays them
direct~.
It is consistent
with the nature of the tax -- which is to tax the value of
facilities and services received on a fcreign trip -- to tax the traveler
on the entire value of his trip.
Where a United states person on a taxable trip makes expenditures for
another person in the taxable area such as entertainment of a friend
- 3 -
(whether or not a U.S. person) or payment of the family expenses of those
accompanying him, the expenditures would be taxed to the person making
them.
A United states person means:
(a)
Any
individual who is a resident in the United states,
other than certain employees of international organizations or
foreign governments and their staffs and families,
(b) A corporatiQn or a partnership engaged in trade or
business in the United States,
(c) An estate or trust which is considered a United states
person within the meaning of section 4920(a)(4) (relating to the
Interest Equalization Tax),
(d)
The United States or any agency or instrumentality
thereof,
(e) A state, including the District of Columbia, Puerto Rico
and the possessions, or a political subdivision or any agency
or instrumentality thereof, and
- 4(f)
A foreign corporation not engaged in trade or business
in the United States 50 percent or more. of the voting stock of
which is owned by a United States person.
United States.--For this purpose, the United States includes the
States, the District of Columbia, the Commonwealth of Puerto Rico and
all possessions.
Thus, residents of Puerto Rico, the Virgin Islands,
Guam, and American Samoa, will be subject to the expenditure tax on
their travel outside the nontaxable area.
A tax on expenditures
by sach residents while traveling abroad is consistent with the fact
that the foreign expenditures of these areas are considered in United
States balance of payments.
On the other hand, there would be no tax
imposed upon expenditures made while traveling in any of these areas.
Thus, these areas would be treated in the same manner as the continental United States.
Any revenue collected under the expenditure tax
from residents of Puerto Rico, the Virgin Islands,or Guam will be
covered into the treasuries of tpose areas.
Taxable Trip.--Only those expenditures in connection with a
"taxable trip" would be subject to the expenditure tax.
Commencement and Conclusion of a Taxable Trip. --A taxable trip of
an individual shall in general
comm~nce
with the individual's depar-
ture from a port or station in the United States, including the possessions and Puerto Rico.
However, since trips within the specified
- 5 10ntrureble area, primarily the Western Hemisphere, are not subject to the expendiGure tax, if the ind i vidual after leaving the United States stops at a port or
station in the nontaxable area for a scheduled interval of more than twelve hours,
Ghe taxable trip shall not begin until his departure from the last such port or
station in the nontaxable area.
The taxable trip shall end when the individual
returns to a port or station in the United States; or, if he makes a prior stop
at a port wi thin the nontaxable area at that time, provided the stop is for a
scheduled interval of more than twelve hours.
The tax will only be applicable to taxable trips beginning more than 20 days
after the date of enactment of the legislation.
The tax will terminate on
October 15, 1969, which marks the end of the European travel season for 1969.
If a person is on a trip on the termination date, he would pay tax only on the part
of his trip falling within the term of the tax.
Nontaxable area.--The nontaxable area means the area lying west of the 30th
meridian west of Greenwich, and east of the 130th meridian west of Greenwich, and
all of Canada, the United States, its possessions and the Trust Terri tory of the
Pacific Island s .
Certain Trips Excepted
Individuals establishing foreign residence.--An individual who, after his
departure from the United States, establishes his residence in
a foreign country
would be considered on a nontaxable trip,
Students and Teachers.--An individual (and his dependents) would be considered
on a nontaxable trip if he is enrolled at and attending, or employed as a member
of the faculty at, a foreign school or university for a normal school term of at
least one quarter.
In the case of the student, he would have to be studying
for a degree at the foreign school or would have to receive credit for such
3chooling towards a degree at a domestic school in order to qualify.
- 6 Trade or Business.--An individual (and his dependents) shall be considered on a nontaxable trip if he is outside the nontaxable area for at
least 120 consecutive days while engaged on a
or business or profession.
full~time
basis in a
t~e
This category of exceptions will cover, for
example, an employee transferred abroad by his employer for more than 120
days, or a professor on sabbatical leave abroad doing research on a fu1ltime basis in connection with his trade or business.
In addition, a
resident (and his dependents) of the United States who is an employee
of an international organization traveling on business would be considered
on a nontaxable trip, regardless of the length of stay.
Moreover, such
an employee (and his dependents) present in the United States on nonresident
immigrant status would not be subject to the tax whether his trip was
business or pleasure.
Partial Vacation Trips and Early Return to the U.S.--If the student,
teacher, employee, or businessman meets the time qualifications for exemption
described above and does not spend a total of more than
14 days outside the
nontaxable area before and after the period he is carrying on exempt
activities, his entire trip would be exempt.
14 days, thus converting his trip
If he stays longer than
to a partial vacation trip, he (and
his dependents) would be considered on a taxable trip, but would be permitted to exclude all expenses incurred
~uring
the period he is engaged
in the exempt activities.
If the student, teacher, employee, or businessman does not stay
abroad for the prerequisite time period, his trip would be taxable
unless he could not have reasonably foreseen the circumstances which
caused him to cut his trip short.
- 7Military.
A member of the armed services (and his dependents)
who is serving on active duty and is assigned to duty in the taxable
area would be considered on a nontaxable trip during his tour of
duty at that duty stationo
A:rry trips he makes back and forth to the
nontaxable area during that tour would also be exempt.
Crew Members of Ships or Air line s • An individual would not be
considered on a taxable trip while he is serving as a member of a crew
of'a facility providing transportation to or from a port or ports
outside the nontaxable area provided that the portion of the trip outside
the nontaxable area does not include any period of layover longer than
normally provided in similar situations.
Taxable Foreign Travel Expenditures. -- In general, unless specifically
excluded, the tax applies to all expenditures in connection with the taxable trip of a United States person made by him or another United States
person.
They include not only the traveler's own living expenses, but
also the cost of any entertaining he may do and the cost of most
tangible personal property he may purchase while abroad.
Expenditures
for the use or maintenance of property while on a taxable trip, such as
rent for an apartment or automobile, are taxable foreign travel expenditures.
In the case of an automobile, boat, other vehicle, or housing
accommodation purchased or owned by the traveler, or furnished free of
charge by another United States person, a special rule would tax the
value of the use of that item during the taxable trip.
Consistent with
this rule, the purchase price of such property would not be subject to tax.
- 8 The value of the use of the article while traveling appears to be a more
appropriate tax base than the full purchase price, since this treatment
will put the person who purchases or borrows a vehicle or housing accommodation in the same position as one who rents one.
Only expenditures made for facilities or services to be provided
on the taxable trip would be considered made in connection with the
trip.
Thus, any expenditures for pre-trip facilities or services, such
as taxi fares to the airport in the United States; costs incurred during
the trip for facilities and services not provided on the trip, such as
in connection with the traveler's house in the United States while he
:i.s gone; or the cost of work done after the traveler's return, such as
to repair damages occurring on the trip, would not be taxable foreign
travel expenditures.
Expenditures of a taxable trip are taxable whether paid before,
during or after the trip.
For example, hotel bills are taxable foreign
travel expenditures whether prepaid to a travel agent, paid in cash
or by check while on the trip, or charged and paid for after return.
Consistent with the rules on deductibility for income tax purposes
of ordinary and necessary business expenses, the
e~enditure
tax imposed
on amounts deductible as business expenses would itself be deductible.
- 9 -
Purchase of Property. -- In general, amounts spent while on a taxable
trip for the purchase of tangible personal property (other than property
held for investment or purchased for use or sale in carrying on a trade
or business, or by an organization exempt from income tax) would be
taxable.
Moreover, the cost of property purchased for delivery to an
individual on a taxable trip would be taxable.
Thus, for example, if a
person purchases a European suit of clothes (whether before leaving or
while on a taxable trip) and takes physical delivery while on a taxable
trip, the purchase price would be a taxable foreign travel expenditure.
Or conversely, if a person purchases the suit while in the taxable area
for delivery after his return to the United states, the purchase price
would be subject to this tax.
As mentioned above, in the case of the pur-
chase of automobiles, boats, or other vehicles, there would be imposed, in
lieU of a tax on the purchase price, a tax on the value of the use of the
article during the taxable trip.
The tax in all these cases would be in
addition to any applicable customs duty.
Business Expenses.
_N
In the case of an individual traveling on a
taxable business trip or on a taxable trip on behalf of an organization
exempt from income tax, his business expenses, or expenses incurred in
carrying out the purpose of the exempt organization, other than for transportation, meals, lodging, gifts and entertainment, would be excluded
from the tax base.
- 10 -
Rate of Tax
The taxable foreign travel expenditures made in connection with
a taxable trip of a United States person shall be subject to tax at
the following rates:
Air Transportation in Connection with Foreign Travel.--The expenditure tax will not apply to the cost of any air transportation paid
for in the United States.
That transportation will be subject to
the expanded ticket tax under H.R. 16241 at a 5 percent rate.
If
the air ticket is not subject to the ticket tax in H.R. 16241, because
it is purchased outside the United States or before the effective
date of the expanded air transportation tax, the expenditure tax will
apply but only at a 5 percent rate.
The cost of transportation exempt
from the ticket tax under a specific exemption (~, transportation
furnished to international organizations) would not be subject to the
expenditure tax.
Sea Transportation in Connection with Foreign TraveL--The expenditure tax will apply to the cost of all sea transportation in connection with foreign travel in the taxable area.
In the case of sea
transportation to the first and from the last scheduled stop in the
taxable area of more than 12 hours, the rate of tax will be 5 percent.
The cost of other sea transportation in the taxable area will be subject to the regular expenditure tax schedule, in the same manner as the
cost of land transportation.
- 11 ..
Amounts paid for food and services (where no separate charge is
made), and seating or sleeping accommodations, during the period transportation is subject to the 5 percent
lower 5 percent rate.
t~x
rate shall also be taxed at the
Thus, if a United states person takes a 30-day
cruise leaving from the U.S. which makes no stops within the non-taxable
area and which makes its first stop in the taxable area of more than 12
hours on the 5th day and makes the last such stop on the 25th day, one-third
of
the cruise fare plus any separate charge for sleeping accommodations
will be subject to tax at a 5 percent rate under the expenditure tax.
The remaining two-thirds of the cruise fare and separate. sleeping
accommodations charge and any additional expenditures (such as for
sightseeing or food) not covered by the basic fare will be subject to the
expenditure tax at the regular rate.
All Ocher Taxable Expenditures.--All other taxable expenditures
will be taxed on the following basis:
(a) Exclusion from tax.--Each traveler is entitled to a $15
daily exclusion from the expenditure tax base.
The amount excludable
under this provision for a taxable trip shall be computed by multiplying
the number of days during any part of which the individual was on such
taxable trip by $15 to arrive at the total exemption.
(b)
jo Percent Rate.--The remaining expenditures shall be subject
to tax at the rate of 30 percent.
- 12 -
For example, if a corporate employee goes to London on business for 10
days and spends $200 for taxable expenditures (whether or not he is reimbursed
by his employer) he would pay a tax of $15 computed as .follows:
Exclusion
x
$15
3cY/o
Remainder
10 days
=
$150
50
rate
Tax Rate
o
30'/0
$200
Total:
If in addition to his plane fare to London, the employer directly paid
for the employee's hotel bill of $200, the employee would also include
this amount in
his tax computation.
would be increased by
Under the above example, his tax
$60 (to a total of $75).
computation of the Tax
In order to preclude the necessity of travelers having to keep detailed
records of their expenses, taxable foreign travel expenditures would be
computed, to the greatest extent possible, by a travel net worth method.
For many people this would involve merely subtracting the money and
traveler's checks with which they returned from the money and traveler's
checks with which they left and adding this to the amounts paid before the
trip began.
More specifically, the first step in the computation for all travelers
would be to determine the cash expenses of the trip..
To do this, the amount
of money (including traveler's checks) with which a person returns from a
taxable trip would be subtracted from the sum of the amount of money
(including traveler's checks ) with which he departed plus .all amounts
received while on the taxable trip.
Amounts received while on the trip
- 13 must be included regardless of their origin.
Thus, withdrawals from domestic
or foreign banks, money sent from home, compensation for services received
while abroad or money received from the sale of property would be included.
The second step in the computation would be to add to the cash expenditure
figure, the amounts of expenditures in connection with the taxable trip paid
before the taxable trip began, the amounts charged while on the taxable trip,
and the amount of checks written while on the taxable trip.
These are all
amounts of which the traveler will have a record, e.g., credit card . statements,
personal check stubs.
The resultant figure would represent the tax base for
most travelers, and would be taxed according to the per day exemption and
30 percent rate} or in the case of certain transportation, the 5 percent
rate of tax.
For others, a further reduction would be made for expenses
specifically excludible from taxable foreign travel expenditures (such as
the cost of business inventory).
The figure resulting from these reductions
would represent their taxable foreign travel expenditures.
Estimated Tax
Every individual, at his point of departure from the United States
for a period during which he reasonably expects to be on a taxable trip,
and whether or not he plans to make a stopover in the nontaxable areas,
would be required to make a declaration of his estimated tax with respect to
that taxa11e trip anu pay the amount of the estimate to the Internal Revenue
Service.
He would include in his declaration a statement of the amount of cash
(and traveler1s checks) he is taking on the taxable trip.
This figure is
necessary in order to utilize the travel net worth method for computing cash
- 14
expenditures.
Appropriate procedures will be developed for filing the
declaration so that compliance with the requirement may be verified before
the traveler t s departure.
The accuracy of the cash statement would be
sub,ject to verification at the point of depa.rture by customs officials
or other Treasury officials.
If a United states person departs on a taxable trip from a port in
the nontaxable area outside the United states, and he did not make the
re~uired declaration and statement upon leaving the United states,
he will be subject to penalty unless he can show such departure was not
expected.
In any event, the declaration or statement, if not previously
filed, would be filed at this time.
Any individual returning from a taxable trip would be required
to make a statement of his incoming cash (and traveler's checks)
at the time he is processed through United states Customs.
This
statement would provide the incoming cash balance from which the
travel net worth would be
computed~
and the accuracy would be subject
to verification by a customs official.
Re1.t:. "'-ns and Paynent of Tax
A tax return for a taxable t.rip, together with payment of any
balance due,would be required to be filed with the Internal Revenue
Service by the traveler wi thin 60 days after his return.
This will
allow the taxpayer adequate time to receive all necessary credit card
and banking records for preparation of the return.
the return may be filed immediate ly upon arrival.
Of course,
A husband, wife,
- 15 and any of their dependent children who travel together on a taxable
trip may make a single taxable trip return jointly with respect to
such trip.
:::cl~h
Such a return rnav be filed even thnUgh one or more of
111,-dviduals has no taxable foreign travel expenditures.
A joint
return would allow a family to utilize the full per diem exemption
available to each traveling member without requiring that each have
separate expenditures to absorb them.
Adrrd.nistratjon and Procedure
Generally
-'~he
administrative and procedural requirements applicable
to other excise taxes would be applicable to this expenditure tax.
Thus,
for example, the general provision for penalties for failure to file returns,
requirements for claims for refund, assessment and collection procedures,
and statutes of limitations would apply to the administration and procedure
of this tax.
Two new provisions would be added to insure compliance with the requirements for declaration and payment of estimated tax.
A flat penalt:" of $200 would be imposed for failure to make a declaration
of estimated tax and statement as to cash on hand, as required at the time
of departure from the United States unless it were shown ttat such failure
was
due to reasonable causes.
Thus, if an ind i 'J ldual flew from NevT York
to Europe without making a declaration and statement, a $200 penalty
Would be imposed for failure to make the declaration in New York.
A
significant penalty is necessary because of the importance of having an
individual establish his outgoing cash figure for purposes of computing
- 16 the tax base.
An underestimation penalty would be imposed of 10 percent
of the underpayment of estimated tax.
The amount of the underpayment
would be the difference between the estimated tax payment and the amount
of tax shown on the taxable trip return.
TECHNICAL EXPLANATION
PROroSED CHANGES IN CUSTOMS RULES RELATING TO TOURIST
EXEMPTIONS AND PROCESSING OF CERTAIN NONCOMMERCIAL
IMFDRTATIONS
The proposal is intended to reduce noncommercial expenditures
of dollars abroad where such expenditures adversely affect our
balance of payments.
It would do this by lowering the duty-free
exemptions allowed returning U.S. residents.
In order to ease
the administrative burden of processing millions of dutiable noncommercial foreign acquisitions brought back to this country by
returning U.S. residents and millions of dutiaQle noncommercial
mail shipments, it would provide for a flat rate of duty on such
articles wi thin certain monetary limits.
At the same time, since the proposal deals only with noncommercial imports, it would not interfere with the
favorabl(~
balance of
p9.yments aspects of our trade account or the legi tirnate business
interests of American businessmen in the import trade.
The proposal would not assess any duty or charge on articles
which are
the~selves
Tariff Act.
free of duty
unde~
existing provisions of the
Most of such articles would be works of art, books,
American goods returned, United States origin personal effects of
residents abroad and similar i terns.
'The Reduced Tourist Exemptions
A.
Present Practice •
The present tourist exemptions granted to returning U.S. residents
permit the duty-free importation of foreign acquisitions not exceeding
- 2 a total retail value of $100.
This exemption is granted to
American residents who have been abroad for not less than
48 hours and may be used only once each 31 days (in the case
of persons arriving from Mexico the 48-hour time limit is waived).
The resident is permitted to include within this exemption one
quart of alcoholic beverages.
This exemption is applicable to
residents returning from any area or country.
However a special
exemption is granted to residents arriving from the Virgin Islands
and certain other U.S. insular possessions.
This special exemption
permits the importation of acquisitions up to a value of $200
retail, of which not more than $100 may be acquired outside the
Virgin Islands or other insular U.S. possessions, and may cover
not more than one gallon of alcoholic beverages of which not
more than one quart may be acquired outside the Virgin Islands
or other insular possessions.
B.
House Bill.
The House bill contains the following exemption structure (com-
puted on retail values as under existing law):
(1)
The exemption for
U.S. residents returning to the United states from any place other
than Canada, Mexico and certain United states insular possessions
would be $10 on a temporary basis and $50 on a permanent basis after
October 15, 1969; (2) the exemption for residents returning direotly
from Canada and Mexico would be $100 permanently and (3) the exemption
for residents returning directly or indirectly from the Virgin Islands
- 3 -
and certain of our other insular possessions would be $100 temporarily
until october 15, 1969, when it would be restored to the present $200
level.
As under existing law, exemptions in excess of the minimum
exemption would be restricted so that goods acquired would be exempt
only to the extent of the exemption applicable to the area of acquisition.
For example, the exemption for a tourist returning from the
Virgin Islands after Jctobe~ 15, 1969 (when the $200 exemption would
be in effect) would be limited to $100 in Canada or Mexico no more than
$50 of which were acquired in Europe.
Goods in excess of these amounts
acquired in these areas would be dutiaulc, even though, in the aggregate,
they did not exceed $200.
Foreign acquisitions accompanying the returning U.S. resident
valued in excess of the exemption would be dutiable at a flat 10
percent of the fair retail value.
The 10 percent rate would be
applied on such articles up to an aggregate value of $500 wholesale.
If dutiable acquisitions above the exemption level exceed $500 in
wholesale value, all dutiable articles would be assessed duty at regular
Tariff Schedule rates.
In addition to any customs duties, articles
such as liquor and tobacco would, of course, be subject to any applicable Internal Revenue taxes.
C.
Current Treasury Proposals.
For the reasons set forth in the Statement by the Secretary of
the Treasury, the current Treasury proposals would modify the House
bill by:
- 4 1.
Extending the exemption level of $100 for Canada
11
and Mexico to the Caribbean Island Area.
2.
Retaining the present $200 exemption for U.S. residents
arriving directly or indirectly from the U.S. Virgin Islands
and certain other insular possessions.
The same limitations
on the exemptions for goods acquired in other areas would be
provided, but at the changed exemption levels that would be
applicable to those areas of acquisition.
3. Reducing the $500
who~esale ceiling on applicability
of the flat rate to $100 retail.
4. Including acquisitions exempt from duty solely by
virtue of the tourist exemption within the $100 ceiling for
purposes of determining applicability of the flat rate.
Articles Not
A.
Accom~nying
Returning Travelers.
Present Practice.
At present, low value items (under $1) such as newspapers are
"passed free."
The same "passed free" status is given to mail parcels
1/ The Caribbean Island Area would be defined as the Bahama Islands,
the Turks and Caicos Islands, the Bermuda Islands, and all the islands in the Caribbean Sea except those belonging to Central and
South American countries, Cuba and its offshore islands and Puerto
RiCO, the Virgin Islands of the United States and all other islands
of United States sovereignty.
- 5 identified as gifts valued at up to $10 retail and to gifts (whether
imported by mail or otherwise) valued up to $50 retail .from servicemen in combat areas.
All other dutiable articles, whether imported by mail or otherwise, are subject to the
B.
~riff
Schedule rates.
House Bill.
The $10 exemption for all mailed gift parcels, with the exception
of those orginating in noncombat areas,
would be reduced to $1
retail administratively by a change of regulation.
The statutory
exemption of $50 for gifts from servicemen in combat areas would
also be retaineu as would the $10 exemption for servicemen
in non-
combat areas.
C.
House Bill.
Dutiable mail shipments valued at over $1 and not over $10
retail would be assessed $1 in lieu of any other duty or tax.
Dutiable mail shipments valued at over $10, and dutiable shipments by other means, containing more than one article and valued
at not over $250 wholesale, would be assessed duty at a flat rate
of 10 percent of the fair retail value.
Shipments containing one article or exceeding the $250 ceiling
would be assessed duty at regular Tariff Schedule rates.
D.
Current Treasury Proposals.
For the reasons set forth in the Secretary's Statement, the
current Treasury proposals would modify the House bill by:
1.
Increasing the flat charge for mail packages valued at
over $1 and not over $10 retail, to $1.50.
- 6 2.
Reducing the $250 wholesale ceiling on applicability
of the flat rate to
Estimated
A.
$50
retail.
3.
Increasing the flat rate from 10 to
4.
Extending the flat rate to single article packages.
Foreig~Expenditure
15 percent.
Reductions
Changes in Tourist Exemptions.
During
1967,
the total value of foreign acquisitions made
by
returning U.S. residents arriving from all foreign countries was
estimated to be in excess of
$362
million.
Of this total, persons
arriving from Canada, Mexico and the Ca!'ibbean countries (including
Ca·"ibbean cruise passengers) a~cOlmted for slightly over
million.
Therefore, the value of a._'ticles acquired by returning
U.S. residents 9.rriving fro:n other
million.
$162
~ountries
was approximately $20J
Approximately $110 million was bro~sht in by persons
wbos,= p.lr~hases totaled less than $100 per person, while approximatel
$90
.ni11io:l was bro·..lgh-c in '-Jy pe cSi:ms \-.rhose foreign acquisitions
exceeded th2 present duty-free exemption.
We estimate that
tlv:~
value: ·;)f foreig!1 acquisitions by persons
now bringing in le:3s than $100 each -Nill be reduced -by $~·5 million
or a-pproximately 40 percent of the total p~r~hases made by this g.rollP
The effect on foreign acquisitions made by the approximately
300,000 p2r.3:)~1S 'rrl:1o
!10'\v
eX:2e~=d.
·)'ll."
duty-free exemption and pay duty
- 7 -
would be someiolhat less.
If we can assume that the foreign ac-
quisi tions by these persons will be reduced by an am.o:mt roughly
eq'llvalent tv the additional duty which they would have to
pay, the total reduction in foreign
~C!quis i tio~s
by this group of
returning U.S. residents would be about $5 million.
Thus, the total red:.lction in fo L~ei3~1 acquisitions to be achieved
by reducing the tourist exe::nption to $10 is estimated to be a:pproxirnately $50 Dli llio~1 on
9"::1
annual basis through October 15, 1969.
that date, when the increased
~iCemption
for Lll:Jst of
th~
After
world applies,
the total reduction will approximate $30 m.illion on ,'in g,nnual basis.
B.
Mail 3rlipllents .
It is estimated that the total value of the 55 million mail
parcels 'Nh ic:!1 arrived in the U. S. dU:"ing 19(-)7
million.
Of
thi~:
55
mi11io~1
total,
!L11
WaS
approximately $500
estimated 11 millio.1 parcels
were gifts or pl:.lrported gifts said to be valued at less than $10;
4 millio.1 wer 2 gifts valued
areas; and 25
~nd
~nilliO:1
;~50 or less from servicemen in co:rnbat
were "flats", newspapers, periodicals, salnples
3hipm'211ts of insignificant value.
Of
th~
remaining 15 million
parcels duty 'was aSSessed m1 1,600,000 par.cels.
"Hovlever, o;xr studies
indicate that apPToximately one-third :Jf the 15 million par.cel total
wO'.lld1a-J2 been d·..ltia'Jle if adeq".late ma"'1povver was available to properly
hat'ld 1e them.
- 8 Certain parcels
elO"N
included in the present $10 gif't exe.'Ilption
are bon <.l. fide gifts ;nailed from nationals of foreign countries to
person:') 5_n
th'~
Jnited states.
3ui~h
wi th respect to
While elimination of this privilege
parcels will n::>t affect expendi tu.re:3 of U.S.
dollars abro:3.d, it 5_s nevertheless believed necessary to eliminate
this free-gift privilege entirely be(!ause it is sll".:>jeet to widespread
abuse and because, in practice, it would be exceedingly iifficult to
di stingllis~ "".:>etween gifts fro:ll foreign natioc1!3.1s and tho,se from
U.S. tourists.
Of the 11 million ,gift parcels u:"1der $10 we esti'nate approximately
4 million froTJl
U. S. tourists would "be dis'~'":)U"ra.'Sed if the existing gift
exemption were ,eli-n:. 1at'2d.
estimated to be
$7.
The a[8rage value of these parcels is
Therefore, foreign expenditure curtailment
of approximately $28 million would be achieved.
The application
of a flat rate of d:J.ty to the remaining noncommercial
wO'J.ld simplify Customs' administrative task.
able to assess
escape
dir'~y
d~ty
on
~!
s~ipmellts
Customs would be
appreciable number of packages which now
simply because CU.3toms manpower cannot cope adequately
with the number of packages involved.
Closing this loophole ~ll
probably deter the sending of a number of thes-= packages.
It is
a conservative estimate that ap;>roximately an additional $12 million
reductio:l in foreign acquisi tio:as, for a total of about $40 million,
will result from the a"bove-proposed changes in the Customs processing
of
fo~eign
mail parcels.
- 9 -
Estimated Additional Reyenue Collections
.. ------ ------
-
-_
~------
It is estimated that reV3nue collections '.vill increase by about
$10 million by reaSOl). of changes in the to;~rist exemptions, and by
an additional $15 million
0:1
mail shipments, for a total additional
revenue collection of $25 million.
TREASURY DEPARTMENT
(
June 25, 1968
FOR IMMEDIATE RELEASE
TREASURY TRANSFERS SILVER TO STOCKPILES
The Treasury Department today transferred 165,000,000
fine troy ounces of silver to the stockpiles established
pursuant to the Strategic and Critical Materials Stock
Piling Act.
The transfer, which consisted of silver from
Treasury stocks .999 fine, was made in accordance with the
Act of June 24, 1967, through arrangements with the General
Services Administration.
The transfer will be reflected in
the Daily Statement of the United States Treasury for June 25,
which will be published on June 28.
000
F-l285
June 26, 1968
FOR Ull'lEDIATE RELEASE
The Treasury Departmsnt, by this public notice, inviteo tenders
serle::~ of 'l'rcaeu.:t"j' b:t118 to tii~ aggregato amount of
$2,700,OOO,OCO,
or th-:;l'CaboutG, for cash und !n exchange foX'
Treasury ·bills maturing
July 5, 1968,
in the amount of
$2,C01,480,OOO,
as follo,,";c:
for two
,July 5, 196B~
go-day bl11s (to maturlty dat(;) to be issued
in the arn.ount of $1,600,000, 000,
oX' thereabouts,
addlticnal anount of' bills dated
April G, 1963,
mature
Oct0~.)er 3, 1968
orlgin/?,.lly ir,sued in the
,lAD 000 ,
the a6c"iitional and or'iglnal bills
$..1 ,000 ,-,
interc han:::;e Ct bl~, .
18J. ··dClY bills,
JUlY 5
,.'
,
$1, J.OCI ~oC)o ,000,
f' ,')1,
:.r.J
_ . . . 1·0
. _
19
__ ' C.C:
v'J,
1'!."'~tUl~(!
"u.
rapr-e: sent ~.. ng an
a.nd to
amount of
to bj~ fr[~cly
b(~
or thereabouts, to
J2:1n.~.::.y
V"~
d:::'.tcd
2, 1938.
_
The bllls of bCltll ~181'1es \>;il1 be: is~ued on a di~;ccul1t b'"lf,tf~ u.~~(~'?r
compe ti tl ve and none on;:;:l8t1.t.lve blc.c11n:s as her'2:inaft€~:c provirJ:-::d (n~d. Clt
r.laturity th'::il" fRee [;.inaun"t HiLl. be paYr)b18 w:ahout inter2st. 'l.'hey
will be. issu~rl. In b~a:C'er fOI"!'! only, and in c1eno),'!inntioTJ3 of' $1,OOD)
J
$5,000, $19,000, $50,000,
(maturi ty value).
$100,000, $500,000 Bnd $1,000,000
Tenders <;:ill be .1.'8(;ei'led at Fcder'al ReS<J:rVd Banks and Bp<:~n('.:r:f'D
up to the c1osj.ng hour, cn9·~th:lrty p.m., E,tster:J J)3.~r:~isht Savin~;
time, NO!1~1:ly .J·l~~'1 J. 1'308.
Tcnde :nJ "vIiJ 11 not be
:t'Jc2i ved u. 'c the 'j re2f,ury De£arcment, Washj.n6tc,.l.
Eat'! h tendS>. yo ffi'lSt
b::- for an even Idult1ple of ;;il,OC)O, and in the C?f\0 of com~)8tit:t-ve
tendprn the ·price offered must be e~pr28scd on the bos1s of 100,
with not more than th::'~c dec ir:·,alf3, (>. g., 990925. Fraccions n'.~s net
be u::'ecl. It 18 t:rge:d that te;i,'·t0n::, be rrl~1.d: on the or1nt2c1 fO:':i13 ;:::;/;
f'or\'!9r~:lej 10 the sp2ciaJ. er1velOpe,l ii::lch ','l:Lll be ~JupPlled "by Feder81
Rese rve Bar.k:::; Or' Branc he '3 on ~:ppI1e at 10!'1 the: i~2for'.
Banki.n2; in 8 t i tut Jans genepaJ.ly m~"y 8U.1.'"!li t t;8nc~E;!.'s for a(~(: 01..1),;( of
customers provir1.ed the n':TnS'U of th,:; Cl..;stC::J::~rs ape f:!'::;t f'oT'th in 8U<;;1
tenders. Others than b3nklng institutioD8 viII net be pe~m1ttc~ to
submit t'2rders except for th(d.r min ~,CCC\\'Flt. 'l'2L':'~~I:";l \-1:1.11 be : :. . ece:;_v~:o
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- 2 Immediately after the closing heur, tenders will be oPened at the
"ederal Reserve Banks and Branc r.2S, f ollmv ing which pub 1 ic announce·,
lent will be made by the Treasury Department of the:; arnOUl1;: and price
~ange of aecepted bids.
Those submitting tenders wi] 1 be advised
)f the acceptance or rejection thereof. Th(~ Secretary of the Treasury
'xpressly reserves the rigb. t : to accept or rejec t Hfly O~~ a 11 tenders,
,n whole or in part, and his acti~n in any such respect shall be
:inal. Subject to fnese rese:c'J8tions, noncompetitive tenders for
'ach issue for $200,000 or less h'ithout stated price from any 0;12
)idder will be accepted in full at the average price (in three
tecimals) of Bccepted comp2titive bids for the rcspecti.v,~ issues.
:ettlement for accepted tenders in accordance with the bids must be
lade or completed at the federal Reserve Bank on July 5, 1968~ in
:ash or other immediately available funds or in a like face Clmount
)f Treasury bills maturing July 5, 19613.
Cash and exchange tenders
,ill receive equal treatment. Cash adjustments will be made for'
lifferences bel,veen the par value of maturing bills accepted in
:xchange and the issue price of the new bills,
The income derived from Treasury bills, whether." interest 01'
;ain from the sale or oth'~r disposition of the bills, does not h3.ve
.ny exemption, as such, a,1d loss from the sale oX' oth'?r dispos5 tion
If Treasury bills does not have any special treat:Ytent, as such,
mder the Internal Revenue Code or 1954. The bills are subject to
'state, inheritance, gift or other excise taxes, \\1hether Fe(i(,1'.:ll OJ::"
:tate, but are exempt from all taxation nc~v or heleafter imposed on
:he principal or interest thereof by any State, or any of the
lossessions of the United States, or by any 10i::.al taxing authority,
'or purposes of taxation the amount of discount at \.;hich TreasuL'Y
lills are originally sold by the United States is considered to be
.nterest. Under Sections 454, (c) and 1221 (5) of the Internal
~evenue Code of 195[~ the amount of discount at which bills i_SStH:c1
lereunder are sold is not considered to accrue unti_l such bills c're
old, redeerr,ed or otherv!ise disposed of, 8nc1 such bi lIs ?re cxc1uded
rom conside~ation as capl tal assets. Accordingly) th2 \}\,mcfr of
'reasury bills (other than life insurance comptC"il1ies) issued her~unck:c
eed inc lude in his inc om2 tax re turn only the d if f er8nc 2 be t\\,'E":.'r,
he price paid for such bills, vJhether on crigi.nal i~,suf' cr on
ubsequent purchase, and th'2 amount actu.ally recei\i~c1 either- upon
ale or redemption at matu~city during tLe taxable year for ~;hicl--.. th~:'
eturn is made ,'CA-::'c: (Jrdir·"~-y
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.•
WASHINGTON. D.C.
)R ],~'1EDIATE RELEASE
*
June 26, 1968
TREASURY OFFERS $4 BILLIO:~ OF l·;,A.l,{CH
j,j'ill
~rf~~:11~t;))
*
-"
"
APRIL TfLY,. BILIS
The Treasury Department, by this public noti.ce , invites telliers for two
lries of Treasury bills to the aggregat.e amount of $4,000,000,000, or therelouts, as follOl'TS:
256-day bills, for $2,000,000,000, or therea.bouts, to be dated July 11, 196~,
and to mature Narch 24, 1969. The bills 'Hill be accepted at face
value in payment of inc:xne taxes due on Harch 15, 1969.
285-day bills, for $2,000,000,000, or thereabouts, to be dated Jl:ly 11, 1~)G8,
and to mature iipril 22, 1969. 'l'b.e bills will be acce})tcd at face
value in payment of inco:ne taxes due on April 15, 1969.
The bills of both series will be is sued on a discount bG.sls under cO::'lpeti ti 'Ie
ld nOl1competi ti ve biddinc~ as Dereinafter provided and at maturi'Gy, to the extent
ley are not presented in payment of income taxes, their face ar;-;ount vTill be payable
thout interest. They "Till be issued in be~rer form only, and in oenof:1inations
$l~OOO, $5,000, $10,000, $50,000, $100,000, $500,000 8,1'"!c1 $1,000,000 (mc.tu!'ity
Llue) .
Taxpayers desiring to apply these bills in payr:ent of incc~:le t£lxes nay sub~[lit
:c bills to a Federal Reserve Bcmk or Branch or to the Off1ce of the Tre9.S'llrer
the United St.ates, Hashington, not rrlOl'e than fifteen· days before the appropriate
Icome tax payr!:lent date. In the case of bills subrlli tt~d in pa.;Ylnent of incor,1c taxes
a corporation they shall be acccmpanied bj- a duly completed Form 503 and the
fice receiving
~s thcteJ1S i·;:Ul effect the deposit on the date t'te taxe~) are du.e
the ca.se of bills subrni tted in payment of incon:c taxes of all other tcLxpayer3,
e office receiving the bills will issue receipts therefor. th~ original of which
e taxpayer shall submit 0:1 or before the clate- the taxes 2~'e due to the District·,
rector of Internal Revenue for the District in i"hich such ta/ces are pa~;2.ble.
0
Tenders Hill be l'eceived at Federal Reserve Be.n~s and Branches up to the
osing hour, one-thirty pow., Enstern D8..ylight Saving tirne, ~l\)esc.;3.y, JuJy 2, 19G8.
nders i'Till not be recci vecl at the TreasUry Department, Ha shine;"" on , Es.ch tender
st be for an even ~tUltiple of $1,000, and in the case of cor:p2t:i_tive tenders
e price offered :n1).st be expressed on the basis of 100, ',;i th not more them three
cil':!als, e of; ., 99. 92:::~ . Pl'3.;tions Day not be used. It :l.s urged t1:3.t tenc:::;l's be
de on the printed forns and fonw.rded in the s-pecial envelo'Ccs tfnic:... '.:ill be
pplied by Federal Reserve 'BcUll-;:s or Branche;; on- 8.Fplicatioll tl1E':-:ci'c)1'
0
Banlrin~
-; .L.uH
..
b J' . n·.,J·
v_
V ;..J.... on" ge:leral]~y liiay S1J.GT::it te~~:e!"s fo!" r~CCCtrn:t of Ct~.s·:'o~/:;rs
:>vided
the
n?:L~S
of t::.e cuStO:::2::"S arc s,::t fQY'ch in :::rlC!l teno.e:<',s. CC.h2Y''::: J.:. r .2.']
,
rlinng institl~tions ':;i11 rlC)t ~e pe::,'rnittccl to su~~(;it te:;'~~.8:-(·S (~:{C[~j:'-J fo~ -Lh,:;ir O"'/:'~~1
~ourlt. Ten~i.ers '.:ill 'D2 rece:i.. ~. Fed 'f~·ri t;,t.l.O~lt ftc:pv.s :i. . .c f .!.... C:~11 incc.;~"l>~l.' 3..!~ 2,-t bD..~%s c,I1Q
.I, ...
.
L281
V
~,,;.;,
- 2 rust compa.."1ies and from responsible and recognized dealers in i:westmcnt. securities.
'enders from others must be acco111pa,'1ied by payrricnt of 2 pe:rcent of the face ar:toun.t
f Treasury bills applied for, unless the tenders are accompcrnied by a!1 express
~anty of payment by an incorporated ba..'1k or trust company.
All bidders are required to agree not to purchase or to sell, or to make any
greements with respect to the purchase or sale or other disposition of any bills
'f the issue for which they are bidding at a specific rate OT price, until afteT
ne-thirty p.m., Eastern DayliglrG Saving time, Tuesday, July 2, 1968.
Immediately ai'ter the closing hour, tenders 'liD. be opened at the Federal
eserve Banks and Branches, fol10.dng which public announce),1ent ,'/ill be made by
he Treasury DepaTtment of' the aJllOtmt C).nd price ranr;e of accepted bids. ThOBe
ubmitting teDders will be advised of the acceptanc8 or rejection thereof. The
ecretary of the Treasury expressly reserves the right to accept or reject any or
II tenders, in whole or in "(lort, and his action in any such respect shall "be final.
ubject to these reservations, nonconpetiti ve ter.ders for $400,000 or less for the
56-day bills and $400,000 or less for the 285-day bills, idthout stated price
rom anyone bidder ,'l:tll be accq)ted in full. at the average price (in three decimals)
r accepted com:petitive bids for the respective is;:;ues. PaY!:lcnt of acccp::'ed tenrJcrs
t the prices offered :reust be ma.de or cO~.1pletecl at the Feder21 Re[:;erve Bank in
ash or other imr.lcdiately availaole fu.'1cl.s on July 11, 1963, p:r-o·'/ide'i, hc:;;ever, eny
ualified de:pesitary ,;i1J_ be perr1itted to l:\ake p3.:yn,ent by credit in its TreasuTY
ax and loan account. fo~: 'l'reasury bills al10tt.ed to it for :!. tsclf and i ts cU3tO[,.,c~rs
p to any 8ro1mt for I'Thien. it shall be qualified in excess 0-: existing deposit:::;
hen so notified by the Federal Reserve Bo.nk of its Distr~ ct.
The income d,eri·\Ted froln 1'reastU'-:y- bills, whr::thcr interest, or gB.:i.!1 frol~ the sc.le
r other disposition of th(~ bills, d.o~s not have any exe7":'lption, as such, and loss
rom the sale cir other di~position o'f Treasury bills does net have any speci2.J.
reatment, as such, under the Internal Revenue Code of 1854, ~lhe bills are snb,j ect
o estate, inherit~mce, gift or other excise t().~es, 'dhether Federal or state, on:;
re exempt from all taxation nm·l or here2:ftcr imposed. on the prir. cipal or interest
hereof by any state, or any of t.:he possessions of t,he U:1.itc(l States, or by any
oeal taxing authority'. For pm"'I>occs of t2.x8.tion t'nc ar;lO"lmt of discou...'1t at 'tihich
reasury bills are originally sold by the United States is consirl.ered to bE: inter'est,
Sections '~5~ (b) and 1221 (S) of the Internal Revem:e Code of 1954' 'che a:"~l:n":;
f Q1SCount at \'ihlch bills issued he-ceu_,dcr a:r.e 381 r1 is not eonsic.creo. to aCC2''C.2
ntH such bill-=: are sol ci 'N.>.:1ee'''''er~ or o-'-'l'''rv-':
-'i-I v.;.
~"")')""""Q"
o·f
c,,,(,1-1 r.~ 11 r
r,-,.."
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~cluded from consideration 2.3 capi +,al acsets. Accordingly, t.n8 O::l!ler of '.I:reas'.::c]
llls (other than life i:13i..U'2.DCe cOTro3.nies) isslJ.ecl. hereu.ncl;:::r n€:e~l inclu:~e i:l ili:,
nco::\e ta..': return only the dif:f'e:r.enc~ bch:;e:1 ti::e pri~e PC!i,-'c for SHeD oills, ·,'ll':t}"1CT
n·.L.horiginal issue or on Suos0ouer:t
•
-m:.rchase, ~:md. thc~ w':',o;''1t actu3.lJ-,
.. rec-'"::i.ved.
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STATEMENT BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE THE
HOUSE BANKING AND CURRENCY COMMITTEE
ON H.R. 16092
THURSDAY, JUNE 27, 1968
~.
Chairman and Members of the Committee:
The Treasury Department strongly urges that favorable
action be taken on H.R. 16092 which would extend the flexible
authority under which the appropriate financial agencies can
regulate maximum rates of interest or dividends payable on
savings accounts.
worth.
This legislation has amply demonstrated its
In view of financial market experience in the period
since 1966, a further temporary extension of this valuable
authority would be an act of ordinary prudence.
The fiscal measures approved last week should be successful
in relieving the strong upward pressure on interest rates that
has been experienced during much of this year.
But, in the
absence of the interest ceiling legislation, we would still be
ill-equipped to prevent the possible re-emergence of the selfdefeating form of competition among financial institutions which
has contributed to mortgage market difficulties and the escalation
of interest rates in the past.
- 2 This same legislation was originally enacted September 21,
1966, for a period of one year.
requested in 1967.
A two-year extension was
As finally enacted last year, shortly before
the authority was to expire, the extension was for a one-year
period, with no other changes in the basic legislation.
Onc-
year extensions, particularly when they occur only shortly
before the authority is to expire, tend to create uncertainty
in the financial community and complicate the task of the
regulatory authorities.
Therefore, a two-year extension is
requested.
In addition to the interest-ceiling authority, this bill
would also extend the authority of the Federal Reserve to:
(a) vary reserve requirements on time and savings deposits
between 3 and 10 percent, and (b) conduct open market operations
in securities issued or guaranteed by any agency of the United
States.
Both are valuable potential tools to promote financial
stability and the efficient functioning of our financial markets
While reserve requirements on time and savings deposits
have not been raised beyond the 3 to 6 percent range permitted
under earlier legis la tion, the reserve required on time depositS
- 3 -
in excess of $5 million is presently at 6 percent.
The broader
latitude inherent in the 3 to 10 percent range is clearly
desirable.
Federal Reserve open market operations can contribute
gradually to the improvement of the market for agency securities.
In time, the yield-spread between agency and Treasury securities
should narrow as the agency market becomes broader and more
responsive.
The legislative authority for Federal Reserve
operations in agency markets was originally granted, and has
since been used effectively, for this purpose.
It has recently been proposed that the Federal Reserve
should also be empowered to purchase obligations directly
from such agencies as FHLB and FNMA in order to promote an
inflow of funds to housing during periods of monetary restraint
and rising interest rates.
The Treasury Department strongly
opposes the direct purchase approach.
It would violate a
widely-accepted principle of central banking in order to
establish what would amount to a special subsidy program for a
part of the home financing industry.
- 4 There is no need to review in any great detail the
circumstances which initially brought the interest rate ceiling
legislation into being.
co~etion
During 1966, a very aggressive
tion for funds developed among financial institutions.
This
aggravated an already difficult situation in the money and
credit markets.
Thrift institutions could not, in all cases,
safely pay the higher rates on savings which were required to
attract new funds and hold old ones.
The flow of savings into
mortgage markets fell off abruptly and the housing industry
suffered a sharp decline.
Not all of these difficulties were
due to uninhibited interest rate competition, but it was an
important part of the total picture.
These interest rate ceilings were one part of a coordinate
program which successfully alleviated strains and reduced upwar
rate pressures in the financial markets by late 1966.
As
soon as the enabling legislation was passed, the regulatory
authorities moved promptly to apply interest rate ceilings.
They found it possible to reduce some of the highest rates
that had developed during 1966.
At the same time, care was
taken not to press the ceiling rates down in a fashion which
- 5 might have choked off the reflow of funds to thrift institutions.
The regulatory agencies, themselves, will be in a better
position to comment upon the details of their experience with
the administration of these ceilings.
During 1967, there was a remarkable improvement in savings
flows.
The total inflow at commercial banks, mutual savings
banks, and savings and loan aSSQciations was around $38 billion.
This was more than double the inflow in 1966 and exceeded the
$32 billion inflow in 1965 and the $29 billion inflows in the
previous two years.
Asa result, the position of lending
institutions was greatly improved.
Savings and loan associations
were able to repay a large volume of advances to the Federal
Home Loan Bank System which is, itself, now in a much better
position to render assistance to member associations.
With the improvement in savings flows, the housing industry
made a vigorous recovery.
New private housing starts rose from
a seasonally adjusted annual rate of a little over 900,000
units in the fourth quarter of 1966 to an average rate of
close to 1,500,000 units in the first five months of this year.
Residential construction expenditures rose from a seasonally
- 6 -
adjusted annual rate of $20.9 billion in the fourth quarter
of 1966 to $28.2 billion in the first quarter of 1968 -- a rise
of more than one-third.
But there is another side to the story.
The rate of gain
in savings inflows slackened more or less steadily during the
course of 1967 although monetary policy was generally expansionary.
This year, monetary policy has become more restrictive
and both public and private demands for credit have been strong.
Market interest rates have risen significantly and in some
areas are above the peak yields of August-September 1966.
Net savings inflows during the first five months of this year
totalled $9.5 billion, about one·half of last year's inflow
during the comparable period, and only slightly above 1966.
Loan
commitments and mortgage lending have held up well to this
point, but housing starts and permits showed a decline in May.
As your Committee is well aware, the legislative authority
for ceiling interest rates is far from a panacea.
In particular,
these ceilings will not prevent rising market rates of interest
from exerting their pull.
It is possible to conceive of a
situation in which market rates were rising so significantly
that the regulatory authorities would have little option but
- 7 -
to make some upward adjustments in ceiling rates.
But, even
then, this authority could be used so as to promote an orderly
adjustment.
The best insurance against further rises in market rates
and a tightening credit situation has already been taken in
the form of the tax surcharge and restraint of Federal expenditures.
Last week's legislative action on the fiscal package
was an extremely favorable development from the standpoint of
the housing industry.
With fiscal restraint and reasonable
balance in financial markets, a substantial savings inflow to
mortgage lenders should continue.
In such a setting, the
extension of authority in this legislation will provide the
regulatory authorities with tools that have proven their value
in preventing a self-defeating form of competition among
financial institutions.
Your prompt and favorable action is
requested on a two-year extension of the existing authority.
June 26, 1968
FOR RELEASE AT 3: 30 P ~ Mo
Tl\E. ~:..SURY
.
BORROHING PLANS
The Treasury Depart.ment announced toda.y that it
will raise $4.0 billion through the sale of tax anticipation bills rna turing in Barch and April of 1969.
The
bills will be auctioned on Tuesday, July 2, for delivery
a.nd. payment on Thursday,
~July
11.
Of the $4.0 billion
total, $2.0 will r::CLture on Narch 24, 1969, Dnd $2.0 \\7111
mature on April 22, 1969.
Corrnnercial banks will be
~.
C.
b1
r:>
L""':"
to pay for the tax antici.pation bills by crediting Treasury
tax and loan accounts.
The Treasury also announced
~h2.t
it plans to COll.tiElle
adding $100 Eillion each week to the weekly sales of 6-month
bills.
This weekly a.dd i tion will prooably continu,e through
the current cycle, which ~vi1l be completed with the bills
to be del ivered Oc tober 10.
F-1283
TREASURY DEPARTMENT
IELEASE 6: 30 P.M.,
!l., July 1, 1968.
RESULTS OF TREASURY' 3 WEEKLY BILL OFFERING
'!he Treasury Department announced tba t the tenders for two series of Treasury
one series to be an additional issue of the bills dated April 4, 1968, and the
~ series to be dated July 5, 1968, which were offered on June 26, 1968, were opened
1E! Federal Reserve Banks today.
Tenders were invited far $1,600,000,000, or there-
I,
;s, ot
bills and for $1,100,000,000, or thereabouts, of 181-day bills.
lls of the tvo series are as follows:
~
90-day
OF ACCEP1ED
~TITIVE BIDS~
High
Low
Average
90-day Treasury bills
maturing October 3, 1968
Approx. Equiv.
Price
Annual Rate
98.665
5.34d.'
98.625
5.50~
98.650
5.40Oi
The
181-day Treasury bills
maturing January 2, 1969
Approx. Equiv.
Annual Rate
Price
97.218
5.533~
97.184
5.60l~
97.190
5.58~
Y
l~ of the amount of 90-day bills bid for at the low price was accepted
99j ot the amount of 181-day bills bid for at the low price was accepted
'lDDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Itrict
I ton
f
York
lladelphia
!veland
!hmoDi
lants.
lcago
, LOUis
meapolis
lSas City
.las
1 Francisco
'roI)lLS
Applied For
Acce~ted
$ 20,929,000 $2,829,000
1,554,387,000 1,074,057,000
28,318,000
28,318,000
42,720,000
42,720,000
13,689,000
13,689,000
38,446,000
38,44:6,000
224,006,000
204,956,000
39,673,000
39,673,000
17,861,000
17,861,000
21,415,000
21,415,000
12,781,000
12,781,000
103,491,000
93,491,000
$2,117,716,000
Applied For
$
3,313,000
1,408,544,000
13,924,000
41,205,000
4,127,000
23,705,000
192,698,000
22,925,000
14,092,000
11,364,000
10,172,000
235,111,000
$1,600,236,000 ~ $1,981,180,000
Acce;Eted
$
2,313,000
792,644,000
5,924,000
23,205,000
4,127,000
17,705,000
81,148,000
20,220,000
9,092,000
11,364,000
10,072,000
122,511,000
$1,100,325,000 ~
lcludes $278,448,000 noncompetitive tenders accepted at the average price of 98.650
lcludes $153,436,000 noncompetitive tenders accepted at the average price ot 97.190
~: rates are on a bank disco·-.:crt basis. The equivalent coupon issue yields are
" for the 90-day bills, and s. 83~ far the 181-day bills.
liO
TREASURY DEPARTMENT
July 1, 1968
FOR IMMEDIATE RELEASE
COMEE BECOMES
DEPUTY ASSISTANT TO SECRETARY
Appointment of Edgar Ao Comee as Deputy Assistant to the
Secretary of the Treasury (Public Affairs) was announced today
by Secretary of the Treasury Henry Hv Fowlero He will serve
directly under Assistant to the Secretary (Public Affairs)
John F Kane
0
0
Mro Comee comes to the Treasury Department from the Agency
for International Development where he had been chief of the
Public Affairs Division for the past two yearso He was
previously Deputy Chief of AID's News Division and a Press Officer
in the Office of News, Department of Stateo
Before entering government service in 1961, Mro Comee was
editorial page director of the Portland (Meo) Press Herald,
Evening Express and Sunday Telegram, newspapers for which he had
previously been a reporter and correspondento In 1959 Mr. Comee
lived in and reported from France as recipient of a Reid
Foundation journalism fellowship. He is a former member of the
National Conference of Editorial Writers, the New England
Society of Newspaper Editors, American Newspaper Guild and Sigma
Delta Chi journalism fraternity
0
A native of Brunswick, Maine, where he was born April 2,
1917, Mr. Comee graduated from Tufts College in 1938, later
pursuing graduate study at the University of Chicago o Entering
active naval service in 1941 after two years' teaching in
Maine high schools, he served afloat as a reserve officer
throughout World War II and was recalled to duty during the
Korean ernergencyo He holds the Navy reserve rank of captaino
The new appointee and his wife, the former Margaret Riddle
of Pensacola, North Carolina, live at 2710 Macomb Street NW,
Washington, D.C. Mro Comee is the father, by a former marriage,
of two daughters, Mrs o Stephen Cowperthwaite of Falmouth Foreside,
Maine, and Elizabeth Comee, a senior at the University of
Maryland
0
000
F-1291
TREASURY DEPARTMENT
q
FOR IMMEDIATE RELEASE
MICHAEL BRADFIELD NAMED
ASSISTANT GENERAL COUNSEL OF THE TREASURY
Treasury Secretary Henry H. Fowler today announced the appointment of Michael Bradfield a8 an Assistant General Counsel of the
Treasury Department.
Mr. Bradfield will be legal advise!," to the Assistant Secretary
for International Affairs and in charge of a section of lawyers which
concerns itself with legal aatters relating to international monetary,
financial and trade atfairs with which the Treasury Department is concerned.
He was born in 1934 in New York City.
He studied at public schools
in New York City and was graduated from Union College with an A.B. degree
in 1956.
During hi s junior year in college, he studied at St. Andrews
University in Scotland.
Mr. Bradfield received his legal education at Columbia University
Law School.
During his second year there, he was awarded an Inter-
national Legal Affairs Fellowship.
The following academic year he
stUdied international economics and diplomatic history at the Columbia
University School of International Affairs.
In his third year of law
school, be concentrated on international and comparative law.
In
June 1960, he received both an LL.B. degree from the Law School and
a Malterts degree in international affairs from the School of International Affairs at Columbia.
F-1292
(OVER)
- 2 -
After a brief period ot private practice J Mr. Bradfield joined
the Treasury Department in March 1962, al an attorney in the International Affaira Section of the Oftice of the General COUDsel.
He
has been a meaber of the delegation to a auaber of international
conferences on .onetary and financial matters and worked closely with
U. S. Government representatives in the preliminary dilcus.ions and
subsequently in final negotiations that resulted in the Agreement on
the Facility for the Creation ot Special Drawing Rights in the International Monetary Fund.
In 1966, he vas the recipient of the Treasury's
Meritorious Service Award.
Mr. Bradfield and hi. wife, the tonter Inai Juk, bave two sona.
They
reside at 312 Highviev Avenue, Silver Spring, Maryland.
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A LUNCHEON IN HONOR OF
MEMBERS OF THE ADVISORY COMMITTEE
ON INTERNATIONAL MONETARY ARRANGEMENTS
THE ARMY AND NAVY CLUB
WASHINGTON, D. C.
TUESDAY, JULY 2, 1968, 1:15 P. M., .EDT
This meeting marks one of the happiest occasions that
I have ever enj oyed in my years of publ ic service. The warm
feeling I have is one that must be shared, because so many
of you worked so hard in bringing to completion the agreement on Special Drawing Rights.
Secretary Dillon created the kind of a Treasury
Department which has been a challenge to me to maintain.
Fortunately, after he left the Treasury he agreed to take
on the Chairmanship of the Advisory Crmmittee on
International Monetary Arrangements, which all of us refer
to, of course, as the Dillon Committee.
I regret that not all members of the Dillon Committee
could be here, because I want to pause today to recognize
their work, in the presence of their colleagues, in the
long struggle to negotiate a fundamental new development in
international finance. To Kermit Gordon, David Rockefeller,
and Frazar Wilde, I will make clear at my first opportunity
how greatly I regret not being able to see them today. But
the members of the Committee -- for good reason -- spend
a great deal of time on the move. They are deeply involved
in the affairs of this nation and are among our most
distinguished citizens.
One of our foremost travelers, however, is here.
Walter Heller has served the work of this Committee in many
~ections of the country and overseas.
We are especially
Indebted to him for his skill during a particularly difficult
period of the negotiations last year, in carrying on helpful
Private conversations in Europe.
F-1293
- 2 Andre Meyer has brought his rare and special talents
and experience to our task, in quiet diplomacy as well as
through his wisdom at our meetings.
Bob Roosa has come to occupy a special place in the
monetary circles of the world -- both the smaller circle of
monetary officials and the wider public reached by his
writings. His farsightedness and drive, initially as
Secretary Dillon's lieutenant in the Treasury, and
subsequently as a member of .this Committee, have helped lead
us to accomplish the possible in this field.
Eddie Bernstein is, of course, a one-man international
institution in his own right. His authoritative observations
and penetrating analysis of problems were indispensable to
our success.
Francis Bator participated first on the Government side
of the table and later as a member of the Connnittee.
Francis was with us at London last year .and his work there
helped make it possible to achieve our goals at that time.
Paul Volcker is here, serving as he has on several occasions
most helpfully as our link with David Rockefeller.
The occasion in London which I mentioned might be
considered to be a turning point in the SDR negotiations,
but as I think back T. -wonder if there really was a single
turning point. From the beginning of the hard bargaining
in the fall of 1965 there always seemed to be a real threat
to reaching an effective agreement. As the Committee well
knows, even bringing the Group of Ten to the point where
it would be willing to discuss contingency planning was a
real problem in 1965. In the summer of 1966, at The Hague,
we went down to the wire once again to achieve agreement on
basic principles for reserve creation and to broaden the
negotiations'by joining with the Fund Executive Directors.
Then, 1967 became a really critical year, for we had a
feeling that it was now or never. Some members of the
Group had dug in pretty hard, and. for quite a while we
seemed to be confronted with a choice between no agreement
at all and an unsatisfactory agreement. We came close to
the point of frustration and ~embers of the Committee know
all too well how we searched our souls together to weigh
the alternatives which-then seemed to confront the
United States. But we found a solution, with the help of
other nations.
- 3
Most recently, we are indebted to the work performed
by several members of the Committee in presenting our
request for legislation to the Congress to enable the
United States to participate in the Special Drawing Rights
facility. The obvious conviction with which this Committee
spoke was highly influential in the Congress. Few persons
can possibly take the time thoroughly to comprehend the
full significance of Special Drawing Rights and the
necessarily complex provisions of the plan. Confidence in
the judgment of these eminent public figures was of great
importance.
The President has expressed pride in the success of
these negotiations. He pointed especially to the important
role played by this Committee when he signed the bill
providing for u.s. participation. My purpose here is to
underline the feeling which we in Government have for the
devotion and skill displayed by this highly unique group
of men.
I take pleasure in presenting to each member of the
Committee the Distinguished Service Award. The Treasury
awards this medal to individuals outside the Department
who have made a notable contribution to furthering the
objectives of the Treasury Department through their public
service.
You will have noticed that I did not call the name
of the Chairman of the Advisory Committee,in presenting
the Distinguished Service Awards.
This is because we wish to honor him with the Treasury's
highest accolade -- that named after the first of our
Treasury Secretaries. He will be remembered as one of those
who led the Treasury into a new and broader realization of
its possibilities for useful activity in the modern world,
both at home and abroad.
As Secretary, Douglas Dillon established a new way of
life in the. Treasury. He. led us t·o seek bold new ways to
defend the dollar and strengthen the monetary system itself,
through new techniques and procedures, and an active spirit
of cooperation and discussion with other treasuries.
I take great pleasure in making this presentation of the
Alexander Hamilton Award to Douglas Dillon, my predecessor as
Secretary of the Treasury and Chairman of the Advisory
Corum! ttee •
000
TREASURY DEPARTMENT
-
q
FOR IMMEDIATE RELEASE
SECRETARY FOWLER PRESENTS AWARDS TO
C. DOUGLAS DILLON AND COMMITTEE MEMBERS
secretary of the Treasury Henry H. Fowler today honored
former Secretary C. Douglas Dillon of New York with the
Alexander Hamil ton Award, the Treasury Department's highest.
At the same time he presented the Distinguished Service
Award to eight other members of the Advisory Committee on
International Monetary Arrangements of which Mr. Dillon is
chairman.
In all cases, Secretary Fowler particularly cited work
in bringing about creation of Special Drawing Rights, a new
form of international monetary reserves in the International
Monetary Fund. The Hamilton Award recognizes "outstanding
and unusual leadership in the Treasury Department. II
Receiving the Distinguished Service Award at a luncheon
at the Army-Navy Club were Professor Francis M. Bator,
John F.· Kennedy School of Government, Harvard University;
Edward M. Bernstein, EMB_, Ltd., Washington, D.C.,
Kermit Gordon, President, Brookings Institution, Washington,D.C.
Professor Halter W. Heller, Economics Department,
University of Minnesota, Minneapolis; Andre Meyer,
Lazard Freres & Co., New York.
David Rockefeller, President, Chase Manhattan Bank,
New York; Robert V. Roosa, Brown Brothers Harriman & Co.,
New York; and Frazar B. Wilde, Chairman Emeritus,
Connecticut General Life Insurance Co., Hartford, Conn.
Mr. Dillon, who preceded Mr. Fowler as Secretary of the
Treasury, was cited for his "wisdom and sound advice" which
have "helped immeasurably" in development of the Special
Drawing Rights plan. "This plan will permit the world for
the first time to create the monetary reserves needed to
Sustain international trade and finance," the citation said.
F-1294
- 2 -
Secretary," Mr. Fowler said, "Douglas Dillon
established a new way of life in the Treasury. He led us to
seek bold new ways to defend the dollar and strengthen the
monetary system itself, through new techniques and procedures,
and an active spirit of cooperation and discussion with other
treasuries. "
IIAI;
Mr. Fowler said the Treasury is indebted for the work of
the advisory committee in presenting the request for
legislation to the Congress to enable the United States to
participate in the Special Drawing Rights. "The obvious
conviction with which this Committee spoke was highly
influential in the Congress," Mr. Fowler said. U. S.
participation has been approved by Congress and signed into
law by the President.
(A copy of the citation to Mr. Dillon is attached.
A complete text of Secretary Fowler's remarks is
available as Treasury Release No. F-1293)
Attachment
CITATION
ALEXANDER HAMILTON AWARD
TO
c.
DOUGLAS
nTI.L ON ,
FORMER SECRETARY OF TIlE TREASURY
By graciously serving as Chairman of the Advisory
Committee on International Monetary Arrangements, you have
added to a long career of unique distinction in public service
as Ambassador to France, Under Secretary of State and
,Secretary of the Treasury
In this position you have brought
to bear the comprehensive grasp of complex financial issues,
the capacity for clear and decisive judgment; and the
prescient sense of the feasible scope for international
financial negotiations, which marked in such an outstanding
degree your distingUished tenure as Secretary df the Treasury.
In the international monetary-field, your. wisdom and sound
advice have helped immeasura~ly in the development of the
Special Drawing Rights Plan from a mere concept to a formal
international agreement now before the members of the
International Monetary Fund for ratification. The Plan will
permit the world for the first time to create the monetary
reserves needed to sustain int~rnational trade and finance by
the exercise of a considered and collective judgment. This
is a major br~akthrough in the long history of monetary
institutions. It has been made possi ble by the support of the
international business ~d financial community of which you
are such a distinguished leader.
CI
This Plan supplements the marked.development, under your
leadership as Secretary of the Treasury, of international
cooperation in the form of international credit facilities on
~ unprecedented scale.
With these facilities the monetary
system has met a series of severe crises with a minimal
disturbance to the prosperous course of world trade and
economic growth. Your guiding hand in a time of trial and
tranSition has signalized progress and cooperation, rather than
chaotic and destructive nationalism, and helped the world to
achieve an era of enlightenment in the sphere of international
finance.
000
TREASURY DEPARTMENT
July 3, 1968
FOR IMMEDIATE RELEASE
TRFASURY'S WEEKLY BILL OFFERING
-
The Treasury Department, by this public notice, invites tenders
tor two aeries or TreuUI'J billa to the aggregate amount or
$2,700,000,000, or thereabouts, tor cash and in exchange tor
Treasury bills maturing July 11, 1968,
in the 8D)unt ot
$2,602,364,000, as tollowa:
91-day bills (to maturity date) to be issued
in the amount or $ 1,6002.000,000, or thereabouts"
additional amount of bil~s dated April 11, 1961S ,
mature October 10, 1968, originally issued in the
$1 000,511,000, the additional and original bills
Inierchangeable.
July 11, 1968,
representing an
and to
amount of"
to be freely
182-day bills, for $1,100,000,000, or thereabouts, to be dated
July 11, 1968,
and to mature January 9, 19690
The bills of both series will be issued on a discount basis under
co~tltive and noncompetItive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
lf11l 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
(maturi ty 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, July 8, 19680
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,
~1th not more than three deCimals, e. g., 99.925.
Fractions may not
be used. It is urged that tenders be made on the printed fonns and
ro~a~ed in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may subm1t tenders for account of
provided the names of the customers are set forth in such
cenders. Others than banking 1nstitutions will not be permitted to
submit tenders except for their own account. Tenders w1l1 be received
dthout deposit from incorporated banks and trust companies and from
~sponslble and recognized dealers 1n investment securities.
Tenders
: rom others muat be accompanied by payment of 2 percent of the face
unount of TreasuI'J bills applied for, unless the tenders are
lccOmpanied by an express guaranty of payment by an 1ncorporated bank
)r trust company.
~ustomers
~-1295
- 2 -
Il1JDediately after the closing hour, tenders will be opened at tb
Federal Reserve Banks and Branches, following which public annoomcement 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 Trell",
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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must ~
made or completed at the Federal Reserve Bank on July 11, 1968, ~
cash or other immediately available funds or in a like face amount
of Treasury bills ma tur ing July 11, 19680
Cash and exchange tender
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 dispositioo
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject m
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed 00
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. Accurdingly, the owner of
Treasu ry bi lIs (other than 1ife insurance compan ies) 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 t~
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
(J
RJIIASE 6:30 P.M.,
July 2, 1968.
-!dIl,
RlSUL1'3 OF TREASURY'S OFFERING OF $4 BILLION TAX ANTICIPATION BILLS
~
Treasury Department announced that the tenders for two series of Treasury
'u bt1c1pation bills, both series to 'be dated July 11, 1968, which were offered on
me 26, 1968" were opened at the Federal Re serve Banks today. Tenders were invited
~'2,OOO,OOO"OOO, or thereabouts, of 256-day bills and for $2,000,000,,000, or
'llenabouts, ot 285-day bills. The details of the two series are as follows:
285-day Treasury bills
maturing April 22, 1969
Approx. Equiv.
Annual Rate
Price
lD OF ACCEPiED
2S6-day Treasury bills
"'rI1!VE BIDS: _.-.;;ma;;;;..t~ur=-:;i;;,:;;:~;w....;:Mar~...;.C,:::h_2:;..;4:;.,r:,~1~96;;..:9;;..
Price
High
96.116
96.141
96.161
Low
Average
!I Excepting
l~
g
Approx. Equiv.
Annual Rate
5.3781'
95.737
5.4:18~
95.689
95.706
5.59~
1 tender of $500,000;
bl
Y
"PJ
5.385~
5.445~
5.424~
Y
Excepting 10 tenders totaling $9,000,000
at the 8lIlount of 256-day bills bid for at the low price was accepted
at the amount· of 285-day bills bid for at the low price was accepted
17~
)00. !EIDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Applied For
Bolton
$
San Francisco
143,435,000
1,556,149,000
228,227,000
502,610,000
78,220,000
127,886,000
604,715,000
150,547,000
169,080,000
81,320,000
126,800,000
646,100,000
roTALS
$4,195,149,000
lIev York
Ph1lacle Iphia
Cleveland
RicbJaoDd
Atlanta
Chicago
St. Louis
Nirmeapo11s
fansas City
Dallas
Acce]2ted
$
62,835,000
490,309,000
128,221,000
160,670,000
27,446,000
58,756,000
320,965,000
76,441,000
98,520,000
45,905,000
57,800,000
472,400,000
APE lied For
$
142,910,000
1,956,418,000
159,019,000
253,301,000
72,215,000
86,300,000
463,031,000
115,170,000
153,565,000
61,788,000
127,358,000
483,949,000
$2,000,280,000 ~ $4,015,036,000
Acce12ted
$
50,110,000
975,800,000
29,519,000
124.,301,000
30,755,000
45,300,000
185,137,000
70,670,000
74,565,000
38,837,000
43,158,000
333,949,000
$2,000,107,000 ~
Includes $264,154,000 noncompetitive tenders accepted at the average price of 96.161
Includes $222,935,000 noncompetitive tenders accepted at the average price of 95.106
2bese rates are on a bank discount basis. '!he equivalent coupon issue yields are
5.65~ tor the 256-day bills, and 5. 6~ for the 285-day bills.
F-12
96
TREASURY DEPARTMENT
July 5, 1968
FOR A.M. RELEASE
SATURDAY, JULY 6, 1968
TREASURY DEPARTMENT ANNOUNCES PUBLICATION OF PROPOSED
REGULATIONS ON INTEGRATION OF PRIVATE PENSION PLANS
The Treasury Department today announced publication
of proposed regulations on the integration of private pension
and other retirement plans with Social Security benefits,
At the same time, the Treasury announced that the
Internal Revenue Service will publish a draft of a tentative
supplemental revenue ruling to assist interested parties in
analyzing and commenting on the proposed regulations"
These proposed regulations provide revised rules
for determining whether a plan which supplements the
Social Security system meets the statutory nondiscrimination
requirement So
The proposed regulations will appear in the Federal
Register of Saturday, July 6, 1968
The draft revenue
ruling will appear in Internal Revenue Bulletin 1968-29,
dated July 15, 19680
0
BACKGROUND
Since 1942, the Internal Revenue Code has provided that
a private pension plan, as a prerequisite to obtaining the
special tax treatment accorded to qualified plans, may not
discriminate either as to eligibility or benefits in favor
of officers, shareholders, supervisory personnel, and highly
compensated ~mployeeso The Code further provides, in effect,
that in determining whether a plan discriminates, consideration
may be given to the employer's participation in the Social
Security program, and if the combined benefits the emp layer
F-1297
- 2 -
provides und~r Social Security and the private plan are not
more favorable for the higher paid individuals than the
lower paid, the private plan is deemed not to be
discriminatory
Thus, the Code provides that a pension plan will not
fail to meet this requirement of nondiscrimination merely
because it provides no benefits on compensation cov~red
under the Social Security Act or it provides benefits at a
Ie s ser rate 0 f compensa t ion covered t.:ndcr the Soc ial Security
Act than on compensation nct covered under the Social
Security Act. Plans so structured in relation to the
Social Security Act are generally called "integrated plan') 11
Since 19~3, specific standards have heen provided
by Treasury Department regulations and Internal Revenue
Service rulings to determine whether such integrated plans,
designed to supplement the Social Security system, meet the
s ta tutory requ i rement 0 f nondi sc rimi na t ion
Each time that
the Social Secllri ty Act has been am"nded, these standards
for nondiscrimi~atory integration hav~ been reviewed and,
if necessary, revised to conform to the changed Social
Security system,
DEVELOPMENT OF PROPOSED REGULATIONS
The proposed regulations are the result of an overall
review of these standards begun shortly after the
enactment of the 1965 Social Securitv amendmentsv This
review was subsequently broadened to take account of the
chang~s made by the 1967 Social Security amendments)
J
As part of this review, on September ]9, 1966, the
Internal ReVenue Service invited tht· public to submit
background information and suggestions to be used in the
examination of the existing standards ,'; This announcement
furnished data to enable interested persons to be informed
of th2 po S s ib L::· resul t S 0 f app 1y i ng t radi tiona 1 rna thematical
concepts in light of the 1965 Socidl Security amendments,
which concepts would have yielded an integration percentage
of 24 percent.
'i"Announcement 66-58, Internal Rev2~iue Bulleti.n 1966-38, p,87
- 3 In response to the announcement, a.large number of
comments from interested persons and groups was receivedo
These comments covered a wide range of matters and offered
a variety of viewpoints
0
To assist the Treasury in evaluating these comments,
an Advisory Panel of experts was appointed on January 19,
19670** This panel met twice with Treasury Department
and Internal Revenue Service officialso
PROPOSED
SLA~DS
The proposed regulations set forth a rate of 30 percent
as the new integration percentageo The integration percentage
is the maximum rate at which a plan, which does not provide
benefits on compensation covered by Social Security, may
provide benefits on compensation not covered by Social
Security, and not thereby be regarded as discriminatoryo
The existing integration percentage is 37-1/2 percento
The 30-percent integration percentage was arrived
at generally by valuing the maxDnum Social Security benefit
package a~ a percentage of the maximum wage base and by
treating the employer as providing 50 percent of that
package
0
This approach is based upon the fact that, under the
Federal Insurance Contributions Act, employees and employers
contribute equal amounts to provide these Social Security
benefits~
The Treasury indicated that it believes this
approach is consistent with the statutory nondiscrimination
concept, and thus, can be expected to be applied to future
changes in the Social Security systemo
Under this approach, a further reduction of the
integration percentage is unlikely to occur despite future
changes in Social Security benefits, unless there is a
fundamental change in the Social Security benefit or financing
structure insofar as it concerns employees earning the maximum
SOcial Security benefits
Most commentary on this subject
has stressed the importance of such stability, and the proposed
standards thus recognized this factor
Q
0
~reasury Press Release F-780, announcing appointment of
AdVisory Panel on Pension Planso
- 4 TRANSITIONAL RULES
To enable existing plans to adapt gradually to the
proposed standards and the new integration percentage, the
proposed regulations contain transitional rules for these
plans o The Treasury noted that transitional rules of this
nature were not included in the 1966 announcement but have
been added as a result of the couunents which have been received.
Specifically, these transitional rules will permit the
following:
No change will be required in existing plans
before January 1, 1971
This will provide
employers a period of time within which they
and their advisors can determine that action,
if any, need be taken o
0
Only benefits accrued for service after
December 31, 1970, need conform to the new
integration percentage o
For benefits for service after December 31,
1970, a plan may retain its present integration
wage level (ioeo, the wage level at which the
private plan replaces Social Security),
although this may not technically meet the new
standards
For example, if a pension plan
presently provides a 37-1/2 percent pension on
wages in excess of $4800 and no pension on wages
below that level, it may, under the proposed
rules, continue to integrate at the $4800 wage
level with respect to future benefits (even
though Social Security benefits are now being
earned on the first $7,800 of wages rather than
$4800, as was the case prior to 1966). To retain
a nondiscriminatory character, it must, however,
on or before January 1, 1971, either add a
7-1/2 percent pension on wages below that level
or reduce the rate of benefits on wages above that
level, so that the difference is no more than
30 percent with respect to wages below that levelo
0
Those wishing to comment on the proposed regulations will
have a period of 45 days (not later than August 20, 1968) to
submit written statements to Commissioner of Internal Revenue,
attention CC:LR:T f Washington, D.C 20224. The time and place
a public hearing, i.f requested, will be published in the Federal
Register in the near future.
e
000
TREASURY DEPARTMENT
=
iELEASE 6: 30 P.M."
!Xl Jull 8, 1968.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
1be Treasury Department announced that the tenders for two series of Treasury
I, O~ series to be an additional issue of the bills dated April 11, 1968, and the
~ series to be dated July 11, 1968, which were offered on July 3, 1968, were
!d at the Federal Reserve Banks today. Tenders were invited for $1,600,000,000,
~reabouts, 01' 91-day bills and for $1,100,000,000, or thereabouts, of 182-day
lhe details of the two series are as follows:
I.
~
OF ACCEPTED
~'l'lTrVE
BIDS:
High
Low
182-day Treasury bills
maturing January 9, 1969
Approx. Equiv.
Price
Annual Rate
5.36(ij
97.290
5.442~
97.249
97.265
5.41~
91-day Treasury bills
maturing October 10, 1968
Approx. Equiv.
Price
Annual Rate
98.660
5.301J;
98.636
5.396~
98.643
5.36~
Y
Average
11
6~ 01' the amount of Sl-day bills bid for at the low price was accepted
oO"p 01' the amount of 182-day bills bid for at the low price was accepted
~ '9DERS
APPLIED FOR AIm ACCEPTED BY FEDERAL RESERVE DISTRICTS:
strict
rmeapolis
rlSas City
Uas
.~ FranCisco
Applied For
AcceEted
$ 25,045,000 $ 15,045,000
1,733,996,000 1,014,196,000
27,313,000
15,273,000
39,906,000
39,906,000
12,755,000
12,755,000
50,439,000
43,119,000
359,378,00Q
151,778,000
63,444,000
59,444,000
19,244,000
18,924,000
33,285,000
33,285,000
28,507,000
21,507,000
242,634,000
175,114,000
romts
$2,635,946,000 $1,600,346,000
stan
II York
iladelphia
!veland.
~bmond
lanta
Lcago
. Louis
!!
Applied For
5,176,060
1,386,839,000
15,167,000
25,447,000
4,873,000
34,021,000
318,546,000
34,085,000
17,672,000
22,316,000
23,922,000
106,006,000
r
AcceEted
$
5,176,000
776,839,000
7,167,000
22,447,000
4,873,000
27,021,000
87,135,000
27,585,000
17,672,000
22,311,000
16,922,000
85,006,000
$1,993,870,000
$1,100,154,000 ~!
,DCludes $313, 736,000 noncompe ti ti ve tenders accepted at the average price of 98.643
.Qcludes $157,455,000 noncompeti ti ve tenders accepted at the average price of 97.265
:le~ rates are on a bank discount basis. Tbe equivalent coupon issue yields are
1·5,,;1' for the 91-day bills, and 5. 64~ for the 182-day bills.
TREASURY DEPARTMENT
4
=
July 8, 1968
FOR IMMEDIATE RELEASE
TREASURY TO INVESTIGATE SUBSIDY
ON FRENCH EXPORTS TO UNITED STATES
The Treasury Department announced today that it is
issuing a notice of countervailing duty proceeding with
respect to French exports· to the United States.
The
notice~
Register of July
which will be published in the Federal
9~
reports that an investigation has been
initiated to determine whether certain exports to the
United States from France are being subsidized.
U. S. countervailing duty
law~
Under the
if the Treasury Department
finds that a "bounty or grant" wi thin the meaning of the law
is being paid, it is required to assess an equivalent countervailing duty.
The investigation was initiated following receipt of
information of issuance by the Government of France on June 29
of decree No. 68-581 providing for certain payments related
to French exports.
The notice of countervailing duty proceeding allows
30 days for submission of
data~
views and arguments concerning
the existence or nonexistence and net amount of a bounty or
grant.
During this period the Treasury will welcome relevant
information from all appropriate sources~ domestic and foreign.
F-1299
000
TREASURY DEPARTMENT
(
:
FOR IMMEDIATE RELEASE
SECRET SERVICE PUBLICATION WINS
FEDERAL EDITORS AWARD
The Public Affairs Office of the U.S. Secret Service has
received an award in the Fifth Annual Government Publications
Contest for its publication, "Counterfeiting and Forgery,"
the Treasury Department said today.
Secret Service's award-winning leaflet offers facts on
counterfeiting and tips to the public on how to recognize
counterfeit money.
It details the steps to be taken when
counterfeit currency is received, and cautions the public
to beware of forged U.S. Treasury checks.
The document won first place in the leaflet category
of the contes t, sponsored by the Federal Edi tors As soc iat ion,
which honored outstanding government publications in a number
of publications categories.
In order to be qualified for
entry in the competition, each publication must have been
produced with government funds and a government editor must
have been directly involved in its writing and production.
The Secret Service is distributing the pamphlet to banks,
financial institutions, and other organizations which -- because they
handle substantial amounts of cash -- are targets for counterfeiters or forgers.
F~1300
000
1968
,-
AMOUNTISSUEO...u:
i
1/,r'~J· .I··~J."';I,';G ;
OLJ7~T/'''[,IWJ;;J:Cf'A'I.-',,;I~~UEG!
/''',),
RL~'~,:,._U!J
;'"u\)l)t,("
OESCRIPTION
__--~------I-------:_-----_rI
1,645
7,280
11,747
13,605
10,504
4,571
4,171
4,205
4,072
3,506
3,035
3,152
3,504
3,490
3,566
3,388
3,106
2,859
2,612
2,489
2,362
2,227
2,289
2,222
2,097
2,003
1,583
123
734
229
989
1,560
1,916
1,691
951
1,061
1,200
1,258
1,153
997
1,070
1,318
1,423
1,551
1,551
1,539
1,663
1,621
1,752
1,908
1,888
2,291
2,243
2,272
2,692
3,061
1,061
-105
12.22
11.96
11.72
12.34
13.87
17.23
20.28
22.20
23.60
24.75
24.73
25.34
27.33
28.96
30.31
31.41
33.13
36.77
38.29
41.31
44.68
45.88
50.02
50.22
52.00
57.3,
65.90
89.61
_ _ _ _ _ _ _ _- - 4
:O-.j _ _ _ _ _ _ _ _-1
lS~-i
;S~J
t"
,..,
_ _ _ _ _ _ _ __
_ _ _ _ _ _ _ __ _
l~'~.
j S _ _ _ _ _ _ _ ___
E~:~
_ _ _ _ _ _ _ _____j
~~c~)
_ _ _ _ _ _ _ _____j
10:',1 _ _ _ _ _ _ _ _
~
~
C' ~ '".I _ _ _ _ _ _ _ __
.Jc~
..... ·vv
----------l
----------l
----------l
----------l
.. "'.,) 1
_ _ _ _ _ _ _ _- - - 1
;~~.:;
---------
1::;,
i~~'~
; ,'r ..I." .. ,)
~S~J
J9~1
_ _ _ _ _ _ _ __
_ _ _ _ _ _ _ ___
.:JuJ _ _ _ _ _ _ _ __
_ _ _ _ _ _ _ _ _~
L~-
~":J
_ _ _ _ _ _ _ _----;
.~cu
-----------i
T0~:: . . S2:ies E
--------l
155,955
112,149
43,805
28.09
ies 2~ (:952 t:1r;,: l\t.ay. 1959)
21_'_ - '
E (June, 1959 thru 1968) _ _-;
5,485
6,677
3,091
1,304
2,393
5,373
43.63
80.47
fatal Series H
------~
12,162
4,396
7,766
63.85
rotal Series E and H _ _ _ _--'
116,545
51,572
_ • • __
-
-
168,117
_ _ _ _ T_"
es J
:,;.~ K
(19$6
I.....
~ Gr<lr.Q
I
I.",
__
_~
_ _ _ _ _ ~._. _ _ _ " __ ." _ _ _ _ _ _ _ _ _ _ _ _ _ _ "
tt:u 1957) _ _
597 - _____ .
r-------- __________
(Tot;ll rr.::..~ured
Series ~ To'-', l' "n"- -"-I..'u"e-a'
------'
!
jj~
Tot:>.l _ _ _ _- - I
37,680
168,713
206,393
.16
.92
457 .__
_______
37,597
117,002
_
•• _ _ _ _ _ _
_
. .- - " . _ -
.0
82
51,712
__ ~2~ ,2?.2 __ _ _51, ,?9~ __
arcrucd dis Count.
rca, i'.,-1tiofl uilluc.
;fI:1/w~cb bonds
lore
30.68
.__. __
-- . .
140
"_Co
~
19-!3 _ _ _ _ _ _ _ _---'
TO
.
_ _ _ _ _ _ _ _--,
19~.~
--- - __
.
_ _ _ _ _ _ _ ___
.14
1,874
8,269
13,307
15,521
12,195
5,521
5,232
5,406
5,330
4,659
4,032
4,222
4,823
4,913
5,117
4,938
4,645
4,523
4,233
4,241
4,270
4,115
4,580
4,466
4,369
4,696
4,645
1,184
629
;==..::::..-
19~1
--;
7
46
29
~
~~:c~
F' "'ii G-l~;';': tl:~ll 1£):;;2 - - J .;l;;~ K-105~ thru 1955 - - - - i
1----
4,996
29,475
3,127
-
";\'~
5,003
29,521
3,156
~
U!\2D
:ries A-1935 tIm: ~-19-l i. - - - - - - i
-
may be held and will earn interest for additioflal pa;ods afta origir.al macurity da.tes.
onds which have not teen prescTIlcd for redemption.
FQ!m PD 3812 - TREASURY DEPARTMEi'H - :;L;raau of tho PuLli~ ::;'cbt
.22
30.65
25.09
TREASURY DEPARTMENT
July 10, 1968
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
$2,700,000,000, or thereabouts, tor cash and in exchange for
Treasury bills maturing July 18, 1968,
in the amount of
$2,603,215,000, as follows:
91-oay bills (to maturity date) to be issued
1n the amount of $ 1,600,000,000, or thereabouts,
add1tional amount of bills dated April 18, 1968,
~ture October 17, 1968, originally issued in the
$1,102,644,000, the additional and original bills
interchangeable.
July 18 1968,
representing an
and to
amount of
to be freely
182-day b1lls, for $1,100,000,000, or thereabouts, to be dated
July 18,1968,
and to mature January 16, 19690
The b1lls 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
dll 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
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
JP to the closing hour, one-thirty p.m., Eastern Daylight Saving
time,
Monday, July 15, 1968
Tenders will not be
received at the Treasury De:partment, Washington. Each tender must
Je ror an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
'lith not more than three deCimals, e. g., 99.925.
Fractions may not
)e used.
It is urged that tenders be made on the printed forms and
~oNaroed iry the special envelopes which will be supplied by Federal
~eserve Banks or Branches on application therefor.
0
Banking institutions generally may submit tenders for account of
provided the names of the customers are set forth in such
:enders. Others than banking institutions will not be permitted to
lubmit tenders except for their own account. Tenders will be received
lithout deposl t from incorporated banks and trust companies and from
:esponsible and recognized dealers in investment securities. Tenders
rom others must be accompanied by payment of 2 percent of the face
tmount of Treasury bills applied for,' unless the tenders are
IccOmpanied by an express guaranty of payment by an 1ncorporated bank
Ir trust company.
~tlstomers
F-1301
- 2 IOIIIediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public annomcement 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 Treasur
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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on July 18, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing July 18, 1968
Cash and exchange tend.
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.
0
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 dispositioo
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 bi lIs 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
TREASURY DEPARTMENT
RILEASE 6: 30 P.M.,
:", Jull 15, 1968.
aESULTS OF 'mEASURY t S WEEKLY BILL OFPERIlIG
'!be Treasury Department announced that the tenders for two series of Treasury
8, O~
series to be an additional issue of the bills dated April 18, 1968, and the
r series to be dated July 18, 1968, which were offered on July 10, 1968, were
ed at the Federal Reserve Banks today. ~Dders were invited tor $1,600,000,000,
he~abouts, ot 91-day bills and for $1,100,000,000, or thereabouts, of 182-day
s. 'lhe details of the two series are as follows:
lE
or ACCEPTED
91-day Treasury bills
maturing October 17, 1968
Approx. Equiv.
Price
Annual Bate
m!IVE mDS:
98.625
98.612
98.618
High
Low
Average
;g
182-day Treasury bills
maturil!6 January 16, 1969
Approx. Equiv.
Annual Rate
Price
97.204 W
5.531J
97.185
5.56~
97.192
5.554~
5."~
5.'91~
5.467~
!I
Excepting 2 teDders totaling $500,000; pJ Excepting 3 tenders totaling $2,212,000
7C1/. ot tJae ~ount of 91-day bills bid for at the low price was accepted
• ot
the
amount of la2-day bills bid tor at the low price vas accepted
L mDERS APPLIED FOR AID ACCEPTED BY FEDERAL BESERVE DISmCTS:
:!tr1ct
ISton
v lork
Ill.ade1phia
,evelaJd
,Cba0D4
llanta
lcalO
• Louis
Dbeapol1s
City
_8
111a8
LD lranelsco
~~
*
Applied For
Accepted
12,275,000
22,215,000 •
1,775,011,000 1,07',911,000
28,354,000
16,354,000
34,639,000
34,439,000
13,434,000
13,434,000
60,854,000
49,554,000
415,015,000
187,825,000
63,233,000
59,143,000
12,611,000
16,686,000
24,853,000
24,853,000
32,581,000
24,281,000
137,832,000
90,882,000
Applied For
$
5,754,000
1,722,153,000
16,704,000
32,795,000
5,263,000
31,398,000
321,664,000
31,696,000
13,556,000
28,106,000
20,068,000
240,333,000
$2,62',827,000 $1,600,562,000 ~ $2,475,490,000
Accepted
$
~,132,OOO
880,088,000
1,332,000
21,795,000
5,163,000
13,698,000
65,964,000
18,696,000
7,056,000
17,606,000
9,868,000
48,014,000
$1,100,412,000 ~/
~eludes $310,622,000 noncce:petitive tenders accepted at the average price of 98.618
:!ludea $138,561,000 noncOllpetitive tenders accepted at the average price of 97.192
. :: rates are on a bank discCUDt basis. 'lhe equivalent coupon issue yields are
).6..~ tor the 9l-day bills, and 5. 7~ tor the laz-day bills.
F-IJ02
TREASURY DEPARlMENT
Washington
RELEASE ON DEL IVERY
(EXPECTED AT 4: 30 P.M., EDT)
MONDAY, JULY 15, 1968
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT THE DEDICATION OF THE
GAINESVILLE NATIONAL BANK BUILDING
GAINESVILLE, GEORGIA
MONDAY, JULY 15, 1968, 4:30 P.M., EDT
It is an honor and a pleasure to be in Gainesville this
afternoon.
It is an honor because the implied approbation of the
kind of people who run banks is something I cherish both
personally and as Secretary of the Treasury. And it is a
pleasure simply because Georgia is the kind of place one
likes to visit and Georgians the kind of people one likes
to call friends.
However, there are additional reasons for my being
here -- aside from the honors and pleasureo One is that
your able and, outstanding Congressman who is my very good
friend, Phil Landrum, asked me to come to Gainesville.
Now I know you all here are familiar with the distinguished
record of Congressman Laudrum and with the high esteem in
which he is held in Congress o But he also happens to be a key
member of the House Ways and Means Committee~ the most
powerful committee in the House, whose jurisdiction includes
much of our national economic and financial policyo So, in
so far as analogies to the present situation may be appropriate,
you may assume that Phil is a key member of the Board of
Directors to whom the Secretary of the Treasury must look for
authority and support to do his job in paying the nation's billso
F-1303
- 2 -
As I contemplated coming to Gainesville, it seemed
particularly fitting and symbolic for a Secretary of the
Treasury to participate in the dedication of a fine new bank
building. I notice my other Cabinet colleagues participating
in the launching of facilities created by public funds
a
school, a highway, power dam, park, a space center, or a
defense project.
But a Secretary of the Treasury can enter more
enthusiastically in the spirit of things by helping to
launch an enterprise such as the Gainesville National
Bank -- that will house and secure the people's private
savings -- that will help put those savings to work in
supplying goods and services for a people with the highest
and most rapidly advancing standard of living in the
world -- that will facilitate the creation of new jobs,
and more incomes and profits.
For a Secretary of the Treasury never forgets that it
is by siphoning a fairly good cut of that flow of funds
through the banking system in the form of taxes and
borrowings that he is able to pay the bills for the
United States Government.
Indeed I can think of no institution more fundamental
to our way of life in the sense of complete identification
with the progress and well being of the people of a
community -- a local, state or national community -- than the
banks that serve it. We simply cannot manage without them.
Moreover, there is no question in my mind that the
nation's banks are a cardinal element in the prosperity and
productivity of these United States. First of all, of
course, our banks are the repository of our savings -- and
thrift is still one of America's foremost virtues. Let no
one suggest that Americans have forgotten how to save, not
when the nest egg they have husbanded in time and savings
accounts in commercial banks increased from $57 billion in
1957 to $185 billion in 1967, a rise of 224 percent.
But primarily, I suppose, our banks are so plainly among
the great sinews of the economy because they are such
effective instruments for the responsible utilization and
diffusion of credit. It is no accident that when the
- 3 -
management of the international development finance
organizations such as the World Bank, the Inter-American
Development Bank, the Asian Development Bank and our own
foreign aid officials begin making loans and giving advice
to poor nations on how to develop their economies, the
creation of the machinery of credit is among the highest
priorities. We Americans learned that lesson well when our
own country was itself poor and undeveloped.
The creation
of an effective dual banking system in which a national
banking system vies with state banking systems to effect
the most efficient, secure and yet dynamic means of handling
money and credit has made our miraculous development possible.
But neither should we forget one of the great intangible
benefits that America's banks bring to communities both large
and small, to Main Streets no less than Wall Street. By
which I mean the prominent examples banks set or, if you like,
the so-called "image" they project to most people. For to me
banks as they are managed in this country stand for the great
attributes of integrity and responsibility, of meaning what
one says, of doing what one promises, of accepting the
consequences of one's ac tions .
And finally let me say in praise of the managers of the
great national network made up of banks like this one that
they have surely kept up with the times in the matter of how
their services are purveyed. The day happily is gone when the
status of banks seemed to depend on the size of the pillars out
front, the massiveness of interior grillwork hiding the
almost anonymous people who worked inside, and the sense of
solid impregnability conveyed by the great safe at the rear
to which admission was reserved only to those initiated into
some arcane rite. Today's bankers have taken banking to the
people and both have profited. The trend that has created
attractive and functional facilities like the one we are
dedicating this afternoon is all to the good.
But banks, after all, are not ends in themselves. They
only serve an end, which is to help make our economy work.
And in the final analysis it is the state of the national
economy that largely determines what we find in our pay
envelopes, the price and quality of what the money will buy,
and the security and durability of our savings.
- 4 So let us pause a moment and draw from recent history
Some conclusions that will light our way along the best
future path.
The points I want to make are four in number:
First, that the United States is enjoying -- right now,
today -- the longest and most materially rewarding period
of sustained prosperity in the history of any nation.
Second, that although the basis of this growth is
the energy of Americans and the productive capacities they
have created and mastered, it did not take place
automatically. It occurred because of the responsible
partnership of government and the private sector -business, labor, agriculture and finance -- and because of
consciously adopted policies and programs that worked.
Third, that there is a consensus among economists and
the fraternity of economy-watchers as they peer down the
road ahead that this growth can continue if we continue to
utilize and adapt these policies to the demands of the times,
observing the priorities that must be observed lest in an
effort to do too much at once, we overstrain our capacity.
Fourth, Americans have made this progress that is the
envy, example, and ambition of the rest of the world -despite comments of frustrated office seekers and
unfriendly critics in foreign capitals -- by a renewed
national dedication as a people to our ancient national goal
handed down by the founding fathers in the Preamble to the
Constitution -- and that effort must continue. We have
used and are using, actively and with vigor, the
instrumentality of our federal system of government to form
a more perfect union, establish justice, insure domestic
tranquility, provide for the common defense, promote the
general welfare, and secure the blessings of liberty to
ourselves and our posterity. As a nation in this decade of
the 60s, we are facing up to and tackling our problems at
home, not hiding them under the rug. As a nation we are
accepting the share of international responsibilities that
is consonant with our position of leadership and strength in
an interdependent world and the harsh but established fact
of history that tranquility abroad, as well as at home,
cannot be insured unless there is law and order, wholesome
respect for the rights, security and property of others, and
shared opportunity.
- 5 Going back to my first point, what, then, are the
dimensions of the sustained prosperity which as I talk is
well into its 89th consecutive month?
Ten million new jobs were opened up in the last eightyear period.
In 1961 the national rate of unemployment was seven
percent. By 1966 it had been moved down to four percent,
and has remained generally at that rate, or below it, ever
since.
In 1961 there were 30 major labor market areas in which
unemployment was 9 percent or more. Today, there are only
two such areas.
American income -- money after taxes and allowing for
price increases -- has gone up 40 percent in the past eight
years.
In terms of current prices, the value of the amount
added to our Gross National Product in the period since
1961 is $320 billion. This national product gain of
$320 billion in the United States since 1961 is more than
the total national product in 1966 of the United Kingdom,
France, and Italy. It represents an average annual rate of
growth of about 5.2 percent, as opposed to a rate of a little
over 2 percent in the late fifties, when there was concern
about 2. stagnant economy.
Prices in the past eight years have averaged an annual
rate of increase of 2 percent. And this price record
has been accomplished during a war, and without price
controls, wage controls, rationing, material controls, or any
of the other red-tape-creating controls you'll remember from
Korea and World War II. Among the 21 industrialized nations which
make up the Organization for Economic Cooperation and
Development, the United States has had the best record of
price stability since 1961. Since 1961 prices have risen
15 percent in the United States. In the other 20 nations
of the OECD prices have risen 38 percent since 1960.
Now these recent achievements contrast very strongly
with past history in one more very important respect.
The past eight years constitute a period of unbroken economic
prosperity unmarked by the recessions that had come to be
expected as inevitable.
- 6 Why was this?
How has the new record been achieved?
The key factor has been the flexible use, over the past
eight years, of fiscal and monetary policies to give
direction to the economy.
In 1962, 1964 and 1965, the Congress enacted tax
reductions totaling about $24 billion at present levels of
income.
An oppressive permanent tax rate structure was broken
down. A web of highly discriminatory excise taxes was torn
away from the economy.
Rules on depreciation of old machinery and plant
equipment were liberalized.
Investment credits -- tax credits to industries which
invested in new plants and new equipment -- were provided as
an incentive to the economy.
All these things meant that American industry was
enabled to work -- and I repeat, in a free market economy,
without the harrassment of oppressive taxation and
controls -- to create new and better products; to sell them
at competitive prices; to use more people, opening up new
jobs; to raise living standards.
The year 1966 brought, with these accomplishments,a
new set of economic and financial challenges which were
basically problems of a prosperity that bordered on the
excessive, a military operation that created new imbalances
in the budget and balance of payments, and an unsustainable
boom in one segment of the economy -- the capital goods
area -- that strained the system.
The most notable economic achievement in 1966 was our
ability, in the framework of a free market economy, to
withstand the demands and dislocations of the Vietnam
conflict and increased civilian needs without resort to
the harsh economic controls imposed during previous military
involvements.
- 7 -
Vigorous monetary and fiscal actions -- both general and
selective -- combined with continued record-breaking
increases in employment and high modern production facilities
made it possible for the nation to shoulder all these burdens.
Price pressures and credit demands, which reached a
peak late in the summer of 1966, abated and the nation
experienced a return in late 1966 and early 1967 to more
stable price movements, more relaxed financial markets and
some lowering of interest rates.
As you all know, in the late summer of 1967 the
cessation of a sharp inventory readjustment downward
combined with a continuing upward creep of military outlays
and a rapid expansion in consumer purchasing power and a
resumption of strong activity in the housing sector combined
to present a new test to our national will.
We were challenged to forge new policies designed to
pay the nation's bills and order our economic and financial
affairs in such a manner as to reverse sharply a trend
toward increasing deficits in our Federal budget and in our
international balance of payments, increasing interest rates
and an unacceptable degree of inflation with a wage-price
spiral.
The strength and stability of the dollar and the economic
system on which it was based was threatened. And all the
world watched with bated breath to see whether or not the
United States was capable of acting decisively to remove
this threat to its national prosperity and the international
monetary system which is so dependent upon the dollar.
The indicated instrumentality was the imposition of
fiscal restraint in the form of a tax increase plus federal
expenditure reductions -- both symbols of declining
expectations that are unpopular and unwelcome.
What was at issue was nothing less than a test of
representative government in the vital but too little
understood world of economic affairs. The decisive votes
taken last month when the Congress approved the legislative
package that contained both a temporary 10 percent tax
surcharge and substantial reductions in Federal appropriations
and expenditures -- both unpopular measures in an election
year -- should go far to sustain confidence in the dollar, the
economy on which it is based, and our system of government.
- 8 It took courage and foresight for President Johnson to
initiate these tax proposals and to insist month after
month that they be adopted.
It took a high sense of public responsibility for leaders
of the business and financial community to put the public weal
above short-run personal and corporate interest and urge that
their taxes be increased in the national interest.
It took courage for the Members of Congress who voted
for this measure. They deserve and should receive the
appreciation of their constituents for demonstrating a high
sense of fiscal responsibility and being willing to
displease some of their constituents rather than harming all
of them.
It took the give-and-take that characterizes our
system of separation of powers, particularly in fiscal
affairs, to arrive at a package that fully satisfied none
but was acceptable to all -- to the Administration and to
both Houses of the Congress -- the tax writing committees
and appropriation committees -- and the responsible leadership
of both parties as represented. in the Congress.
We are used to crunches and crises in this country.
They are part of the democratic process. My point is that,
although obtaining passage of this needed measure of fiscal
restraint was something of a serialized cliffhanger, the
enactment was a victory for representative democracy as well
as responsible free enterprise capitalism. And I also
entertain the hope that in the process we learned a good
deal more about fiscal policy and our economic system and
the importance of a strong sound dollar to the world as well
as the United States.
Now that we have the legislation and the policy that
will arrest the excessive demand pressures on our economy
that give rise to unwelcome inflation,and the government has
put its bouse in order, it is incumbent upon business and
labor to exercise the voluntary restraint in wage-price
decisions that will reduce the cost-push type of inflation.
Both anti-inflation approaches are needed to enable the
economy to return to the pattern of stability in costs and
prices that characterized the first half of this decade.
- 9 -
Moreover, we must continue to act firmly and courageously
to correct our international balance of payments account as
we have in dealing with our domestic deficit, but hopefully
with greater dispatch.
We must stop spending more overseas than we take in.
We must cut down -- not necessarily on going abroad, but
on the number of dollars per day we spend while abroad. We
must more effectively promote foreign tourism in the
United States.
We must reduce government expenses overseas or
neutralize their impact by reciprocal action by the countries in
which they are expended.
We must hold down temporarily on financing capital
investments abroad from U. S. dollars.
Most important, we must boost sales of our products
abroad and restore an increasing competitive advantage by
returning to stability in costs and prices.
And, in this connection, while I have dwelt at a little
length on the recent history of the domestic economy, I must
remind you that America also has a role of leadership to
play in the vital field of international monetary affairs.
While we were meeting our responsibilities to put our own
economic house in order we also were working with other
nations to modernize the international monetary system that
has served America and the Free World so well since the
Bretton Woods agreement in 1947 in the greatest era of
expanding trade and development in recorded history.
There is not time today to discuss the extended
negotiations among the chief trading nations that are leading
to the creation of those Special Drawing Rights in the
International Monetary Fund. This new facility, hopefully,
will be operable early next year and can be expected to lead
to orderly expansion of reserves for which traditional
reliance on monetary gold, the dollar and the British pound
sterling has for some years appeared patently inadequate.
- 11 The action and attitudes of the Central Banks and
governments represented, which were reflected in the
communiques of meetings in Washington on March 17 and in
Stockholm on March 30, have opened the way for a thoughtful
and considered approach to the future role of gold in
the international monetary system based on the present
official price of $35 an ounce. There are fruitful areas
for further exploration which become inviting in a monetary
world where Special Drawing Rights and a more effective or
acceptable adjustment process for payments imbalances are
a reality. Moreover, these accords in March and April
strengthened the close cooperation between governments
as well as between Central Banks to stabilize world monetary
conditions.
During the past week the Central Banks of the major
financial nations, with the support of the governments
involved -- including the United States -- have taken new,
important and imaginative initiatives designed to shore
up and stabilize the financial situation of two important
countries and currencies, Britain and the pound, France and
the franco
Now, if we are watchful and wise and decisive, if we do
all that we should do, what can we expect to happen to that
pay envelope, and what its contents will buy, which I
mentioned earlier? The consensus among private economists,
I am happy to say, is that the future is indeed bright.
What they think may be fairly summarized thus:
By 1975 the Gross National Product may reach $1
trillion -- which I will tell you, before you check the
dictionary, is one thousand billion dollars. This means,
among other things, that the average yearly income of the
U.S. family can be on the order of $10,000 in terms of
today's buying power -- compared to about $7,500 in 1967.
It also means steady growth rates for our economy of up to
4-~ percent annually, and the continued status of the dollar
as the world's strongest and most stable currency.
But, as I have tried to say, there is a very large
IF written plainly on this prediction and it has been expressed
by, among others, the Joint Economic Committee of the Congress
Which, in presenting the projections I have used, said, and
I quote:
"This higher rate of growth will not be achieved
automatically, but will require improvements and
adjustments of economic policies, both public and
private, if it is to be achieved in a manner that does
not generate undesirable inflationary by-products."
- 12 I come to the fourth and final pointo
It is not enough for a national government to promote
economic and financial policies designed to assure an
economic environment in which our economy can flourish
however fundamental that task may be to all elseo
The founding fathers desired an active, energetic
federal system in areas other than commerce o They were
dissatisfied with the passive and negative pattern of the
Articles of Confederation e
Ytley established a federal system -- that included
a strong national government of granted powers -- to achieve
objectives set forth in the Preamble of the Constitution -to form a more perfect union, establish justice, insure
domestic tranquility, provide for the common defense, promote
the general welfare, and secure the blessings of liberty
to ourselves and our posterityo
Today, this nation under the leadership of
President Johnson, with the support of an effective Congress,
is using that federal system actively and with vigor to
achieve these objectiveso And that effort must be continued o
There must be no retreate There must be priorities e We
cannot do everything at once o But there is a vast
difference between priorities and paralysise
We are using and must continue to use the federal
system -- the active cooperation between the national
government and State and local bodies -- to provide more
effective law and order and a deeper and more abiding
respect for the rights, security and property of otherso
Without these the nation cannot establish the full justice
and assured measure of domestic tranquility contemplated by
the founding fathers
These are fundamental to conserving
the progress the nation has made for most, and broadening the
participation to include all o
0
But that is only one side of the coine Without a
sharing of ever increasing opportunity that is implicit
in the promotion of the general welfare, we will not achieve
at home the full measure of these constitutional objectiveso
- 13 That is why we have undertaken and must continue
action programs by the national government, working in
conjunction with state and local authorities, to Lmprove
elementary and secondary education, and to assist our
higher institutions in providing an opportunity for every
young American who wants and is capable of using a college
education
0
That is why the nation has undertaken and must continue
an effective program of Federal, state and local
cooperation for ~proved health facilities, including
Medicare for the aged and Medicaid for the helplesso
That is why we must bring the opportunities for home
ownership and suitable housing conditions to those elements
of our society who in past years have not shared this
opportunity
0
That is why we are tackling and must continue to
tackle the problems of poverty -- not by a dole or
outworn welfare systems -- but by increasing the opportunities
for training and developing the attitudes that are
conducive to securing and holding a good paying job -- and
mobilizing an enlightened private business community to see
to it that the job opportunity follows the training o
That is why we are tackling and must continue to
tackle through Federal, state and local cooperation, the new
and emergent problems of life in the heart of our great
cities -- with the zeal and skill that we brought in the
Thirties to making life on the land more productive and
rewarding
0
And let no one mistake the fact that the objectives
embodied in the Preamble to our Constitution must have a
validity in the international as well as the national spherea
There must be in the world at large an increasing pattern
of law and order that involves the wholesome respect for the
rights, security, and property of other nations o Otherwise
the blessings of liberty we are seeking to assure for
ourselves and our posterity, and the pe~ce in the world that
is complementary to domestic tranquility at home, will be
threatened
0
- 14 This nation has sought and is seeking today -through the peace-keeping machinery of the United Nations,
through regional alliances, through the practice of direct
diplomacy -- to make its contribution to the march toward
world peach through security, order, and respect for the
rights of otherso
We have helped arrest aggression and the use of
violence or the threat of violence -- open or concealed
to destroy freedom and self-determination of countries
large and small -- in two world wars,in Iran, in Greece,
in Turkey, in Berlin, in Korea, in Lebanon, in Taiwan,
in the Congo, in Laos, in India, in the Middle East o
And now we are carrying on in South Vietnamo
And we must not let those, who would beat a retreat,
thereby rewarding and encouraging aggression and violence,
speak for America o
But again that is one side of the coin of achieving
peace and security in the international sphere
The other
side is again the sharing of increasing opportunityo We
are using and must continue to use our influence and wealth,
our hands and our hearts, in a dedication to shared
opportunity in an interdependent world, that promises a
large-scale attack on poverty, illiteracy and diseaseo
0
We have sought and struggled to make these concepts
universal within the framework of the United Nations and
outside it
We are providing direct aido We have encouraged',
provided leadership for, and sought to expand the
cooperative effort of all the developed nations to promote,
through multilateral development organizations, for the less
developed nations, the progress and stability essential to
meeting the needs and demand of their peopleo We must continue
that effort, Just as we cannot turn our backs on aggression
and the challenge to national self-determination in Southeast
Asia, so we cannot turn our backs on our responsibility to
participate in the development of other less fortunate countriesg
0
That is why the notion of a moratorium on foreign aid
or a refusal to replenish the funds of a successful ~ltilateral
institution, such as the International Development Association
of the World Bank, would be a drastic retreat from
responsibility
0
- 15 If these remarks of mine have conveyed the idea that
these are difficult times and that their challenges are very
great, this is no less than the truth o But I would remind
you that these United States are wi.thin a decade of being
two hundred years old and that their Constitution is perhaps
the oldest written document governing a modern natiollo
Which is merely another way of saying that we achieved the
heights we occupy by addressing and solving problems that in
their time loomed as large as any that confront us now o
I, for one, am proud today to be an American -- living
in a free society, that is tackling its problems at home
and helping to promote security and development abroad o
It is up to us whether we build upon this heritage,
reaping the benefits of this course while savoring its
high adventure, or supinely rest upon it to take the
usual consequences of irresponsibilityo
000
TREASURY DEPARTMENT
(
July 15, 1968
FOR IMMEDIATE RELEASE
U. So COMPLETES ACTION ON
SPECIAL DRAWING RIGHTS FACILITY
The United States today became the first of the
major industrial nations to complete governmental action
approving the creation of Special Drawing Rights in the
International Monetary Fund and providing for
participation in the Special Drawing Rights (SDR) plano
Treasury Secretary Henry Ho Fowler, acting as the
United States Governor of the IMF, notified the International
Monetary Fund that the U. S. Government accepts the
proposed amendment to the IMF Articles of Agreement
establishing the SDR facility, and has completed all action
necessary for U. S. participation in the SDR plano
The official certification, which Mro Fowler signed
and sent to the IMF today, states that "The Government
of the United States of America accepts the proposed
amendment to the Articles of Agreement of the International
Monetary Fund approved by the Board of Governors on
May 31, 1968, and Resolution #23-5, and undertakes all of
the obligations of a participant in the Special Drawing
Account in accordance with United States law and has taken
all steps necessary to enable the United States to carry
out these obligations a"
Legislation ratifying the necessary amendment to the
llW Articles of Agreement and authorizing U. S. participation
in the SDR plan was approved by Congress on June 6, and signed
into law by President Johnson on June 190
F-1304
- 2 The SDR's will be a new form of international
reserve asset, and are designed to meet the need for
increased reserves as world trade expands o The decision
to create SDR's,and the amounts to be created, will be
determined by the member nations of the IMFo
The SDR facility will be established in the
DW when 65 member nations which have 80 percent of
the weighted votes in the Fund accept the plano The
United States has about 22 percent of the voteso
000
TREASURY DEPARTMENT
July 16, 1968
FOR IMMEDIATE RELEASE
TREAS~TRY
MARKET TRANSACTIONS IN JUNE
During June 1968, market transactions in
direct and guaranteed securities of the Government
investment accounts resulted in net purchases by
the Treasury Department of $143,939,600.00.
000
F-1305
TREASURY DEPARTMENT
July 17, 1968
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
$2,700,000,000, or thereabouts, for cash and in exchan~e fo:
Treasury bills maturing July 25, 1968,
in the amount. of
~,603,374,000,
as follows:
91-day bills (to maturity date) to be issued
in the amount of $ 1,600, 000, 000, or thereabouts,
additional amount of bills dated April 25, 1968,
mature October 24, 1968, originally issued in the amou:"~, of
n,100,682,000, the additional and original bills t(J h~ f:re-ely
interchangeable.
182 -day bills, tor $ 1,100, 000, 000, or thereabou ts, to be dated
July 25, 1968,
and to mature
January 23, 19690
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 denominatlcns of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $l,OC~.OJO
(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, July 22, 19680
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
forwarUed 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.
- 2 Immediately after the closing hour, tenders will be opened at
Federal Reserve Banks and Branches, following which public announce
ment 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 Trea.
expressly reserves the right to accept or reject any or all tenden
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on July 25, 1968, U
cash or other immediately available funds or in a like face amount
of Treasury bills maturing
July 25, 19680
Cash and exchange teo
\.rill 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 ha~
any exemption, as such, and loss from the sale or other dispositioo
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject m
estate, inheritance, gift or other excise taxes, whether Federal M
State, but are exempt from all taxation now or hereafter imposed 00
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 an
sold, redeemed or otherwise disposed of, and such bi lIs are exclude:
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereund
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 the
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
any Federal Reserve Bank or Branch.
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$1,500,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing
July 31, 1968)
in the amount of
$1,501,080,000, as follows:
273-day bills (to maturity date) to be issued
$ 500,000,000,
or thereabouts,
additional amount of bills dated April 30, 1968,
mature April 30, 1969, originally issued in the
$1,000,784,000, the additional and original bills
interchangeable.
1n the amount of
July 31, 1968,
representing an
and to
amount of
to be freely
36~day bills, for $1,000,000,000,
or thereabouts, to be dated
July 31, 1968,
and to mature
July 31, 19690
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
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Wednesday, July 24, 1968()
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 o (Notwithstanding the fact that the one-year bills will
r~n for 365 days) the discount rate will be computed on a bank
?lSCount 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
D )
0
c t Banking institutions generally may submit tenders for account of
t US orners provided the names of the customers are set forth 1n such
d
s~~~rs.
Others than banking institutions will not be permitted to
t tenders except for their own account. Tenders will be received
F-1307
- 2
p
without deposit from incorporated banks and trust compan1es and traa
responsible and recognized dealers in investment securities. Tender.
from others MUst be accompanied by payment of 2 percent of the taci
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated ~
or trust company.
Immediately after the closing hour, tenders will be opened at t~
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 Treasu~
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
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on July 31, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing July 31, 1968.
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 froo.
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
•
(
RJI·F.ASE 6: 30 P.If. I
lull 22, 1968.
!!l,
RESULTS
or
TREASURY'S WEEKLY BILL OPftBIBG
'D:le TrealurJ Department announced that the tenders for two series of 1'reasury
one series to be an additional issue of tbe bills dated April 25, 1968, and
otber series to be dated July 25, 1968, which were offered on July 17, 1968, were
led at the Federal Reserve Banks today. TeDders were invited for $1,600, 000,000,
~reabouta, ot a1-day bills and for $1,100,000,000, or thereabouts, ot 182-day
,s. ~e details of the two series are as follows:
,I,
II or ACCEPTED
ITImE BIOO:
91-day 1reasury bills
_turing october 24, 1968
Approx. iquiv •
Price
Annual Rate
5.25iij
98.671
98.659
5.3OS~
98.662
5.293~
11gb
Low
182-day Treasury bills
maturing January 23, 1969
Approx. Equiv.
Price
Annual Rate
97.294
5.3531.'
97.281
5.378~
97.287
5.366~
Y
!/
Average
6~ ot the amount of 91-day bills bid tor at the low pr ice was accepted
~ ot the amaunt of 182-day bills bid for at the low price vas accepted
lL TERDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DIsTRICm:
lstr1ct
,
11148
in Prancisco
Applied For
Acce;Eted
26,603,000 $ 16,603,000
2,012,243,000 1,164,940,000
20,419,000
32,419,000
33,639,000
33,639,000
21,723,000
25,863,000
36,199,000
48,523,000
130,917,000
415,617,000
43,292,000
62,792,000
14,060,000
19,450,000
38,415,000
34,415,000
21,993,000
16,993,000
671,7131,000
130.z 8151. 000
'roTALS
$2,868,372,000 $1,600,913,000
lston
IV
York
Uladelphia
leveland
Leana.
~laDta
l1cago
" LOUis
LDDeapOlis
lD8as City
!I
AEElied Por
$
3,594,006
1,612,285,000
13,731,000
22,390,000
18,760,000
28,748,000
387,938,000
38,515,000
19,957,000
28, 7'B, 000
14,974,000
175 2 6601.°00
Acce;Eted
$
3,594,000
810,315,000
5,631,000
17,680,000
10,260,000
12,491,000
136,958,000
21,365,000
10,457,000
22,998,000
9,974,000
381.387z000
$2,365,300,000
$1,100,110,000 ~/
(Deludes $311,715,000 noncompetitive tenders accepted at tile average price of 98.662
(Deludes $135,225,000 nonccmpetitive tenders accepted at the average price of 97.287
~se rates are on a bank discount basis. The equivalent coupon issue yields are
).~ tor the 91-day bills, and 5.5~ for the 182-day bills.
'·1308
TREASURY DEPARTMENT
July 24, 1968
FOR. IMMEDIATE RELEASE
TREASURY' S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, 1nvites tenders
tor two series or Treasury bills to the aggregate amount of
$2,700,000,000, or thereabouts, tor cash and in exchange tor
Treasury bIlls maturing August 1, 1968,
in the 8JlK)unt of
$2,600,420,000, as follows:
91-day bills (to maturity date) to be issued August 1, 1968,
in the amount 0 f $1,600,000,000, or thereabout s, represent ing an
additional amount of bills dated October 31, 1967) and to mature
October 31, 1968, originally issued in the amount of $1,001,770,000,
(additional amounts of $500,170,000 and $1,100,119,000 were issued
January 31, 1968, and May 2, 1968, respectively), the additional
and original bills to be freely interchangeable a
l8Cday bills, for $1,100,000,000, or thereabouts, to
August 1, 1968,
and to mature
be dated
January 30, 19690
The bills of both series will be issued on a discount basis under
and noncompet1t1ve bidding as hereinafter prov1ded, and at
~turity their face amount will be payable w1thout 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
(maturi ty value).
co~etitive
Tenders will be received at Federal Reserve Banks and Branches
up to the clOSing hour, one-thirty p.m., Eastern Standard
time, Monday, July 29, 19680
Tenders will not be
~ce1ved at the Treasury De~artment, Washington.
Each tender must
be for an even mult1ple 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 dec1mals, e. g., 99.925. Fractions may not
~ used. It 1s urged that tenders be made on the printed forms and
fONarded 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 pennitted to
Submit tenders except for their own account. Tenders will be received
Without deposit from incorporated banks and trust companies and from
~8PonSlble and recognized dealers 1n investment securities. Tenders
rom others must be accompan1ed by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
~C~anied by an express guaranty of payment by an incorporated bank
l' trust company.
'''1309
- 2 -
IDJDediately 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 Treasur
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
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on August 1, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 1, 1968
Cash and exchange tende
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.
0
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 m
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 bi lIs 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
TREASURY DEPARTMENT
(
FOR RELEASE
AFTER THURSDAY, JULY 25, 1968, 10:00 A.M.
PHILADELPHIA-NEW JERSEY-DELAWARE CONFERENCE
HELD ON REQUIREMENTS FOR BANK'S MINORITY HIRING
The U. S. Treasury Department, jointly with the American
Bankers Association and the Philadelphia Clearing House, held an
~qual employment opportunity conference Thursday, July 25 at the
~el1evue-Stratford Hotel in Philadelphia.
Robert A. Wallace, Assistartt Secretary of the Treasury and
~qual Opportunity Officer of that Department, said that the purpose
)f the Conference was:
1.
To encourage Afro-Americans, Puerto Ricans, and other
racial and religious minorities to apply to banks for
employment and training opportunities.
2.
To review the provisions of Executive Order 11246 which
requires banks with Federal deposits to eliminate all
discrimination in the hiring and promotion of minorities.
Wallace said that a sample of some 60 banks in the Philadelphia
rea showed that the employment of Afro-Americans and other
inority groups had grown from 1,100 to 1,700. This brought the
'roportion of non-white employment in these banks to nearly 7 perent as compared with less than 5-1/2 percent last year.
But, Wallace declared that a considerable number of banks
till have no black or Puerto Rican employees and that others have
nly one or two. He also urged all the banks to develop career
ad~e~s to help new minority workers advance to better jobs through
ra1nlng and education.
As to the possible withdrawal of Federal funds from banks
hich fail to adopt affirmative equal opportunity programs, Wallace
aid this should seldom be necessary, but indicated that such action
ad already been taken in several cases •
. The Philadelphia Conference is one of a series of state and
eglonal conferences to be held throughout the country by the
D S. Treasury Department
and the American Bankers Association o
-1310
000
STATEMENT BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON LABOR OF THE
SENATE COMMITTEE ON LABOR AND PUBLIC WELFARE
ON
THE PENSION BENEFIT SECURITY ACT
THURSDAY, JULY 25, 1968, 10:00 A. M.
Mr. Chairman and Members of the Subcommittee:
I appreciate having this opportunity to comment on the
legislative proposals embodied in "The Pension Benefit
Security Act" (S. 3421).
While these proposals relate to
matters to be administered by the Labor Department, they are
in an area which has also been of interest and concern to
the Treasury Department for a number of years.
Public policy has been clearly directed towards encouraging the growth of the private pension system.
An important
aspect of this policy has been the granting of favored tax
treatment to those pension plans which provide coverage for
a broad range of employees within the particular company
involved.
To this end, the Internal Revenue Code contains a
series of special tax provisions for "qualified" pension plans
coupled with a set of nondiscrimination standards which must
be met as a prerequisite to obtaining that "qualification".
F-131l
- 2 The obj ective of the "qualification" requirements is to
ensure that the tax benefits flow to employees in general
and not merely to a handful of highly paid employees.
The
Treasury Department and the Internal Revenue Service are
charged with the interpretation and implementation of these
statutory provisions and, through these functions, have had
close contact with -- and a continuing interest in -- the
private pension system.
At the outset, let me state first that the Treasury
Department wholeheartedly supports the objectives of "The
Pension Benefit Security Act."
This proposed legislation
arose from recommendations contained in the 1965 Report of
the President's Cabinet Committee on Corporate pension Funds.
The Treasury Department was a member of that Committee and
consistent with its interest in this important area actively
participated in the preparation of the Report.
We have
similarly participated with various other Government agencies
in the work of an inter-agency staff task force which considered the comments and criticisms received on the 1965
Report and which, based on that critique, developed a series
of specific legislative proposals with regard to three of the
-3 areas covered by the Report.
The legislation embodied in
"The Pension Benefit Security Act" is based on the work of
this task force.
Secondly, the fact that this legislation has been proposed should not in any way be interpreted to indicate that
the Federal Government is engaged in a campaign to bring
the private pension system under its wing.
To the contrary,
I think the very fact that this program has been submitted
is a recognition of the important role being played -- and
which should continue to be played -- by the private pension
system.
By recommending specific improvements in the system,
a continuation of its active role is explicitly recognized.
The proposed legislation represents a three-part program assuring a worker that years of labor in a company
having a pension plan will bring him a benefit when he reaches
retirement age even though events may cause him to leave that
company before retirement age, and that there will be funds
on hand for the payment of that benefit.
First, it is proposed that an employee's accrued pension
benefits become non-forfeitable once he has accumulated ten
years of service (after age 25) with his employer.
After
- 4 this length of service, the fact that he moves to another
job could not eliminate his pension
through his prior service.
e~pectations
built up
As a matter of simple equity,
it seems clearly undesirable to allow situations where an
employee must forfeit ten or more years of accrued pension
benefits merely by changing jobs.
The mobility of our
people and the constant changes in our industrial and commercial activities require a vesting standard along these
lines if the private pension plan system is to be a real and
vital part of an ever-changing America.
Persuasive testimony to the hardship that can result
from a lack of vesting is contained in the letters we and
other Government agencies receive from individuals who, after
working many years for an employer, find that they have lost
their pension accruals because they accepted a new job or
because they were laid off.
These individuals are now facing
retirement without the pension they expected.
There is no
way for them to retrace their steps and make other financial
arrangements to fill the void.
For them, the private pension
system is a failure.
The remaining two proposals in the bill would institute
a jOint program aimed at insuring that private pension plans
- 5 are in fact able to meet the financial commitments represented by vested benefits.
This financial security would
be obtained through an improved minimum funding requirement,
coupled with a termination protection fund that would be
available before full funding is achieved, to help meet a
plan's vested liability commitments in the event of a termination of the plan.
In essence, this financial protection
program holds a pension plan basically responsible for funding its pension promises, and to that end establishes basic
funding requirements looking toward full funding over a
period of time.
However, this individual responsibility
would be back-stopped by a combined effort,under the termination protection fund, on the part of all private plans to
make good on a particular plan's promises if it is terminated prior to attaining a full funding status.
In this way,
the basic individuality -- and thus flexibility
of private
pension plans can be retained without jeopardizing the pension expectations of the employees involved.
It would seem clear that if the private pension system
is to fulfill its role as a partner with the public social
security program, it must make good on its promise that a
- 6 -
pension will be available on retirement as the reward for
years of service to an employer and that funds will be
available to pay that pension.
The fact that an employee
may be forewarned of the possibility that under some con-
tingencies -- such as a shut down of the company or plant
before the plan is funded
he may never receive a promised
pension benefit is not an adequate substitute for the protection of that benefit.
To really be an effective substitute,
the warning should lead the employee to ignore altogether his
possible private pension benefit in any financial planning
for his future retirement -- or at best to realize that he
is engaged in a gamble that long years of service mayor may
lot produce a retirement benefit.
Surely this is not what
:he designers of private pension plans want or intend for
heir employees.
In sum, it would seem hard to quarrel with the goals of
his bill.
Each of the proposals are important improvements
n the present operation of the private pension system and
19ht to be made.
There is, however, a definite need for
Llowing flexibility in the transition to these new requiremts in order to avoid placing difficult burdens on individual
- 7 -
plans.
The bill aims to provide this flexibility through
various alternative transitional devices which will have
the effect of phasing in the new rules over a period of
t~.
If one transition procedure does not fit the partic-
ular needs of a plan, it is likely that another will.
If
none of the transitional procedures now in the bill is
suitable to cover a particular situation, consideration can
be given to one that will.
But in any analysis of the comments received with
respect to this bill, it is important to recognize the distinction between a disagreement with the policies of its
basic recommendations and any problems that may arise in
moving to the new standards.
In the area of those basic
recommendations -- vesting, funding, and termination protection for private pension plans -- I would suspect and
certainly hope that there are not large differences over
policy issues.
What problems may exist are more likely to
be related to the aspect of transition, and these problems
can be worked out.
The proposals in the bill represent, in
Our opinion, an appropriate and useful framework within which
to work them out.
- 8 -
The Secretary of Labor would
)~
responsible for the
administration and enforcement of the new standards.
There
have been some who have questioned this proposed administrative machinery as being at odds with past practice, which
has largely depended upon the revenue system for administering
min~um
standards for private pension plans.
To the
contrary, we believe that the procedures proposed for
administering the new standards are in accord with the
nature of the legislation and not inconsistent with prior
practice.
The present standards for qualifying for the tax benefits provided for private pension plans are mainly concerned
with preventing discrimination in favor of highly paid
employees.
The objective of those standards is to insure
that the tax benefits flow to employees generally rather
than to a narrow band of highly paid employees.
On the other
hand, the requirements for vesting, funding, and termination
protection contained in this bill, in combination, seek to
fulfill and secure an employee's pension expectations from
his employer.
These proposals t~'IS i~volve important aspects
of employee welfare and employer-e~pl~yee relations -- matters
-9 -
within the general responsibility and expertise of the
Labor Department.
Thus it seems completely appropriate
that this Department have responsibility for their administration.
It may be noted that the Labor Department at present
has jurisdiction over another significant aspect of pension
legislation, namely the Welfare and Pension Plan Disclosure
Act which requires disclosure of the financial operations of
pension plans.
Here again, the objective of that legisla-
tion is to provide protection for employees covered under
private pension plans by providing them access to the
information necessary for them to discover any activities
that are against their interests.
In summary, the Treasury Department fully supports the
objectives of the proposals contained in "The Pension Benefit
Security Act."
While we completely agree with assigning the
responsibility for the administration and enforcement of the
new standards to the Labor Department, we of course stand
ready to cooperate with that Department in any way we can,
especially to remove any unnecessary overlap of reporting and
examination.
- 10 Likewise, the Treasury Department favors the enactment of the recommendations in S. 1024 for prescribing and
enforcing a Federal standard of fiduciary responsibility
for individuals who administer welfare and pension funds.
This legislation will also serve to add a meaningful measure
of protection to an employee's pension expectation.
TREASURY DEPARTMENT
=
:LFASE 6: 30 P.M - ,
!!9'
July 2~, 1968.
RESULTS OF TREASURY'S K>ITBLY BILL OFFERING
!be Treasury Department announced that the tenders tor two series at Treasury
, oae series to be an additional issue at the bills dated April 30, 1968, and
;her series to be dated July 31,1968, which were offered July 18, 1968, were
l at the Federal Reserve Banks today- TeDders were invited tor $500,000,000,
!reabouts, of 273-day bills and tor $1,000,000,000, or thereabouts, at 365-day
'D1e details ot the two series are as tallows:
O'AC~lED
273-4&y 1reasury bills
9:fLVE BIDS: _--.;;;;ma.;...tur~..;;;.i.;;;;ng~A...p;.;;.r.;;;;.i1;;;.....,;;3;..;0J.,.,...1;;;;,.96;;;..,;;..;;9_
Approx. Equiv.
Price
Annual Bate
11gb
95.958
5.33~
~ov
95.944
5.M~
365-day !reasury bills
_turing July 31, 1969
.A.pprox. Equiv •
Price
Annual Rate
94:.629
5.297;
L'ferage
94.617
95.9~9
5.34~
9~.6oa
11
5.3l8~
5.30~
11
)~
ot the amount of' 273-da:r bills bid tor at the low price was accepted
1j ot the aaount of' 36S-day bills bid tor at the low price vas accepted
UDERS APPLIED FOR AIm ACCEP.C&D BY FEDERAL RESERVE DISTRICTS:
!trlct
gton
York
Ll.adelphia
I
neland
ehloDd
lanta
Lcago
• LOUis
!II1eapOlis
1l8&& City
llas
D Francisco
AEE1ied For
AcceEted
21,000
21,000
1,373,671,000
468,771,000
4,838,000
838,000
33,138,000
2,138,000
10,196,000
196,000
11,725,000
925,000
199,157,000
8,257,000
38,870,000
13,310,000
13,149,000
7'9,000
11,735,000
2,135,000
11,585,000
1,585,000
131,859,000
859,000
•
roTALS $1,841,1«,000
•
$
500,,",,000
!:I
Applied For
$ 10,560,000
2,009,571,000
12,703,000
64:,915,000
11,534,000
2',959,000
426,277,000
52,393,000
13,670,000
12,358,000
11,801,000
294.,135,000
AcceEted
$
560,000
856,442,000
1,703,000
2,505,000
1,534,000
3,594,000
119,870,000
3,793,000
670,000
3,358,000
1,807,000
5,085,000
$2,9,",882,000
$1,000,921,000 ~
Includes $ 15,791,000 noncoapetitive tet1Clers accepted at the average price of 95.949
InCludes $ 38,621,000 noncompetitive teDders accepted at the average price of 94.611
!!hese rates are on a bank discount basis. The equivalent coupon issue yields are
S.5~ tor the 273-day bills, and 5.61 j tor the 365-day b::'lls.
312
TREASURY DEPARTMENT
(
IIILIASE 6:30 P.M.,
p.yz Jull 29, 1968.
RESUL'lS
or
TREASURY I S 8m.Y BILL OJT.UIBG
'!he 'rreasury Department announced that the teDders tor tvo series ot Treasury
LlIJ one series to be aD additional issue ot the bills dated October 31, 1967, and
! otber series to be dated August 1, 1968, which vere ottered on July 2', 1968, were
.Dld at tile lederal Reserve Janks toc1ay. feDders were invited tor $1,600,000,000,
thereabouts, ot 91-day bills and tor $1,100,000,000, or thereabouts, of le2-day
Lls. !he details ot the two series are as tol1ows:
1& or ACClP'lD
R'1'11'lVJ: BIDS:
91-day ~easury bills
maturleg October 31, 1968
Approx. J:quiT.
Price
Ammal Bate
98.695
98.683
98.688
11gb
Low
Average
S.163J
5.21~
5.19~
182-day !reaaur,J bills
_turing J8.DU8l7 30, 1969
Approx. EquiT •
Price
AJmual Rate
·•
11 ··
S.254J
97.!"
97.320
97.327
5.301;
5.28'7j
!I
7~ ot the 8IlOUrlt ot 91-daJ bills b1d tar at the low pr1ce vas accepted
8~ ot tlIe aaaunt ot 182-day bills bid tor at the low pr1ce vaa accepted
IlL !DDEBS APPLIED P'OR Alm ACCiP'l'iD If PGBBAL RESIRVE DISmCm:
)1str1ct
to.ton
lev York
?h1ladelphia
:leftland
liebmoDd
ltlanta
lbieago
It. Louil!l
Ubapol1a
raDaas Citl
lallas
kn franCisco
roTALS
A~~lied
$
For
26,003,000
1,806,095,000
29,380,000
29,931,000
25,493,000
42,369,000
402,186,000
60,263,000
23,405,000
23,439,000
26,068,000
126,603,000
•
Acce;2ted
15,803,000
1,125,295,000
16,332,000
29,181,000
20,4.68,000
33,369,000
185,636,000
",14.3,000
11,4.05,000
20,729,000
17,858,000
74:,04r8,OOO
$2,621,235,000 $1,600,267,000
·
!I
Applied For
$
3,639,000
1,533,650,000
15,681,000
20,591,000
21,195,000
37,285,000
368,548,000
36,670,000
20,403,000
21,327,000
20,156,000
219,911,000
$Z,319,056,000
AcceEted
•
2,639,560
818,050,000
5,64:1,000
19,031,000
15,955,000
22,280,000
94,350,000
21,638,000
13,4:23,000
18,291,000
12,156,000
57,011,000
$1,100,465,000 ~j
Includes $298,954,000 DODCa.petit1'ft tenders accepted at the average price of 98.688
IDcludes $131,827,000 JloDcompeti tift tenders accepted at the average price of 97. j27
~ae rates are on a bank discOWlt basis. '!he equivalent coupon iasue ;yields are
.3~ tor the 91-day bills, aDd 5 .51~ tar the 182-day bills.
-1313
July 30. 1968
-
FOR IMMEDIATE RELEASE
JOINT STATEMENT OF HENRY H. FOWLER. SECRETARY OF THE TREASURY.
AND CHARLES J. ZWICK. DIRECTOR OF THE BUREAU OF THE BUDGET,
ON BUDGET RESULTS FOR FISCAL YEAR 1968
SUMMARY
The June Monthly Statement of Receipts and Expenditures of the
United States Government released tod8¥ shows receipts of $153.5 billion
and outlqs of $118.9 billion for the fiscal year 1968, which ended on
JUDe 30. The budget deficit was $25.4 billion.
Receipts were $2.3 billion below the estimate in the budget last
January because late enactment of the tax surcharge legislation did not
pendt collection of $2.1 billion of estimated revenue in fiscal year
1968.
OutlayS were $3.3 billion higher than the January estimate but only
$0.8 billion above the budget estimate adjusted for the Vietnam increase
of $2.5 billion announced by the President on March 31. Compared with
the March 31 estimates
-- Outlays for military functions of the Department of Defense and
mili tary assistance are up $1.1 billion. while
-
Outlays for other programs are down $0.4 billion.
The budget deficit was $5.6 billion above the January estimate and $3.1
billion higher than the revised estimate of March 31.
FEDERAL FINANCES, FISCAL YEAR 1968
(billions of dollars)
Estimate
January
Description
Budget Receipts. Expenditures and Lending:
Expend! ture account:
Receipts ••••••••••••••••••••••••••••••••
Expenditures ••••••••••••••••••••••••••••
Expenditure defi ci t {-) •••••••••••••
Loan account:
Net lending •••••••••••••••••••••••••••••
Total budget:
Receipts ••••••••••••••••••••••••••••••••
Outl~8 •••••••••••••••••••••••••••••••••
Budget deficit (-) ••••••••••••••••••
t.eans of Financing:
Borrowing from the public •••••••••••••••••
Reduction of cash and monetary
assets. increase (-) •••••••••••••••••••••
Other means •••••••••••••••••••••••••••••••
__
Total budget financing ••••••••••••••
Change from
January 1968
estimate
1968
Actual
155.8
~
-1 .0
153.5
11 3 • 0
-19.5
-2.3
+3.1
5.8
5.9
+.2
155.8
153.5
~
-19.
~
-25.
-2.3
+3.3
20.8
23.1
+2.3
-1.9
-.4
+1.5
0.8
19.9
2.7
25.4
~
+5.
Note: Detail will not necessarily add to totals because of rounding.
F-1314
-5.*
-5.6
2
RECEIPTS
Receipts of $153.5 billion were $2.3 billion below the January
budget estimate becaUie the budget ulued earlier enactllent ot the
President'l proposals tor an income tax surcharge and III acceleration
ot corporation tax Plfmentl. The budget estimate included $.9 billion
of individual income taxes and $1.8 billion of corporate income taxes-a total of $2.7 billion--to be collected during tilcal year 1968 under
the propoled tax legislation. None ot thi. was actually collected
betore June 30 due to the later enactment of the lurcharge lesillation.
BUDGET RECEIPTS. FISCAL YEAR
1968
(billions of dollars)
Estimate
January
Individual income taxes:
Existing tax rates ••••••••••••••••••
Proposed tax legislation ••••••••••••
Corporation income taxes:
Existing tax rates ••••••••••••••••••
FropOied tax legislation ••••••••••••
Employment taxes ••••••••••••••••••••••
Excise taxes ••••••••••••••••••••••••••
All other •••••••••••••••••••••••••••••
Total •••••••••••••••••••••••••••
Note:
Detail will not
necessari~
1968
Actual
Ch an ge f'rCIII
January 1966
eltimate
66.8
68.7
o
+1.9
-.9
28.7
o
21.3
14.1
14.8
-.9
-1.8
-.4
.9
29.5
1.8
21.1
13.8
~
I5""5:"B"
+.2
~
-2.3
153.5
add to totals because of rounding.
Apart from the effects of the surcharge
del~.
total receipts were
$.4 billion higher than estimated in the January budget. Individual
F
income tax receipts were higher than estimated by $1.9 billion. Part
of the increase reflects higher penonal incomes than were projected
last January. part of it reflects a higher than anticipated withholding,
and part resulted from adjustments in allocations of withheld taxes
between individual income taxes and employment taxes. The.e adjustments
also accounted for the entire $.4 billion shortfall In employment taxes.
Al.o. apart from the effects of the delq in pUlage of the tax
legislation. corporate income tax receipts were $.9 billion lower than
the January estimate. as current collections on estimated tax liability
were smaller than originally anticipated. Differences in the estimates
for other sources of receipts are shawn in the table above.
3
OUTLAYS
Total outl~s in fiscal year 1968 were $178.9 billion, $3.3 billion
higher than was estimated last January.
Outl~s for the militarY functions of the Department of Defense and
foreign military assistance were $77. 8 billion:
-- $3.6 billion higher than the January estimate, and
$1.1 billion above the budget estimate adjusted for the
$2.5 billion increase ,for Vietnam announced on March 31.
The added requirements for Southeast Asian operations included additional
deployments, reserve callups, a higher tempo of operations, and other
measures to strengthen the forces in South Vietnam. Other increases were
principally in shipbuilding and in research and development.
For all other programs, outlays were $.4 billion less than estimated in January. This decline was the net result of a number of
decreases and increases.
The principal decreases were:
-
Outlays for the Department of Housing and Urban Development
were $576 million under the budget estimate I with most of
the decline being in several grant-in-aid programs and in
the Department's mortgage support activities.
-- Department of the Interior net outlays were $520 million below
the budget estimate, primarily because collections from mineral
leases on the Outer Continental Shelf~ecorded as offsets to
Interior's disbursements) exceeded the earlier estimate by about
$460 million.
Department of Labor net outlays were $494 million lower, with
the largest single decrease being a $417 million drop from the
estimate of unemployment trust fund expenditures, mainly as a
result of lower unemployment.
Foreign economic assistance spending was $272 million below
the January budget estimate, mainly because of a slowdown in
the Commercial Import Program in Vietnam caused by the Tet
Offensive. Alliance for Progress funds were also disbursed
at a slower rate than anticipated.
Farm Credit Administration outlays were $190 million lower as
a result of reduced lending by the Banks for Cooperatives and
Federal Intermediate Credit Banks in response to the Administration's policy of credit restraint.
4
The principal increases were:
-- Department of Agriculture outl~s were $621 million above the
January budget estimate. principally because (a) tight market
condi tions resulted in Commodity Credit Corporation acquhitioc
of nearly $470 million of loan paper held by banks and (b) lalea
of insured loans by the Farmers Home Administration were $151
million lower than anticipated.
De artment of Health Education and Welfare net outl~s were
392 million more than the budget estimate. reflecting the net
effect of increases in. public assistance ($121 million) and in
hospital insurance fund outlays ($283 million) and decreases in
other social security trust funds.
Interest payments increased due both to higher interest rates
and to a larger than anticipated public debt and accounted for
most of a $258 million increase in Treasury Department outlays.
-- Export-Import Bank outlays were $217 million above the January
estimate as a result of liberalization of the Bank's Discount
Loan Program to encourage expanded export financing by commercial banks.
Railroad Retirement Board outlays were up by $160 million.
principally because those receipts recorded as deductions
from expenditures were less than expected.
Attachment
BUDGET RECEIPTS AND OUTLAYS
(Fiscal years.
In millions)
1968
January
budget
Actual
Change
from
budget
$61,526
33,971
26,195
13,719
2,978
1,901
9, 26 5
$67,700
31,300
27.7 45
13,848
3,100
2,000
10,137
$68,692
28,657
27,307
14,071
3,045
2,038
9,675
+$992
-2,6 43
-438
+223
-55
+38
-462
149.555
155,830
153 , 48 5
-2,3 45
326
28
369
32
346
28
-23
170
865
2,231
1,509
98
143
223
525
2,107
1,870
208
108
201
657
1,835
1,888
214
-35
-22
+132
-272
+18
+6
3,433
2,408
738
4,080
2,625
782
4,537
2,789
800
+457
+164
+18
73,695
1,378
40,859
4,551
779
444
3,876
1,087
428
5,753
77,190
1,287
41,251
3,975
259
430
3,382
1,084
420
5,731
+3,495
-91
+392
-576
-520
-14
-494
It Office ••••••••••••••••••••••••••••••••••••
lte •••••• ••••••••••••••••••••••••••••••••••••
Ulsportation •••••••••••••••••••••••••••••••••
67,453
1,310
34 ,950
2,641
529
403
3,175
1,141
418
5,428
:nterest. ••••••••••••••••••••••••••••••••••••
lther ••••
• • • Commission
• • • • • • • • • • ••••••••••••••••••••••••
•• • •• •• •• • • • • •• •• • • •• •
)mi C Energy
13,52 1"
-479
2,26 14
14,497
-36
2,333
14,715
+218
+40
+131
Description
1967
actual
1/
Receipts by source
,lvidual income ta.:ces ••••••••••••••••••••••••
~ora.tion income taxes •••••••••••••••••••••••
ioyment taxes ••••••••••••••••••••••••• ~ • • • • •
tse taxes •••••••••••••••••••••• • • • • • • • • • • • • •
!l.te and gift taxes ••••••••••••••••••••••••••
toms •••••• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
other •••••••••• • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Total receipts •••••••••••••••••••••••••••
OutlayS by major agency
I
islative Branch and the Judiciary •••••••••••
eutive Office of the President ••••••••• " ••••
ds Appropriated to the President:
ppalachian regional development progrBll18 ••••
nternationa1 financial institutions •••••••••
iIi tary assistance ••••••••••••••••••••••••••
eonomic assistance ••••••••••••••••••••••••••
ffice of Economic Opportunity •••••••••••••••
ther ••••••••••••••••••••••••••••••••••••••••
'iculture:
:ommodi ty Credit Corporation •••••••••••••••••
Ither ••••••••••••••••••••••••••••••••••••••••
lIDerce •••••••••••••••••••••••••••••••••••••••
'ense:
!il't
1 ary •••••••••••••••••••••••••••••••••••••
'ivil
Llth, Education, and Welfare •••••••••••••••••
ISing and Urban Development ••••••••••••••••••
'er'lor •••••••••••••••••••••••••••••••••••••••
,tice ••••••••••••••••••••••••••••••••••••••••
I
••••••••••••••••••••••••••••••••••••••••
I
)or ••••••••••••••••••••••••••••••••••••••••••
!asury :
4
2,464
-4
-3
-8
-22
2
1268
1967
actual
al Services Adminis trati on ••••••••••••••••
lIal Aeronautics and Space Administration ••
illS Administration ••••••••••••••••••••••••
Se~ce Commission •••••••••••••••••••••••
i-Import Bank. of the Uni ted States ••••••••
Credit Administration •••••••••••••••••••••
al Deposit Insurance Corporation ••••••••••
al Rome Loan Bank Board •••••••••••••••••••
oad Reti rement Board ••••••••••••••••••••••
B~iness Administration ••••••••••••••••••
d States Information Agency •••••••••••••••
independent agencies •••••••••••••••••••••
lances, undistributed ••••••••••••••••••••••
rederal security transactions ••••••••••••••
Itributed adJustments:
femment contributicms for
IIployee reti rement •••••••••••••••••••••••••
terest recei ved by trust funds •••••••••••••
-1,743
-2 ,285
outlays ••••••••••••••••••••••••••••
et surplus (+) or deficit (-) ••••••••••••••
Total
$131
5.423
6.688
2,007
436
642
-239
-157
722
155
185
983
Y
January
budget
$389
4,803
7,139
2,186
573
696
-261
-392
776
183
187
1,237
100
Actual
$417
4,722
7,037
2,228
790
506
-259
-260
936
288
185
1,236
Change
from
budget
+$28
-81
-102
+42
+217
-190
+2
+132
+160
+105
67
-2
-1
-100
+67
-1,913
-2 L678
-1,904
-2,692
+9
-14
1~8.362
l1~ .6~2
11 8 • 822
+~1221
-8,807
-19,805
-25. 407
-5,602
853
mounts for 1967 differ slightly fran those shown in the 1969 budget document released
anuary 29. 1968. The addi tiona! time since January has permitted greater precision
n making the accounting changes recommended by the President's Commission on Budget
oncepts.
Preliminary Statement of
1
Receipts and Expenditures of the United States Government
for the period from July 1, 1967 through June 30, 1968
(Amounts are rounded in thousands of dollars, therefore details may not add to totals)
TABLE I--SUMMARY {In millions}
11
I
==---
Means of Financing
Budget Receipts, Expenditures and Lending
Receipt-expenditure Account
Loan Account
Fiscal Year
Receipts
-
Expenditures
Surplus(+)
or
Deficit (-)
Net
Lending
Budget
Surplus (+)
or
Deficit (-)
By
Borrowing
from the
Public
By Reduction
of Cash
and Monetary
Assets
Increase (-)
Total
Budget
Financing
By
Other
Means
+$838
$19,805
-419
2,736
25,407
5,165
794
8,807
mated 1968 .........
$155,830
$169,856
-$14,026
-$5,779
-$19,805
$20,840
1'-$1,873
al fiscal year 1968 ••
(Twelve months)
153,485
172,956
-19,471
-5,936
-25,407
23,090
al fiscal year 1967 ••
149,555
153,184
-3,629
-5,178
-8,807
2,848
r
TABLE II-SUMMARY OF BUDGET RECEIPTS, EXPENDITURES AND LENDING {In thousands}
Loan Account
Current Fiscal Year
Receipt-Expenditure Account
Current Fiscal Year
Class ification
To date
Estimates
To date
Estimates
RECEIPTS
:nal Revenue:
dlvldual income taxes ........................................... .
)rporation income taxes ••••••••••••••••••••••••••••••••••••••••••
nployment taxes ................................................ .
!late and gift taxes ••••••••••••••••••••••••••••••••••••••••••••••
$68,691,824
28,657,236
27,306,929
14,071,229
3,045,054
$67,700,000
31,300,000
27,744,798
13,848,000
3,100,000
Subtotal·--Internal Revenue ••••••••••••••••••••••••••••••••••••
141,772,272
143,692,798
oms ......................................................... ..
)Iher. ......................................................... .
2,038,238
9,674,557
2,000,000
10,137,202
Total ...................................................... .
153,485 , 067
155,830,000
255,413
90,634
28,083
273,940
95,235
31,910
ccise taxes ............................................................................................ ..
................
. .•.•.......•.....
•.•..........•.. ...................
. ....•..•.....•..
..•••......•..•.
••.•....•.•...•. . ....•.......•...
............... . ..................
............... .. ...................
................ . ..................
................. . ...................
.................. . ....................
EXPENDITURES
~~\iV~ Branch •••••••••••••••••••••••••••••••••••••••••••••••••
~1cry ••••••••••••••••••••• , •• + . . . . . . . . . . . . . . . . . . . . . . . . . . • • • • •
:0 ve Office of the President •••••••••••••••••••••••••••••••••••••
1s appropriated to the President:
:~i~~~lt:~~e............................................. .
tther
....
656,685
1,835,000
2,396,068
6,932,223
756,108
culture 'Department: .:.......................................... .
I
............................................... .
mere D
t
• • ••••••••••••••••••••••••••••••••••••••••••
'lISe ~p!~:e~~nt ••••••••••••••••••••••••••••••••••••••••••••••
IUltary ....... : ••••••• ' ................................................ .
:tVll
77,196,060
1,286,260
41,134,709
637,127
239,205
430,004
2 3,382,413
1,083,932
419,585
5,731,275
14,584,839
133,915
2,464,237
415,844
4,721,824
6,730,190
4,010,461
d............................................. .
an Welfare Department •••••••••••••••••••••••••••
~h Ed.;~itl""·
!mg and U on,
rio De ~ban Development Department .......................... .
ieerDe:~~:~~t ••••••••••••••••••••••••••••••••••.••••••••••••••
Jl'De tm
............................................... .
t Offl%:";,ep~~~~~t ••••••••••••••••••••••••••••••••••••••••••••••
!Depart
t
............................................ .
ISporlati~~~ ~~t~~~""""""""""""""""""""'"
t ••••••••••••••••••••••••••••••••••••••••••
lSUry Departm~nt:
blerest on the publl c debt ••••••••••••••••••••••••••••••••••••••••
Commis~i~~' •••••••••••••••••••••••••••••••••••••.•••
!ral Services Adm·
.: •••••••••••••••••••••••••••••••••••••••
0IIa\ Ae
f
Imstrahon ••••••••••••••••••••.••••••••••••••••
'rans Adroninautslcs and Space Administration. " ••••••••••••••••••••••
.Ir Independent
m tration
enci" ......................................... .
Winces und· t~b es ............................
,
IS rI uted
·Federal securit tran~···········································
Istributed . I Y
actIOns •••••••••••••••••••••••••••••••••••
Federal m erfund receipt transactions:
Interesl em~\oyer contributions to retirement funds •••••••••••••••••
ere ted to certain Government accounts .................. .
2,430,246
6,555,774
737,373
$15,695
394,148
43,624
73,694,107
1,377,827
40,787,102
985,483
757,529
444,192
3,876,118
1,087,403
428,208
5,752,960
-5,732
430
116,309
3,337,435
19,327
................. .
14,350,000
110,872
2,333,290
435,164
4,803,174
6,768,274
3,598,028
100,000
-1,904,185
-2,692,202
-1,912,572
-2,677,677
172,955,705
169,855,679
!ipt'expendlture account surplus (+) or deficit ( - ) •••••••••••••••••••
-19,470,638
-14,025,679
lending (+) or (_) .............................................. ..
-5,936 191
-5 778 892
!!t SUrplus (+) or deficit (_) ••••••••••••••••••••••••••••••••••••••
-25,406,830
-19,804,571
>ther.
Die Energy
II ••••••• I ' ,
I
............... .
Total ..................................................... .
footnotes on page 3.
.............. . ..................
3
..................... .. ....•...........
...•..•.......•.
. .................
................
525,000 , ............... .
2,106,719 . •.......•.......
,
I'
. ...•.•.•...•••.•
.................
··········ii4;257
149,716
44,753
430
430
71,639
3,565,129
21,463
................. ........... .......
.................
..............
..................... ... .....................
•..•.•....••...• ..................
................. ....................
~
~
....................
.................
697
-70
I
.................
306,353
,
1,640,602
••••••••••••• I
...
67,373
..
.................
-48
. ......•••.•..•..
-45,988
........•...•....
370,282
1,586,829
....•........•••
...................
................. .......•.•.....••
•..........•...•
••• ••••••• 0 ••••••
f----.
5,936,191
5,778,892
to.)
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING (In thousands)
I
Class lficat ion
RECEIPT-EXPENDITURE ACCOUNT
RECEIPTS
Internal Revenue:
Individual Income taxes:
Withheld ........•....•... , ..•........•..••...••....
Other •.•••••..••.•••..•••.•••.•..•••.•.•••••..•..•
Current Fiscal Year to Date
This Month
4
Gross
Receipts
Net
Receipts
Refunds
(Deduct)
Gross
Receipts
Comparable Period Prior Fiscal Year
-"
$4,804,094
' 2,977,487
Refunds
(Deduct)
Net
Receipts
Net
Receipts
Refunds
(Deduct)
$50,520,874
18,849,721
, .!57, 267,620
4 20,950,634
I
Gross
Receipts
7,781,582
£:207,485
$7,574,096
78,218,254
$9,526,430
$68,691,824
69,370,595
n, 844, 839
$61,525,75€
Total--Indlvidual income taxes •••.•..•..•.•.•••••.•.
Corporation Income taxes .......••...••....•.•........
7,411,881
119,489
7,292,392
29,889,415
1,232,180
28,657,236
34,917,825
946,468
33,971,357
Employment taxes:
Federal Insurance Contributions Act:
Federal old-age and survivors ins. trust fund ..•...
Federal disability insurance trust fund .....•••.••.
Federal hospital insurance trust fund •.•.....••....
' 1,815,463
'. 268,074
' 327,411
1,815,463
268,074
327,411
19,113,026
'. 2,341,909
43,111,862
218,745
21,920
22,050
18,894,281
2,319,989
3,089,812
19,145,438
1,891,499
2,274,722
262,719
19,437
. ........
18,882,719
1,872,062
2,274,722
Total--FICA taxes .....•..•..............•....
2,410,948
. ......
. ......
.......
. .......
2,410,948
24,566,796
262,715
24,304,081
23,311,660
282,156
23,029,504
82,427
7,989
-36,122
4 1,335,588
4
128,386
4
79,878
1,478,874
149,104
148,000
1,543,852
1,543,852
1,775,978
.........
.. ................
. ........
. ........
1,478,874
149,104
148,000
54,293
...... .. ..........
........ ..........
.........
. .... . .. ........
1,335,588
128,386
79,878
54,293
.......
.......
.......
.......
79,113
8
79,105
858,517
503
858,014
792,858
165
792,693
2,319
593
1,726
606,811
5,829
600,982
602,745
5,972
596,773
2,546,673
601
2,546,072
27,575,976
269,047
27,306,929
26,483,241
288,293
26,194,947
831,662
367,700
11,578
15,000
820,084
352,700
9,819,277
4,493,273
126,934
114,387
9,692,343
4,378,886
9,461,379
4,652,369
183,292
211,507
9,278,087
4,440,862
Total--Excise taxes •.•.••..••... , •..•••.•.•.•.
1,199,362
26,578
1,172,784
14,312,551
241,322
14,071,229
14,113,748
394,799
13,718,949
E state and gift taxes ......•......•..•..••.••.•.....••
236,578
2,723
233,856
3,076,336
31,282
3,045,054
3,014,406
36,095
2,978,311
Self-E mployment Contributions Act:
Federal Old-age and survivors Ins. trust fund ... , ..
Federal disability insurance trust fund .•...•.•.••.
Federal hospital insurance trust fund .•••.••.••....
Total--SECA taxes ............................
RaILroad Retirement Tax Act:
Railroad Retirement Accounts •.....••.•••••.••••
Federal Unemployment Tax Act:
Unemployment Trust fund .•••....•..•.•.•....•..
Total--Employment taxes ...•.••••..•.•.....•.
Excise taxes:
Internal Revenue Code: Subtitle D:
Miscellaneous excise taxes ..•..••.•..•.•..•.•....
Highway Revenue Act of 1956, as amended:
Highway trust fund .•....•••.•••..•.•••.•..••.....
4
4
82,427
' 7,989
-36,122
4
1,775,978
Total--Internal Revenue ..• , .•.•.....•....•.......•.
19,176,076
356,876
18,819,200
153,072,533
11,300,261
141,772,272
147,899,815
9,510,495
138,389,32C
Customs duties ...••.•.•..•.••..•..•.••.....••...•....
182,799
7,152
175,647
2,113,475
75,237
2,038,238
1,971,800
71,085
1,900,7H
Railroad Unemployment Insurance Act contributions:
Unemployment trust fund ..•.....••.•...••.••••.•.•••
19,353
.......
19,353
139,595
.. ..............
139,595
145,666
. ...............
145,66!
. ........
2,035,557
202,994
279,360
53,026
1,835,408
183,231
205,962
32,136
.. ...............
. ........
1,835,401
183,23]
205,96:
2,604,647
5,175,584
by states for:
Old-age and survivors, disability. and health insurance:
Federal Old-age and survivors ins. trust fund .•.•••••
Federal disability insurance trust fund •••••.••.•••.••
Federal hospital insurance trust fund ......••.••.•...
Federal supplementary medical ins. trust fund •••••••
Unemployment insurance:
Unemployment trust fund .•••.••..•••...•..........
~epos\ts
Totlll--Deposits by states .••••.•••.••.•.••.••.••
-
-
-
.
8,521
( )
.......
.
8,521
( )
.. ...............
... 's:ais
.......
.......
..........
8,318
2,035,557
202,994
279,360
53,026
23,185
.......
23,185
2,604,647
..•......
.........
40,024
........
40,024
5,175,584
...•.....
.............
.. ................
2,916,933
...................
........
. ........
2,916,933
5,173,870
. ........
5,173,870
32,13t
ClassUtcat10n
RECEIPT-EXPENDITURE ACCOUNT--Contlnued
RECEIPTS--Contlnued
This Month
Gross
Receipts
Refunds
(Deduct)
Net
Receipts
Gross
Receipts
Net
Receipts
Refunds
(Deduct)
Insurance premiums:
Medical insurance for the aged:
Federal supplementary medical ins. trust fund .•••....
$68,195
.............
$68,195
$645,462
..............
Federal employees retirement contributions:
Civil service retirement and disability fund •...•.•..•.••
Foreign service retirement and disability fund ...•..••••
Other •.••..••.••.••.•••••....•.••.•.••.••••......••
117,719 .............
365 .............
39 .............
117,719
365
39
1,335,700
4,566
479
Gross
Receipts
~645,462
$614,546
.............
.............
.............
1,335,700
4,566
479
1,204,370
4,287
468
1,340,745
1,209,125
1,805,377
316,504
..............
,
---
Cotnparable Period Prior Flscal. Year
Current Fiscal Year to Date
Refunds
(Deduct)
Net
Receipts
.............
$614,546
.............
.............
.............
.............
1,204,370
4,287
..............
1,805,377
316,397
468
Total--Federal employees retirement contributions ••••
118,122
.............
118,122
1,340,745
Miscellaneous receipts:
Deposits of earnings by Federal Reserve Banks •••.•••.•
All other •••..•••••••.•.•.••.••.•..••..••..•.•••••••
204,959
30,151
.............
$3
204,959
30,149
2,090,948
282,287
.............
$63
2,090,948
282,224
Total--Miscellaneous receipts •••.•..•••.•••••.••••••
235,110
3
235,107
2,373,235
63
2,373,172
2,121,881
107
2,121,774
153,485,067
159,136,502
9,581,686
149,554,815
Total--Budget receipts ••...••••...•.•••••••..••••.•
19,839,679
364,030
19,475,649
164,860,627
11,375,561
$107
FOOTNOTES
Source:
Prepared by the United States Treasury Department, Bureau of Accounts, on the basis of reports received from disbursing, collecting, and administrative agencies of
the Government.
iLess than $500.00.
Th,s statement is preliminary and is based on reports from disbursing, collecting and administrative agencies of the Government. Final
reports
of Government disbursing, collecting and administrative
agencies, including certain overseas transactions for the year ended
June 30, 1968, which it has not been possihle to include in this statement,
will be incorporated in the final statement for fIscal year 196R to be
published at a later date.
<Transactions cover the period July I, 1967, through June 3D, 1968
and are partially estimated.
3Excludes transactions of the Federal Reserve System, Board of
Governors and the Milk Market Orders Assessment Fund.
4"Individual income taxes withheld" have been increased $201,052
to correct estiTIlates for quarter ended September 30, 1967 and "Indivi_
dual income taxes other" have been increased $43,707 to correct
estimates for calandar year 1966 and prior. The total of the above
adjustments ($244,759) is shown as a decrease of "Employment taxes"
under "Federal Insurance Contributions Act" representing decreases
in appropriations of $154,537 for Federal Old_age and survivors
insurance trust fund; $17,926 for Federal disability insurance trust
fund and $28,588 for Federal hospital insurance trust fund and as an
increase of "self-employrr>ent taxes" under "Self-Employrr>ent Contributions Act" representing decrease in appropriations of $2,426 for
Federal old-age and survivors insurance trust fund and increases in
appropriations of $2,011 for Federal disability insurance trust fund
and $44,122 for Federal hospital insurance trust fund.
r Revised.
1,209,125
•
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
This Month
Class ification
RECEIPT -EXPENDITURE ACCOUNT
Expenditures
(Disbursements)
EXPENDITURES
Legislative Branch:
Senate .......................................... .
House of Representatives •.........................
Joint items for Senate and House .................. .
Architect of the Capitol •..........................
Botanic Garden ....................•..............
Library of Congress ............................. .
Government Printing Office:
General fund appropriations •....................
Revolving fund (net) ............................ .
General Accounting Office ••.•••..•.•..••........••
Receipts offset against expenditures ••••.••••••••...
Inlerfund receipt transactions ••••..•••..•........••
44
3,267
138
4,222
.............
............
...............
. ...........
..................
nao
__ ' w
v
").4
...............
Total--The Judiciary. .... ... ..... ... .. ........
'1. .--I;?1l
Funds appropriated to the President:
Alaska programs ..........•...... __ ............. .
Appalachian regional development programs •....•...
Disaster relief •••.......•.•....•................
Emergency fund for the President .... ' , ........... .
EXp!Lnslon of defense productlon . . ....•.....•......
Expenses o( management improvement ............. .
International Financial Institutions:
Asian Development Bank .................. _ .... .
Investment in Inter-American Development Bank. _ .
or~':!~ll~lg!'O:l~Os.~~~~~l Development Assn.
EeOftoftlle opport\lnlty pro.ram ....
4
................
~
•
-
$1,210
I
F
44
4,065
3,267
138
4,222
-1,210
Applicable
Receipts
.............
. ...........
. .............
. ...........
............
31,266
-7,482
53,112
. ..............
..............
.............
.............
$13,101
2,645
427
1,365
1,453
768
7,142
28
-768
87,588
512
.-- I
I;_'W_
R<;R
'1AR
............
3,357
90,634
87,638
1,878
85,760
. ..............
. ...........
150
2,821
801
604
9,025
854
503
150
2,779
742
710
9,033
731
516
............
. ............
............
............
. ...........
150
2,779
742
710
9,063
731
516
1,113
639
411
liOl
.............
3,109
6,492
1,212
930
526
-697
3,931
6,696
1,102
-22
534
-178
. .............
.. ...........
. ............
............
. ............
.............
............
...............
............
.............
130
520
99
164
41
3,109
6,492
1,212
930
526
-697
. ...........
236,0311
241
. ...........
. ............
............
93,991
130
520
99
164
41
241
24,500
239,966
81,419
540
-1,878
..............
··········8:230
11,326
1,878
1,113
639
25
251,293
$11,326
. ...........
75
37
(*)
. ...........
. .............
81,419
540
.............
7,095
-723
26,385
815
48,539
-11,326
-723
..............
. ..............
. .............
............
808
............
87,588
512
-3,357
75
37
7,395
26,385
815
48,539
............
............
3,357
.............
... ...........
............
...................
31,266
-7,482
53,112
-13,101
..............
............
.............
.............
. ...........
. ...........
150
2,821
801
604
9,025
854
503
............
.. ...................
.............
...............
...............
. ...........
............
............
.............
nA'I I --------- .. ·1
--,---
. .............
. ............
............
. ............
. ............
............
?
I -----------, I
I
28.083
?:7.767
.............
............ . ............ . ............... ............. ................
2,601
. ...........
............
7,395
108,163
................
.............
108,163
..................
.
...........
............
BOO
31,760
31,760
53,472
.............
...........
............
122
(*)
.............
122
254
.
1,409
5,686
82,335
29,236
53,099
33,975
135,641
.... -_..........
25
231
. .............
231
28
............
- Tffi'l
---
........ _......
.......... -.....
........... _.-
............
.. ................
$38,060
76,006
9,433
22,017
503
30,257
l38,060
76,006
9,433
22,017
503
30,257
2,589
432
1,246
1,413
13
201
89
-89
458
37
37
_,n_
............
Net
Expenditures
2,645
427
1,365
1,453
............
..............
............
............
............
............
Applicable
Receipts
. ..............
. .............
I
.............
............
Expenditures
(Disbursements)
$42,441
81,833
10,871
20,654
549
35,271
1~
13
201
89
-89
458
37
37
?'_(J!i~
Net
Expenditures
.............
$42,441
81,833
10,871
20,654
549
35,271
204
32
112
109
............
I
$3,626
6,924
216
1,596
'vw
............
............
............
............
7,142
28
Net
Expenditures
Comparable Period Prior Fiscal Year
Fiscal Year to Date
............. .............. ............. . ................
1-,--?In I
'J'J
lnl
__ RRQ I
---,--255,413
'JAR '" ~ I
............
204
32
112
109
Executive Office of the President:
CClmpensation of the President .................... .
The White House Office .......•..•................
Special projects, ................................ .
Executive mansion •..............................
Bureau of the Budget ............................. .
Council of Economic Advisers .................... .
National Aeronautics and Space Council ........•....
National Council and Commission on Marine SCience,
Engineering, and Resources .................... .
National Security Council •...•.....................
Office of Emergency Planning:
Civil defense and defense mobilization functions
of Federal agencies ......................... .
Other .•......•................................
Office of Science and Technology .................. .
President's Commission on Postal Organization .... .
Special representative for trade negotiations ....... .
Miscellaneous ....•.............•.................
I
............
............
............
............
............
.............
4,065
Total--Legislative Branch.....................
Applicable
Receipts
............
$3,626
6,924
216
1,596
The Judiciary:
Supreme Court of the United States ................ .
Court of Customs and Patent Appeals .........•.....
Customs Court .................................. .
Court of Claims ................................. .
Courts of appeals, district courts, and other judicial
services ......................... , ....••.......
Judicial survivors annuity fund ..•....••••.••.•••..•
Receipts offset against expenditures .•.••.•..•••••••
Total--Executive Office of the President. .......
I
Current
I
II(DisDursements)
Expenditures
?.R
.--_...........
.... -......
..
24,500
8,230
10,000
61,346
130,100
...- ..............
236.038
1 . . . . 8111
-.... _---- ... --
10,000
61,346
130,100
1
. . . . . ~~
10,000
5t.OOO
108,000
.~-
. ............
..............
•.••.•••..•• I
2,589
432
1,246
1,413
411
601
3,931
6,696
1,102
-22
534
-178
?:7,767
2,601
..................
53,472
2M
-101,666
28·
.10.000
18::=
Classification
RECEIPT-EXPENDITURE ACCOUNT--ConUnued
This Month
EXPENDITURES--Contlnued
Funds appropriated to the Presldent--Continued
~~~We ~rpsd" ·t·(··························.........
P brPP
uca fn programs........................
S u ~clw?r i acce eration.............................
pecia are gn currency activities . . . . . . . . . . . . . . . . . . . .
Southeast hurricane disaster. . . . . . . . . . . . . . . . . . . . . . . . . .
Military assistance:
Office of Secretary of Defense.......................
Department of the Army............................
Department of the Navy.............................
Department of the Air Force........................
All other agencies.................................
Foreign military sales fund.........................
Military assistance advances........................
Receipts offset against expenditures... .................
e:s
~sca1
Year to Da.t.e
Com.parabl.e Per'lod. Prior Flacal Year
Applicable
Receipts
Net
Expenditures
I(Disbursements)
Expenditures
"'12,060
••.•... .•.•.••
65
10
.•.......•..•.
$2
•.•.•..••.••
............
•.• . • . . .• • . •
... ••....•..
$12,058
............
65
10
............
U10,228
15.364
4,957
201
590
U58
.... ••••••.•
............
. . •.•••• •• ••
............
$110070
15;364
4,957
201
590
$112,189
lI304
3,400
•••••.•••••••
21,133
•.•••.•.••..•
226
.•••••••. . •..
10,408.............
S111,886
3,400
21,133
226
10,408
372
25,418
48.695
329.829
9.281
85,538
37.320
177.387
3.762
3,050
-7,390
175,131
164,935
1,014,252
-135,447. ••••••••••••••
....... •••••
.•• .... •••..
.•••••••••••
•• ..........
•••••••••••.
192,878
••••••••••••
961,042
25,418
329,829
85,538
177,387
3,050
-17,746
1,014,252
-961,042
59,144.. •••• .......
388,297...... •••• •••
130,033
•••.•••••••••
331,175
•••••••••••••
-5,630
•••••••••••••
161,068
191,442
1,069,952
.............
.............
1,078,035
59,144
388,297
130,033
331,175
-5,630
-30,374
1,069,952
_1,078,035
1,153,920
656,685
2,134,037
1,269,476
864,561
...... ••••••
••••••••••••
••••••••••••
••••••••••••
•••••••.••••
••••••••••••
............
218,566
92,690
45,489
432,215
130,391
43,196
75,275
220,661
101,019
63,240
587,025
112,796
98,620
73,751
.............
•••••••••••••
•••••••••••••
•••••••••••••
•••••••••••••
...... •••••••
.............
220,661
101,019
63,240
587,025
112,796
98,620
73,751
310,802
503,207
598,429
722,883
-14,299
173
-97,752... ..........
93,243
61,190
10,330
88,004
409,964
661,693
-10,157
-88,004
2483 374
252,766
2,230,608
-581. ............
144
-144
1,659699
4,850,975
264
223,275
56,397
92,496
1 230
'
114,178
103 531
15' 877
12'281
13'264
'
372
..• •••• .....
48,695............
9,281
•••••.•••.••
37,320
••• •••••••••
3,762
............
41,944
49,334
164,935
••••••••••••
••• •••••••.•••
135,447
Total--Military assistance........................
Economic aSSistance:
Technical cooperation and development grants:
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliance for Progress............................
Social progress fund, Inter-American Dev. Bank......
Supporting assistance...............................
International organizations and programs.............
Contingencies.............. ........................
other.. ................ ......... ...... ............
Public enterprise funds:
Alliance for progress, development loans...........
Development loan funds. .........................
Foreign investment guarantee fund........ . . . . . . . . .
Receipts offset against expenditures........ ....... . .
CUrrent.
Expenditures
(Disbursements)
306,309
184,781
19,078.... .... ••••
10,157
............
4,900
••• .•• ••••••
31,581
••••••••••••
7,953
............
4,715
••••••••••••
7,882
............
121,528 I
1,810,605
19,078
10,157
4,900
31,581
7,953
4,715
7,882
218,5661
92.690,
45,4891
432,215'
130,391
43,196
75,275
AppUcable
Receipts
I
Net
Expenditures
Expenditures (Disbursements
Applicable
Receipts
Net
Expenditures
31,976
41,311
91
.•• ...... •••••
7,114
10,067
1,440
23,672
24,862
31,244
-1,349
-23,672
384,152
667,498
1,674
•••• ...... ••••••
73,350
69,070
15,973
97,752
Total--Economic assistance......................
159,646
42,293
117,353
2,091,144
256,145
Receipts ofL:;et against expenditures ...................
...... ........
33
-33
................
581
Total--Funds appropriated to the President.........
765,472
228,627
536,844
6,329,324
1,441,572
4887,753
-80
19,692
4,375
5,763
87
............
............
••.• ••••••••
............
............
-80
19.692
4,375
5,763
87
-63
238,152
58,969
90,057
1,383
............
............
••••••••• •••
••••••••••••
............
-63
238,152
58,969
90,057
1,383
264
.... .........
223,275
.............
56,397. ••••••••••••
92,496
•••••••••••••
1,230.. ...........
9,174
7,712
1,566
1,109
1,237
............
........... •
....... .....
............
............
9,174
7,712
1,566
1,109
1,237
120,492 ............
99,784 ••••••••••••
15,826 ....... •••••
13,198 ............
14,688 ••••••••••••
120,492
99,784
15,826
13,198
14,688
114,178 .............
103,531.............
15,877 •••• •••••••••
12,281 •••••••••••••
13,284
.............
-7,964
............
20
• ••••••. ••••
9,018
••••••••••••
16,934 ............
31,337............
7,717
............
2,388
............
-7,964
20
9,018
16,934
31,337
7,717
92,965
1,750
103,731
216,859
184,827
174,731
31,436
••••••••••••
••• ••••• ••••
••••••••••••
............
•• ••••••••••
............
•• ••••••••••
92,965
1,750
103,731
216,859
184,827
174,731
31,436
82,923
.............
1,750 ••• ••. •••••••
96,066
•••••••••••••
208,298
.............
114,095.... .........
145,419 .............
29,647... ...... ••••
82,923
1,750
96,066
208,298
114,095
145,419
29,647
1'9,449
59,449
806,299
............
806,299
678,199
678,199
f------
1,835,000
6,510,673
~griculture
Department:
Agricultural Research Service:
lntragovernmental funds (net) .......................
other ., .................... :......................
CooperatIve state Research ServIce. . .. . .. . . . . . . . . . . . . .
ExtenSIOn ServIce....................................
Farmer Cooperative Service. . . . . . . . . . . . . . . . . . . . . . . . . .
Soil Con:::ervation Service:
Conservation operations....... .....................
Flood prevention, watershed protection and other. . . . . .
Great Plains conservation program. . . . . . . . . . . . . . . . . .
Economic Research Service...........................
Statistic::l Reporting Service..........................
Consumer and Marketing Service:
Consumer protective, marketing and regulatory
programs.......................................
Payments to Statf!S and possessions. . . . . . . . . . . . . .. . . .
Special milk prugram...............................
School lunch program...............................
F00d stamp program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Removal of sltrplus agricultural commodities.........
Other.. .... .. . . .. .. . .. . .... ... ..... . .. .... .. .. .. ..
Total--Consumer and Marketing Service............
'1
••••••••••••
2!~1--
.............
VI
0-
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING --Continued {In thousands)
Class ificat ion
HE CEIPT -EXPENDITURE ACCOUNT --Continued
EXPENDITURES--Continued
Expenditures
(Disbursements)
Agriculture Department--Continued
Foreign Agricultural Service •••••••••••••••••• , ••• '"
International Agricultural Development Service ••••••••
Commodity Exchange Authority •••••••••••••••••••..••
Agricultural Stabilization and Conservation Service:
Expenses •••••••••••••••••••.••••••••••••••••••••
Sugar act program •••••••••••••••••••••••••••••• "
Agricultural conservation program •••••••••••••••.•
Appalachian region conservation program •••••••••••
Cropland conversion program •••••.• , ••••••••••••••
Cropland adjustment program ....•....•••••••••••••
Emergency conservation measures •••••••••••••••• ,
Conservation reserve program (soil bank) •••••••••••
Indemnity payments to dairy farmers •••••••••••••••
.......
Total--Agricultural Stab. and Conservation Service
I
Applicable
Receipts
.............
.............
.............
.............
.............
.............
. ............
.............
.............
.............
I
Net
Expenditures
Expenditures (Disbursements
$2,443
33
124
$24,769
-444
1,516
.............
..............
13,437
1,055
11,765
146
8
113
506
13
...............
139,680
83,477
225,132
-6,945
3,126
83,716
5,311
121,791
264
27,042
.............
27,042
Commodity Credit Corporation:
Public enterprise funds:
Price support and related programs •.••••••••••••
Special activities .••••••••••••••••••••••••••••••
Foreign assistance and special export programs •••••••
249,870
5,673
137,617
$218,847
13,740
872
Total--Commodity Credit Corporation and foreign
assistance and special export programs •••••••••
393,160
762
2,119
972
Federal Crop Insurance Corporation:
Administrative expenses ••••••••••••••••••••••••••
Federal Crop InSurance Corporation fund ••••••••••••
Rural Electrification Ad ministration .•••••.•••••••.•••
Farmers Home Administration:
Community development programs .•••••••••••••••••
Salaries and expenses ........................................................ ..
!2,443
33
124
13,437
1,055
11,765
146
8
113
506
13
4,101
5,287
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This MOnth
Applicable
Receipts
............
I
Net
Expenditures
Expenditures (Disbursements
............
$24,769
-444
1,516
$21,149 I .............
343 I .............
1,304
.............
$21,149
343
1,304
...............
..............
................
139,680
83,477
225,132
-6,945
3,126
83,716
5,311
121,791
264
131,691
81,689
215,572
2,800
1,655
53,575
5,702
140,735
166
... ............
.............
131,691
81,689
215,572
2,800
1,655
53,575
5,702
140,735
166
655,552
.............
..............
............
. .............
.. ............ .
...............
.............
...............
.............
655,552
633,587
.............
633,587
31,023
-8,067
136,745
8,492,028
116,249
1,439,333
$5,296,903
253,479
37,517
3,195,124
-137,230
1,401,816
6,110,451
241,102
1,544,138
:"4,466,221
2?..3,823
34,649
233,458
159,702
10,047,609
5,587,899
4,459,711
7,895,692
4,724,693
. .............
762
1,817
972
10,838
48,067
12,668
33,346
10,838
14,721
12,668
8,632
25,241
12,210
. .............
............
4,101
5,287
30,760
58,333
..............
30,760
58,333
11,585
52,167
.. ..............
. ............
11,585
52,167
2,386
4,666
154
11,676
2,766
63
524
4,377
-197
-3,914
4,782
-63
35,407
216,739
6,434
258,527
22,196
1,536
33,877
159,433
-1,748
193,402
22,192
1,306
1,530
57,306
8,183
65,125
4
230
27,732
13,144
7,237
84,803
22,321
745
50,897
24,320
2,529
93,502
27,059
1,019
-23,165
-11,177
4.708
-8,700
-4,738
-275
20,406
302
.............
.
~
..............
. ...........
. ...........
.............
.............
.............
.............
..............
................
.............
31,580
. .............
Public enterprise funds:
Direct loan account •••••••••••••••••••••••••••••
Rural housing Insurance fund •••••••••••••••••••••
Emergency credit revolving fund •••••••••••••••••
Agricultural credit insurance fund ••••••••••••••••
Rural housing direct loan account. •••••.••• , ••••••
Other.. .. .. .................................... '" .............................. ..
2,910
9,043
-43
7,761
7,548
Total--Farmers Home Administration ••••••••••••
36,607
21,711
14,896
629,932
408,462
221,470
219,733
199,327
Rural Community Development Service •••••••••••••••
Packers and Stockyards Administrati.on .••.•••••••••••
Office of the Inspector General •••••••••••••••••••••••
Office of General Counsel ••••••.•.•.•.••••.... , ...•.•
Office of Information ••.•••••••••••••••••••••••••••••
Nattonal Agricultural Library •••••••.••••••••••.••..•
Office of Management Services •••••••••••••••••• " •••
General administrat1on:
Intragovernmental funds (net) ••••.•••••••••••••••••
Salaries and expenses •••••••••••••••••••••••••••••
Forest Service:
Intragovernmental funds (net) .••.••••.••••••.••••••
Other •.••••••••••.•..•.•••••••••••••••••••••••••
32
203
1,008
344
122
346
264
.............
32
203
1,008
. ...........
............
. ............
390
2,591
12,070
4,418
1,638
6,786
2,755
700
11,366
4,170
2,039
2.633
2,612
. .............
................
264
390
2.591
12,070
4,418
1,638
6,786
2,755
-15
334
-276
4,332
...............
.............
-961
32,061
-89,675
..................
-736
488,218
...................
............
261,937
13,411,479
.
( )
-15
334
-961
32,061
Recelpts offset agamst expenditures ........•.•.• " •••
........
Tota,l- -Agrlculture Department ..•••••.•••...•..
607,083
Net
Expenditures
Applicable
Receipts
..............
..............
..............
................
..............
...................
..............
................
.................
...............
89,675
345,147
344
122
346
...............
..............
..............
................
-276
4,332
-736
488,218
2.380
11
3,728
-2,080
449,549
-449 549
463,401
......................
6,479,256
6,932,223
10,61111,880
. ..............
. ..............
. ............
..............
.................
I
1,644,230
17,280
1,509,489
3,170,998
8,632
-6,339
12,210
700
2.380
11,366
4.170
2.039
2,633
2,612
.............
.. ..............
.................
.................
359 466
-2,080
483,401
-359 486
5.315,066
8,".'184
11
3,728
Classificatton
ACCOUNT--Conttnued
EXPENDITURES--Continued
~ECEIPT-EXPENDITURE
This Month
Expenditures
(Disbursements)
AppUcable
Receipts
Commerce Department:
General Administration •.••.••.••.•..•.•.••...•••.•..•
Business Economics and Statistics:
Office of BUSiness Economics •.•••••••...•••••......
Bureau of the Census .••...••..••••..••.•..•.•..••..
Economic Development Assistance:
Public enterprise funds •.•...•••••.•.•.•.••..•.•.•••
Other •••.•••.•••••....•••••••..••••..••••..••.....
Promotion of Industry and Commerce:
Business and Defense Services Administration •.•••••.
International Activities •••••••••••••••.••••.•••.•••.
Office of Fi.eld Services •....•••.•••••.•••••••.•••••
Participation i.n U. S. Expositions ••••••••••••••••••.•
U.S. Travel Service ••••••••••••••••••.•.•••••.•••••
698
28,537
Total--Promotion of Industry and Commerce ••.•••••
5,940
.............
.............
.............
.............
.............
.............
.............
13,467
2,880
Science and Technology:
Environmental Science Services Administration ••••••.
Patent Office ••••••••••••••.••••••••••••••.••••••••
National Bureau of Standards:
Intragovernmental funds (net) ••••••••••••••••••••••
Other •.•••.•.••••••••••.••.••••••••••.•••••••••.
Office of State Technical Services .••••••••••••.•.•••
$622
.............
725
5,444
Current Fiscal Year to Dat.e
Net
Expenditures
Expenditures (Disbursements
Applicable
Receipts
$622
t3,587
..................
.............
•.....•.•..•.
725
5,444
3,375
38,012
$537
161
28,537
3,112
145,632
965
4,213
333
113
316
4,851
19,569
4,552
4,909
2,763
5,940
36,643
..............
13,467
2,880
-258
2,924
745
.............
.............
......•......
965
4,213
333
113
316
................... .
COInparab1.e Period Prior FlBca.'\ Year
Net
Expenditures
Expenditures (Disbursements)
. ......•...••
$3,587
3,375
38,012
114,363
2,625
29,725
. •...........
$8,814
-5,702
145,632
1,534
114,000
.............
.............
. ............
.............
.............
4,851
19,569
4,552
4,909
2,763
5,964
17,703
4,550
4,979
3,047
............ .
36,643
36,244
174 200
38;346
..............
.............
174 200
38;346
175,869
36,424
-258
2,924
745
1,821
40,145
4,147
1,821
40,145
4,147
19,759
258,658
......•......
....•..•.....
.......•.••..
..........•..
..............
Applicable
~eceipts
. ...•.......
Net
Expenditures
......•.....
84,363
2,625
29,725
$5,005
-3,471
114,000
. ...........
............
..........•.
............
...•..•.....
••..........
............
............
5,964
17,703
4,550
4,979
3,047
36,244
175,869
36,424
4,669
48,370
2,733
.......•.....
....•......
...........•
............
.........•.•
258,658
268,065
............
268,065
4,669
48,370
2,733
Total--Science and Technology ••••••••••••.•••..•.
19,759
•.•.•..•..•.•
Ocean Shipping:
Maritime Adm1ni.stration:
Public enterprise funds ••••••••.••••.••••.•.••••••
Operating differential subsi.dles •••••••••••••.•••.•.
Other •••••••••••••••••••.•••.••.•.••••.. '" ..•..
13,869
12,976
20,152
.............
100,607
200,130
161,244
.............
. .............
-23,056
200,130
161,244
213,124
175,632
128 634
215,214
.............
-1,356
12,976
20,152
. .......••..
. .•..•......
-2,089
175,632
128 634
Total--Ocean Shipping •••••••••.•.•••••••••••••..•
46,997
15,225
31,772
541,981
203,663
338,318
517,390
215,214
302,177
Receipts offset against expenditures ••••••••••••••••••••
..............
1,832
-1,832
..............
62,414
-62,414
.........•.•..
36,820
-36,820
Total--Commerce Department ••••••••••••••••••••••
108,722
17,595
91,127
1,030,999
274,892
756,108
973,946
257,039
716,907
Defense Department:
Military:
Military personnel:
Department of the Army ••••••••••••••••••••••••••
Department of the Navy ••••••••••••••••••••• '" •••
Department of the Air Force ......................
Defense agencies ••••••••••••••••••••••••••••••••
899,078
555,653
503,479
187,073
.............
.............
....•..•.....
.............
899,078
555,653
503,479
187,073
8,300,980
5,730,237
5,005,584
2,094,789
...............
...•.•.....•
............
8,300,900
5,730,237
5,005,584
2,094,789
7,300,206
5,232,355
5,423,926
1,830,233
Total--Military personnel ......................
2,145,282
.............
2,145,282
21,931,589
..............
21,931,589
19, 786, 7a:l
.....••....•
. ...........
....••......
. ...........
. ...........
Operation and maintenance:
Department of the Army ••••••••••••••••••••••••••
Department of the Navy •••••••••••••••••••••••••••
Department of the Air Force ••••••••••••••••••••••
Defense agencies ••••••..•••••••••••• , ••••••••••••
988,854
549,012
532,300
87,253
...•.........
.............
..............
..............
--_._---
988,854
549,012
532,300
87,253
8,141,054
5,164,266
6,182,342
997,960
8,141,054
5,164,266
6,182,342
997,960
7,293,385
5,058,303
5,714,461
934,103
. ...•.......
. ....•.....•
. ...........
. ............
7,293,385
5,058,303
5,714,461
934,103
Total--Operatlon and maintenance •••••••••••••••
2,157,419
.............
2,157,419
20,485,623
.............
.............
•........•...
•.•..........
.............
20,485,623
19,000,253
. .........•.
19,000,253
Procurement:
Department of the Army ••••••••••••••••••••••••••
Department of the Navy ..........................
Department of the Air Force ••••••••••••••••••••••
Defense agencies •••••••.••••••••••••••••••••••••
439,006
663,135
950,183
3,278
..............
..............
.
..•....•.....
•............
439,006
663,135
950,183
3,278
5,839,127
7,993,579
9,422,822
42,088
.............
.......•.....
.......•.....
.............
5,839,127
7,993,579
9,422,822
42,088
4,389,955
6,484,835
8,096,361
40,706
Total- -Procurement ••••••••••••••••••••••.•••••
2,055,602
...•.•..•....
2,055,602
23,297,616
.............
23,297,616
19,011,857
15,225
-
--
.
203,663
..............
...••.•....
..............
...........
. ..••...••..
. ...........
7,300,a:l6
5,232,355
5,423,926
1,830 233
19,786,720
4,389,955
6,484,835
8,096,361
40,706
19,011,857
~
CD
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING --Continued {In thousands}
Classification
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES--Conlinued
Expenditures
(Disbursements)
Defense Department- - Continued
Military--Continued
Research, development, test and evaluation:
Department of the Army .........................
Department of the Navy .........................
Department of the Air Force .....................
Defense agencies ...............................
Applicable
Receipts
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Net
Expenditures
Expenditures (Disbursements)
Applicable
Receipts
Net
Expenditures
Expenditures (Disbursements)
Applicable
Receipts
Net
Expenditures
.
.
.
.
$123,560
00,084
308,937
50,210
$123,560
89,084
308,937
50,210
$1,431,870
2,002,822
3,774,417
509,835
$1,431,870
2,002,822
3,774,417
509,835
$1,633,950
1,791,101
3,229,192
505,424
$1,633,950
1,791,101
3,229,192
505,424
Total--Research, development, test and
evaluation .................................. .
571,792
571,792
7,718,944
7,718,944
7,159,668
7,159,668
Military construction:
Department of the Army ......................... .
Department of the Navy ......................... .
Department of the Air Force ..................... .
Defense agencies ..................... . ........ .
24,276
22,201
29,359
752
24,276
22,201
29,359
752
675,439
99,074
487,905
18,322
675,439
99,074
487,905
18,322
447,850
522,638
550,289
14,802
447,850
522,638
550,289
14,802
Total--Military construction ................... .
76,589
76,589
1,280,739
1,280,739
1,535,579
1,535,579
.
.
.
.
13,007
8,723
13,010
215
13,007
8,723
13,010
215
170,585
122,989
196,519
5,078
$1,839
168,745
122,989
196,519
5,078
117,319
127,428
235,900
4,554
117,319
127,428
235,900
4,554
Total--Family housing ......................... .
34,955
34,955
495,171
1,839
493,332
485,~
485,200
Civil Defense .................................... .
Special foreign currency program ................... .
Revolving and management funds:
Public enterprise funds:
Department of the Army ....................... .
Department of the Navy ....................... .
Department of the Air Force ................... .
Defense agencies ............................. .
Civil defense procurement funds ................ .
Intragovernment funds (net):
Department of the Army ..............•.........
Department of the Navy .....................•...
Department of the Air Force ................... .
Defense agencies ............................. .
Undistributed stock fund transactions ........... "
7,330
445
7,330
445
107,637
1,724
107,637
1,724
100,058
11
100,058
11
36
45
623
15
....J78
-168
354
27
147
19
Family housing:
Department of the Army .........................
Department of the Navy ..........................
Department of the Air Force .....................
Defense agencies ................................
40
66
482
257
-47,718
217,245
....J9,413
15,688
Total--Revolving and management funds .......... .
146,648
Other ••••......•.................................
Receipts offset against expenditures ................. .
Interfund receipt transactions ...................... .
797
Total--Military ..•..............................
Civil:
Department of the Army:
Corps of Engineers:
Rivers and harbors and flood control ........... .
Intragovernmental funds (net) .................. .
The Panama Canal:
Canal Zone Government ....................... .
Panama Canal Company ....................... .
other . . . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,196,858
$4
116
2,528
12,884
3,601
-2,046
257
11
356
30
1,002
179
2
1
(*)
.............
-47,718
217,245
....J9,413
15,688
860,626
1,098,431
92,001
84,546
2,647
144,000
2,136,639
1,213
2,135,426
512,978
······79;636
797
-79,636
5,516
·······:7:ioo
•.... 254;926
5,516
-254,926
-7,160
3,123
...............
-7,050
7,114,575
77,454,038
257,979
77,196,060
67,588,396
112,161
-1,472
1,287,585
1,287,585
....3,533
1,303,130
-1,820
6,513
42,393
155,4.27
41,7'14
42,393
-14,140
37,7U9
82,283
112,161
-1,472
6,513
-50
······ii:600
284
3,601
860,626
1,098,431
92,001
84,546
....3,533
..... i69;567
41,774
$223
770
270
2
1
-54,882
199,548
-65,725
433,844
...............
S8,07&
-1
-1
-54,882
1I11l,548
-65,725
433,844
131,335
-196
-623
-251
1,266
511,712
...........
••.• i33; 9-ii
3,123
-133,941
-7.050
135,208
67,453,188
................
........•..
····i..;ioc
•.•......•.
1,303,UO
-1,820
37,'708
-.1JI,""
_,07IJ
Clas.st1'1catton
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES- -Continued
This Month
Expenditures
(Disbursements)
Applicable
Receipts
Current: Flscal Year
Net
Expenditures
Expenditures (Disbursements
Defense Department--Continued
Clvll--Continued
Navy--WUdllfe conservation, etc ••••••••••••.••••••••
Air Force--Wildllfe conservation, etc ••••••••••••••••
Soldiers' Home:
U. S. Soldiers' Home revolving fund •••••••••••••••.
Other ...........................................
Receipts offset against expenditures ..................
Interfund receipt transactions ........................
86
................
(*)
14
850
-21
-1,920
..............
-2,351
..............
$12
2
850
2,329
-1,920
Total--Civil ......................................
132,616
10,261
Total- -Defense Department ••••••..••••••••••••••
7,329,474
92,544
1,148
6,336
.............
197
56
289
(*)
.............
............
Date
COD'l-p.a.rable Per103 .k"r1.0r ...."1Bca.L y: .ar
Net
Expenditures
Expendltures
(Disbursements
............. .
$12
45
$12
$141
..............
4
9,967
-65,545
-12,302
141
7,597
-12,302
............
65,545
............
122,355
1,521,513
235,253
7,236,930
78,975,551
951
6,336
3,477
62,984
. ...........
.............
.............
.............
-53
-270
48,472
156,712
300,383
275,472
53,838
70,767
3
165
256,893
506,379
1,429,152
895,533
142,377
279,806
$6
$12
45
to
AppUcable
Receipts
145
9,967
48
Appl.lcable
Reeelpts
............
..............
$144
Net
Expenclltnres
.12
48
-3
. ............
-15,774
. ...........
47,545
. ...........
7,597
-47,545
-15,774
1,286,260
1,501,543
191,793
1,309,749
493,232
78,482,320
69,089,939
327,001
68,762,938
2,966
511
62,984
3,001
58,279
. ...........
3,070
-69
58,279
56
..................
. ...........
. ............
. ............
. ............
. ...........
-53
-4,739
256,893
506,379
1,429,152
895,533
142,377
279,806
42
250,257
447,074
1,265,971
466,794
385,925
175,876
..............
-2,394
250,257
447,074
1,265,971
466,794
385,925
175,876
Healt~
Education, and Welfare Department:
Foo and Drug Administration:
Public enterprise funds •••••••••••••••••••••.••••••••
Other ••••..••.•.•••••••••.•••••••.•.•••••••••••••.
Office of Education:
Public enterprise funds:
Student loan insurance fund ••••••••••••••••••••••••
Higher education facilities loans fund •••••••••••••••
Assistance for vocational education •••••••••••••••••••
School assistance in federally affected areas ••••••••••
Elementary and secondary educational activities •••••••
Higher educational activities .........................
Defense educational activities •••••.•••••••••••••.••••
Other ••••••••••••.•••••••••.•••.••••••••••••••••.••
3
19
48,472
156,712
300,383
275,472
53,838
70,767
Total- -Office of Educa Hon ••••••••.••••••••••••••••
905,666
345
905,321
3,510,308
4,960
3,505,348
2,991,938
2,436
2,989,502
-975
8,199
-893
.............
..............
.............
-975
8,199
-893
84,532
142,883
209,122
...........
... ...............
...........
84,532
142,883
209,122
8,453
61,508
229,836
. ...........
. ...........
. ...........
8,453
61,508
229,836
.............
.............
.............
258,670
221,464
1,041,578
242,929
18,322
128,272
7,289
....................
258,670
221,464
1,041,578
242,929
11,033
128,272
208,135
261,458
942,060
218,503
225
41,640
................
.............
7,096
.............
13,169
5,069
-93,146
-34,389
-7,078
37,920
. ...........
. ...........
Otl1er ................... ~ .......... "" ...................................
13,169
5,069
-93,146
-34,389
18
37,920
. ...........
208,135
261,458
942,060
218,503
-8,730
41,640
Total--Public Health Service ••••••••••••••••••••••
-65,028
7,096
-72,124
2,347,772
7,289
2,340,483
1,971,819
8,954
1,962,864
Social and Rehabilitation Service:
Grants to States for public assistance •••••••••••••••••
Grant. for reh.1bilitation services and facilities ••••••••
Gr ..nts for maternal and child welfare •• , ••••••••••• ,.
Rehabilitation research and training ••••••••••••••••••
Other •••••••.••••••..•••••.•••••.•••.•••••••.••.••
299,153
27,093
39,862
37,891
245,519
.............
.............
.............
.............
.............
299,153
27 ,093
39,862
37,891
245,519
5,086,789
280,728
218,308
54,100
326,395
............
.......
.........
..
.............
4,175,058
208,277
183,741
51,881
75,497
. ...........
.............
...............
5,086,789
280,728
218,308
54,100
326,395
. ...........
. ...........
4,175,058
208,277
183,741
51,881
75,497
Total--Social and Rehabilitation Service ............
649,519
.............
649,519
5,966,321
.
..............
5,966,321
4,694,455
. ...........
4,694,455
669
382
287
6,217
6,081
135
5,453
-7
.............
13,923
906,631
105,000
.............
.............
5,461
13,923
906,631
105,000
949,850
105,000
. ...........
. ...........
949,850
105,000
Public Health Service:
Office of the Surgeon General .•••••••••••••••••••••••
Health Illanpower ...............
Disease prevention and environmental control ••••••••••
Health services:
Hospital construction activities ••••••••••••••••••••
Other •••••••••••••••••••••••••••••••••••••••••••
National Institutes of Health •••••••••••••••••••••••••
National Institute of Mental Health •••••••••••••••••••
Public enterprise funds ••••••••••••••••••••••••••••••
4> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social Security Administration:
Operating fund, Bureau of Federal Credit Unions •••••••
Payment to trust funds for health insurance for the
aged ••••..•••••••..•••••.•••••.••••..•••.•••.•••
Payment for military service credits •••••••••••••••••
..............
..............
.............
.............
.............. ............
4,904
............
. ...........
. ...........
.................
..............
... ................
................
2,436
. ...........
. ...........
. ...........
. ...........
. ...........
. ...........
. ...........
..
............
8,954
.
~
..0
-
o
TABLE 111-- BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
Health, Education, and Welfare Dept. --Cont' d.
Social Security Administration--Continued
Federal old-age and survivors ins. trust fund:
Administrative expenses .........................
Benefit payments ...............................
Vocational rehabilitation services .................
Payment to Railroad Retirement Board ............
Construction ....................................
I
Expenditures
(DisbursemEmtsJ\
N3,210
1.913.941
.
.
.
.
.
Total--Federal old-age and survivors insurance
trust fund .................................. .
Federal disability insurance trust fund:
Administrative f'xpenses ......................... .
Benefit payments ............................... .
Vocational rehabilitation services ................ .
Payment to Railroad Retirement Board ............ .
Construction •....................................
Applicable
Receipts
I
1,957,698
. .....
. .....
f-------- -
....
7,859
314,314
.....
. ....
.,
Other .............................•...............
Payments from Rallroad Retirement account:
Federal hospital insurance trust f .... d ............. .
Tot.al--N ....... h
.. """ ....... ,.......
.. ..... ,.
~_,.
__ _
!!333,029
18,885,811
.~333,029
1,957, 698L_. 21,623,331
21,623,331
19,728,146
19,728,146
111,104
2,088,413
15,393
20,410
1,263
98,405
1,860,761
6,534
30,634
216
98,405
1. 860, 761
6,534
30.634
216
.......... .
J
111,104
2,088,413
15,393
20,410
1,263
11,002
193,838
1.584
249
----
-
........... .
.......... ..
......... '"
........... .
90
508,046
1, 171
-t-
206,673
2,236,584
2,236,584
1, 996,551
1,996,551
7,859
314,314
78,672
3,736,322
78,672
3,736,322
88,940
2,507,799
88,940
2,507,799
2,596,739
2,596,739
f-'-
.--+
---+----- -
322,173
322,173
15,198
107,063
3,814,994
}--
-,,-""-
---- "-- t- -- _ . - - 3,814,994
- '--=1"-
"--
,.=.
t--'-
15,1981
107,063
142,645
1,389,622
142,645
1,389,622
134,682
664,261
134,682
664,261
122,261
122,261
1, 532,267
1,532,267
798,943
798,943
-6
-6
( )
2,623,007
30,225,023
50
194
1,125
445
17
3,039
25,750
r-- .......
Total--Federal supplementary medical insurance
trust fund .................................. . ~
Special institutions:
American Printing House for the Blind .............. .
National Technical Institute for the Deaf ............. .
Model Secondary School for the Deaf ................ .
Gallaudet College ................................. .
Howard University and Freedmen's Hospital ......... .
Office of the Secretary:
Intragovernmental funds (net) ....................... .
Other .. " ........................................ .
Receipts offset against expenditures .................. .
Interfund receipt transactions:
Payments for health insurance for the aged:
Federal hospital Insurance trust fund ............. .
Federal supplementary medical insurance trust
fund ........................................•.
Payments for military service credits:
Federal Old-age and survivors insurance trust
fund .........................................•
Federal dlsablUty insurance trust fund ............ .
Federal hospital insurance trust fund ............. .
Net
Expenditures
18,885,811
90
508,046
1,171
-
Total--Social Security Administration ......... .
Appllcable
Receipts
~'"
Total-- Federal hospital ins. trust fund ....•...... ~_
Federal supplementary medical ins. trust fund:
Administrative expenses ......................... .
Benefit payments .... '" ... '" ................... .
Const ruction ................................... .
Net
I Expenditures
Expenditures KDisbursements)
!,445.423
20,736,641
291
437,634
3,342
F
....
Applicable
Receipts
$445.423
20,736,641
291
437,634
3,342
546
Total--Federal disability ins. trust fund ........ .
Federal hospital insurance trust fund:
Administrative expenses ......................... .
Benefit payments ................................ .
Construction ................................... .
I
Net
Expenditures
Expenditures (Disbursements)
$43,210
1,913,941
546
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Classification
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES- -Continued
..... .
.. ....... ..
2,623,389
$382
..
~
50
194
2
2
-95
2,057
-95
2,057
55
1,721
769
-13,923
55
1,721
-769
-13,923
116,081
817
27,747
6,751
33
30,218,942
26,180,715
1,125
445
17
3,039
25,750
1,025
231
1,025
231
2,718
19,235
2,718
19,235
817
-1,391
'lfl ,747
-6,751
33
t5,461
26,175,254
23,360
5,247
-1,391
23.360
-5,247
-272,631
-272,631
-326,850
-326,850
-634,000
-634,000
-623,000
-623,000
-78,000
-78,000
-16,000
-11.000
-7B.000
-16.000
-11.000
-78,000
-18.000
-11.000
-16,000
-11,000
~.,'.:"'~'--"'-"+"""""'-
..
)
(
~.~---L'~:";'-' :"~::--'
-436
-:.~~-1 ~ ~~ ..:.:.:. ::.~:..:....L ___
-105
ClassUtcatton
RECEIPT-EXPENDITURE ACCOUNT--ConUnued
EXPENDITURES--Continued
This Month
EXPenditUreS'
(Disbursements)
AppUcable
ReceIpts
I
Net
CUrrent. Fiscal Year to Dat.e
Expendtt\U"es
I
Expenditures (Disbursements)
Applica.ble
Receipts
\
COnlparable Pertod Prior Fiscal Year
Net
\
Expenditures \
ExpendItures (Dlsbursem.ents)!
Appllca.ble
Receipts
Net
Expenditures
Housing and Urban Development Department:
Renewal and housing assistance:
Public enterprise funds:
College housing loan fund .•••••.•••..••••••••••..•
Urban renewal programs ••••••••••••••••••••••••
Low-rent public housing •••••••••••••••••••••••••
Housing for the elderly ••••••••••••••••••••••••••
Other ••••••••••••••••••••••.•••••••••••••••••••
Other •••••••••••••••••••••••••••••••••••••••.••••
$6,730
43,967
49,632
151
13
704
$4,107
2,081
702
889
-72
$2,623
41,886
48,930
-739
86
704
$113,639
492,561
288,350
2,349
151
36,259
$91,323
18,032
8,583
8,024
206
$22,316
474,530
279,767
-5,676
-52
36,259
$80,665
379,717
277,268
1,239
1,460
834
$85,188
-7,424
20,082
5,685
Total--r:enewal and housing assistance ••••••••••••
101,197
7,707
93,490
933,312
126,168
807,144
741,183
103,621
637,562
Metropolitan development:
Public enterprise funds:
Urban mass transportation fund ••••••••.••••.••••
Other •••••.•.•••••••.••••••••.•••••.•••••••••••
Open space land programs •••••••••••••••••••.••.••
Water and sewer facilities ........................ .
Other •••••••••..•••••.•••••••••••••••••••••••••••
985
1,434
1,096
3,574
1,888
36
1,555
948
-121
1,096
3,574
1,888
66,100
25,376
33,339
44,444
31,221
202
18,633
65,898
6,743
33,339
44,444
31,221
43,136
27,966
19,860
5,691
21,849
220
17,751
42,915
10,216
19,860
5,691
21,849
Total--Metropolitan development •••••.•••••••••••
8,976
1,591
7,385
200,481
18,836
181,645
118,502
17,971
100,531
Demonstrations and Intergovernmental Relations:
Mod el Cities Programs .•••••••••••••••••••••••••••
Other •••••••••••••••••••••••••••••••••••••••••••
Urban technology and research ••••••••••••••••••• , •••
769
4
468
769
468
4,131
2,252
3,984
4,131
2,252
3,984
732
30
3,676
4
Mortgage credit:
Federal Housing Administration:
Public enterprise funds:
Federal Housing administration fund •••••..•••••
Other •••.•••.•••••••••••••••••••.••••.•••.•.•
Other •••.•.••••••••••••••••.•••••••.•••••••••..
Federal National Mortgage Association:
Management and liquidating functions ••••••••••••••
Special assistance functions .•••••••••••••••••••••
Participation sales fund •••••••••••••••••••.•••••
Secondary market operations .................... .
20,744
-169
386
33,956
151
-13,212
-319
386
299,624
-438
2,053
483,430
1,634
-183,806
-2,072
2,053
513
2,266
8,403
31,256
_2,211
14,739
87,200
47,585
-1,521
264,249
129,218
116,655
46,642
2,725
-12,473
8,403
-15,386
Total--Mortgage credit ••••••••••••••••.•••••••
63,399
93,276
-29,877
698,751
Departmental management .......................... .
Receipts offset against expenditures .................. .
Interfund receipt transactions ....................... .
5,368
5,368
10,520
Total--Housing and Urban Development Department •••
180,181
nterior Department:
Public Land Management:
Bureau of Land Management ••••••••••••••••••••••••
Bureau of Indian Affairs:
Public enterprise funds ••.•••••••••••••••••••••••
Indian tribal funds •••••••••••••••••.••••••••••••
Other ••••••••.••••••••••••••••••••••••••••••••
Bureau of Outdoor Recreation ••••••••••••••••••••••
Office of Territories ••••••••.•••.•••••....••...•••
1,469
15,888
6,525
3,642
Total--Publ1c Land Management •••••••••••••••••.
33,644
2
-2
102,576
77,606
1,847,014
6,119
150,020
-55
1,469
15,888
6,525
3,642
10
118,285
244,049
103,144
45,703
33,589
661,212
6,119
55
55
387,141
257,186
-4,446
1,370
834
732
30
3,676
465,363
-3,588
809 ;
436,387
2,218
28,976
-5,805
809
333,904
-42,019
-69,070
-1,521
-69,655
76,680
51,370
-33,832
221,159
101,410
96,462
-44,032
244,688
-24,731
-45,092
10,200
-23,529
1,064,841
-366,090
777,961
837,133
-59,173
10,520
-43
-6,417
12,918
43
38
-13,718
12,918
-38
-13,718
1,209,887
637,127
1,641,285
958,764
682,521
150,020
156,712
-219
118,285
244,049
103,144
45,703
2
633
174,245
226,694
68,265
38,530
........... .
-631
174,245
226,694
68,265
38,530
680,983
664,450
633
663,816
-6,417
229
..
90
-$4,523
.......... .
229
156,712
.....
.....
-
~
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
Classiflcation
RECEIPT-EXPENDITURE ACCOUNT--Conhnued
EXPENDITURES - -Continued
Interior Department--Continued
Mineral Resources:
Geological Survey ................................. .
BlIreau of Mines:
public enterprise funds .......................... .
Other .......................................... .
Office of Coal Research ........................... .
Office of Oil and Gas .............................. .
Total--Mineral Resources .......................•
Fish and Wildlife and Parks:
Office of Commissioner of Fish and Wildlife ......... .
Bureau of Commercial Fisheries:
Public enterprise funds .......................... .
Other .......................................... .
Bureau of Sport Fisheries and Wildlife ........•......
National Park Service ............................. .
Total--Fish and Wildlife and Parks
Water and Power Development:
Bureau of Reclamation:
Public enterprise funds:
Continuing fund for emergency expenses,
Fort Peck project, Montana .................. .
Upper Colorado River Basin fund ............... .
Other ..•........................................
Alaska Power Administration ....•..................
Bonneville Power Administration ................... .
Southeastern Power Administration ................. .
Southwestern Power Administration ................. .
Total--Water and Power Development ............. .
This Month
Expenditures
(Disbursements)
2,884
4,511
1,024
7
14,426
•••••••••••
1,388
I
Net
Expenditures
Expenditures (Disbursements)
$6,000
$88,453
1,496
4,511
1,024
7
51,749
52,906
13,038
205,688
Applicable
Receipts
$21,911
I
Comparable Period Prior Fiscal Year
Net
Expenditures
Expenditures (Disbursements)
719
21,911
Applicable
Receipts
Net
Expenditures
$79,659
$88,453
$79,659
29,838
52,906
$28,346
719
51,539
50,964
9,989
731
23,193
50,964
9,989
731
183,777
192,884
28,346
164,538
(*)
92
•••.•••••••
92
11,862
11,862
(*)
593
7,808
10,317
10,781
20
...........
...........
...........
573
7,808
10,317
10,781
920
50,133
101,962
120,471
150
••••• •••••
..........
..........
769
50,133
101,962
120,471
429
944
42,560...... .....
90,973
...........
125,985
...........
-514
42,560
90,973
125,985
29,498
20
29,478
273,486
150
273,335
260,039
944
259,096
271
4,339
31,246
45
13,555
16
2,677
255
1,662
31,246
45
13,555
4,750
31,829
••••••••••
...... ....
..........
..........
..........
-3,240
26,133
244,462
805
163,518
602
7,647
1,322
74,562
258,233
3,749
30,204
.................
-2,426
44,359
258,233
36,580
439,927
466,858
29,551
17,149
130,190
17,149
130,190
5,193
7,405
8,962
229
-1,515,129
-39,014
4,872
6,093
6,226
-554
......................
4,872
6,093
6,226
-554
-1,154,467
-22,222
1,218,343
507,643
86
86
566
566
1,510
57,962
244,462
805
163,518
602
7,647
47,4~4
476,506
4,498
20,965
4,49B
20,965
29,551
183,986
339
499
745
-314
339
499
745
-314
--357,953
-39,014
5,193
7,405
8,962
229
...... '':j~;Oi4
-246,716
1,813,203
1,573,999
239,205
1,725,986
7,091
14,284
6,430
87,134
192,850
82,087
..........
..........
........ ,.
87,134
192,850
82,087
79,561
185,166
80,230
79,561
185,166
905
-16
-4,745...... ••••
3,126
3,182
-4,745
-55
-7,310
2,753
1,446
3,441..........
3,441
-7,310
-39
50,107
Total--Interior Department •...•.•................
115,392
Totlll--Justice Department •••••..•..•••..•.•.•..
$1,388
r-----------~r--
--39,014
Legal activities and general administration ...•......•..
Federal Bureau of InveStigation ......•.................
Immigration and Naturalization Service •....•••........
Federal Prison Systems:
Federal Prison Industries, Inc. (netl ••••••.••.••.••••
Federal Prisons commissary funds ••..•..••••••.•••.
Bureau of Narcotics and Dangerous Drugs ••••••.••••••.•
Other •••••.••••••••••••••••••••••••••••...•.........
Recelpts offset against expenditures ••....•.••.....•••••
Receipts
$6,000
Water Pollution Control:
Office of Saline Water ..................•...........
Federal Water Pollution Control Administration ...... .
Secretarial Offices:
Office of the Solicitor .............................. .
Office of the Secretary .......•.••...................
Office of Water Resources Research .........•.......
Virgin Islands Corporation .......................... .
Receipts offset against expenditures .................. .
Interfund receipt transactions ........................ .
~ustice Department:
A~plicable
Current Fiscal Year to Date
2,693
••..•...•..
357,953
362,108
7,091
14,284
6,430
905
278
.......... ···294
1,446
183,986
. i; Si5; i29
5,720
•••• .... 289
5,720
-289
73,864
..............
..........
.. 570
36.154
583
35.571
437.756
7.752
.................
536
8,116
33,952
1,154,467
-22,222
..
...... .
70.
73,864
~
-4,570..............
oUO.oot
..· .... ii4;088
124,088
536
8,116
..11....
432,905
80,230
•.. •.. 2;792
5,434
-5;04
8,:DB
401.• 1'"
Class11'lcatton
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES- -Continued
Expenditures
(Disbursements)
I
This Mont.h
Applicable
Receipts
I
Net
Expenditures
Labor Department:
Manpower ·Administration:
Public enterprise funds:
Advances to employment security administration
account, unemployment trust fund. .. ... .. ....... ...............
• .•• .•••..•. .............
Farm labor supply revolving fund. . . . . . . . . . . . . . . . .. • . .. .. ..... . . ..
• . . . . . . .. .. . '. .. .. .... .. .•
Manpower development and training activities. . . . . . . . .
$38,819............
$38,819
Office of Manpower Administrator... .... .. .. ... .... .
5,066
............
5,066
Bureau of Apprenticeship and Training.... .... .. .... .
627
............
627
Unemployment compensation for Federal employees
and ex-servicemen... .. ........ . ...... ... .. .... ..
8,145
............
8,145
Bureau of Employment Security:
Salaries, expenses and other .....................
-1,194
............
-1,194
Unemployment trust fund:
Employment security administration account:
2,775
Salaries and expenses ....................... .
2,775
Grants to States for unemployment compo and
88,026
88,026
employment service adm .................. .
Payments to general fund:
Reimbursements and recoveries ............ .
94
94
Interest on refunds of taxes ................ .
23
23
Interest on advances from general (revolving)
fund ..................... , . . . . . . . . . . . . .. ...............
............ .............
Railroad unemployment insurance account:
Benefit payments ...... , . . . . . . . . . . . . . . . . . . . . . .
3,880 ............
3,880
Interest on advances from railroad retirement
account...................................
5,880 ............
5,880
Railroad unemployment insurance adm. fund:
Administrative expenses... . . ......... . ..... . .
745 •••• ........
745
State accounts: Withdrawals by States ...........
126,707............
126,707
Federal extended compensation account ..........
-3 ............
-3
Total--Unemployment trust fund...............
other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total--Manpower Administration. .. . ... . .. . .. ... . .
Labor-Management Relations ............. , .. , . ... . .. . .
Wage and Labor Standards:
Wage and Labor Standards Administration. .. . ... ... . .
Bureau of Employees' Compensation:
Employees' compensation claims and expenses......
other...........................................
Wage and Hour Division ............................
Total--Wage and Labor Standards.................
228,126
I
Current. Fiscal Year to Dat.e
Expenditures
(Disbursements)
I
Appllcable
Receipts
COlllparable Period Prlor Flseal. Year
I
Net
\
Expenditures \
Expenditures (Disbursem.ents)
Appllca.ble
Receipts
Net
Expenditures
-83,545
42
274,829
26,887
7,914
-$3,271
. . ... . .. . • . . ..
349,245
34,276
8,202
............
. . . . .. • . .. . .
............
...... ......
... .........
-$3,271
• .. • .•. .. .. •
349,245
34,276
8,202
-$3,545
45
274,829
26,887
7,914
106,883
...... ......
106,883
79,006
4,681
............
4,681
-686
17,869
17,869
18,174
18,174
551,545
551,545
539,855
539,855
9,362
251
9,362
251
14,368
274
14,368
274
............
3,271
3,545
3,545
75,720 ............
3,271
$3
79,006
I ............. 1
-686
75,720
70,985
70,985
7,130
............
7,130
9,150
9,150
7,012
2,074,137
-42
............
............
............
7,012
2,074,137
-42
2,746,256
............
2,746,256
228,126
............
-2
. .••••••• •••
-2
-30
. .• . •. •.••• •
279,586. ...........
279,586
3,246,242
... .........
5,992
2,001,079
.............. .............
5,992
2,001,079
• ............ .
2,663,422
.............
2,663,422
-30
-887
• .••••••••. • •
-887
3,246,242
3,046,984
3
3,046,981
615
..... .......
615
8,569
............
8,569
8,264
.............
8,264
785
....... .....
785
10,114
. ...........
10,114
8,858
.............
8,858
7,900
115
1,920
.... ........
.••• ........
• ...........
7,900
115
1,920
61,804
124
23,499
............
....... .....
............
61,804
124
23,499
56,516 .............
125 .............
22,092 .............
56,516
125
22,092
10,720
............
10,720
95,540
............
95,540
87,592
.............
87,592
Bureau of Labor Statistics.. .. .. . .. .. .. .. .. . .. .. . .. . ..
829
Bureau of International Labor Affairs. .. .. .. .. . ... ... . .
264
Office of the Solicitor.. ...... ............ .. .. . .. . ... ..
466
Office of the Secretary:
Federal contract compliance and civil rights programs.
39
other.. .. .. .. .. . ... .. .. .. .. .... . .. .. .. .. .. .. .. .. ..
889
Receipts offset against expenditures .................... ' ...............
............
............
........ ....
829
264
466
20,665
1,115
5,697
............
...... ......
...... ......
20,665
1,115
5,697
20,469 .............
1,336 • ............
5,490 .. ...........
20,469
1,336
5,490
............
..... .......
-$826
39
889
826
1,115
951 .............
4,385
4,389 .............
-915... ...........
198
951
4,389
-198
-826
294,234
Total--Labor Department... .... . .. .... ... . . ... . ..
293,408
1,115 ............
4,385 ............
..............
$915
3,383,328
915
3,382,413
3,175,476
201
3,175,275
Co)
-
".
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued {In thousands}
Classification
RECEIPT-EXPENDITURE ACCOUNT--Continued
Expenditures I
(Disbursements)1
I
EXPENDITURES--Contlnued
--------------------------+
Post Office Department:
Receipts
~~5~~~~+~:439,588
Postal Fund ... ' ............... .
State Department:
Administration of foreign affairs:
Salaries and expenses .............................
Acquisition, operation and maintenance of buildings
abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ .......
Intragovernmental funds (net) ......................
Foreign service retirement and disability fund .......
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
::~lj~:~~h-!
Net
IExpenditures
1
!!96,102
EXPend~t:::nt F~::::c::;: to Da~et
(Disbursements)
!f6,793,912
Receipts
E;:n:~t:::le P::~~C::li:r IFisca~:ear
Expenditures
!f5.709.979
:1>1,083.932
- +----- -
2
~=+---
(Disbursements)
- -- - - -t--
.~6.467,613
-
Receipts
Expenditures
j
!5.326,428
!1,141,186
.
-2,811
-2,811
196,405............
196,405
184,573
184,573
.
.
.
.
8.759
-2
8,759
-2
1,121
334
17,052............
46
.. ..........
11,969............
4.499
.... ........
17,052
46
11,969
__ ~499
23,885
-746
10,582
3,849
23,885
-746
10,582
3,849
Total--Administration of foreign affairs ........... .
7,401
7,401
229,972
229,972
222,144j_ ... ~""-".J_
222,144
.
.
.
.
.
.
50
341
3,142
4,168
2,261
50
341
3,142
4,168
2,261
-331
109,341
5,500
25,065
50,731
9,401
109,341
5,500
25,065
50,739
9,401
-9,261
101,348
6,622
29,721
56,004
9,548
101 ,348
6,622
29,721
56,004
9,548
-5,659
.
-96
-72
-96
-72
-706
-466
-706
-466
-1,065
-430
International organizations and conferences:
Contributions to international organizations ..........
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International commissions ...........................
Educational exchange ................................
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reeeip1s offset against expenditures ..................
Inte !'fund reeL'ipt transact ions:
Foreign service retirement and disability fund:
Payment from Civil Servlce retirement
and disabilitv fund ... _ .........................
L55~ I
~
331
O(}Wl" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total--State Department ......... ,. ...............
I
17.195
Transportation Department:
Offiee of the Sec retary ...................... __ ...... .
Coast Guard:
Intragovernmental funds (net) ......... _ ....... _ .... .
Other .... _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Aviation Administration:
Public enterprise funds .......................... _ ..
Grants-in-aid for airports ......................... .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ ..
Federal Highway Administration:
Highway beautification ................... _ . __ ...... .
State and community highway safety programs ....... .
Highway trust fund:
Federal-aid highways .....•......................
Interest on advances ...................•.........
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ .... .
Federal Railroad Administration:
Alaska Railroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saint Lawrence Seaway Development Corporation .....•..
National Transportation Safety Board ......•.••.. , ..... .
~eceipts offset against expenditures ................... .
..nterfund receipt tI'ansactions:
Highway trust fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-15.098
Total--Transportation Department .... _ .... _ .. _ ..
583,857
Treasury Department:
Office 0( the Secretary:
Salaries and expenses .... _ ......... _ . _ . __ .... _ . _ .. .
Federal Farm Mortgage Corp_ liquidation fund . . . . . . . .
lntragovernmentai funds (net) . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . _ .. _ .. _ . _ . __ . . . . . . . . . • . . . . . . . . . . . . . . . .
.............+-
331
-7
9,261
l--. -=1~,864__l-__.__
428,839
9,254
----_._----+-
5,659
419,585
423,891
~---+
-1,065
-430
5,659
418,232
1.572
1,572
9,483
9,483
5,727
5,727
-127
59,463
-127
59,463
5,068
539.796
5,068
539,796
2,737
493,906
2,737
493,906
15
15,427
66,048
25
74,701
821,138
13
74,701
821,138
64,147
818,796
-2
64,147
818,796
3,037
3,369
3,037
3,369
40,022
19,216
40,022
19,216
23,820
2,850
23,8211
2,850
425,563
425,563
4,170,961
4,170,961
3,973,426
3,973,426
19,893
19,893
63,264
63,264
52,750
52,750
-67
2,189
-554
336
-1,444
23,913
15,524
9,917
3,641
-74
15,524
3,522
3,641
-19,903
22,968
7,253
7,194
16
15,427
66,048
1,830
2,189
338
336
2
1,897
892
1,444
............
I
4,236
~::::::
12
23,987
6,395
19,903
50,2981
5'~:~::~: I ...........
.
9
596
596
6,968
--------_.-.
1
1
29
20,629
7,099
2,339
7,253
95
20,106
-20,106
5'~:::~~: 1 .... -.......... I .......... I ............ •·
5,475,583
t
..............
11
6,968
1
1
29
47,845
5,4Z7,738
6.800
6,800
1
1
r.)
C.)
19
I
19
ClassUtcatton
RECEIPT-EXPENDITUFlE ACCOUNT--Continued
EXPENDITURES- - Continued
Treasury Department--Continued
Bureau of Accounts:
Salaries and expenses ............................. .
Claims, judgments and relief acts .................. .
Interest on uninvested funds ........................ .
Government losses in shipment ..................... .
Other ............................•................
Bureau of Customs:
Salaries and expenses ............................. .
Intragovernmental funds (net) ...................... .
Other ............................................ .
Bureau of Engraving and Printing:
Intragovernmental funds (net) ...................... .
Other ............................................ .
Bureau of the Mint:
Salaries and expenses .....................•........
Other ............................................ .
Bureau of Narcotics ................................. .
Bureau of the Public Debt ............................ .
Internal Revenue Service:
Salaries and expenses ...........•..................
Revenue accounting and processing ................. .
Compliance ..............................•........
Interest on refunds of taxes ........................ .
Payments to Puerto Rico for taxes collected ......... .
Federal tax lien revolving fund .......•..............
Office of the Comptroller of the Currency •.......... , .•.
Office of the Treasurer:
Salaries and expenses ............................. .
Check forgery insurance fund ...................... .
U. S. Secret Service ................................. .
f
This Month
EXpenditures
(Disbursements)
Applicable
Receipts
$3,273
COnlparable Period Prior Fiscal Year
Net
EXpenditures
$3,273
51,661
51,661
112
112
11
11
9
9
6,949
303
3,571
EXpenditures
(Disbursements)
Net
EXpenditures
$37,649
$37,649
9,633
58,490
58,490
EXpenditures
(Disbursements)
Applicable
Recei.pts
Net
EXpenditures
$33,625
48,562
12,753
$33,625
48,562
9,633
155
21
155
21
12,753
57
-127
6,949
303
3,571
92,585
92,585
86,845
86,845
36,751
36,751
31,416
31,416
-551
-551
1,261
6
6
800
1,261
800
1,046
1,991
1,046
1,991
1,950
1,194
1,950
1,194
5,400
5,400
16,182
12,842
5,035
57,574
16,182
12,842
5,035
57,574
20,118
13,321
6,207
51,944
20,118
13,321
6,207
51,944
1,657
13,441
36,058
8,612
5,674
1,657
13,441
36,058
8,612
5,674
20,197
178,186
497,413
120,288
66,130
20,197
178,186
497,413
120,288
66,130
18,735
171,334
471,940
120,094
59,334
18,735
171,334
471,940
120,094
59,334
-2,915
-2,079
-2,079
6,566
18,468
6,082
754
15,682
$247
1,713
9
1,960
-2,668
$6
247
590
60
1,932
56
590
4
1,932
6,566
772
18,468
771
3
(*)
57
-127
$729
6,082
24
15,682
Interest on the public debt (accrual basis):
Public issues ..................................... .
Special issues .........•...........................
1,109,915
226,885
1,109,915
226,885
12,275,237
2,309,602
12,275,237
2,309,602
11,366,963
2,024,105
11,366,963
2,024,105
Total--Interest on the public debt ................ .
1,336,801
1,336,801
14,584,839
14,584,839
13,391,068
13,391,068
Receipts offset against expenditures .......•...........
Interfund receipt transactions ........................ .
17,230
-17,230
-41,839
-710,974
395,424
-41,839
-395,424
-710,974
-748,988
Total--Treasury Department ..................... .
1,439,431
17,533
1,421,898
15,115,203
396,449
14,718,754
Atomic Energy Commission ........................... .
223,730
3,077
220,653
2,468,578
4,342
2,464,237
7,138
3,671
35,929
5,269
7,138
3,671
35,929
5,269
115,871
73,195
7,945
294,651
115,871
73,195
7,945
294,651
151,849
80,656
-1,719
299,771
151,849
80,656
-1,719
299,771
31,468
3,572
31,468
3,572
-8,442
69,749
-8,442
69,749
28,014
66,694
28,014
66,694
1,286
8,530
-18
1,286
8,530
911
18,413
12,161
-73
18,413
12,161
609
18,757
809
-192
2,471
1,862
-5,369
-192
2,471
1,862
-5,369
-429
6,107
23,037
-22,605
-429
6,107
23,037
-22,605
192
18,587
9,992
-22,568
General Services Administration:
Real property activities:
Construction, public buildings projects .............. .
Repair and improvement of public buildings .......... .
Intragovernmental funds {net} ...................... .
Other ............................................ .
Personal property activities:
Intragovernmental funds (net) ...........•...........
Other .................•..•........................
Records activities:
National Archives trust fund ....................... .
Other ............................................ .
Transportation and communications activities .......... .
Property management and disposal service:
Intragovernmental funds (net) ...................... .
Strategic and critical materials .................... .
Property m'anagpment and disposal service ............ .
Surplus real property credit sales ................•....
97
115
985
773,219
-773,219
-748,988
13,818,534
773,948
13,044,586
2,264,488
534
2,263,954
838
-229
18,757
809
192
18,587
9,992
-22,568
U'I
-'
0-
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
I
Classification
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES--Continued
Expenditures
(Disbursements)
General Services Administration--Continued
General activities:
Public enterprise funds .............................
Intragovernmental funds (net) .......................
Other ....... , .....................................
Receipts offset against expenditures ......•....•....••.
................
Total--General Services Administration
................
National Aeronautics and Space Administration
...............
Veterans Administration:
Compensation, pensions, and benefit programs .........
Public enterprise funds:
Direct loan revolving fund ...................•......
Loan guaranty revolving fund
Other ...........................................•.
Benefits, refunds and dividends:
Government life insurance fund ..........•.•.........
National service life insurance fund ....•....•..•.••••
Other ...................••..•..•.•...•.......••.•.•.
Receipts offset against expenditures:
Government life insurance fund •.....••..•.•••......•
National service life insurance fund ...•..•••.•....•••
Other ............•........•.•..•.•...••••..•.•.••.
Interfund receipt transactions:
Payments to veterans life insurance funds:
Government life insurance fund ...•...•..•....•....
National service life insurance fund ..•.•.••.••.••••
........
0
.........................
Total- - veterans Administration .........•..•..•.
Other independent agencies:
Administrative Conference of the United States •.....•...
American Battle Monuments Commission ...............
Arms Control and Disarmament Agency ............•...
Central Intelligence Agency--construction ......•.....•.
Civil Aeronautics Board:
Payments to air carriers ..........•......•.•..•..•.
Salaries and expenses .......•....•.................
Receipts offset against expenditures .................
Civil Service Commission:
Payment to civil service retirement and disability
fund ......•.....................................
Government payment for annuitants, employees
health benefits ..••.•...•.••.•..••....•...•.....•.
Civil service retirement and disability fund .•........•
Employees health benefits fund ......................
Employees life insurance fund ...•...•...............
ReUred employees health benefits fund ...............
Other ....................•...••.•.......•.•• · .. ·· .
Receipts offset against expenditures .•.•..••..•••...•
Current Fiscal Year to Date
This Month
Applicable
Receipts
............
..............
Expenditures
Net
Expenditures (Disbursements)
..............
..............
$174,664
-$2
-1,0ll)
1,946
-174,664
591,492
175,649
415,844
451,019
4,724,901
3,077
446,453
5,078,327
............
............
-$2
-1,016
1,946
$13,525
$2
1,754
157
-13,525
..............
97,643
13,639
64,004
451,303
284
446,453
............
$2
1,754
157
Net
Applicable
Receipts Expenditures
Comparable Period Prior Fiscal Year
Expenditures
(Disbursements)
. . .. .. .. .. .. ......
............
~
Net
E xpenditur es
Applicable
Receipts
. .............
517,401
-$31
1,668
1,981
-517,401
655,293
518,270
137,023
4,721,824
5,425,815
2,399
5,423,417
5,078,327
4,606,721
. ............
4,606,721
95,599
99,003
297,881
-915
6,151
-65,148
$1,668
1,981
. .............
$31
............
-2,065
-6,464
-14,029
99,056
100,041
299,297
103,752
118,794
364,322
-4,695
-18,754
-65,025
94,684
105,154
232,733
............
............
6,150
38,247
127,090
72,664
500,344
1,659,805
..............
...............
.. ...........
72,684
500,344
1,659,805
84,145
670,816
1,562,409
..............
.... ...........
............
84,145
670,816
1,562,409
...............
..................
1,026
32,821
212
-1,026
-32,821
-212
...............
...............
...............
11,542
473,687
1,901
-11,542
-473,687
-1,901
. ................
. ...................
. ..............
12,607
486,634
2,289
-12,607
-486,634
-2,289
-5
-479
............
.............
-5
-479
-77
-5,287
............
..........
-77
-5,287
-72
-5,794
.............
. ...........
-72
-5,794
658,197
97,359
560,838
7,804,188
1,073,998
6,730,190
7,350,794
994,013
6,356,781
(*)
..............
(*)
-11
2,182
10,740
41
. ....................
-11
2,180
10,739
41
............
...............
1
2,134
. ............
6,749
3,974
30,019
8,814
10,439
44,048
6,150
38,247
127,090
................
259
1,090
............
(*)
(*)
259
1,090
..•......... . .............
.............
4,056
54,999
............
737
9,074
...................
5
-5 ...............
..................... ............. .............
71,000
................
4,056
737
....................... ....................
............
193,565
55,819
58,618
. ...................
................... ...................
(" )
866
29,925
1,245
2,903
32,133
379
Total--Civ11 Service Commission •..•..•...........
283,457
91,130
Commiuton of Fine Arts ......•.................•....
CommiSSion on CivU Rights ...•.......•..•...•........
Dlstrict 0( Columbta federal payment •.......••........
Eq,ual Employment 0Wtrtunity CommiSSion ............
E1tPOrt-Import Bank
the United States ................
14
280
150
556
31,612
.......................
...................
.............
.......•.....
68,329
2
(*)
. ...... .........
~
9,508
1,432
. ................
.............82
62,322
11,536
. ..............
................
............
68
62,322
11,536
-68
...............
71,000
73,000
. ...........
73,000
36,644
1,965,119
573,354
140,137
20,841
20,211
. ..............
. ................
..............
(.)
..............
5
40,748
2,138,580
-26,089
-33,390
-1,212
38,374
-5
192,326
3,203,459
975,453
2,228,006
2,829,306
14
280
150
556
101
2,530
78,853
6,179
.. ...............
101
2,530
78,853
117
2,450
61,394
4,631
2,903
-36,717
179,282
2,133
9,508
1,432
54,999
9,074
-82
............
40,748
2,138,580
659,173
239,027
16,557
38,374
193,565
-2,798
-2,208
(*)
685,262
272,417
17,769
................
.................
.-
.............
...
( )
283,215
-1C::~1
115&,579
.. ...........
............
36,644
1
1,965,119
-18,538
-69,295
-518
20,211
-1
822,684
2,006,622
591,892
209,432
21,359
. .................
.
...............
( )
................
(.)
237,882
117
2,450
61,38&
4 M 430
-8:1, . . .
...
ClassU1catfon
RECEIPT-EXPENDITURE ACCOUNT--Contlnued
EXPENDITURES--Conttnued
Other independent agencies--Continued
Farm Credit Administration:
Revolving fund for administrative expenses •..........
Short-term credit investment fund ..•................
Banks for Cooperatives investment fund ..............
Banks for Cooperatives fund .•.•.............•......
Federal Intermediate Credit Banks fund •.............
Receipts offset against expenditures .....•..•••......
Interfund receipt transactions. • • . . . .. . ..............
Total--Farm Credit Administration
This MOIlt:h
Expenditures
(DisburseInents)
$252
Appl1cable
Receipts
$714
................ .............
1,770
...............
12,133 ...............
2,473 .............
(*)
...............
-42 .............
................
14,815
Net
Expenditures
Expenditures ( Disbursements)
-$462
. ...........
-1,770
12,133
2,473
(*)
-42
2,484
Federal Coal Mine Safety Board of Review .•.....•......
8 .............
Federal Communications Commission ..•...............
1,533
69
Federal Deposit Insurance Corporation .................
-480 .............
Federal Field Committee for Development
41 .............
Planning in Alaska .................................
Federal Home Loan Bank Board:
155,456
58,162
Federal Savings and Loan Insurance Corp. fund •......
1,200
1,346
other .............................................
1
268
Federal Maritime Commission ........•...............
( )
575
Federal Mediation and Conciliation Service .....•.......
1,087
-1,694
Federal Power Commission ...........................
8 .............
Federal Radiation Council ............................
Federal Trade Commission .•.........................
192
1,
1
(*) 1
Foreign Claims Settlement Commission ................
18~ .......... ~::
Historical and Memorial Commissions .................
Indian Claims Commission . .... ....... ...... .... ... ...
48 ••••.•.••••..
Intergovernmental agencies:
Advisory Commission on Intergovernmental Relations ..
15
H
Appalachian Regional Commission •••................
56
179
Commission on status of Puerto Rico ................
.............
.
Delaware River Basin Commission ..................
6 .............
Interstate Commission on the Potomac River Basin .... ...............
Washington Metropolitan Area Transit Authority ....... ............... .............
Interstate Commerce Commission .....................
9
1,794
National Capital Housing Authority ••••••••••••••••••••• ............... .............
35
152
National Capital Planning Commission ..•...............
3 .............
National Capital Transportation Agency ..........•......
714
(*)
National Foundation on Arts and Humanities ...•......•.
2,363
(-"1
National Labor Relations Board ....................... I
173 .............
National Mediation Board ................•...........• I
123
39,050
National Science Foundation •.........................
President's Advisory Committee on Labor-Management
,
..............
Policy ..................•............•.....•...... ...............
12,331
Railroad Retirement Board:
Payment for military service credits .................
Railroad retirement accounts:
Administrative expenses •.........................
Benefit payments, etc. . ............... ' ...........
Payment to Federal hospital ins. trust fund ........
Interest on refundS of taxes ....... , . , .............
Receipts offset against expenditures. , ...............
Interfund receipt transactions:
Railroad retirement account:
Payments for military service credits ............
Interest on advances .....•.......•.............
Payments from Federal old-age and survivors
and disability insurance trust funds. ...•••••...•
Payment to Federal hospital insurance trust fund ••
Total- -Railroad Retirement Board .............
'" ...........
................ ..............
674 . ............
125,355 . ............
............... .............
(*) .............
..
.....................
.......... ....... ...
-5,880
Receipts
. .............
-4,814
............
2
............
-34,606
13,473
Year
N~
eeeipte
Expenditure.
$3,194
-$89
200
. .............
..............
............
13,087
.............
............
2
............
..............
-48,079
-11,583
16,282
-27,865
-7,254
2,039
-1,271
-12,238
-34,972
,
.••...•..•••••
-2
-4,814 I
-4,490
-.
_13,087
2,039
-12,238
-2
-4,490
............
421
............
76
17,832
-238,859
41
225
............
225
181
. ...........
181
-97,295
146
267
575
2,781
8
1,192
186
1
48
114,714
23,178
3,578
7,336
14,576
97
15,221
198,063
27
446
387,511
17,738
9
(*)
13
-272,797
5,439
3,569
7,336
14,563
97
15,215
198,062
27
446
46,129
17,035
3,454
7,079
14,081
107
14,108
20,997
124
336
268,446
17,191
7
(*)
13
-222,317
-157
3,447
7,079
14,068
107
14,105
20,997
124
336
15
123
502
1,982
(*)
179
5
1,626
23,690
502
723
(*)
178
5
1,626
23,608
385
798
315
156
5
6
............
........ ... ..
1,784
............
117
3
713
2,363
173
38,927
. .............
872
1,871
12,608
31,863
2,014
448,293
. ...........
6
1
............
. ...........
c.. )
1,260
............
.
(- )
........... .. ..
. ...........
..............
............
. .............
1,215
.. ...........
1
17,839
17,201
674
125,355
13,302
1,387,711
44,049
13
. ...........
. ...........
. ...........
1
13,302
1,387,711
44,049
13
-1
12,546
1,257,343
16,305
3
. .............
-17,839
-7,130
-17,201
-9,150
-458,044
-43,613
936,288
-538,680
-16,200
722,165
. ...........
. ...........
-17,839
-7,130
.. .............
...........
-458,044
-43,613
936,288
. ...........
120,149
(0.. )
. ...........
385
657
290
156
5
1
. ............
.... ... ... .. ...
c.. )
142
25
................ ...............
20
(*)
3,530
17,839
. ...........
. ...........
.. .............
...........
5
. ...........
-5,880
3
760
1,871
12,603
31,842
2,014
444,763
. ..........
. .............
(*)
..
............
( )
27,006
6
1,115
2,977
9,787
30,190
1,981
413,671
. ............
111
............
. ...........
............
. ...........
27,107
44
1,245
2,977
9,787
30,197
1,981
414,886
82
..............
...............
c*)
Fla~
76
18,253
-238,859
............
..
~ueable
97
18,662
-259,174
. ...............
~
$3,106
Perlod Prlor
............
599
............
(*)
............... .............
$34
$3,217
. ...........
10,254
. ...........
(*)
... .............. .............
120,149
$3,251
200
3,000
-1,271
-34,972
Appllcable
97
19,261
-259,174
8
1,464
-480'
..
....... .... .....
COlllParab1e
Net
Expendltures B)
Expend ltures (Dlsburselllents
Current: Fiscal Year t:o Date
. ...........
1
101
39
130
7
(*)
. ...........
.. ............
...........
...............
...
...........
2
. ...........
. ...........
. ...........
. ...........
2
17,201
12,546
1,257,343
16,305
3
-2
-17,201
-9,150.
-538,680
-16,200
722,164
.......
01)
TABLE III--BUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
Class If1cation
RECEIPT-EXPENDITURE ACCOUNT--ConUnued
EXPENDITURES--Continued
Other independent agencies--Continued
Renegotiation Board ................................. .
Securities and Exchange Commission
Selective Service System ............................ .
Small Business Administration:
PubliC enterprise funds .....................•.......
Salaries and expenses .. , ....•.................•....
Other ............................................ .
Receip1s offset against expenditures ....•..•....•....
19,457
112
...............
............
..............
............
..............
-1
..............
Total--Small BUSiness Administration ............ .
19,569
7,081
12,487
Smithsonian Institution .............................. .
Subversive Activities Control Board .................. .
Tariff Commission .......•..•.......• , ..... " ....... .
Tax Court of the United States ....................•...•
Temporary Study Commissions ....................... .
Tennessee Valley Authority:
Tennessee Valley Authority fund .....•..•............
Receipts offset against expenditures ....•..••.......•
3,872
19
277
187
253
(,,;
(*)
3,872
.. " ............
32,817
7
Total--Tennessee Valley Authority .................. .
58,923
32,824
1
54
$2,519
16,680
56,031
70,001
1
81,667
4,933
120
_1
156,721
70,001
86,719
(It)
32,217
330
3,400
2,183
7,825
2,048
.
. ............
41,433
248
3,694
2,328
8,652
. ............
............
(*)
30,169
330
3,400
2,183
7,825
..............
537,268
400,491
87
136,777
-87
. ..............
468,532
366,467
62
102,065
-62
26,099
537,268
400,578
136,690
468,532
366,529
102,003
-53
791
165,576
16,362
4,648
1,064
.............
-272
165,576
16,362
4,648
-1,227
2,814
157,591
16,531
11,022
. ...........
. ...........
157,591
16,531
11,022
185,087
187,958
3,179
184,780
. ...........
3
117,858
6,028
-12
-3
151,667
4,933
120
. ................
238,275
114,404
123,871
2,306
277
187
253
43,739
248
3,694
2,328
8,652
26,106
-7
12,376
112
232,259
6,028
-12
............
--
- +---I=-- 7~--l
I
=1=---357,207
668,865
i
(-!If)
$5
2
114,401
. ...........
(*)
. .. .... . .. ...... . ..
13,265
251
264
-42
. .............
. ...........
.. ..... i;227
13,684
187,378
2,290
206 I
1=
206
~ll
tl"il.
---,---
2,929
658
1 -,---,--- 1 -'---'--'1
tl ?1'1 11111
') ?Il, ,,,,,
2,271
-665
20
1,952
3,375,909
-452
-425
-370,000
-45,000
-60,000
-40,000
-6,000
-7,000
-397,000
-48,000
-65,000
............
...................
-397,000
-48,000
-65,000
-354
-354
-4,433
..................
-4,433
-116,292
-116,292
-1,389,281
............
-1,389,281
-1,263,532
-20
...............
-20
-20
-1,904,185
-1,743,160
. . . . . . . . w .....
300
1,806,443
.. ............
•
2,514
1,972
-452
-1,904,185
("l
5,182,353
-38
-169,684
............
665
................... .....................
-38
.............. w
............
461
-,---,
A 1l11l
..
-40,000
-6,000
-7,000
-169,684
Net
Expenditures
............
$1
5
(*)
42
97
Applicable
Receipts
E xpendi tures
(Disbursements)
$2,519
16,681
58,036
$2,640
17,642
56,764
.............
251
Net
Expenditures
$2,640
17,637
56,762
$196
1,303
4,683
19
264
Water Resources Council ......................•..•...
Subtotal •.•••••••••••••••.••••.••.• _ •••••• _ •.
$7,081
13,265
Total-- U. S. Information Agency ....•.............•
US distributed inter fund receipt transactions:
Federal employer contributions to retirement funds:
The Judiciary:
Judicial survivors annuity fund ..•..•.••.•.•..••.•.
Health, Education, and Welfare:
Federal old-age and survivors insurance trust fund •.
Federal disability insurance trust fund ...•••..••...
Federal hospUal insurance trust fund •.••••......•..
State Department:
Foreign service retirement and disability fund .••..•
Other Independent agencies:
Civil Serv1ce Commission:
ClvU service retirement and disability fund ••.•...
Tax Court of the United States:
Tax court judges survivors annuity fund •.•...•...
(,,;
(,,)
58,923
United States Information Agency:
Informational media guarantee fund .................•
Salaries and expenses ..... " •.•...••..•.. " .•..•...
Construction of radio facilities ..................... .
Other ........................... '" .............. .
Receipts offset against expenditures .•......••••.••••
Total--Other independent agencies ..•.•..•.••..• , .•
("l
3196
1,303
4,683
Applicable
Receipts
Expenditures
Net
Expenditures (Disbursements)
Applicable
Receipts
Expenditures
(Disbursements)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
•
••••••• w •••
..............
-425
. ...........
. .............
-4,183 . ...........
-370,000
-45,000
-60,000
. ...........
. ...........
. ............
-1,263,532
-4,183
-20
-1,743,160
Thls Month
Class1.t'1catJon
RECEIPT-EXPENDITURE ACCOUNT--Continued
EXPENDITURES--Contlnued
Undistriouted interfund receipt transactions-Continued
Interest credited to certain Government accounts:
The Judiciary:
Judicial survivors annuity fund •• " ••••••••••••••••
Defense Department:
Civil:
Soldiers' Home Permanent Fund •••••••••.••••••
Health, Education, and Welfare Department:
Federal old-age and survivors insurance trust fund ••
Federal disability insurance trust fund •••••••••••••
Federal hospital insurance trust fund ••••••••••••••
Federal supplementary medical insurance trust fund.
Interior Department:
Indian Tribal Funds ••••••••••••••••••••••••••••••
Labor Department:
Unemployment trust fund •.•••••••••••••••••••••••
State Department:
Foreign service retirement and disability fund ••••••
Transportation Department:
Highway trust fund •••••.••.•••.••••••••••••••••••
Veterans Administration:
Government life insurance fund ••••••••••••••••••••
National service life insurance fund ••••••••••••••••
Civil Service Commission:
Civil service retirement and disability fund •••••••••
Railroad Retirement Board:
Railroad retirement accounts •••••••••••••••••••••
Other ••••••••••••••••••••••••••••••••••••••••••••
Expenditures
(Disbursements)
Applicable
«ecefpts
CUrrent Fiscal Year to
Net
Expenditures
.ua:~e
",",Us:nplIILrlLl.M.a ,r-a.l.-..L,--
Receipts
(Dis burseDlents)
-$143
e. • • • • • • • e..
-$143
-$129
...........
-3,195
-3,214
............
-724,563
-66,192
-45,888
-15,041
(Disbursements) ,
Expendltu.res
-$4
....•......•
-$4
•...........•.
.............
.............
............
.............
..........•
-3,195
-338,484
-29,654
-23,104
-7,242
-900,116
-84,498
-59,973
-20,103
..........
-900,116
-84,498
-59,973
-20,103
.....•.•....
•.....•...•.
-563
-6,773
...........
-6,773
-9,150
-162,408
-441,955
• • • • e. • • • • •
-441,955
-382,898
-1,674
-1,665
-338,484
-29,854
-23,104
-7,242
-563
-162,408
...............
..11' ........
• .. e. • • • • • • •
...........
...•.•....
~..L.&"".I.
Applicable
Receipts
............
...•.......
..............
............
..e. . . . . . . . . .
. ..........
.•.•..•...•
...•..•.•..
...........
.•..•..•...
r
.u:.~
.... . . .
Net
Expenditur....
-$129
-3,214
-724,563
-66,192
-45,888
-15,041
-9,150
-382,898
-1,457
.............
-1,§7
-1,674
-10,303
.•..........
-10,303
-33,503
-14,225
..............
-31,266
-194,427
-36,545
-213,544
......•.•.
..........
-33,503
-31,266
-194,427
-36,545
-213,544
-30,398
-200,485
-586,391
-709,455
..•.....•.
-709,455
-625,165
...
-178,705
-2 022
-162,808
-2 941
-2,692 202
-2 284 761
.•.•.....•.
-2.284 761
-4,596,388
-4,027,92D
...........
-4,027 92D
172 955 705
172 442 136
$19,258,250
153 183 886
-586,391
.............
.............
-123,183
-159
...•.•...•.•
•.•.•..••...
-123,183
-159
-178,705
-2022
..............
-1,508,844
-2,692,202
Total--Undistributed interfund receipt transactions
-1 508 844
-1,678,528
.............
-1,678,528
-4,596,388
Total expenditures (eXCluding net lending)•••••••••
16,578,139
$2,092,375
14,485,764
Subtotal •••••••••••••••••••.••••••••••••••••••
Applicable
Net
Expenditures
Expendi'tures
4,989,884
Receipt-expenditure account surplus (+) or deficit (-)
0 ..........
.•..•...••
......... .-
194,108,115 $21 152 409
-19,470,638
• . . . . . . + .• + • •
.. ...........
......•.•.•
.......•.•.
-1,665
-14,225
-30,398
-200,485
-625,165
-162,808
-2 941
-3,629,071
MEMORANDUM
Receipts offset against expenditures
Current
Fiscal Year
to Date
Comparable Period
Prior Fiscal Year
Proprietary receipts ......••.•.•......•................
Interfund receipt transactions .................••......••
4,539,134
6,937,395
4,748,268
6,484,381
Total receipts offset against expenditures ..•.......•.•...
11,476,529
11,232,649
-0
to.)
o
TABLE III-wBUDGET RECEIPTS, EXPENDITURES AND LENDING--Continued (In thousands)
I
---
Current Fiscal Year to Date
This Month
Classification
LOAN ACCOUNT
Funds appropriated
Economic opportu
Defense produdiu
Total--Funds a
Agriculture Departm
Commodity Credi
Storage facility
Farmers Home A
Agriculture ere
Direct loans ..
Emergency cre
Rural housing d
Rural housing i
State rural reha
Rural Electrificat
Loan
Disbursements
ent:
.......•... 0.· ..........
....
0
••••••••••••••••••••
) the President ..........
~~
Loan
Repayments
Net
Lending
............
~1,004
$447
5
11557
-5
1,004
452
552
Comparable Period Prior Fiscal Year
Net
Lending
Loan
Disbursements
Loan
Repayments
$17,377
-1,682
$31,892
...............
17,502
3,338
!24,389
-3,338
11,943
15,695
31,892
10,841
21,051
192,590 I
114,979
77,611
534,578
272,651
261,927
382,245
293,670
91,779
45,316
415,84{)
1,492
204,540
-45,448
86,870
15,528
-31,810
1,964
-1,026
290,460
382,009
339,24{)
92,510
15,680
396,934
4,774
411,995
399,837
296,003
88,621
45,081
354,646
4,290
180,249
-17,828
43,238
3,889
-29,4{)1
42,288
484
231,746
Loan
Disbursements
Loan
Repayments
.................
$27,638
:1110,261
1,682
27,638
Net
Lending
.>.
I
I
:
6.343
5,745
598
'If/,781
16,336
11,479
1,190
41,917
222
30,609
12,900
12,783
2,214
6,637
51,518
136
30,010
14,881
3,553
9,265
-5,447
-9,601
87
600
336,797
380,540
107,307
13,507
417,804
466
495,000
135,878
121,942
13,936
1,944,010
1,549,861
394,148
2,177,7ro
1,641,379
536,341
2,918
625
2,294
59,380
6,720
52,660
33,234
3,859
29,375
ince ....................
....................... .
..............
. .............
15
1,350
-15
-1,350
..................
. ......... ..........
1,467
7,569
-1,467
-7,569
...............
492
1,579
7,398
-1,087
-7,398
Total--Comm
lent ....................
2,918
1,990
928
59,380
15,756
43,624
33,726
12,836
2JJ 890
Defense Department
Military:
Defense product
Civil:
Construction of
's ..•...................
665
524
141
8,4'lf/
14,158
-5,732
28,070
27,759
311
Ryukyu Islands .......
-482
-2,522
2,041
430
...............
430
205
..............
205
... ...................
184
-1,999
2,182
8,857
14,158
-5,302
28,275
27,759
516
IS,I71
281
17,890
105,025
2,365
..............
............
.......... ".
10 .............
110
11,194
-58
1,085
..............52 . ...........
. .............
................
91
336
...............
2,242
..............
................
230
3,224
2,968
63
186
. ............
Total--Agricult
Commerce Departm
Economic Develop
Economic devel
Maritime Adminis
Federal ship mo
Other.
>
rm export sales credits ...
:
•••
Health, Education, a
Office of Education
Higher education
Student loans ..
Other ......... .
Public Health Serv
Other .......•....
Total--Health
iIluslng and Urban D
Renewal and housi
College housing
Housing for the
Low-rent public
Other ........ .
MetropoUtan devel
Urban mass tra
Public facUity I
Liquidating prog
Federal HOUSing A
Mode rnlsation , I
Community dlspo
•••
,
'.
_
••••••••••••••
..................
•••••••
,
••••••••••••
0
•••
........................
•••••
0
•••••
••••••••
0
0.·
••••••••••
•••••••••••••••
·ation ...................
mt .....
>
•••••••••••••••
stration:
.......................
••••••
Total--Defens
0
.....
lS,
t
00
~
~
-.
'epartment:
................... , ....
· ..................... ...
, ........................
.........................
85
251
3,976
355
102,660
10
10,109
-91
3,621
18,559
477
18,082
120,204
3,895
116,309
87 687
3 447
84240
.....................
........................
· ...... ...... .............
74,959
4,S29
21,615
27,511
1,243
72
12,033
42,529
73,716
4,757
9,582
-15,018
318,981
82,108
181,254
282,055
40,641
796
170,964
303,90'/
278,34{)
81,312
10,291
-21,852
390,847
78,063
154,077
606,698
382,064
77,487
10,515
...........................
..........................
200
4,645
-200
..........................
.................
3,833
.....................
28,783
576
143,562
543,128
..............
2,823
200
493
InII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,641
231
-2100
55,914
-493
!lee, 1M
17,_
~
'
•••••••••••••
0
•••••
0
•••
and Welfare Department..
82,222
81,992
-726
-63
3,038
)epartment:
'"
•
.....................
~
0
o.
~
n:
and mortgage insurance ..
>
~
100
776
18
42.918
43
-100
3,058
-18
-3,717
188
....................
50,065
....................
590,873
1,00'7
344
45,421
-344
.................
520,<408
70.465
-52
5'76,762
1.06&
58,737
4,17'7
",.,
63,570
a,eoo
Classification
LOAN ACCOUNT--Continued
This Month
Loan
Disbursements
Housing and Urban Development Department--Continued
Federal National Mortgage Association:
Management and liquidating functions ...............
Special assistance functions ........................
Secondary market functions ........................
Loan
RepaYInents
CUrrent J:.O"'1SCBJ. I ear- 'Co" ,1...n"I01..-=
Net
LendIng
Loan
DlsburseInents
Loan
RepaYInents
Loan
Net
Lending
Dlsbursell1ents
Loan
Repayments
\
Net
Lending
$37,707
55,516
161,999
$14,564
6,613
26,492
$23,143
48,903
135,507
$500,018
634,667
2,216,899
$136,001
63,326
278,202
$364,017
571,341
1,938,697
$521,042
177,974
1 066 911
1198,155
63,530
236 256
8422,887
114,444
830 655
Total--Housing and Urban Development Department. "
427,840
147,400
280,439
4,857,927
1,520,492
3,337,435
3 635 287
1,677 236
1 958 051
Interior Department:
Bureau of Reclamation ............•..................
Other ..............................•...............
534
1,203
64
-252
470
1,455
14,685
9,328
1,253
3,432
13,432
5,896
16,705
8 324
854
2 999
15,852
5 326
Total--Interior Department. ........................
1,736
-188
1,925
24,013
4,685
19,327
25,030
3 852
21 177
5,369
5
1,311
-5
4,058
. ................
22,605
70
21,908
-70
697
155
20,995
557
26,817
-402
-5 822
Veterans Administration:
Direct loan program .....................•...........
Loan guaranty program ..............................
National service life insurance ..................... , ..
Other ..............................................
13,323
19,629
9,933
702
7,524
3,099
4,895
1,047
5,799
16,531
5,038
-346
147,678
242,280
115,626
15,429
95,622
35,480
70,035
13,522
52,055
206,800
45,590
19rYl
141,673
302,282
129,462
16 603
88,494
84,566
71,379
13 943
53,179
217,717
Total--Veterans Administration ....................
43,588
16,566
27,022
521,012
214,659
306,353
590,020
258 381
331 639
Other independent agencies:
District of Columbia .................................
Export-Import Bank of the United States ............ ' ..
47,350
238,926
120,753
47,350
118,173
60,231
1,632,908
38,789
739,203
21,442
893 705
55,207
1 154 753
35,596
636 452
5~~:~~g
Farm Credit Administration:
Banks for Cooperatives ............................
Federal Intermediate Credit Banks ..................
115,549
449,019
143,117
344,394
-27,568
104,626
1,796,152
7,317,377
1,637,118
6,922,012
159,034
395,365
1, 686, rYl9
6,634,531
1,495,119
6,155,695
190,960
478,836
Total--Farm Credit Administration ...............
564,569
487,510
77,058
9,113,528
8,559,130
554,398
8,320,611
7,650,815
669,796
16,318
7,608
-570
-201
164,220
65,380
17,368
26
297,506
380
332
566
229 309
65,000
17,036
-540
68 197
Treasury Department .........•............•...........
General Services Administration ........................
................
••
~
•••
0-
•
0-
0-
••
~
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation .....
Interstate Commerce CommiSSion .....................
National Capital Planning Commission •................
Small Business Administration •......................
...............
...............
Subtotal ........................................
1,522,638
Purchase and Sale of Federal Home Loan Bank and
Federal Land Bank Securities (See detail as
memorandum information at end of TABLE IV-Sch. A) .•..
547,367
Total--Loan Account ................•...........
2,070,005
TOTAL BUDGET
13,318
21,401
.
6,922
3
6,395
-3
...............
17,550
3,852
407,618
8,710
570
201
243,398
920,695
601,943
18,816,247
12,947,428
5,868,819
16,541,637
12,216,555
4,325,082
165,303
382,064
1,205,538
1,138,165
67,373
1,256,95U
403,973
852,977
1,085,998
984,007
20,021,785
14,085,593
5,936,191
17,798,587
12,620,528
5,178,059
............ . .......... . ...............
J
.-
58,~~
26
(Net totals)
(Net totals)
(Net totals)
Receipts (+) (Receipt-expenditure account) ............•..
+19,475,649
+153,485,067
+149,554,815
Expenditures (-) (Receipt-expenditure account) ..•.....•..
-14,485,764
-172,955,705
-153,183,886
Net Lending (+) or (-) (Loan account) ....................
-984,OrYl
-5,936,191
-5,178,059
Total expenditures and net lending (-) .•..•........
-15,469,771
178,891,897
-158,361,945
Budget surplus (+) or deficit (-) .........................
+4,005,877
-25,406,830
-8,807,130
t.)
......
22
TABLE IV--MEANS OF FINANCING (In thousands)
Net Transacttons
[( -) denotes net reduction of either
liability or asset accounts 1
Fiscal Year to Date
This Month
This Year
Prior Year
Classification
(Assets and Liabilities
Directly Related to the Budget)
Account BalllOces
Current Fiscal Year
Beginning of
This Year
TIUs Month
ClQ(
'l\Ia
LIABILITY ACCOUNTS
Borrowing from the public:
Federal secllrities:
Public debt securities ..............................
-
-$4,715,683
$21,357,469
$6,313,850
$326, 2aJ, 938
$352,294,000
tHI
.19,624
.84,200
-73,035
r 2,035,591
rl,9'lO,935
I
.231
56,404
50,667
492,024
548,e69
.70,000
239,170
3,070,000
1,808,103
2,720,000
809,724
4,830,(0)
4,079,103
7, 970,!XXl
5,648,036
.............
... ..............
·121
.106
3,207
3,087
.11
-4
120
109
183,555
500,000
387,465
19,452
..............
778,610
'''i;i63;tiis
1,683,068
a
-68,118
111,760
172,452
408,820
190,778
469,750
1,071,628
3,362,575
1,312,198
3,659,635
1
3
.............
(*)
5,433
-3
107,800
Total agency securities .....................
901,512
Total Federal securities ....................
-3,814,171
Deduct:
Federal securities held as investments of
Government accounts (See Schedule A) ........•...
Non -interest bearing public debt securities
held by IMF and international lending institutions ..
Total borrowing [rom the public ...........
Agency seclIrities :
Defense Department:
Family housing mortgages ......... , " ........ ,.
HOUSing and Urban Development Department:
Federal Housing Administration •................
Federal National Mortgage AssociatiOn:
Participation sales fund:
Participation certificates ...................
Secondary market operations ..................
Trans portation Department:
Coast Guard:
Family housing mortgages ....................
Treasury Department:
Federal Farm Mortgage Corp. liquidation fund
Other independent agencies:
Export-Import Bank of the United States:
Agency securities ..................•.•.. " ...
Participation certificates ....••.••..•..•....•.
Farm Credit Administration:
Banks for Cooperatives fund ..................
Federal Intermediate Credit Banks fund ........
Federal Home Loan Bank Board:
Federal Home Loan Bank Board revolving fund ..
Home Owners' Loan Corporation fund ..........
Tennessee Valley Authority......................
.............. ............
~,910
I
I
I
-14
132,200
263
417 200
5,433
260
5OO!XXl
5,951,514
5,078,569
r 18,455,327
r23 505 329
1&
27,308,983
11,392,419
"344,676,264
r375 ,799,418
m
359,658
5,338,260
9,026,209
73,861,833
78,840,435
'IS
-405,000
.1,119,000
-481,500
3,328,(0)
2, 614, !XXl
I
-3,768,829
23,089,723
2,847,711
r267,486,432
r 294,344,984
Accrued interest payable on public debt securities .........
.839,352
352,138
.10,754
1,439,740
2,831,230
••
Deposit funds ..........................................
27,272
227,677
1,613,437
r 3,396,669
r 3,597,074
Miscellaneous liability accounts .........................
1,290,451
2,044,051
·1 G88 546
3 190 039
Total liability accounts ...................
.3,290,459
25,713,589
2,761,848 r 275,512,880
3.943.63ll
r 304,516,928
25,000 i
1,
"
J.
Ill,
ASSET ACCOUNTS (Deduct)
Cash and monetary assets:
Within general account of Treasurer, U. S•.............
With other Government officers ........................
With International Monetary Fund ...................... _
Total cash and monetary assets ...........
Miscellaneous asset accounts ...........................
187,922 \
177,043
405,000
.1,064,932
945,437
538,000
-4,648,383
-175,049
-342 000
7,758,995
1,677,962
427 750
6,506,140
2,446,357
560 750
e,
769 , 965 !
418,505
·5,165,432
9,864,707
9,513,246
10,
-39,615
243,000
-77,742
1,066,946
1,349,561
h
10 931 653
10,862,008
Ih,
+8,005,022 ,r+264,581,228
r+293,654, lID
+281,
............
339,814
+8,807,130 r+264,581,228
r +293, 993,935
Total asset accounts ........ .............
730,350
661 505
...... .............
-4,020,809
+25,052,084
S~irr~f::~~ ~~f\~i1f~i.e.d. :~ .c.u.r.r.e.n~. ~~~~' .s............
14,931
354,746
Total budget finanCing [Financing of deficit (+J or
disposition of surplus (-) 1 ............................
-4,005,877
+25,406,830
Excess of Liabilities (+) or Assets (-)
Add:
See footnotes on page 3.
·5 243 174
802,108
I,
S,
TABLE IV-SCHEDULE A--INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES (In thous(mds)
~
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
This Month
This Year
23
Beginning of
Prior Year
This Year
This Month
Close of
This Month
dleiary:
survivors annUl·t y ( un d ...••.•.•.•••.••.........
$156
$549
$472
.£3,583
$3,976
$4,132
,lture Depart~~nt:
ic debt sec.untles ., ....•............•.............
ICY securities •......•............•.•..............
............
.............
-200
-6,000
168
-5,593
373
87,925
173
81,925
173
81,925
erce Department ....•..................•..........
12,378
9,282
-8,718
49,043
46,547
58,924
............ .............
110
482
482
482
~iat
Ie Department
......................................
Education, and Welfare Department:
'ral old-age and. ~urvivors ins. trust fund:
lie debt securities ....•....•.....................
. ney securities ........•....•.............•.....•.
icipation certificates .•..................•.......
ral disability insurance trust fund:
blie debt securities .....................•....•....
gency se~urities. : .•............................•..
rlicipahon certificates .......•....................
rat hospital insurance trust fund:
lie debt securities ....•..........................
ey securities ......•............................
icipatlon certificates ......•.....................
rat supplementary medical ins. trust fund ..........
r ........ ·· ...•..................................
I
and Urban Development Department:
ropolitan Development:
ency securities ...................................
ral Housing Administration:
eral Housing Administration Fund:
Public debt securities .............................
Agency securities .................................
participation certificates ••••••••••.•••.•••••.••••.•
>ther:
Public debt securities •••.•••••••••• _ •••••••••.•••••
Agency securities •..•..••....•.......•.......•....
'deral National Mortgage Association:
Iecondary market operations:
Public debt securities •..•......•...........•......
Agency securities •...•.••...•..••.•......•........
PIrtlcipation sales fund:
Public debt securities
Agency securities .... : : : : : : : : : : : : : : : : : : : : : : : : : : : : :
Mana gement and liquidating functions fund:
Public debt securities ..•................•.........
gency securities .................................
clal assistance functions fund:
geney securities •...............•.....•........•.
e Housing Programs ...•....•.•........•.•..•.....
-219,447
1,380,784
-7,000
210,000
3,437,083
103,500
200,000
21,362,481
103,500
200,000
22,902,712
90,500
410,000
22,743,265
9\3,500
410,000
107,234
•••• 0 ........
............
515,855
10,000
65,000
225,878
20,000
50,000
1,690,578
20,000
50,000
2,099,199
30,000
115,000
2,206,433
30,000
115,000
............ ................ ........
............
20,000
-41,551
-197,436
............ .............
-2,015
67,117
405,889
41,500
50,000
478,849
-10
1,191,647
41,500
50,000
478,849
139
1,260,779
41,500
70,000
322,964
139
1,258,764
41,500
70,000
281,413
139
............ .............
-2,593
.............
..............
~
13,012
-54
60
138,162
-2,069
60
56,666
-11,955
............ ............... .............
551,209
85,498
676,359
83,483
............. ............ .............
36 ............. ............ .............
36
............ ............. .............
388
388
689,371
83,428
60
36
388
............. ............. ............ ............. .............
............ .............
-1 ............ .............. .............
•
0
••••••••••
-32,635
-480
437,531
48,460
84,762
-22,795
86,465
50,715
556,631
99,655
523,996
99,175
............ ............. ............. ............ ............. .............
-174
-1,955
-1,943
61,429
59,647
59,473
-451
-7,000
-5,019
-10,000
-6,736
-8,000
126,891
13,000
122,324
10,000
121,873
3,000
14,506
17,382
-26,113
7,713
10,590
25,095
............
............
~2,178
-90
1,022,525
-57,000
180,000
-115
777,024
203,500
175,000
-109
10,038,634
203,500
175,000
224
11,063,337
146,500
355,000
199
11,061,159
146,500
355,000
109
..........
1,287
-285
557
42,145
40,573
41,860
rtation Department:
ay trust fund ...... ..............................
-44,647
256,614
483,947
721,710
1,022,971
978,324
-60,513
-25,000
-12,500
-540,814
-25,000
-23,000
648,070
50,000
25,000
1,300,ll90
50,000
25,000
820,390
50,000
14,500
759,876
25,000
2,000
............
-139
-86
1,807
1,607
1,667
5,870
8,022
34,546
24,704
33,781
19,764
52,553
189,382
81,229
206,064
87,099
214,086
'lor Department .....................................
II Department:
ployment trust fund:
lie debt securities •...•••..•.....•...............
ney securities ..•...•..•.................•.......
leipation certificates .••.••••.•..•......•..•.....
E
~..................
•••••••••••
••
a
••••••••••••••••
IDepartment:
lI'elgn service retirement and disability fund
lIorY Department:
lillie debt securities
lene
l;~:i~~~~li;~~t:e:s: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :
Irtie
!rat Services Administration
••
a
••••••••••••••••••••••
inns Administration:
!terans reopened insurance fund ••.•.........•........
!terans special term insura
.
nce f un d ••.•...............
Overl'nm ent lif e msurance
fund:
Pub IC debt securities
....•........•.................
Agency securities
alionaI serVice life 'i~~~~~~'c~' i~~ci:'
Pubt
....................
securities " ....•..•.....................
Agen~ydebt
securities
PartiCipation certrl;~~t'e's' : : : : : : : : : : : : : : : : : : : : : : : : : : : :
ther.
................. ..............................
876,400
-123,643
62,373
26,272
............ ............. .............. ............ ................
814,027
850,128
. .............
5,744,307
109,500
150,000
1,070
5,673,206
G7,500
305,000
1,370
5,855,749
67,500
305,000
1,070
182,543
............
............
-300
111,442
-42,000
155,000
.............
-368,423
109,500
150,000
137
24
TABLE IV-SCHEDULE A--INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES--Continued (In thousands)
Securities Held as lnV\!s~
Current Fiscal Yev
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
This Month
This Year
Other independent agencies:
Civil Service Commission:
Civil service retirement and disability fund:
Public debt securities ........................... .
Agency securities ............................... .
Participation certificates ........................ .
Employees health benefits fund ..................... .
Employees life insurance fund ...................... .
Retired employees health benefits fund .............. .
Export-Import Bank of the United States ... " .......... .
Farm Credit Administration:
Banks for cooperatives:
Public debt securities ..•.•.....•....••............
Agency securities ..•..••.........•...............
Federal intermediate credit banks:
Public debt securities .....•..•.......•...........•
Agency securities •.•..........•.....•............
Federal Deposit Insurance Corporation ................ .
Federal Home Loan Bank Board:
Public debt securities ............................. .
Agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . .. ,
Participation certificates .......................... .
Railroad Retirement Board:
Public debt securities ............................. .
Agency securities ................................. .
Participation certificates .......................... .
Other .......................•.......................
Total. ....................................... .
Prior Year
Beginning of
This Year
This Month
I
5343,150
........1,084
, ....
$596,735
-7,000
210,000
24,758
45,753
2,382
-81,500
-9,295
-40,200
3,239
4,850
-14,469
17,453
731
7,462
24,853
258,232
108,740
2,600
27,524
I
359,658
I
$701,009 ;
103,500
200,000
17,952
54,981
304
81,500
-1,450
1,650
$17,304,071
103,500
200,000
75,078
449,395
1,438
81,500
46,042
I
$17,557,656 !
I
I
............ I ......
2,650
58,576
47,700
238,192
109,297
1, ax!
3,582,400
131,227
9,Dl
3,839,901
171,976
4,000
88,600
211,567
1,728,268
1,791,504
4,00)
86,00)
~5,469
61,644
10,000
160,000
50,000
21
4,131,216
61,500
50,000
124
4,068,22:1
51,500
9,026,209
73,861,833
78,840,435
5,338,260
............
-600
117,
96,500
410,00)
99,836
494,064
3,8a) i
I
3,t
l,t
71,500
210,001
124
'Il,'
MEMORANDUM
Investments in Federal Home Loan Bank and Federal
Land Bank Securities, Included in Loan Account:
Banks for cooperatives.......... .............•.......
2,057
3,257
2,550
1,500
2, 'lOO
Civil service retirement and disabil\ty fund. . . . . . . . . . . . .
308,500
400,600
114,000
114,000
286,100
Federal intermediate credit banks......................
1,000
8,978 .............
3,250
11,228 i
Federal old-age and survivors ins. trust fund ...... , '" . .......... •••
-114,000
114,000
114,000
Federal hospital insurance trust fund...... ... . . ..... . . . .............
-15,000
15,000
15,000
Federal disability insurance trust fund...... .. .... ... .. • .......... "
-74,000
74,000
74,000
Participation sales fund...............................
20,507
113,788
146,177
179,172
Railroad retirement account ................... ,. .... ..
50,000
-64,000
114,000
114,000
I
Unemployment trust fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • ............
-114,000
114,000
114,000
Veterans life insurance funds ......................... f--.._._._
.._._
.._._._
..--r___
-1_5_8,:....250_+-_ _1_58,.:.,_25_0-t+___1_5_8,:....250_+-._._
.._._
.._._
.._.._+_.._._
...;.;..
.. ..
.......•
I
Total ...................................... .
382,064
67,373
851,977
887,172
572,481
•
For sale by the Superintendent of Documents U. S. Government Printlng OUice, Washington, D. C. 20402
Subscription price $6.00 per year (domestic), $11.00 per year ;;;Jditional (foreign mailing), includes all issues of daily Treasury statementl and
the Monthly Statement of Receipts and Expenditures of the U.S. Government. No single copies are sold.
GPO
TREASURY DEPARTMENT
DR 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
2,700,OOO,OOO,or thereabouts, tor cash and in exchange for
~rea8ury bIlls maturing August 8,1968,
in the amount of
2,601,196,000, as follows:
~or
91-day bIlls (to maturity date) to be issued
In the amount of $1,600,000,000, or thereabouts,
Iddltlonal amount of bills dated May 9, 1968,
I8ture November 7,1968 originally issued in the
,1,101,578,000,the additional and original bills
~nterchangeable •
August 8, 1968,
representing an
and to
amount'of
to be freely
182-day bills, for $1,100,000,000, or thereabouts, to be dated
and to mature February 6, 1969.
llgust 8, 1968,
The bills of both series will be issued on a discount basis under
ompetltive and noncompetitive bIdding as hereinafter provided, and at
laturlty their face amount will be payable without interest. They
r111 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
maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
~p to the clOSing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, August 5, 1968
Tenders will not be
received at the Treasury Del>artrnent, 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,
ifith 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
fONamed in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
0
Banking institutions generally may submit tenders for account of
~ustomers 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 muat be accompanied by payment of 2 percent of the face
amount of Treasul')' bills applied for, unless the tenders are
accOmpan1ed by an express guaranty of payment by an 1ncorporated bank
or trust company.
F-1315
- 2 ItIlDediately after the closing hour, tenders will be opened at
Federal Reserve Banks and Branches, following which public announce
ment 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 Treaa
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 f~
each issue for $200,000 or less without stated price from any ooe
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 ~
made or completed at the Federal Reserve Bank OD August 8, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 8,1968.
Cash and exchange ten
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 excluder
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 the
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
any Federal Reserve Bank or Branch.
000
TREASUTIY ANNCUJ'rCES AUGllS'.r
FJ]I!'l~CING
The Tr(!asury 'Hill b01TOi'i :p5.1 billion, or thcreo.bouts, from the: }?lhJ5c
through the issu,-:nce ,of 6-year 5-5/81) Trc2.s\.1.:··Y notes of Series B.. 197~" at. gCJ .[,2
to yield about 5. 70p for the pur'pose of lX:lJ.:.(J.:; erf in cash 'l'reG,El.1J.7 SCCl).:riti~.CS
maturing August 15, 1968, and borrm'ling n(;.\; eash. In c-dd:L'vion to the 8ffioun-c
offered to the :;;mblic an addi tio:i:',l n.m.o'JJlt i-lill be <J] luttc 3. tCi G'Jven1rnent
Investment Accounts arc1 Federal Reserve Banl:s. The P ill)Ul1t of the maturinG
issues is $-3.6 biJlion of i'lhjch ~;3.G billion is hclcl by tlj(~ p1..l,rJ: ,ic.
'
T
The maturing secUl'j ..ties aX'e:
$5,935 mil1jon of 4~1/ ~~; 'rre8.Su.ry Hot(;s of Series C··19G8:; <lah:d He,y
15, 1867; and
$2,640 million of 3-3/4..%
TI':;8SU1"Y P,o}lcl.S
The nm., potes 'viLl be dated
1974.
Au~ur.t
of 1968, elated AF':'iJ 18, 1~G2.
15, 19GB, and Hill mature
l!U:?;I}.i31:;
1.:;,
IntE:l'eS1) 'vill be payable on February 15 cmd lmcust 15.
Payment and dcl-.i.xc:cy date fur t.he notos ;;Jill be Au.gust 15. Pc;yG\ent may b;:~
made in cc"sh, 02:' in 1::.··1/4~~ no"c(!s of Series C··196f3, OJ" 3'::)/~/!J bond::: of 19G8, "lidch
will be accepted at l)::l.1', in :P<:cY](1(;nt or exctl:mc;e, in y;hole or i'1 pa.rt, for th;:.~ l~O':';(,:~
subscribed for, to the extent sucb subscriptions ~Jre [J,llot'ced by the Tl'CiJ.Sm'y.
Payment by credit in Tl'es,sury Tax and Loan Accounts ma.y be macle fo::: SO;{ of t:·:c:
amount of not,es I".llottecl.
r'he SUbSC1'iption books villI be open Olily on I,\ondcty, Ausust. t;. SubscX':i.>:Jic;ll~;
with the required del)osi ts ad~h'essec.l to a Federal Rese:l've B8.nk or Branch ~ Or' to
the Treasurer of the- United StBtcs, and :placed in the mail before rniclnigj~~J A\~Gl)sL
5, 1968, "nIl bc considered timely.
Subscriptions fro;n cOTmflcrei21 ban1"s, for their OUD acco1l.l1t, i'1j 11 be rcst::-:Le: (".:Q
in each ca,se to all BYI01..:mt not c::{u~2:d~i.ng 50 percC211t of the co'nbined cuI,itr,l (l!ut.
including capital notes or deben'Cl.':ccG), surpluG and undivided pr0fi ts' of the
subscribir:g be.nk.
Subsc)~i:pt.:l.:.ms
f'ro:n cormnE:Tc:5.al and other banks for their OY7I aCC()(Ult, }i'('(I"2i.'::~J J yinsured savings and loB.!)' [1.sDociat:i.o:JS, StD,tCf,!. poli-c.:i c(),l sl1Juiyj sions or :.i..n;~:':'~')JJ'C:'>
talitie:;; thereof ~ Imblir.; peDf .ion a:.lci retiren1l:'i1t and otlK:r ~,~ _loJ.ic f-v.u) s; :i :ntc:;:··
nationu.l organiZations in \'lhic;1 tbe United sttJ:Lp,;-; h:l}O.S r:e' CiE-:!'~:'";ill)} io:ce'ir,r: C:~:lt'-.:-~J
F.. 1316
- $:2 DankS and foreign states, and. d~9,lcrs ,{Iho r;'lake pr:i.ll/a:ry rnar}:cts in GO'fo . .~r,.:-netJt sec:. 'ties and reyort daily to the Peele:!.'uJ. Reserve'. riunk of l'icI'J Yo:cl\. tbc;j:c IJositiuliS
:~h res-pect to Government secw.'ities and borroHin,3s thereon i,Jill be receivC'd.
without deposit.
subscriptions from all others must bf' accompanied by lJctYI:lent of lO;'~ (1n co. s}) ~
., .
'
A'
t ],.),
r:
1'"'''9
t l)ar)\ 01:n tIle 2JnOU1Y~ c~:~
r eligible Treasury seeul' .l.T,lCS
mat
urlng
lJf:;U8'
J Q . , a,
~otes applied for not subject to 'idthclrm·ml until after allotment.
The Secretery of the Treasury reserves the right to reject or reduce any
subscription, to allot less than the runov.:nt of notes applied for, and. to make
different percentage allotments to various classes of subscribers; and any c..c[,ion
he may take in these resPects shull be fin""l. The basi::; of the o.llotLlent ui11
be publicly announced, und aJJ.otment notices will be sent out promptly ur on allo;';-
mente
Subject to the reservations in the precedinG p:lragraph, (1) nIl subscriptions
in runounts up to and inclu(1inG ~;250,OOO vJill be oJJ.ott.ed in full (lDd. .st~1-)scj.':irtions
over $250,000 'Hill be allotted on a percentage basis but not less them $2~..iO,OOO;
and (2) all subscriptions from states, political subdivisions or instnljl;r,ntr.li tic:::
thereof, rublic pl~n8ioE and rcti:cement and o1.her p'J.blic fU;'llls 5 in-cernn;LicncJ.l
organizations in vlhich the United states hold.s membersh:;']!, [lnu fo::'eiC;ll centred
banks and foreign states "i·lill be allotted in fD.Il if a statem2nt i~~ SU~~)j ;.::\:.c:J
certifying th2.t the amount Oi the subscription does not exceed the ar:loD.nc. 0:::' the
t,~o maturing securities o'.med or contrD,ctecl fDr p\.1:rchase for value, at 4. J! .r:1, ;;
Eastern daylight savinG time, July 31, 19G8. Any such suof.::criber may el1te'I~' ern
additional subscription subject to a rercent8.e;e allotr.lent.
n
The note::: will be mcde available in registered as "Jell as be2xel' fon.':. /'.1J.
subscr:i.bers requestinG ree;istercc1 notes '\;ill be requi.:ced to f'nrnish aVIJ:"o'p£'i"J.tc
identifying numbers as required on tax returns and. other docu:nents subrid. t.tecl. to
the Internal Hevenue Service.
A1l subscribers arc required to aGree not to purchase or to :::;el1, or to ma1,\c
any agreements with respect to the lJ'lITc:hase o:c sale or othe:C' disl'osit:i.on cf tillY of
the notes suoscr:i.bed for under this offerinG at 8, specific !'Bte or price, lmtil
after midnight August 5, 1968.
Commercial bwJcs in submitting subscriptj ons -,.lill be required to certjf',;
that they have no beneficia,l interest in any of the subscriptions they enter fa;:
the account of their customers; and thut their customers have no be:'lei'icio..l
interest :~.n t.he banks t su-oscriptions for their O'fm account.
Estimated Ownership of the August 15, 1968 Maturities
as of June 30, 1968
(In millions of dollars)
-
Total
4-1/4~
Note
3-3/410
Bond
$1,731
$769
$962
26
11
15
companies
•••••••••••••••••••••••••
casualty and marine ••••••
5
54
1
8
46
jal, insurance companies •••••
59
9
50
Igs and loan associations ••••
196
57
139
)rations ......................
768
168
600
!aoo local governments ••••••
509
275
234
lther private investors •.•..•
312
134
178
privately held •••••••••••.
3,601
1,423
2,178
ral Reserve Banks and
lernment Accounts .•.•••••••.•
4,975
4,513
462
l outstanding ••.••••••.••••••
8,576
5,936
2,640
treial banks.... . . . . . . . . . . . . .
~l
savings banks •••••••••••••
~ance
~et ~
~e,
l,
!e of the Secreta·.ry of the Treasury
rrice of Debt Analysis
4
July
31, 1968
TREASURY DEPARTMENT
WASHINGTON
August 1, 1968
FOR IMMEDIATE RELEASE
Secretary of the Treasury Henry H. Fowler held a
press conference today at which he made public various
documents which are attached hereto.
They are:
1.
His general statement.
2. A letter to The Honorable Russell B. Long,
Chairman of the Senate Finance Committee.
3. The Secretary's comments on utility rates,
the tax surcharge and the outlook on interest rates.
4. A table showing major interest rate swings
since July, 1965.
Attachments (as noted)
F-1317
STA!EMlNT FOR SECRETARY FOWLER' S PRESS CONFERENCE
'lhe Revenue and Expenditure Control Act of 1968 is now
somewhat over a month old.
Its real impact on individual
income, corporate flows, and govemment spending are in an
early phase.
But is 1s appl:Opriate to look at some of the results that
have already begun to flow from that enactment.
It is also appropriate to underscore the fact that, while
the tax and expenditure btll sets the stage for and makes
possible a fuller achievement of our economic objectives at
home and abroad, it C8DDOt do the entire job by itself.
The
reestablishment of non-inflationary prosperity, the achievement
of a bUance in our int.mational payments, and the maintenance
of stability in the free world economy depend upon a series of
related and supporting actions by the
u.s.
Government and private
sector and by the nations which are our principal financial and
trading partners.
We can already see some important benefits to the nation
and feel the contribution that has been made to the stability
of the international monetary system as a result of the passage
of this important legislation by the United States Government.
Some of the benefits are psychological, others are tangible.
- 2 -
OIl the psychological side, better feelings have emerged
b~aU8e
of the outlook for lower interest rates and the fact
that tight money and credit need no longer threaten a monetary
crunch.
There is more confidence in the long term character
of our prosperity.
Fiscal res traint has now been conj oined
to monetary restraint.
111e latter can now be muted in the
discretion of the Federal Reserve System as the situation
requires.
All these give assurance that we need not run the
unusual and dangerous risks of choking off prosperity in order
to arrest inflation.
Further, the threat of another severe
housing recession implicit in a hitherto unavoidable dependence
on monetary restraint alone to fight inflation has been averted.
~roughout
the housing industry the outlook for the future is
now a brighter one.
Finally, a more stable international financial atmosphere
based on a strong dollar and a viable international monetary
system has pushed aside the apprehension of grave crisis
and threatened international financial collapse that characterized
ID\I:b of the period between the devaluation last fall of the
British pound and the passage of the tax bill.
An excessive
expansion was undermining our prosperity, destroying our trade
balance, and blocking the way to a restoration of an enduring
equilibrilDD in our balance of payments.
lbe application of
- 3 -
fiscal restraint to make possible a beneficent disinflation
stands out as a signal contribution by the United States to
me
series of recent measures of unprecedented cooperation
a~ng
the industrial nations of the world.
The list is
impressive:
-- Containing the UK devaluation.
Establishing the two-tier system to prevent
speculation in gold from undermining exchange
stability and the monetary system.
Further progress toward bringing the Special
Drawing Rights into operation.
Bold action to deal with the problem of
sterling balances.
Complementary fiscal and monetary policies among
the Atlantic countries: the UK austerity program;
policies to revive economic growth and eliminate
excessive unemployment on the continent.
-- Cooperation in defending the French franc.
There can be no question but that the action by the United
States in putting its own financial house in order, coupled with
this impressive set of measures of international financial
cooperation, have created a better international atmosphere
respecting money, gold and the world economic and financial outlook.
-4In addition to the psychological benefits, the nation
is beginning to realize a number of tangible and real benefits
fur which the Revenue Act is directly or indirectly responsible:
(1) Interest rates have declined substantially from their
record high levels of late May, when the outlook for the tax
bill was uncertain.
Rates on Treasury bills and long term
Federal securities are down about three-fourths of one percent,
with impressive reductions, particularly in recent weeks, in
the yields of municipal bonds and corporate bond issues.
Exact
data on the recent trend in interest rates in the perspective
of the past is contained in a table entitled "Major Interest
Rate Swings Since July 1965", copies of which are available.
(2) The price of gold in the free market, which reached a
high of $42.60 an ounce this past spring before the prospects
for the tax bill seemed promising, has recently been in the
$37-39 range, due, of course, to the whole series of measures
of international financial cooperation of which the tax bill
is an integral part.
(3) The prospective Federal deficit for the fiscal year 1969,
which is now one month old, has been reduced from over $20 billion
to approximately $5 billion on the basis of the new unified budget.
This swing in the budget is the biggest swing toward restraint
We will have had in any year in the past twenty, and there can
- 5 be
DO
doubt that it will contribute to a reduction in inflaticmary
pressures.
(4) Inflationary pressures are also being reduced by
restraint
OIl
the growth of personal and corporate incomes by
the tax surcharge.
BegiDning with the larger withholding on
individuals and with the July 15 tax payments by corporations
for the surcharge for the first half of 1968, the restraint on
the growth of personal and corporate incomes will be an
estimated $11.5 billion during the current fiscal year.
'l'he list is impressive and for only the first month;
alteady the outlook for the third and fourth quarters of
calendar 1968 is for a substantial reduction from the excessive
growth that characterized the first six months.
not be a cause for alarm or concern.
disinflation.
'Ibis should
The name of the game is
This excessive growth responding to excessive
demand was contributing to a pernicious spiraling of prices
and a depleted trade surplus which the recent figures for June
results clearly underscore.
Therefore, a slackening in growth
is impera tive.
MOreover, if restoring price stability and an equilibrium
in our balance of payments -- as yet unrealized objectives of
the tax and expenditure action -- are to be achieved, many
other complementary actions are needed.
-6I wish to focus attention on only three of these
complementary actions because contemporary events give them
significance.
They are:
(1) The practice of price and wage restraint to reverse
the vicious spiral which President Johnson emphasized in his
statement of July 23 calling attention to the 250 collective
bargaining contracts which will expire from August through
December and the thousands of important price decisions to be
made during the period.
(2) The avoidance of any pass-through of the temporary tax
surcharge in the competitive pricing of unregulated businesses,
the regulated pricing of utilities, or wage negotiations.
(3) The taking of effective measures by both the government
and the private travel sector to deal with the travel deficit
which is at this season sorely affecting our balance of payments.
First and foremost, our economy needs price and wage
restraint to combat the inflationary price-wage spiral, which
continues to be a most crucial economic problem for the nation.
As most of us are well aware, prices have been rising at an
overall rate of four percent annually.
In this inflationary
process there are, of course, no long-run winners.
Rather, as
prices chase wages and wages chase prices, the result is, as
- 7 President Joh_1son has said, "Bus iness suffers, labor suffers,
all America suffers from a wage-price spiral."
Inflation
undermines our ability to compete in world markets and thus
intensifies our balance of payments problem.
If we are to obtain a downward trend in prices, we must
clearly deal with the inflationary tendency for too large a
demand to pull prices up -- a matter attacked directly and
successfully by the tax and expenditure restraint in the
recently enacted law.
~flation
But we also must attack cost-push
through wage and price increases.
This means, if it means anything, that just as we have
temporary taxes, for the time being wage increases should not
reflect all cost of living increases, and for the time being
profits should not reflect all cost increases -- if the spiral
is to be reversed and a return to price stability with continu~g
prosperity safely achieved.
Clearly, the temporary increase in our income taxes should
not be reflec ted in wage and price s ituat ions.
The tax is
temporary and it is on income, and this form of tax restraint
was chosen because there is no reason for such restraint to
be reflected in price increases -- as is usually the case with
an excise tax increase.
If a temporary tax increase is to be
- 8 -
built into our price structure, then it will be difficult if
not impossible for that increase to be eliminated from our
prices when the tax expires.
Consequently, very strong
efforts must be made by business and labor to keep the tax
increase from influencing wage and price decisions.
A special aspect of the price structure and taxes is
that of public utilities whose rates are determined by regulatory
coomissions.
Some utility companies have already filed, or
stated their intention to file, requests for rate increases
which would include recovery of the tax surcharge.
While I
do not wish to connnent on specific cases, I do wish to indicate
my
views on utility rates and the tax surcharge in view of the
urgent national need for restraint in price and wage decisions,
as it may bear on the decisions of regulatory counnissions.
These views are contained in a Supplementary Statement
entitled "Secretary Fowler's Comnents on Utility Rates, the
Tax Surcharge and The Outlook on Interest Rates."
Finally, referring to the third topic -- one always uppermost
in our minds at this session of the year -- namely, the balance
of payments and the travel deficit, I am releasing a copy of a
letter I have dispatched to Senator Russell Long, Chairman of
the Senate Finance Committee.
This letter proposed an additional
amendment to H.R. 16241, the House-passed bill dealing with a
- 9 -
portion of the Administration's recommendations on reducing
the travel deficit.
The amendment proposed in the letter to Senator Long would
create a Special Fund to be used, under the direction of the
President, to finance a program to encourage foreign travel to
the United States, along the lines set forth in the February
Report of the Industry-Government Special Task Force on Travel,
into which there would be deposited funds obtained from the
proposed temporary travel tax as well as a portion of the funds
from the expansion of the present ticket tax to cover international travel.
This amendment would provide the resources
for a five-year program, including both government actions and
private sector activities on a contractual basis aimed at
increased foreign travel in the United States.
In addition to describing the new amendment, the letter
stresses the importance of enactment at this session of the
Congress of the pending recommendation for dealing definitively
with the foreign travel aspects of our balance of payments deficit.
Copies of this letter are available.
August 1, 1968
•
THE SECRETARY OF THE TREASURY
: ... ::
WASHINGTON. D. C. 20220
.,
JUl 31 1968
My dear Mr.
Chairman:
As the Congress enters upon an extended recess,
presumably to resume and conclude this session some time
after Labor Day, I want to propose an additional amendment
to H.R. 16241, pending before your CoIllDi.ttee, which contains
a portion of the Administration' s recODJDelldations on reducing the travel deficit, and to stress once more the
~ortance of enactment at this session of recommendations
pending before your Committee for dealing with the foreign
travel aspects of our balance of payments deficit.
The legislative aspects of the travel program which
was proposed to the Congress contained three elements:
(1)
Permanent elimination of the exemption of international flights from the 5% tax on airline
tickets.
(2)
Permanent reductions in the duty free allowance
for articles brought into the United States by
returning travelers and for gifts sent by mail.
(3)
A temporary tax based on expenditures made by
u.S. travelers outside the Western Hemisphere.
The bill before you, H.R. 16241, essentially carries
out the first two of these recommendations but contains
no provision regarding the third. In the hearings before
the Senate Finance Committee on June 25 and 26, I proposed
certain minor modifications of the House bill, and also
recommended that a temporary tax (through October 1, 1969)
in a form less complex than the proposal made early in
February to the House Ways and Means Committee (on which it
deferred decision), be imposed on foreign travel expenditures
outside the Western Hemisphere.
- 2 Under the new proposal, the first fifteen dollars per
day of travel expenditures (computed on an average basis
over the entire trip) would be exempt from the tax; the
total of expenditures in excess of that exeDt>tion would be
taxed at a 301 rate. The purpose and effect of the tax would
not be to restrain any traveler from undertaking a trip but
would be to encourage him in the course of the trip to keep
his spending to a modest levelo This would offer the
greatest opportunity for foreign exchange savings with a
minimum of impact on travel.
On November 16, 1967, President Johnson appointed an
Industry-Government Special Task Force on Travel to:
Make specific recommendations as to how the Federal
Government can best increase foreign travel to the
United States and thereby improve our balance of
payments; and
Build into its program ways and means that will
insure that more foreign visitors truly learn to
know our country and peop Ie.
In announcing this action the President called attention
to his previous statement that: liThe most satisfactory way
to arrest the increasing gap between American travel abroad
and foreign travel here is not to limit the former but to
stimulate and encourage the latter. U
This policy position rests on the assumption that the
U.S. Government and the private travel sector act affirmatively
and effectively to stimulate and encourage foreign travel in
the United States.
The path for achieving this long term solution has
been charted. Pursuant to a speed-up directive to the
Industry-Government Special Task Force on Travel, contained
in the President's New Year's Day Balance of Payments
~ssage, the Task Force, under Ambassador Robert MCKinney,
~ned ways to achieve this goal and submitted its Report
on February 17. There has been a substantial measure of
achievement of recommendations in that Report having to do
With the provision of travel incentives through lowering
- 3 costs to the foreign visitor to the United States by sizeable
discounts on everything from plane fares to hotel accommodations. Moreover, there is encouraging progress on
other recommendations designed to make the entry of foreign
visitors into the United States faster and smoother and their
reception more hospitable.
But as yet neither the Government nor the private
travel sector has set in motion efforts of a nature and
scale sufficient to carry out the promotional activities
~d provision of services necessary to meet the challenge
to our balance of payments inherent in the travel situation.
These efforts must and should be undertaken well in advance
of the travel season in 1969 if the nation is to make a
beginning on this vital task. The problem is not only one
of reducing the present travel deficit by the half billion
dollar target set forth in the President I s New Year I s Day
Message but of preventing its increase in the years ahead.
Without a concerted program, the spread between our
travel expenditures and receipts is projected to grow from
its $2 billion level of 1967 to a $4 billion level by 1975,
as U.S. disposable income, and the proportion of it spent
on foreign travel, increases and as new airplanes with
larger capacities and greater speeds bring lower fares.
And we are faced with the inescapable fact that the disposable
income base from which foreigners finance their travel is
smaller than that of U. s. residents.
I know as a result of my appearances before your Committee
and private talks with you, Senator Smathers and other members
of the Committee from both sides of the aisle, that we are
all troubled about this situation and that there is a genuine
desire to take steps to deal with the problem in a manner
that promises a long range constructive solution.
Accordingly, I am proposing a new amendment to the
proposed Foreign Travel Tax designed to give the United States,
for the first time, an adequately financed program to
encourage foreign travel to the United States. This amendment would create a Special Fund to be used for this purpose
under the direction of the President, into which there would
- 4 be deposited the funds obtained from the proposed temporary
travel tax as well as a portion of the funds from the
expansion of the ticket tax.
In this fashion, the proposed taxes would take on a
twO-fold character. In addition to accomplishing an
bDediate balance of payments savings by prompting Americans
traveling abroad to keep their expenditures within reasonable
bounds, the law would also constitute a positive measure to
promote tourism to the United States. Both steps are
necessary to bring our travel deficit to a manageable
situation.
The amendment would provide for the deposit, from the
ticket and travel taxes to be collected during the fiscal
years 1969 to 1973, inclusive, a sum not to exceed $150
ndllion, to be used and expended during those years, in
such amounts and under such rules and regulations as the
~esident might prescribe, for the promotion of travel by
foreigners to and within the United States.
This Special Fund would be available to finance a multifaceted program, including both Government actions and private
sector activities, on a contractual basis.
Out of these resources and these activities -- public
and private -- there could be developed, under the direction
of the PreSident, an organization more powerful in scope and
scale than the present U.S. Travel Service. It would be
designed and equipped to carry out the long range activities
recommended for a dynamic U.S. travel promotion effort in
the Report to the President of the Industry-Government Special
Task Force on Travel.
The provision of funds on a scale of $30 million a year
for a five-year program of travel promotion will carry out
the principal and most far-reaching recommendation of the
Task Force. That Report, at page 46, following a detailed
discussion of the various activities which should be carried
on as a part of a national tourist office, stated:
- 5 -
"For fiscal year 1969, the Task Force recommends
that the authorization for the U.S. Travel Service
be increased to $30 million. Its appropriation
should be transferred to the new tourist office
if it becomes operational during fiscal year 1969.
Timely availability of these funds is essential
if the needed work for the 1969 travel season is
to be undertaken and produce results. The increased
promotional effort by the u.S. Travel Service should
be concentrated in countries with the largest
potential for increased travel to the United States."
By establishing a solid financial base for a program to
promote foreign tourism in the United States, we would for
the first time be able to test the results of a vigorous
program in this area. I am certain that what we will see
will be a vast increase in travel to the United States, one
that will provide a more nearly adequate counter-balance to
the amounts spent by our people traveling abroad. In this
fashion we should be able to establish the base that will
support travel by our citizens abroad. Under this amendment,
the ticket and temporary travel taxes become the keys to this
support.
It is appropriate that U.S. residents who choose to travel
abroad and spend amounts in excess of a determined modest
average per day, thereby contributing unduly to the U. S.
balance of payments problem, should be asked to help fund
its solution. It is particularly appropriate when the solution
is to promote two-way tourism, avoiding or minimizing the
threat that some future reassessment of balance of payments
priorities between private foreign investment, national security,
and aid to developing nations, might lead to the kind of direct
restrictions on travel that have been employed by other nations
in times of financial difficulty.
I am recommending financing for a five-year period to
provide a solid base at the start. At the end of that period
we could see what the level and nature of the financing for
future years should be for this program.
- 7 In fact, for the period 1961 through 1967, the total
foreign payments for international travel (about $21 billion)
were nearly as great as the total foreign exchange costs
($22.9 billion) of our military expenditures abroad, including
the foreign exchange costs of the war in Southeast Asia. In
other words, the balance of payments costs of our foreign
travel have been equivalent to the balance of payments costs
of our national security to the extent that it depends upon
the operations or presence of our military forces outside
the United States.
The net foreign exchange impact of this level of foreign
travel spending can be measured by offsetting against it the
spending in the U. S. by foreign travelers. For the same 1961
through 1967 period, the net deficit in foreign exchange
payments arising from foreign travel amounted to a little
over $11 billion, as compared to about $17.4 billion net
foreign exchange deficit for military expenditures abroad after
offsetting the foreign purchases of military equipment in the
United States.
We hear a great deal in some quarters about ending the
war in Southeast Asia, or bringing United States military
forces home, as methods of reducing our balance of payments
deficit. We also hear a great deal about reducing our
forces in Western Europe because of their foreign exchange
costs. I do not intend to debate these issues here. I
s~ly want to say that the Government is seeking a program
of doing whatever it can, consistent with national security,
to reduce or neutralize the foreign exchange costs of our
military operations overseas, and that it must similarly
tackle the problem of travel expenditures when our balance
of payments is still in a serious state of chronic deficit.
Moreover, unless effective measures are undertaken, the
situation with regard to travel can only get worse in the
future.
The economic and social trends in this country, the
advances in transportation facilities for foreign travel
which lie immediately ahead, and all other pertinent factors,
can lead to no other conclusion than that our foreign
travel payments will increase year by year. This situation,
- 8 -
present and future, presents a problem that cannot be dismissed
or laughed off or put under the ruga
To accept supinely a projected UoS. travel deficit of
$4 billion by 1975 would be to imperil the political and
diplomatic position of the United States, endanger the international monetary system, condemn private foreign investment
to regulation too extended in time or too restrictive in type,
and to place limitations on our ,national security arrangements
that may prove undesirable.
It is imperative that the Government of the United States
make a positive, vigorous start on a solution to this problem
of arresting and reversing the trend of increasing deficits in
our balance of payments attributable to foreign travel. To
reduce the U.So travel deficit to $1 billion by 1975, the
increase in annual travel receipts must be double the annual
percentage increases of the last eight years. That means,
inevitably, a massive promotional effort on the part of both
the u.s. Government and the travel-related private sector.
For these reasons, I hope the Committee will see fit to
schedule any necessary hearings on the pending proposals,
receive testimony from Ambassador Robert MCKinney, the
Chairman of the Industry-Government Special Task Force on
Travel, concerning the scale of resources and activities
needed to promote foreign travel in the United States, and
act affirmatively on H.R. 16241 with the amendments proposed.
Respectfully yours,
H~H.~
Henry H. Fowler
Honorable Russell B. Long
Chairman, Senate Finance Committee
United States Senate
Washington, DoC
0
CC:
Senator Williams
Senator Smathers
August 1, 1968
SECRETARY FOWLER'S COMMENTS ON
UTILITY RATES, THE TAX SURCHARGE AND
THE OUTLOOK ON INTEREST RATES
The President's a?peal for wage and price restraint
applies, of course, to public utilities as well as to other
sectors of the economy.
Public utilities have had a
commendable record of price stability in recent years -- a
tribute to the progressiveness of their management and skills
of their labor force, and the concern of their regulatory
commissions.
I am confident that both the utilities and the
members of state regulatory commissions will consider the
critical necessity of restraint in price decisions to help
preserve and extend that fine
ilie President's appeal.
re~ord,
and thus, respond to
I urge the utilities and the
regulatory commissions to consider th2 special objectives of
the tax increase and its temporary character in examining
rate proposals based on these higher taxes.
The purpose of
this temporary tax rise is to curb price increases by
moderating the growth of purchasing power of both individuals
and corporations.
Systematic attempts to shift the tax
increase to others by raising prices or wages would
obviously thwart this objective.
- 2 -
For non-regulated firms, competition limits the ability
of a firm or industry to pass on the surcharge in the form
of higher prices, and any shifting of taxes which may occur,
would take time.
Thus it is unlikely that the non-regulated
businesses will shift any substantial part of the temporary
surcharge during the period it is in effect.
Regulated public utilities are entitled by law and court
decisions to a fair rate of return after income taxes.
Utility
rates depend not only on tax rates but on the relation between
revenues, operating expenses, all taxes, and the after-tax
rate of return.
Utility rates, of course, are set by regulatory
commissions, not by Congress.
The imposition of a temporary income tax surcharge should
not be a basis for an automatic utility rate increase, any more
than an increase in some other cost or in a local property tax.
Presumably, in response to a request from a utility, a regulatory commission would consider the temporary 10 percent surcharge
together with any changes in revenues, costs, and other taxes
to determine whether a rate increase is appropriate.
In view of the temporary nature of the surcharge and its
relatively small size for the average utility, it is quite
- 3 l~ely
that many utilities may not seek, or regulatory
commissions may not approve, rate increases as a result of
the tax.
The surcharge is scheduled to exp ire on June 30,
1969, covering only a year and a half for corporations.
Also
the Federal corporate tax surcharge for the average utility
is estimated to amount to only 0.8 or 0.9 of one percent of
utilities' revenues, an amount which many utilities would be
able to absorbe for a limited period, at least. ok
If a utility does request a rate increase on the basis
of the tax surcharge, naturally we would expect the regulatory
commision to follow its usual procedure of a study and a
public hearing, at which the utility and other interested
parties could present evidence to enable the commission to
~termine
whether in view of all the facts, including but not
limited to the surcharge, the rate of return is inadequate
or confiscatory and a rate increase is justified.
While the
tax surcharge is a factor the commissions might consider, it
does not automatically entitle the utility to higher rates.
I am pleased to note that several commissions (South Carolina
*If the surcharge is passed on, it would mean an average
increase in rates of abo:J.t 1.8 percent, as the increased
revenue is subject to tax at approximate ly a 50 percent rate;
the most profitable utilities with the most taxable income
would increase revenues as much as 3.4 percent.
- 4 and Florida, as examples) are now handling requests for
mcreases based on the surcharge in this normal careful
manner.
If after consideration of all factors, a regulatory
coomission authorizes a rate increase as a result of the surcharge, it should be limited to the durat ion of the surcharge.
If the surcharge ends as scheduled on June 30, 1969, this
mcrease in utility rates should be ended then.
In addition to the tax surcharge, some utilities have
cited the sharp increases in interest rates as another bas is
for seeking rate increases.
According to reports in the press,
rising interest costs have been put forth as justifying a
significantly higher overall rate of return on utility investments on the grounds that such higher returns are necessary
to attract both debt and equity capital.
In the long run,
approval of higher rates of return because of higher interest
rates would have a greater impact on utility rates than the
temporary tax surcharge.
Future prospects for interest rates
are highly relevant here since rates of return allowed
regulated firms are traditionally changed infrequently.
- 5 During the past year, the delay in the passage of a tax
increase added to Federal borrowing requirements, stimulated
private demands in the capital markets, and required a
restrictive credit policy by the Federal Reserve.
We
nperienced a sharp rise in interest rates between the spring
of 1967 and the spring of this year.
Now with the passage of
the new fiscal program, the forces pushing up interest rates
have been reversed.
Nobody can predict how fast and how far the decline will
go.
But the evidence surely argues against any assumption
that interest rates will continue at their current unusually
high leve Is.
I recognize and appreicate the tasks and responsibilities
~f
regulatory commissions in rate-making.
~c~ions
Of course, individual
can be based properly only on the detailed record
Ilhich sets forth the specifics of each '.:ase.
It is my under-
ltanding, however, that cons iderat ions relat ing to the general
!conomic environment are regarded by regulators as among the
:elevant factors.
In
For that reason, I am offering
some views
the critical problem of price stability that continues to
:onfront the Nation, on the nature of the surcharge, and on
:he outlook for interest rates.
000
Major Interest Rat':; Svi.ngs Since July 1965
(Tn percent)
Peak
: VietlJam: D:Lsco
:escala-: :rd~tes : yields
Tise
: tiO!l
:
Aue·-
1968 niL[~h
.
•
Dee, ·_·_·_-----·June
:
21;!.l
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.
.
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:1!?-8!65: 1.9 65
---
1966
1966
Yield:
.
Date
5/2 J.
4.58
6.39
6.21
6.02
.. . r'7
)
,
5/22
5/21
5/22
3/14
L~.92
4.84
1968
31,
---.-~-
5.92
6.08
6.03
h.8l
h.26
4.30
4042
. July
_!_ _ __
ho12
1968
5/21
.Iii (' \~--:-6I;;1
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L
4
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to : La
: date : d:;.t c
5.17
5.28
5.20
-.75
- .80
-.83
-.03
-.20
-.32
5.87
5. 7L~
5.60
5.32
5.50
5.50
5·39
5.19
- .89
-.71
-.63
-.58
-.37
-.24
-.21
-.13
5/21
.0
4.00
4• H:
.J-/
4.20
Cl "
1~.21
It .44
5·99
5.89
5.51
5.]?
c)
1~.28
4.w
6.36
5.49
6.48
5/22
6.19
5.72
- .76
-.47
ds ••• o , .
11058
4.86
6,,35
5.87
7·09
5/21+
7000
6.75e -.34
-.25
3025
3.50
1;..21;.
3.77
4071
5/23
~.• 43
4.16
- .27
5.78
5.88
6.69
6.. 66
7.25
June
7025
7.25
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0
0 ••••
ct.
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e
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~ .• 52
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ted
er.)
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tId
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-.55
~on-
s.
)"Oto ••
Y
the Secl'etl',17 'of the Tre~ry'----""-- - . - - - - - - - ~fice of Debt Analysis
Ie mO::lth of November
Q
5 year call
30 b:;.sj.s po:i.n~~s.
; based on issues with no call prot8cU.on, for
:t (at present t,j.me) a.pproximately
ed,
Pl'o·~cctcd
is sues
Monday, August 5, 1968
MEMO TO TREASURY "REGULAR" CORRESPONDENTS:
secretary Fowler had his gall bladder removed
this morning at Walter Reed General Hospital because
of chronic infection and stones.
No complications
were encountered and his immediate postoperative
condition is good.
The operation performed is knowa medically as
a cholecystectomy.
The operating team consisted of Lieutenant
General Leonard D. Heaton, Colonel Carl W. Hughes,
Colonel Joseph H. Baugh and Captain Richard M. Lampe,
surgeons, and Colonel Herman R. Hanson, anesthesio-
,J.OgIst.
.
The outlook is that the Secretary will have a
five to six week period of convalescence, spent partly
at Walter Reed and partly at his home.
\'\
~;L' \L.""
'\' Kane
/". . ..-]o'hn
'p.
\
Assistant/'to the Sec:retary
.
(Public Affairs)
TREASURY DEPARTMENT
,
August 6, 1968
FOR IMMEDIATE RELEASE
MINT TO SELL TWO MILLION UNCIRCULATED COIN SETS
Miss Eva Adams, Director of the Mint, today announced
that orders for the 1968 uncirculated coin sets will be
limited to two million sets.
The Mint already has
received orders for about 1.7 million sets.
The Mint announced in May that uncirculated coin
sets would be available but that acceptance of orders
would be contingent upon the Mint I s ability to meet
an unpredictable demand.
Present Mint facilities and
workload will make it necessary to cutoff
orders at
two million sets.
Only those coins currently being manufactured for
circulation are included in the uncirculated sets.
The
price of $2.50 per set includes first class registered
mail fee.
20 sets.
The maximum number of sets per order is
Uncirculated coins manufactured in prior years
are not available at the Mint.
000
RED~Er-'ED THROUml J.q 31, 1968
(Doiler amounts in millions - rounded and will not necessarily add to totals)
UNITED STATES SAVmGS BONDS ISSUED AND
DESCRIPTION
AMOUNT ISSUEOlJ
i£D
S,003
29,521
3,1S6
Seri_es A-1935 thru 0.1941
SeriesF and 0-1941 thru 1952
SeriesJ and K-1952 tbru 19S5
AMOUNT
REDEEMEOY
4,996
29,476
3,129
AMOUNT
I '1,0',-;"~Th!IG1~;r, !
OUTSTANmNG?J' 0:'" ;S:·J:;T ISSUED!
,TURED
,
'j
I
!
Total Series E
Series H (1952 thru May. 1959) 21
H (June. 1959 tbru 1968)
TOUl Series H
Total Series E and H
1,674
8,273
13,3U
IS,SJO
12,200
S,52S
S,237
S,4u
S,3J6
11,664
4,037
11,228
11,826
4,917
5,122
11,943
4,650
4,526
11,239
11,246
4,279
4,123
4,590
4,476
4,378
4,705
4,6$6
1,597
589
1,647
7,287
U,760
13,620
lO,SlB
,4,578
4,179
4,216
4,081
3,515
3;043
3,1.60
3,514
3,501
3,579
3,402
3,121
2,877
2,627
2,506
2,375
2,241
2,304
2,0)6
1,661
229
690
227
966
1,552
1,910
1,682
947
l,OS7
1,196
1,255
1,149
994
1,066
1,312
1,416
1,542
1,542
1,529
1,651
1,612
1,740
1,903
1,882
2,286
2,234
2,260
2,670
2,995
1,368
-101
IS6,490
112,626
43,864
28.03
S,bS5
6,719
3,122
1,3la6
1,887
5,383
34.40
80.12
12,204
4,458
7,745
63.46
168,694
117,oBS
51,609
30.59
597
474
123
15.43
37,680
169,291
206,971
37,600
117,559
155,159
79
51,732
51,812
.21
30.56
25.03
19S6 th;u 1957)
l
(Total matured
11 Series Total unmatured
Grand Total
-
.15
.86
----
Series E!l:
19H
1942
19013
f9-i4
19-;5
1948
19017 ,
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1908
Unclassified
Series J and K (
.14
7
4S
27
2,2412,118
~I GCCTlU!d discolUJl.
::tlelllptioll value.
ilea o/OlllIleT bonds 1IJ(J1 be heM a.ntllllill earn interest for additional periods after original maturity dales .
."",eJI bonds IIIhieh luJve no' been pTesenud lor retiemp'ioll..
F..... PD 3112,-
T~E.uURY
DEPARTMENT _ B __ u of the Public Debt
12.12
ll.92
ll.66
12.30
13.79
17.11
20.18
22.10
23.52
24.64
24.62
25.26
27.19
28.80
30.11
31.20
32~88
36.46
38.03
40.98
44.47
45.65
49.60
49.91
51.62
56.75
64.33
85.66
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Tr~asury bills to the aggregate amount of
$2,700,OOO,000,or thereabouts, for cash and in exchange for
Treasury bills maturingAugust 15, 1968,
in the amount of
$2,601,927,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of $1,600,000,000, or thereabouts,
additional amount of bills dated May 16, 1968,
mature November 14, 1968 ,originally issued in the
$1,101,062,000,the additional and original bills
interchangeable.
August 15, 1968,
representing an
and to
amount of
to be freely
182-day bills, for $ 1,100,000,000,or thereabouts, to be dated
August 15, 1968, and to mature February 13, 1969.
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
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, August 12, 1968.
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
fONa~ed in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
up
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.
F - 1318
- 2 Immediately after the closing hour, tenders will be opened at t
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 Treasu
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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on August 15, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 15, 1968.
Cash and exchange tend
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 hereunde
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thi
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
TREASURY DEPARTMENT
-
I mJASI 6:30 P .)1.,
5' August 5, 196~
RlStJLTS 07 1m:ASUBY 'S WElKLY BILL OrPERIIG
!be TreasUl'J Department aDDounced that the teDders tor two series of Treasury
L11, one series to be an additional issue ot the bills datecl May 9, 1968, and the
IIr .eries to be dated August 8, 1968, which were offered on July 31, 1968, were
tlla at the federal Reserve BaDks today. !enders were iDVited for $1,600,000,000,
~Nabouts, of 91- da1 bills and tor $1,100,000,000, or thereabouts, ot 182-4&1
Lli. !he utails ot the two series are as to11ows:
91-day 1reasury bills
maturing Ioveaber 7l 1968
Approx. Equiv •
Price
Annual Rete
98.766
4:.88$
98.752
4:.937~
98.760
~.9OS~ 11
111 OJ ACClP.tIW
1P11Um: BIDS:
1191
Low
Average
~
l~;
ot
ot
the amount
the IJIOUIlt
182-4&7 ~easur.J b111s
tl.lriy I'e »>ruary 6 1 1969
Approx. EQu1Y •
Price
Almual Rate
97.4:36
5.07~
97.4:13
5.117~
97.4:22
5.09~
JIB.
Y
ot 91-day bills bid for at the low price vas accepted
ot 182-day b111s b1d for at the low price vas accepted
& mERS APPLIED lOR AlID ACCEP.fEJI) BY J'EDERAL RESERVE DIS'l'RICm:
D1.tr1et
•
Dallas
San lru.c18cO
Applied Por
ACC8,ted
13,619,000 $3,619,000
1,931,074:,000 1,095,774:,000
17,4.52,000
29,4.66,000
35,468,000
35, 4.68, 000
24:,272,000
2',272,000
30,790,000
26,790,000
215,24:3,000
189,456,000
4.5,511,000
55,331,000
21,599,000
21,599,000
22,704:,000
23,603,000
25,4.26,000
17,4,26,000
126,4.50,000
90,295,000
'l\)!AI"s
$2,532,341,000 $1,600,366,000
btOD
lew York
Piilade1ph1a
ClnelaM
RiclaODd
Atlanta
Chicago
St. LQ11s
liDDeapOl1s
ran••
City
!I
APR1ied Por
•
241,717,000
1,756,078,000
13,326,000
24:,895,000
5,509,000
37,734:,000
14:5,302,000
39,94.8,000
19,636,000
10,074:,000
19,0:51,000
181,4:01,000
Acce,ted
$41,711,000
833,178,000
5,326,000
18,34:5,000
4:,509,000
20,604,000
92,802,000
26,14:8,000
15,636,000
10,013,000
11,031,000
4.1,729,000
$2,277,651,000
$1,100,098,000 ~
Ineludes $261,356,000 DODCOlipetitive tenders accepted at the average price of 98.760
lDelUdes $114:,376,000 Donccapetitive tenders accepted. at the average pr1ce ot 97.422
.se rates are on a bank diacoUllt basis. 1he equift1ent coupon issue ;yields are
S.04j tor the 91-day billa, and 5.31~or the 182-day bills.
F-1319
TREASURY DEPARTMENT
(
August 7, 1968
FOR IMMEDIATE RELEASE
WILLIAM F. HAUSMAN BECOMES
DEPUTY ASSISTANT FOR NATIONAL SECURITY AFFAIRS
William F. Hausman has been appointed Deputy Assistant to
the Secretary for National Security Affairs, Acting Secretary of
the Treasury Joseph W. Barr announced today.
Mr" Hausman will assist Raymond J. Albright, principal
~viser to Secretary Henry H. Fowler, on national security
~tters.
He will also aid in supervising Foreign Assets
Cootrol activities and liaison with the Department of Defense
a~ other government agencies on matters involving national
security in relation to international financial programs.
Immediately prior to his appointment at the Treasury,
Mr. Hausman was Assistant Director, Division of Authorizations,
Office of Foreign Direct Investment, Department of Commerce.
From 1963 until 1967, he was Deputy Assistant Administrator for
International Affairs of the National Aeronautics and Space
Administration.
As a Colonel in the U. S Marine Corps, from which he retired
in 1963, he accumulated over 4,000 military pilot hours. During
ilie Cuban missile crisis, he was Chief of Staff of the Fleet
Marine Force, Atlantic. He has headed aviation bases, jet
aircraft groups, an academic departrpent of civilian professors at
the National War College, an attache office in the U.S. Embassy
in Colombia and the nationwide Marine Aviation Reserve.
0
Born July 31, 1914, in Indianapolis, Indiana, Mr. Hausman
holds a bachelor of arts degree, received in 1934 from
~p~w University, with honors in political science. He is
married to the former Mary Jane Moran of Glendale, California.
They have three children and make their home in Arlington, Virginia.
000
F-1320
TREASURY DEPARTMENT
(
•F)R IMMEDIATE RELEASE
-
RESULTS OF TREASURY'S CASH OFFERING OF 5-5/8% NOTES
~e
Treasury today announced that subscriptions from the public total
23,510 million for the offering of $5,100 million, or thereabouts, of 5-5/8
percent Treasury Notes of Series B-1974, due August 15, 1974.
The total amount
of subscriptions accepted from the public is about $5,448 million.
An additional
4,811 million was allotted to Federal Reserve Banks and Government Investment
accounts.
The Treasury will allot in full, as proVided in the offering circular, all
s:ubscriptions for $250,000 or less and 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, and foreign central banks and foreign States where the required certification
of ownership of securities maturing August 15, 1968, was made.
All other sub-
script ions will be allotted 18 percent with a minimum allotment of $250,000 per
subscription.
Subscriptions received from commercial banks for their own account totaled
about $10,990 million and all other subscriptions from the public totaled about
h2,520 million.
Details by Federal Reserve Districts as to subscriptions and allotments will
be announced later this month.
F-1321
TREASURY DEPARTMENT
-
8 RELEASE 6: 30 P.M.,
!ll, August 12, 1968.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
1be Treasury DepartD=nt announced that the tenders for two series ot Treasury
11s, one series to be an additional issue of the bills dated May 16, 1968, and the
Jler series to be dated August 15, 1968, which were offered on August 7, 1968, were
ened at the Federal Reserve Banks today. Tenders were invited for $1,600,000,000,
thereabouts, of 91-clay bills and for $1,100,000,000, or thereabouts, of 182-day
Us. The details of the two series are as follows:
o
OF ACCEPTED
IPETITIVE BIDS:
91-day Treasury bills
maturing November 14 z 1968
Approx. Equiv.
Price
Annual Rate
High
98.729 ijJ
Low
98.706
98.715
Average
5.02~
5.11~
5.oa4~
182-day Treasury bills
maturing Februa2 13,t 1969
Apprax. Equiv.
Price
Annual Rate
S.246J
97.3408 ]V
97.329
5.283~
5.273~
97.334
Y
!I
-y
!I
Excepting one tender of $260,000;
Excepting one tender of $1,470, 000
9'~ of the amount of 91-day bills bid for at the low pri,.!e was accepted
5l~ of the amount ot 182-day bills bid for at the low price was accepted
I'rl\L TENDERS APPLIED FOR AlID ACCEPTED BY FEDERAL RESERVE DISTRIC'l'S:
District
Boston
lev York
Philadelphia
Cleveland
Ricbmorn
Atlanta
Chicago
St. Louis
MinneapOlis
l'ansas City
!allas
San FranCisco
roTALS
AcceEted
APE lied For
14,384,000
$
$ 14,:381-,000
1,106,624,000
1,854,924,000
18,929,000
30,929,000
27,392,000
27,392,000
16,343,000
16,343,000
29,860,000
39,902,000
179,015,000
183,115,000
33,919,000
40,219,000
17,995,000
18,745,000
:30,857,000
:31,917,000
17,280,000
24,340,000
107 z 470,l000
123,z 1:30,t 000
$2,405,340,000
A1)'Dl~ed
For
1s,5ie,ooo
1,853,350,000
14,079,000
31,205,000
3,746,000
28,420,000
138,542,000
22,026,000
18,158,000
20,142,000
19,703,000
119,2727,t000
$
$1,600,068,000 ~ $2,284,616,000
Acce;Eted
$ 14,518,000
856,650,000
6,079,000
16,315,000
3,626,000
15,670,000
93,542,000
12,576,000
10,658,000
13,470,000
9,703,000
48,209°2°00
$1,100,897,000 ~
Includes $288,427,000 noncompetitive tenders accepted at the average price of 98.715
InCludes $124,941,000 noncompetitive tenders accepted at the average price of 97.334
ibese rates are on a ba.Jlk discount basis. The equivalent coupon issue yields are
S.2~ for the 91-day b111s, and 5.4,~ tor the 182-day bills.
F-1322
TREASURY DEPARTMENT
,
=
August 12, 1968
FOR IMMEDIATE RELEASE
NEW TRADE REGULATIONS ISSUED BY
TREASURY FOR SOUTHERN RHODESIA
The Treasury Department announced today that it has issued new
regulations extending mandatory economic sanctions against Southern
Rhodesia.
The regulations implement a United Nations Security Council
Resolution of May 29, 1968. Issued under Presidential Order of
July 29, they prohibit virtually all unlicens'ed commercial and
financial transactions by Americans with Southern Rhodesia.
Exports from the United States are governed by Commerce
~partment regulations.
Exceptions, under Treasury regulations,
may be made for shipments from foreign countries by Americans of
medical, educational, news materials, and foodstuffs in special
humanitarian circumstances. Payment of pensions to persons in
Southern Rhodesia and charitable remittances to missionary
societies can be authorized.
Licenses will be issued for imports of merchandise of
Rhodesian origin not previously embargoed when the Treasury is
satisfied that the merchandise was exported from Southern
Rhodesia prior to May 29, 1968. The Treasury, in general,
will consider applications for licenses for other imports where
payment had been made by Americans prior to July 29, 1968. This
policy is designed to alleviate cases of undue hardship arising
from transactions entered into before the date of the Executive
Order. Applications for licenses may be filed with the Federal
Reserve Bank of New York.
Penalties for violation of the regulations provide for
imprisonment for not more than 10 years and a fine of not more
than $10,000, or both.
The new regulations bear the title "Rhodesian Sanctions
Regulations " and replace "Rhodesian Transaction Regulations"
which have been revoked.
000
F.. 1323
-
TREASURY DEPARTMENT
(
August 13, 1968
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN JULY
During July 1968, market transactions in
direct and guaranteed securities of the Government
investment accounts resulted in net purchases by
the Treasury Department of $136,744,000.00.
000
F-1324
TREASURY DEPARTMENT
•August 13, 1968
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES COUNTERVAILING DUTY ORDER
ON IMPORTS OF FRENCH MERCHANDISE
The imposition of countervailing duties on the
importation of a wide variety of French products was
announced by the Treasury Department today.
The action is the result of an investigation
conducted soon after the issuance by the Government of
hmce of Decree No. 68-581, later amended by
Decree No. 68-599, providing for certain subsidy payments
related to French exports.
Countervailing duties will be assessed on all shipments
of French dutiable imports, except those not benefiting
from the provisions of Decree 68-581, as amended.
The
amount of the countervailing duty will be equal to 2.5
percent of the f.o.b. price of the imported merchandise.
The order will be effective on the 31st day after
its publication in the Customs Bulletin dated August 14,
1968.
000
F- 1325
TREASURY DEPARTMENT
;
August 13, 1968
RELEASE ON RECEIPT
ACTING SECRETARY OF THE TREASURY BARR NAMES LEVI P. SMITH, JR.,
AS NEW SAVINGS BONDS CHAIRMAN FOR THE STATE OF VERMONT
Levi P. Smith, Jr., Administrative Vice President and Comptroller of the Burlington Savings Bank, was appointed by Under
Secretary of the Treasury Joseph W. Barr as volunteer State
Chairman for the Savings Bonds Program in Vermont effective
August 9.
Mr. Smith succeeds his father, Chairman of the Board of
the Burlington Savings Bank, who had served since July 1941.
The senior Mr. Smith was the program's first State Chairman.
Mr. Smith will head a committee of state business, financial, labor and governmental leaders who -- working with the Savings Bonds Division -- assist in promoting the sales of Savings
Bonds and Fr eedom Shar es •
He is President of the Burlington Rotary Club; Chairman,
Chittenden County Chapter, American Red Cross; Trustee, Permanent
Funds, Josephine P. Baird Children's Center; Trustee, Fletcher
Free Library, Burlington; Director, Vermont Council on World Affairs and Senior Warden, St. Paul's Cathedral, Burlington. He is
active in numerous other state and national banking associations,
local civic and charitable organizations.
Mr. Smith was born in Burlington on November 30, 1918. He
was educated in Burlington public schools and Phillips Academy,
Andover, Mass.. He received a Bachelor of Arts Degree from Princeton University in 1940. He attended Harvard Law school, Wayne
University, Detroit, Mich., and the Graduate School of Banking,
Rutgers University.
(OVER)
- 2 -
He served in the Army for four years during World War II.
In 1946, he was appointed U. S. Foreign Service Officer and Vic
Consul of Career. He was stationed at Southampton, England;
Leopo1dvi11e, Belgian Congo; and Windsor, Ontario, Canada.
He has been with the Burlington Savings Bank since 1954.
Mr. Smith is married to the former Sybil M. Watts; they
have four children -- Levi, III, John H., Victoria B., and
Barbara.
000
TREASURY DEPARTMENT
August 14,
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
$2,700,000,000, or thereabouts, for cash and in exchange for
Treasury b1lls maturing August 22, 1968,
in the amount of
$2,600,858,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of $ 1,600,000,000, or thereabouts,
add1t1onal amount of bills dated May 23, 1968,
mature November 21,1968,orlginally issued in the
$ 1,100,119,000,the additional and original b1lls
interchangeable.
August 22, 1968,
representing an
and to
amount of
to be freely
182 -day bills, for $1,100,000,000, or thereabouts, to be dated
August 22,1968,
and to mature February 20, 1969.
The bills of both series will be issued on a discount basis under
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
(maturi ty value) .
co~et1tive
Tenders will be received at Federal Reserve Banks and Branches
to the clos1ng hour, one-thirty p.m., Eastern Daylight Saving
Ume, Monday, August 19, 1968.
Tenders will not be
received at the Treasury Del>artment, Wash1ngton. Each tender must
be for an even mu1t1p1e 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 decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
fONarded 1n the special envelopes which will be suppl1ed by Federal
Reserve Banks or Branohes on app11cation therefor.
up
Banking institutions generally may subm1t 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
~Spons1ble and recognized dealers in investment securities.
Tenders
from others must be accompanied by payment of 2 percent of the face
~ount of Treasury bills applied for, unless the tenders are
accompan1ed by an express guaranty of payment by an incorporated bank
or trust company.
F-1326
- 2 -
Immediately after the closing hour, tenders will be opened at
Federal Reserve Banks and Branches, following which public announcE
ment will be made by the Treasury Department of the amount and pric
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treas
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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on August 22, 1968, i
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 22, 1968. Cash and exchange ten
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 exclude
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereund
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 th
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and th
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
(
-
August 14, 1968
FOR IMMEDIATE RELEASE
SUBSCRIPTION AND ALUYIMENT FIGURES FOR TREASURY'S CURRENT CASH OFFERING
The Treasury Department today announced the subscription and allotment
figures with respect to the current offering of 5-5/8'f. Treasury Notes of Series
B-1974, due August 15, 1974.
subscriptions and allotments were divided among the several Federal Reserve
Districts and the Treasury as follows:
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Total from public
Total Subscriptions Received
$ 1,201,956,000
'8,759,816,000
903,802,000
1,452,656,000
890,739,000
911,562,000
2,726,796,000
632,151,000
313,317,000
647,412,000
638,236,000
4,489,324,000
768,000
$23,568,535,000
Total
Allotments
$ 254,594,000
1,850,789,000
193,709,000
323,078,000
215,284,000
314,204,000
695,769,000
208,694,000
118,655,000
224,775,000
170,565,000
903,079,000
768,000
$5,473,963,000
Federal Reserve Banks and
Goverrunent Investment Accounts
Grand Total
4,811,432,000
$28,'579,967,000
4,811,432,000
$10,285,395,000
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
st.
Louis
Subscriptions from public by investor classes:
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 which submitted certification and received full
----________________________ _
C~ercial banks (own account)--------~otment
ru others----------------------------Total
F-1327
$
122,442,000
10,993,654,000
12,452,439,000
$23,568,535,000
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 2: 30 P. M., E. D. T .
FRIDAY, AUGUST 16, 1968
STATEMENT OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
ON SECOND QUARTER BALANCE OF PAYMENTS RESULTS, 1968
The United States is making very substantial progress
towards achieving equilibrium in its international balance
of payments.
The second quarter results show only a small deficit of
$150 million when measured on a seasonally adjusted liquidity
basis and a large surplus of $1,450 million in the official
reserve transactions basis.
But this progress, however welcome, is unbalanced and
some features may be transitory. It should not and must not
excuse any let up in an all out effort to press forward and
to carry out all the elements of the Balance of Payments
Program announced on New Years Day by President Johnson.
This progress was achieved:
Despite the significant -- and, I believe,
temporary -- deterioration in our trade
account, on which constructive efforts are
now in motion;
Despite the continued large deficit in the
tourist account, which cannot be arrested
or reduced until Congress acts on proposals
before it to finance a comprehensive long
term program to promote foreign travel to
the United States by combined private and
government effort.
A comprehensive program to promote foreign travel to the
United States is called for, among other things, in order that
other sectors of the economy; such as direct investment, do not
carry a disproportionate share of the effort.
F-1328
- 2 The desirability of this travel program is also suggested
by second quarter developments affecting another element in the
accounts - - foreign purchases of U. S. corporate bonds and
stocks.
The capital inflow in the second quarter, resulting
from these portfolio purchases by foreign investors, is the
highest in history for any single quarter. This is not just
a flash in the pan. The inflow from this source has been
increasing over the last year and a half. It rests fundamentally
on the strength and dynamic quality of the U.S. economy and the
confidence of investors the world over in the prospects of this
economy. A factor contributing to this inflow
was the program launched several years ago to promote
foreign investment in U.S. corporate securities, highlighted
by the passage of the Foreign Investors Tax Act.
There were other elements of progress in the capital
account this year. They included:
The reduction in the scale of capital outflows
by reason of the cooperation of the private
business and financial community in the Foreign
Direct Investment and the Federal Reserve Program;
Success in negotiating bilateral arrangements
with other governments to neutralize the
balance of payments effects of u.s. military
expenditures within their borders.
Special Transactions,representing investment in
long-term securities by foreign official holders, are
running somewhat lower in 1968 than they were in a comparable
period in 1967. Investments of this type, while recorded in
the liquidity figures, do not affect the official reserve
transactions basis in any way •
,,,
.......
,...
,,,
"
...1. . . . .' . . . . .' ...
LIQUIDITY MEASURE
On the liquidity measure, our deficit declined by
$510 million, to a deficit of $150 million, on a seasonally
adjusted quarterly basis. The First Quarter deficit of
$660 million was itself down substantially from the Fourth
Quarter 1967 deficit of $1,742 million.
- 3 -
On the basis of a year-to-year comparison, the
Second Quarter Seasonally Adjusted Liquidity Deficit of 1968
was well below the $522 million deficit shown in the Second
Quarter of 1967. On a six-month seasonally-adjusted basis,
the 1968 deficit of $810 million is down $217 million from
the $1,027 million of the first six months of last year.
OFFICIAL TRANSACTIONS
Substantial progress has been shown in the Official
Reserve Transactions measure of our international payments
position. In the Second Quarter, official transactions
showed a surplus of $1,450 million, seasonally adjusted,
a large swing from the $530 million deficit of the First
Quarter and a still larger swing from the Fourth Quarter
1967 deficit of $1,082 million.
On a six-month basis, the Official Reserve Transactions
measure carried a surplus of $926 million as compared
with a deficit in the first six months of 1967 of $2,570
million.
The progress these statistics reveal is primarily
the result of achievements affecting the capital account.
Capital movements, however, are by their nature less
consistent transactions than those of the current account,
such as trade, investment income and tourist expenditures.
Nevertheless, the savings the United States has received
in the direct investment program and in the Federal
Reserve program serve a vital purpose in contributing
to a substantial improvement in our balance of payments
position pending the beneficial results of other
measures designed to improve our current account.
IMPROVING THE CURRENT ACCOUNT
The restoration of a healthy trade surplus is fundamental
to a balanced, long term solution of our payments picture.
Several measures are already launched and under way to
reverse the trend of our balance of trade. The most
important of these is the tax surcharge and expenditure
cut legislation which Congress passed only at the end of
June. No doubt the delay in this measure means that we
will have to recover from a lower point than would otherwise
- 4 have been the case and that the forces of inflation will have
had more time to be at work. Moreover, experience shows
that a flood of imports, once in motion, takes time to
reduce or moderate.
Nevertheless, this courageous bipartisan action
on the part of the Congress in an election year made a
vital contribution to our international financial position.
It demonstrated the capacity of this democracy to do what
is necessary to preserve the position of the dollar.
Passage of the fiscal package led to the outlook for a more
normal condition in our money markets and to heightened
confidence in the long-term appraisal of our stability.
It has permitted restoration of more healthy conditions
for balanced growth. The impact of this action was
especially pronounced abroad, among people who hold our
dollars and who look to us for leadership and prudence in
the management of our financial affairs.
Settlement of the copper and steel bargaining disputes
gives rise to another condition that can do much to restore
a healthy trade surplus. This is the avoidance of work
stoppages or anticipated work stoppages which distort our
normal trade picture by accelerating or adding to imports.
Three other measures, outlined in the President's
program, will help our trade account:
First is the new Export Expansion Facility,
created within the Export-Import Bank, to
expand the export financing opportunities
available to American business.
Second is the expanded rediscount system
put into effect by the Export-Import Bank
to encourage private banks across the
nation to help firms export.
Third is the inauguration of the Joint
Export Association, through which the
Department of Commerce, working with
industry, will serve .to find new exporters
and add to our exporting opportunities in the
future.
- 5 -
These long-term measures could not have had an
effect upon our trade account in the figures we are discussing
today. But we will benefit from them in the future.
In addition, the timing of the Kennedy Round cuts
has adversely affected our trade in the first half of this
year but will benefit our trade position during the second
half of the year. We put into effect the first of five
annual tariff cuts on January 1. Most of Our trading
partners put into effect a double cut as of July 1.
Consequently, Arne rican products will be reduced in price
in our maj or markets during the second half of this year.
However, let me make one thing clear: we cannot
e~ect to feel satisfied with the level of the current
account until we deal effectively with the problem of our
large tourist deficit -- which threatens to become even
larger over the future unless something is done about
it.
With respect to the travel deficit, much remains
yet to be done. We have taken some comprehensive action.
The imaginative recommendations of the President r s
Travel Task Force, headed by Ambassador McKinney were
for the most part, put into effect -- insofar as they
could be -- through administrative authority. But to be truly
effective and positive, a long-term program, designed primarily to
promote foreign tourism in a variety of ways, must be
assured of a sufficient source of funds. This is the
thinking behind the amendment I offered to Senator Long on
August 1 on H. R. 16241, pertaining to the temporary tax
based on expenditures made by U. S. travelers outside the
Western Hemisphere. This amendment would provide for
a portion of the ticket tax revenue (a provision already
passed by the House) and a portion of the expenditure tax
revenue to be placed in a special fund to finance the
travel promotion needed to carry out the far-reaching
recommendations of the Travel Task Force.
- 6 -
GOV~NT
EXPENDITURES ABROAD
The United States must continue to take every step
available,without endangering our national security, to
reduce the impact on the balance of payments of government
expenditures outside the United States and its territorieso
These expenditures have been and must continue to be reduced
or neutralized o
This is an on going, many faceted, programo
For example, Secretary Clifford stated in hearings
in May before the Senate Foreign Relations Committee
concerning the redeployment of troops from Western Europe
to the United States:
"As you may know, at the present time
we are bringing 34,000 of them back, but they
are to be ticketed for use in NATOoooo Now
there will also be a substantial balance of
payments savings as a result of redeploying
this group of 34,000 men and their familieso
An estimated $75 million a year will be
saved by bringing those men backo"
Of course, a
big opportunity to reduce government,
and especially military expenditures overseas, will corne
when the fighting stops in South Vietnam and a transition
to long term security arrangements with our allies in the
Far East becomes possible
0
In the meantime, the Secretaries of State, Defense
and Treasury are Vigor.ously executing the President I s
mandate of last January 1 to initiate prompt negotiations
with our allies to neutralize the foreign exchange costs
of military expenditures abroad by bilateral und;rtakings
for the purchase in the United States of more of their
defense needs, and investments in long-term United States
securities.
- 7 -
Indeed, some of the special transactions to which I
already referred are the result of specific negotiations
with allies abroad o The principle being followed here is
that our allies should not receive windfall balance-ofpayments gains as a result of our force commitments
undertaken in the context of our mutual security arrangementso
Within this multi-lateral policy, which is understood by
our allies, we negotiate, bilaterally, measures to
neutralize the balance-of-payments cost through long-term
investments in U. So securities, to the extent to which more
permanent offsets, such as the purchase of additional
military equipment, cannot be arranged o
Directives by the President issued earlier this
year to reduce the foreign exchange costs of civilian
government expenditures are also being implemented
0
The tying of bilateral aid programs to purchases
in the United States has been further tightenedo
The reduction in numbers of people serving at our
embassies abroad is already well underway; a first bite
has been taken and a second is underway
This action should
be reflected in reduced government expenditures abroad both
in this and in later yearso
0
SUMMARY
The second quarter results and the outlook ahead
underscore several pointso
The first is that President Johnson's New Years Day
Action Program to bring our balance of payments to -- or
close to -- equilibrium in the year abroad is producing
results o
- 8 His statement then that "The need for action is a
national and international responsibility of the highest
priority" has been clothed wi th meaning.
The combined effort of the President and the
bipartisan cooperation of the Congress, exemplified in the
enactment of the Revenue and Expenditure Control Act of
1968, have made the first order of business the defense
of the dollar and the restoration of a balanced non-inflationary
economy
0
The second point is that, although various elements
of the Action Program are being accomplished, there are some
areas in which the nation is only getting underwayo
As the experience of other years has proven, this in
not enough to assure balance of payments equilibriumo All
not one -- or two -- of the elements of the Action Prog-;;rn:;:
must be carried through including:
responsible action by labor and management in
wage price decisions, which so directly affect
our competitive positions at home and in world
markets;
the temporary measures concerning direct
investment, lending by financial institutions,
travel abroad;
the reduction and neutralization of the foreign
exchange impact of government expenditures abroad;
the encouragement of exports through special measures
for export promotion and financing, and the reduction
by vigorous negotiating efforts, of non-tariff barriers
to the export of our goods and the disadvantages to
our trade arising from differences among national tax
systems.
The promotion, by well designed, comprehensive
long-term programs, of combined private and
public effort to increase foreign investment
and travel in the United States.
.
The program to date demonstrates that bold, wLse action can
lnfluence events and developments
Complete pursuit of the full
P:ogram, in full bipartisan partnership, is the only course that
Will achieve and maintain equil ibrium in the U. S. balance 0 f
payments and thereby assure the soundness of the free world
monetary 8y stem
0
0
TREASURY DEPARTMENT
-
(
roB BEr·1ASI 6: 30 P.J(.,
19, 1968.
!!!WI Aupat
BBSUL!S OP
!RIASUBI I S WDXLY BILL OJ'tlQttBG
'DIe 'lftasury DepartEnt amaOUDced that the teDders for two leriea of !reasUl7
to be aD add1t1oDlLl issue of the b111s dated May 23, 1968, and the
other seriel to be dated August 22, 1968, which were ottered on August 1", 1968, were
opeDed at the J'ederal Resene Dants today. !\Inders vere iurlted tor $1,600,000,000,
at tbereabouts, of 91-Qay billa aD4 tor $1,100,000,000, or thereabout., of 182-da,.
bill.. b cleta!l. ot the two seriel are &8 follows:
billa, ODe aeries
BAD or ACCIP'lID
caR1'l!IVI lIDS:
91-dB,. !reasurJ b111s
:
- turiJ:!g BOYeIIlber 21, 1968 :
Approx.
Price
98.713
98.699
98. 70S
Bisb
Low
!"rap
8lj ot the 8lIOUDt
,~
ot
182-4&1
~eaBurJ
_..;;-~tur::::;:.;:1ng:::;a-=J'e;;.;;.::b=-ru&rJ=-!~.;;.20;..ot",-=1~96_9~_
Equ1v.
ApprO%. Equiv.
Annual Bate
S.091J
S.147~
S.12~
bills
Price
97.380
97.352
97.361
1:1
AnImal Bate
5.182J
S.2~
S.22~
1:1
ot 91-da7 bills bid tor at
tbe low price vas accepted
the &IIOUDt of 182-dQ bills bid tor at tbe low price vas accepted
IDmL 2DDERS APPLIED FOB AIm ACC&P'l.£D BI IEDDAL BESERVE DIS'lmCm:
Distr1ct
Boston
JevYort
Philadelphia
ClevelaDd
Ricbaond
Atlanta
Chicago
st. Louis
M1Jmeapo118
bas Ci't7
r..J.laa
Sail lrancisco
~
APll1ed For
•
Acce~ted
23,693,000 $3,693,000
1,792,857,000
25,877,000
20,630,000
20,768,000
Irl,S83,000
139,042,000
4.0,188,000
20,418,000
24:,809,000
22,563,000
108 2 965 z000
1,206,877,000
13,877,000
20,630,000
1',768,000
32,123,000
132,212,000
27,208,000
19,728,000
22,114,000
13,563,000
73. 385 zoo0
$2,281,193,000 $1,600,178,000
·•
·•••
••
••
·••
··
AEElied Por
13,237,000
1,621,454,000
12,"19,000
33,663,000
9,39',000
30,235,000
107,4.68,000
20,750,000
18,257,000
23,059,000
20,106,000
123,! 293 z 000
•
!I $2,033,335,000
AcceEte4
12,237,000
8-'6,034,000
4,419,000
25,663,000
3,394,000
19,735,000
66,388,000
11,'10,000
17,237,000
13,04.9,000
10,106,000
•
70,343,000
$1,100,015,000 ~
!I aclude.
$254:,130,000 DODCaapetitift tenders accepted at tbe aftrag8 price ot 98.705
~ Includes .$117,556,000 aoaccapetitift teDclers accepted at the average price of 97.361
bae rate. are oa a bank di.eomat basis. Dae equivalent coupon iSlue 7ields are
5.26j tor the 91-c!q bills, aDd 5.~ tor the le2-day billa.
F-1329
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE JOSEPH W. BARR
ACTING SECRETARY OF THE TREASURY
BEFORE THE
DEMOCRATIC PLATFORM COMMITTEE
STATLER HILTON HOTEL, WASHINGTON, D.C.
TUESDAY, AUGUST 20, 1968. 9:30 A.M. EDT
The traditional approach to adopt in presenting an
account of the Administration's stewardship over the
American economy is to detail the progress that has been
made during the past eight years.
just such a progress report today.
I intend to submit
However, I recognize
that a mass of statistics can become meaningless, so I
will do my best to spell out what the progress of the past
eight years really means to each of us and to the future
of our country.
To temper the report I am going to present, I must
emphasize one point right at the start:
The economic
growth we have achieved is extraordinary, but we have far
too much yet to be done.
Our prosperity has not solved and
will not solve all of our problems.
F-1330
The needs of our urban
- 2 ghettos are urgent and awesome; there are tremendous pressures
on our public services -- health facilities, public safety,
transportation systems, and the like; too many of our young
people still are educationally deprived; we need to improve
dramatically the total environment of rural life in this
country; and this brief listing is far from exhaustive.
If anything, the increasing affluence of the Nation as
a whole has made these problems all the more striking in
contrast, and all the more intolerable.
Moreover, when at
long last our deprived fellow-Americans begin to move toward
full participation in the benefits of American life, they
understandably become impatient for more rapid progress.
Social conflict and friction thus result in part from the
very fact of progress.
This same economic progress, however,
can provide us with the resources to tackle these problems,
and with this in mind, let me turn to the record.
Do you remember the boast of Soviet Premier Khruschev
in the late fifties that he would "bury us" economically?
Do you remember the concern that was often expressed
about the sluggish United States growth rate and the envious
appraisals of the growth rate of Western Europe and Japan?
- 3 -
Do you remember the serious concern over the increasing
frequency and length of recessions and the upward drift of
the unemployment rate?
Do you remember the concern over the "technology gap"
and the "educational gap" that gripped the Nation after
Sputnik I was launched1
Do you remember the gloomy predictions that automation
would leave a sizable proportion of our work force permanently
unemployed?
These worrisome issues have disappeared in the past
7 1/2 years -- in large part becuase of the astounding performance of the United States economy_
We do not hear today
the invidious comparisons between U.S. and foreign growth
rates.
Instead we read of the difficult problems that the
Soviet Union and other Communist Bloc countries are encountering in trying to allocate their resources and maintain
reasonable growth patterns.
The "technology gap" has been
reversed with a vengeance; European writers are now warning
that the inventiveness and the managerial skill of u.S. firms
can spell eventual American domination of the free world's
industry.
Little credence is placed in the possibility of
massive technological unemployment.
undergone a revitalization.
Our educational system has
U.S. productivity has bounded
- 4 sharply upward.
In short, while the American people certainly Itill face
problems, the economic gloom of the fifties il not one of them
Our growth record hal made thoae issues dead issues.
Letts first look at .the pattern of the 8ixties a8 compare
with the pattern of the fiftie8:
1961-1 (or Feb.196l)
to
1968-11 (orJune1968)
Indicator
Percent
change
Absolute
change*
1953-1 (or Feb.
to
1960-1I(orJune
Absolute
change.
Perl
- chi
Gross national product
Current prices ..........•.
+$348 bile
+69.l~
+$141 bile
+3
1968-11 prices ...•........
....$267 bile
+464
+$94 bile
+1
Industrial production ...... .
Employment
..... ... .. . . .. . . . .
Unemployment rate ..•........
.0.
of months below
4~
+58.94
+10,456,000
+15.94
+11
-+4,283,000
+6
down from 6.94 to 3. S1 up from 2. 6~ to
....
19
30 months
month!
Personal income .•...........
+$272 bile
+66.8%
+$116 bile
+4(
. ..
+$232 bi1.
+65.24
+101 bile
+4(
After-tax personal income for
family of 4 .............. .
+$3,908
+50.34
+$1,488
+2~
After-tax per capita income
(1958 prices) ............ .
+$560
+29.31
+$157
+9
After-tax corporate profits .
+$26 bile
+106.14
+$6 bile
+2f
Met farm income ............ .
~2.0
+15.6~
-$1.4 bile
.l(
After-tax personal income
.umber of recessions ....... .
*Current prices except as indicated.
bile
.one
Three
- 5 -
Just what have we done with the enormous income that we
have earned during the past eight years?
Have we "blown it"
on profligate spending or have we invested with some degree
of wisdom and prudence in our people and our economy?
The
record is quite clear that while we have lived quite a bit
better
our expend.itures on personal consumption have ex-
panded by about 41 percent
still we have made huge invest-
ments in our people and in our productive resources.
We have
thus laid a firm foundation for continuing growth in this
country:
our total public and private expenditures on
education have risen from $27 billion in 1960
to $52 billion today.
our total public and private expenditures on
health were $27 billion in 1960 and are
$50 billion today.
our total annual investment in manufacturing
has increased from $14.5 billion in 1960 to
$27.5 billion today.
our total annual investment in farm plant and
equipment has increased from $4 billion in 1960 to
$6.1 billion today.
- 6 our total annual investment in private transportation has increased from $3 billion in
1960 to $5.9 billion today.
the liquid savings of the American people was
$399 billion in 1960 and is $677 billion today.
the net working capital of our nonbank business
institutions was $132 billion in 1960 and is
$205 billion today.
the resources of our commercial banks, savings
and loan institutions, and mutual savings banks
were $370 billion in 1960 and are $666 billion
today.
The liquid financial assets of farmers were
$18 billion in 1960 and were $22 billion in
early 1968.
I believe that you can see from these figures that although
as a people we are spending more and living quite a bit better
still we seem to have shown the good sense to plow back
huge sums into education, health, plant and equipment, and
savings.
These are the resources that we must have if we are
to continue to grow.
- 7 -
Still another way to reduce the economic record of the
past 7 1/2 years to human terms is to look at what has
happened to the American people.
Keither I nor my colleagues
in the area of Federal finance make any claim to sociological
expertise, but it has become abundantly clear that the United
States economy firing evenly on all eight cylinders is a
mighty engine of social progress.
It. offers better jobs and
higher incomes to millions of workers.
of the unemployed into productive work.
It draws millions
It enables millions
of young people to complete their education, and encourages
them to seek more education.
I would hasten to say again that growth alone will not
solve all our problems.
On the contrary, growth has created
and accentuated quite a few problems.
But the record is clear
that our economic growth has been the most powerful social
weapon at our disposal.
In addition, this growth provides
the revenues to enable the government to attack those areas
of social disadvantage that are not met directly by the
expansion of the private economy.
It has given millions of
Americans a new opportunity for full-fledged participation
in our economic system, and at the same time it has given
government added resources to aid those who cannot achieve
such participation.
-8-
From 1960 to 1967:
Thirteen million Americans have moved out of
the poverty category.
No present government
social program alone could have produced this
result.
It required the persistent and strong
expansion of the entire economy.
Eleven million more families achieved yearly
incomes above $5,000.
Eleven million more families achieved yearly
incomes above $10,000, 2 1/2 times the number
in 1960.
The overall percentage of workers without jobs
was cut from about 7 percent to 3.7 percent.
Of course, these are overall figures, and we know
that we have not eliminated the problem of racial
discrimination.
Have black Americans advanced as a
result of prosperity?
The fact is that they have.
Consider, for example, that between 1960 and 1967:
The proportion of nonwhite families earning
over $8,000 (adjusted for price changes) more
than doubled -- from 13 to 27 percent.
- 9 -
The percentage of nonwhites in poverty dropped
from 55 to 35 percent.
The nonwhite jobless rate dropped from a 12.4
percent high, reached in 1961. to 6.8 percent.
The number of nonwhite white-collar workers,
craftsmen, and operators jumped 47 percent.
Over half of all nonwhite workers now hold
these better-paying jobs.
The education gap between young whites and
nonwhites, as measured by years of school
experience, has been cut to less than onehalf year (12.2 years for nonwhites compared
to 12.6 for whites).
The percentage of high
school graduates among young nonwhite adults
has jumped from 39 to 58 percent.
This record did not just happen -- it was consciously
planned and carried out.
Everyone is in favor of prosperity,
but President Kennedy and President Johnson did something
about it.
They accepted the challenge never accepted before
in this country -- to operate a full-employment economy, to
realize the full potential of our economic system -- and they
made this policy work.
- 10 Above all, both Presidents demonstrated a high degree
of courage -- courage to abandon shibboleths and slogans and
to apply to the Nation the economic policies on which
reasonable men had long agreed.
It took courage in 1963 and
1964 to argue that the burden of Federal income taxes was
excessive and could be reduced with a resulting gain in our
total output.
It took courage in 1967 and 1968 to argue that
the economy was under dangerous inflationary pressures and
that a tax increase was needed to bring our growth rate back
to a more normal pace.
Let me hasten to add at this point that we reduced
Federal income tax rates by about 20 i. in 1964 and increased
these rates by 107. this year, so even with the recent tax
increase we are significantly below the rates that prevailed
in 1961.
The social benefits I have listed have not been achieved
by a redistribution of existing income.
We have not reduced
the living standard of the middle-income and upper-income
families to raise the living standard of the poor.
Instead,
to the benefit of all income groups, we have expanded the
~
economy -- we have baked a bigger pie that can be cut into
more slices, including some slices to be used by government
- 11 to attack the deepest and most difficult of our social problems.
I will defer to my colleagues in other departments
for a fuller discussion of the uses to which government has
been putting its port ion.
This discussion brings us to a question with two parts:
(a)
What will the Mation look like four years from
today if we continue on the course charted in 1961, which
was designed to utilize our human and material resources to
the fullest and give e"\iery American an opportunity to
participate in the benefits of the U. S. economy?
(b)
What will be the position of the United States four
years from now if we relax this effort and return to the
policy of allowing the economy to fall into the periods of
recession and woefully slow growth which prevailed through
much of the fifties?
If this Nation decides to continue our full-employment
policies, then I believe it can safely grow at a rate of 4
to 4 1/2 percent over the next four years, with reasonable
price stability.
This would give the country a gross
national product in excess of $1 trillion in 1972 (at todayfs
prices).
A return to the 2'.2 percent rate of growth that
characterized the fifties would yield a gross national product
- 12 in the range of $900 - $925 billion (also at today's prices)
in 1972 -- a difference of $75 to $100 billion.
The differences might seem small at first glance -- say,
a 2 1/4 percent growth rate as against 4 1/4 percent, and
a 5 1/2 percent unemployment rate as against 3 1/2 percent.
But if we choose the slower path, we are really deciding that:
--
by 1972, three million workers who could have
had useful jobs may instead be unemployed.
over the next four years, $150 - $200 billion
of additional income that the American people
could have earned will instead be lost.
over the same period, $30-40 billion of additional
Federal revenue that could have been available
will instead be foregone.
I can assure you that these Federal revenues will be of
crucial importance to the next President of the United States.
The increased revenues that would flow from the faster growth
pattern would probably mean that the next President would
have some leeway in his budget.
He would have the financial
resources to give him options to launch a massive attack on
the problems of the cities, to consider a plan of income
maintenance, or possibly to reduce taxes.
- 13 With the slower rate of growth I would assume that the
next President will have little or no room to maneuver.
options will be foreclosed.
His
It will probably be impossible
to consider expanding present social programs, creating new
programs, or cutting taxes.
All of these assumptions of course are subject to a basic
qualification:
none of us can predict the political situation
in the world four years from now which will dictate our security
posture.
For example, in the next few years the cost of our
security arrangements and a great deal more will depend on
the Soviet response to NATO's recent proposals for balanced
and mutual force reductions and arms limitation understandings
in Europe.
International Issues
Our international financial and economic policies in
the past eight years have been a logical development from
the basic policies laid down at the end of World War II
and pursued under Presidents Truman, Eisenhower, Kennedy and
Johnson.
These policies, stroply expressed, have been directed
towards building a soundly growing world economy in which trade
and funds can move freely among nations.
- 14 During the past 7 1/2 years there has been a shift in
the programs in this area, but a shift that was contemplated
in the basic policy in 1945.
We moved from rebuilding, pro-
tecting and developing large segments of the free world almost
single-handedly, to an emphasis on cooperation with the nation
that have staged such a dramatic recovery.
Let me list a few
areas of cooperation.
The General Arrangements to Borrow, which gave
a much needed back-stop to the funds of the
International Monetary Fund.
The huge currency swap networks, now totaling
almost $10 billion.
The development of "Special Drawing Rights" to
provide for orderly expansion of world monetary
reserves.
The cooperative arrangements to offset the
foreign exchange costs of our military deployments.
The reciprocal reduction of tariff barriers
in the "Kennedy Round".
- 15 The expansion of multilateral aid to developing nations through the Inter-American Development Bank and the International Development
Association, andfue creation of the Asian
Development Bank.
The cooperative efforts to assist nations that
have found themselves in temporary monetary
difficulties -- Canada, the United Kingdom,
Italy, and, most recently, France.
I must take particular note of the agreement on special
drawing rights.
This historic development, at
took years of patient negotiation and study.
u.s.
initiative,
It holds out
promise for the first time that eventually the world economy
can be freed from the shackles of a limited gold stock and
gold production and an undue reliance on national currencies.
It means that the world now has a way to expand trade and
finance among nations with confidence that monetary reserves
will grow sufficiently to make this flow of trade and finance
Possible.
The progress we have made in recent years has occurred
during a period of formidable pressures on the international
financial system and on our own balance of payments.
The
- 16 -
year 1961 opened in an atmosphere of intense speculation
against the dollar.
It was Canada's turn for trouble in
1962; Italy in 1964; the U.K. in 1965, 1966 and 1967; and
Canada and France this year.
Last fall, there was intense
speculation against several principal currencies.
Any of these crises in an earlier period could have
ripped apart the international monetary system.
The fact
that they were contained is a tribute to the institutions
that have been established and the cooperation we have
managed to develop.
Even though we are presently in a period of relative
calm, let no one assume that we have solved our own balance
of payments problems or the problems of the international
monetary system.
~ation
This is far from being true.
But as a
we have recognized the problem; the President laid
down a forceful corrective program on January 1, the
Congress
has reponded with a program of fiscal responsibility, and our
results so far this year indicate that we are moving back to
the pattern of improvement that marked 1965 and 1966.
I know that our friends in the Republican Party will
forgive me if I steal a phrase from their platform.
Underlyinl
- 17 the achievements of the last eight years has been a pursuit
of the "partnership principle."
Clearly this "partnership
principlell holds out the bes t hope for the future in approaching international trade and investment. the financial aspects
of mutual security, assistance to the developing nations,
and international monetary arrangements.
-000-
APPE)I])IX
THE RECORD
Economic Growth
There have been no recessions during the period beginning in early
1961. Indeed, the 87 months of uninterrupted economic growth from February
1961 to June 1968 is the longe st period of continuous expansion recorded in
the annals of the Nation. By contrast, the period from 1953 to 1960 was
interrupted three times by recessions -- in 1953-1954, 1957-1958 and 19601961.
The prosperity of the 1960' s demonstrates what our dynamic free
enterprise economy can achieve when it is supported by appropriately flexible
fiscal policies, together with supportive monetary policies which assist the
fiscal actions in achieving their objective s. In February 1961 the unemployment rate stood at 6. 9 percent and there was a gap of nearly $50 billion
between the amount of goods and services the economy was actually producing
and the amount it was capable of producing at full employment. Fiscal
measures were taken to stimulate economic expansion.
The 1962 tax changes, which strengthened investment incentives
by liberalizing depreciation and by introducing a tax credit for
investment spending.
The 1964 tax bill, which added about $14 billion of purchasing
power to the economy by cutting personal and corporate income
tax rates.
The excise tax reduction in mid .. 196 5.
In response to these actions, the economy expanded -- slowly at first
and then more rapidly - - reaching an unemployment rate of 4 percent by
late 1965, When expansion became excessively rapid, generating inflationary
pressures in late 1965 and early 1966 and again in 1967-1968, measures of
fiscal restraint were put into effect, including
The introduction of graduSl-ted withholding under the personal
income tax, a speedup in corporate tax collections, and suspension
of the inve stment tax credit.
- 2 -
The enactment in mid- 1968 of a 10 percent surcharge on
individual and corporate income taxes, coupled with a cut in
Gove rnment spending.
As a result of the interaction of these fiscal actions with the marvelous
productive energies of the American economy, the total growth of GNP in
the period of seven and one-quarter years between the first quarter of 1961
and the second quarter of 1968 (expressed in constant prices of today in
order to eliminate the effects of rising prices), amounted to $267 billion.
This gain of 46 percent was
Larger than the total real output of the Nation as recently as
1937 (expressed in today' s prices).
La rger than the gain we had achieved in the preceding 11 years.
Two and a half times the percentage increase recorded in the
preceding seven and one-quarter years (from the fourth quarter
of 1953 to the first quarter of 1961).
If we had again followed the same low road of the 1953-1961 period,
our output today would be about $120 billion lower than it actually is, and
we would have lost a total of $420 billion of output (valued at today's prices)
over the 1961- 68 pe riod. If we were to follow this 1953- 61 low road in the
next four years, we would lost $180 billion as compared with the alternative
of growing at 4- 1/4 percent, the anticipated rate of growth of output at full
employment.
From 1953 to 1960 the U. S. stood absolutely last in the rate of growth
of per capita GNP when compared with the countries of Western Europe and
Scandinavia, along with Japan, Canada, Mexico, and Australia. During
the 1960' 5, however, the U. S. rate of growth hnproved markedly relative
to this same group of countries. Invidious comparisons of U. S. and foreign
growth -- corrunon in the 1950's -- ceased, to be replaced with concern
about the perforInance of some European economies and much publicity
about the re source allocation problems and general sluggishnes s of the
U. S. S. R, Czechoslovakia, and other Communist- bloc countries.
- 3 -
!.mployment
Between February 1961 and June 1968 total civilian employment increased by 10.5 million persons
more than today's combined employment in the New York and
Chicago labor markets, and
far more than the increase of 4. 4 million persons in the preceding
7-1/2 years.
Enough new jobs were created to absorb an increase of 8. 6 million in the
labor force and to reduce unemployment by 1. 9 million. Unemployment
fell relatively slowly at fir st from the high level of early 1961, but the improvements continued and have been sustained. The unemployment rate,
which equalled 6.9 percent in February 1961, averaged 3.8 percent in 1966
and 1967, and was 3.8 percent in June 1968. In contrast, during the period
1953-60, the unemployment rate rose from 2.9 percent at the beginning of
1953 to 6.6 percent by the end of 1960, and reached a high of 7.5 percent
during the 1958 recession. The unemployment rate averaged more than
4 percent in every year from 1954 to 1960.
Prices
Avoiding inflation is a primary goal of our economic policy. Inflation
is capricious -- it redistributes income and wealth from those whose income
and wealth are fixed in money terms to those whose income and wealth
respond to rising prices. The aged, the poor, and holders of fixed interestbearing assets suffer in particular.
Despite the considerably faster pace of economic growth since early
1961, our overall price record is at least as good as in the period preceding
1961. In the seven and a quarter years from the first quarter of 1961 to
the second quarter of 1968
Wholesale price s rose by 7-1/2 percent, compared with a 9 percent
increase in the previous seven and one-quarter years.
Consumer prices rose 16 percent in the more recent period,
11 percent in the earlier period.
The most comprehensive price index, the "GNP deflator, II rose
16 percent in the most recent period and 18 percent in the earlier.
- 4 -
The overall behavior of prices during the 1961- 68 period thus compares
favorably with previous experience. But our price performance has not
been uniform. In the fir st 4 year s of the expansion up to late 1965, costs
and prices remained relatively stable. More recently. however, our price
record has been much less satisfactory. In part, the recent inflation can
be attributed to an excessive rate of expansion which has been outrunning
the growth of our capacity to produce. The 10 percent tax surcharge
enacted in July is de signed t~ counteract the se excesses. It should enable
us to achieve a more orderly growth, thereby in due course checking the
inflation.
Since 1960 the United States has had a much better record of price
stability than most other leading industrial nations. On the average, the
21 other nations of the OECD experienced a 46 .percent increase in consumer
prices since 1960, while U. S. prices rose only 17 percent, as indicated
below. Even in the most recent two years, U. S. prices have risen less
than in most of the other OECD countries.
Consumer Price Index
for second quarter 1968
(1960=100)
United States . . . . . . . . . . . . . . . . . . . . . . . . • .
Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luxembourg, Germany, Belgium .•......
Switzerland, Austria, Portugal,
Netherlands, United Kingdom,
France, Sweden, Italy, Norway,
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan, Turkey, Denmark, Spain . . . . . . . .
Yugoslavia, Iceland . . . . . . . . . . . . . . . . . . . .
117
117
119
120-129
130-139
150-169
Above 200
- 5 -
Balance of Payments
In the early 1950' s the United State s had a strong balance of payments
position and the U. S. dollar was without equal among world currencies.
That strength was eroded as the 1950' s progressed. We developed a
balance of payments deficit (on a liquidity basis) which averaged $1. 5
billion per year from 1953 to 1956. Beginning with the establishment
of currency convertibility in Europe in 1958, the United States deficit
increased ominous ly. Thus, in 1961 we we re confronted with a se rious
deterioration of the U. S. Balance of Payments, which showed deficits
of $3.4 billion in 1958, $3.9 billion in 1959, and $3.9 billion again in
1960.
From 1960 to 1965 the deficit was reduced primarily through a series
of policy actions including:
Measures to raise short -term interest rates to attract and
hold mobile capital in the United Stat e s.
Voluntary restrictions in corporate investment abroad and
bank lending abroad.
Enactment of the Interest Equalization Tax in 1964.
These measures had notable success and in 1965 and 1966 the deficit
had been reduced to about $1. 3 billion. In 1967, however, the international
monetary system was shaken by the devaluation of the British pound sterling
and some other currencies and by monetary speculation following therefrom.
The United States balance of payments, primarily reflecting these developments, recorded a deficit of $3. 6 billion. Contributing to this dete rioration
also was the slackening of Europe's growth, our own rapid expansion, our
large share in aid to less developed countries and our expanding military
commitments.
In 1968 significant improvement has once again occurred. A new policy
program was begun on January 1 which instituted more rigorous controls
of direct investment abroad by U. S. corporations, together with tightened
restrictions on foreign loans by commercial banks. The se measure salone
put strength in the dollar and also improved the workings of the international
monetary system. However, further measures were needed to strengthen
- 6 the system as gold speculation was renewed. In response to this development, an agreement was reached in March 1968 among Western central
banks to establish a two-price system for gold. This decision assured
the private demand for gold would no longer drain away international
monetary reserves.
In the immediate future, the tax surcharge which went into effect
In July should have further beneficial effects on the U. S. balance of payments and through it on the world monetary system. Excessive increases
in incomes and prices will slow down, cutting the growth of our imports
and making our exports more competitive. Nevertheless, restoration of
equilibrium in our balance of payments without resort to restrictions on
the free inte rnational movement of capital is a task that will continue to
require imagination and ene rgy.
Throughout the 1960's the United States has worked cooperatively
with othe r c ountrie s to strengthen the inte rnational financial and trade
system. In 1967, the Kennedy Round tariff negotiations were com.pleted
and steps toward the creation of a new form of international liquidity, the
Special Drawing Rights, we re taken. The se have been signal achievements
and point the way for our tasks in the future.
Allocation of the Growth Dividend
The fruits of economic growth have been used for a wide variety of
useful purposes.
The 46 percent expansion of our real output over the last
seven and one -quarter years reflects increased real purchases by consumers, by business, and by governments:
Raising Arne ricans' living standards, real pe rsonal
consumption expanded by 41 percent;
Increasing and modernizing the productive capacity of
American industry, real business fixed investment
increased by 68 percent;
Meeting the public needs of our citizens, real purchase s
of State and local governments grew by 52 percent;
Strengthening our defense and the development of our
Nation, real Federal Gove rnment purchase s expanded
by 53 percent.
- 7 -
• All industrie s benefited from. the se growing dem.ands:
Manufacturing production rose 61 percent;
Mining output gained 26 percent;
The output of utilitie s clim.bed 68 pe rcent;
Agricultural output was up 11 percent.
Growth of Inc om.e s
This added production provided growing incorn.es for all groups of
Americans.
Total wages, salaries, and other compensation paid to workers
and executives grew by 72 percent, or $205 billion -- an amount
more than double the Nation I s food bill in 1965.
Owners of business have benefited, too.
Corporate profits rose 106 percent afte r taxe sand 102
percent before taxes; dividends advanced 81 percent;
and the value of outstanding shares clirn.bed about $460
billion, or 85 percent.
Profits rose every year from 1961 through 1966; there
had not been two consecutive years of marked increase
through the decade of the If ifties. Although profits
dipped in 1967, they rebounded sharply in early 1968.
Despite persistent problems in our agricultural sector, farm
income increased 21 pe rcent from 1960 to 1967, while the
value of total farm assets climbed 38 percent. Income per
farm rose 53 perc,ent.
The earnings of nonfarm unincorporated businesses and the
independent professions rose 38 percent from the first
quarter of 1961 to the second quarter of 1968.
- 8 -
The 10.5 million jobs that were created by economic expansion
between February 1961 and June 1968 were widely shared by all classes
of society.
Nonfarm payroll employment has increased 27 percent, including the following gains in various areas of the economy:
Percentage
Increases!.!
Manufacturing • • • . • . . . . . . .
Construction . . • . • • . . • . •
Transportation and public utilities . • • •
Wholesale and retail trade . . . •
Finance, insurance, and real estate
Services and miscellaneous.
Federal Government . • • • •
State and local gove rnments.
23
14
11
. .'
...
!/
February 1961 to June 1968.
25
23
39
25
51
Seasonally adjusted data.
Unemployment rates have fallen for every category of workers
as shown be low:
Unemployment Rate
(percent; seasonally adjus
February 1961
Professional and technical workers.
Manage rs, officials, and proprietors.
C Ie ric a 1 w 0 r ke r s. . . . .
Sale s worke rs
Craftsmen and foremen
Operatives . . • •
Nonfarm laborers
Service workers.
Farm workers . . .
........
....
2. 1
2.0
4.6
4.6
6.8
10. 8
14. 1
7.2
3.0
June
1.
2.
3.
2.
4.
7.
5.
2.
The marked reduction in unemployment was felt all across the NatioJ
In June 1961, 88 of the Nation's 150 major labor market areas had
unemployment rates 6 percent and above; only 11 had such high
rates in June 1968.
- 9 -
Social Progre s s
-
Dr. Otto Eckstein once stated that lIthe mightiest engine of social
reform is the U. S. economy operating at full employment and hitting
smoothly on all eight cylinders. 11 This philosophy has been the basis
of many of the policies of the Kennedy/Johnson Administrations since
1961.
Between 1960 and 1967:
Thirteen million Americans have moved out of poverty.
Nearly 11 million more families have achieved yearly
incomes of $10, 000 or more, two and a half times the
number enjoying such incomes in 1960.
The proportion of nonwhite families earning $8, 000 or
more (adjusted for price changes) doubled -- from 13
to 27 pe rcent.
The nonwhite jobless rate dropped from a 12.4 percent
high, reached in 1961, to 7.4 percent. The rate for nonwhite married men shrank from 8 to 3.2 percent.
The number of nonwhite craftsmen, white -collar workers,
and ope rators jumped 47 pe rcent. Ove r half of all nonwhite
workers now hold these better paying jobs.
Between 1960 and 1968:
The percentage of nonwhites in poverty dropped from 55
to 35 percent, and the proportion of those living in large
city "pove rty areas 11 shrank from 77 to 56 pe rcent.
The education gap between young whites and nonwhites has
been cut to about one -half year of school experience (12.2
years for nonwhites compared to 12.6 for whites). The
percentage of high school graduates among young nonwhite
adults has jumped from 39 to 58 percent.
Of course, economic growth alone cannot provide the material benefits
to which all our citizens are entitle,d. Economic expansion can provide
job Opportunities. But such opportunities are of no avail for the person
who, because of advanced age, physical infirmity, or inadequate
~ocational skill, lacks the ability to putsue productive employment
III a competitive economy. Thus, while the brisk demand for labor
generated by the high-employment economy is the single most important
- 10 -
force operating to break down social barriers to employment, we would be
singularly obtuse if we permitted our commitment to social and racial
equality to go no further than the maintenance of general prosperity.
Accordingly, in addition to our actions to promote economic growth and
high employment generally, we have launched a further two- pronged attack
on poverty. On the one hand, we have developed programs - - the Job
Corps, Program Headstart, the Manpower Development and Training Act,
the "Upwa rd Bound" prog ram - - de signed to provide training or upgrade
the skills of members of poor families who are working or potentially
capable of working, or who will be entering the labor force in the future.
On the other hand, we are also attacking poverty through programs providing income security for those unable to benefit from training programs -the unemployed, aged, disabled, and families where the father is absent.
Social Security retirement benefits were raised in 1961, 1965, and 196
and Social Security coverage has been extended until virtually all of the labc
force is covered. Medicare benefits were made available to the elderly
beginning in 1966. Average benefits for the two major public assistance
programs -- aid to dependent children and aid to the blind -- increased
faster (in real terms) during 1961-66 than in the period 1953-60.
Federal spending on health, education, and welfare has expanded from
$4 billion in fiscal 1960 to nearly $20 billion in fiscal 1968. It is obvious
that this almost fourfold increase was greatly facilitated by an expansion
of Federal revenues from $92-1/2 billion in fiscal 1960 to $153-1/2 billion
in fiscal 1968 - - the product of a steady and vigorous economic growth,
despite an approximate 1/5 decrease in income tax rates. Had the economy
merely continued the sluggish economic growth of the 1950' s, the revenues
simply would not have been available to finance the imaginative new social
programs of these years.
Together, the strong advance in the economy and the new social progra
have rescued many millions of AInericans from poverty and hardship. The
have reduced the rates of ' infant and maternal mortality, raised school
enrollment and school completion rates. They have allowed millions more
to attend college. And they mean a lot of things that can't be measured in
statistics - - dignity, pride, and hope.
The Tax Burden in the U. S.
The achievements in growth, employment, and social progress during
the 1960's have not resulted in a rise in the aggregate burden of Federal
taxation. The ratio of Federal receipts (personal and corporate income
- 11 -
taxes, payroll taxes, indirect business taxes and contributions to social
insurance) to GNP remained unchanged at just under one-fifth from 1960- 67.
Total government receipts -- Federal and State-local -- did rise relative
to GNP, but only because State and local receipts rose from 8.6 percent to
9.6 percent of GNP.
Compared with other advanced, industrialized countries, the U. S.
tax burden is low. In terms of total revenues (Federal, State, and local)
as a percent of GNP, the U. S. in 1965 ranked fourteenth among 18 OEeD
countries. The ratio was 27.6 percent in the U. S. compared to the 43. 6
percent for Sweden, which had the highest ratio.
TREASU1{Y DEPARTMENT
HJLSH1.NGTON
HEt-ir'lliKS OF' TH01'1AS
~.r.
v!OL?E
DIRECTOR, OFFICE OF DOY~STIC GOLD AND SILv""ER OPffit\TIOlm
BEFOHE TIm
l'fllH Al{NUAL CONVEl'fl'ION OF TBE
AMERICAN NUlv[ISItl\TIC ASSOCIATION
ET-, CORTEZ HOTEL, SAN DilDO, CALIFORNIA
WEDNESDAY, AUGUST 21, 1968, 10:30 A.M.
~eoday
I am going to talk aoout the domestic gold market and the
Treasury reg111ations governing the productiOl'l, holding, and t1:;';e of gold
by Americans for industrial and artistic purposes as well as the holding
of gold coins.
:F'irst, I would like to give a very brief revie,·r of hOyT the
controls on the use of gold came about, then discuss some of the more
important d.anges over the years vi th particular emphasis on the events sinc:e
last March.
In the broader picture, the responsibjlity of my Office -- the Office
of Domestic Gold and Silver Operations -- is not to make or alter basic
monetary and gold policies.
Our responsibility is to adapt and administer
a set of regulations -- to the extent that regulations are necessary -that are intended to help impl'2I:lent these basic rr.onetary and gold. policies
we hope in an e"£,fective ana. sensible way.
The regulations governing the use and holding of gold "by i\Tr1'2:cic:ans
na.ve, in the nain, been lssued un::ler the authority of the Gold
Act of 1934.
ReSel"fe
The relevan.t part of the.t Act~ for the purposes of this
discussion, gi 7es the Sec:cet8.r'Y of the Treasury authority to l'::-'escribe
cond.itions und.er wbich go:d. rr.ay be acquired an.c. held, transpo:,ted or
treated, imported, exported or earwarked :~or' industri2.1, professioutl
abc. artistic use and for such other purposes as in his judE[JE:ilt are ywt
- 2 -
inconsistent with the purposes of the Act.
Just for the record, the
purposes of the Act, as sta.ted in the prealillile, are to protect the
currency system of the United States and to provide for the better
use of the monetary gold stock of the United S"cates -- a definition which
obviously gives the policy makers a good deal of terri tory hl which to
operate.
Follo"wing the enactment of the Gold Reserve Act a set of regulations
was issued which in substance remained much the same for the next 34 years
until Yarch of this year.
The two key provisions from the standpoiYlt of the
domestic economy were (1) that gold could be privately held and used only
for recognized industrial, professional or artistic purposes as authorized
by Treasury license and, (2) that the U.S. Treasury was prepared to buy from
and sell gold to licensees at $35 an ounce.
We need not here go into the rather complex reasons for the original
enactment of the Gold Reserve Act, vlhich I think have only a limited
relev~nce
to the present situation.
But just to dispose of one point
which is still raised from time to time, the consti tutionali ty of the
~M
Reserve Act and the Regulations issued under it have been affirmed
in the Federal courts at the highest level.
Generally, specific licenses are necessary to acquire, melt, treat,
and to do just about anything with gold.
However, in order to relieve
small business of some of the burdens of these requirements and to
avoid unnecessary expense to the Government in administering a licensing
control over all of the small jewelry manufacturers and scrap dealers
in the United States, specific licenses are not required for users of gold
- 3 in small ammmts.
Hm.rever, these persons ancl firms are
,:ject to
2
quantitative lirnitatior:s on the amm.:mt of gold thEY can t
_d at anyone
time as well as visitation and examj,nation of records by
'casury auditors.
For similar reasons, no specific licenses are
re~uired:'c
natural state provided it is not melted Or treated.
vIi tr
[;old in its
certain
1
limitations fabricated gold and d01[!estic transactions in
.Jld coins of
numismatic value are also exempt from the specific licem
12-'
However, all imports of gold coins
re~uire
a license and
re~uirer.lents.
.r:t~n3es
are
issued only vrhen the coin has been issued for circulatior ..ri thin the country
of issue and is deemed to have exceptional numismatic va]
I think most of you are familiar w:Lth the eeneral
01.
Treasury regulations governing the holding ar.d dealing it
_,
,ine of the
~old
coins.
The
key point is that only gold c oi ns cons id ered to be rare (-
-1
unusual may be
aClluired and held by collectors and dealers v7ho are subje
_,
'co
diction of the United States Government.
~dministration
To simplify the
of this regulation any gold coin made before April
5,
19~
~i
the juris--
s considered
to be rare and may De held and freely traded among collec::rs w:L thin the
United States.
The only gold coins made after 1933 whict ;nsy be held by
collectors are those for which a special determination he
-been made by
the Treasury that the coin is of exceptional value.
Until
1962
the regulations governing gold coins appJ c:::d only to
COins vrithin the United States.
prohibited the unlicensed
In that year amendments
ac~uisi tion
abroad or
ere issued which
importat~n
coins by persons subject to United States jurisdiction.
of any gold
':nport licenses under
this prOvision are issued only when the rare gold coin iY;'~lestioD is
judged to be of exceptional numismatic value and has beer ~_ssued
foy
- 4circulation within the country of issue and not for sale t
the public as
a means of providing gold to the private market or of earr 19 foreign
exchange.
I should point out that in considering whether
coin may be imported, no blanket eligibility is granted fc
made prior to 1933.
particular geld
all gold coins
The Treasury has prepared and distril ,ed a complete
list of all coins for which import licenses have been grar :d.
bas been published in several of the trade publications ar
~ide
for those planning to acquire cOins from foreign
so~
I want to emphasize that the license must be issued before
This list
is a useful
~es.
~he
However,
coin in
question can be purchased from abroad.
One of the basic questions we are frequently asked iE Thy Americans
are not permitted to buy and hold all the gold they want.
Tell, the simple
answer is that the holding of gold by U.S. nationals is fC)idden by law.
The Gold Reserve Act- of 1934, as I have noted, prohibits t
gold by U.S. nationals, except for industrial, professiona
use under regulations established by the Secretary of the
~ holding of
and artistic
~easury.
But this is obviously not the complete answer to this 'iuestion.
~ws
are changed from time to time, and a further query mi It be what
is the justification for continuing this law.
The origina.
justification
for restricting the ownership of gold was that this action .m.s necessary
to protect the currency system of the U. S. and to provide
use of our monetary stock.
today.
Essentially the same argument
,I'
the better
!Jlds true
Private demand for gold throughout the "\t7orld, part c:ularly for
industrial use, is much greater in relation to supply than it was a
generation ago.
industrial users.
The Treasury no longer sells gold from it:
It is
,
therefore , essential to
~eserves
realizin~ o~
to
international
- 5 monetary policy objectives and to preserving the strength of the dolla.r
that as large a share of current gold production as possible be channeled
into legitimate industrial uses rather than into speculative hands.
To
help achieve this objective we ask only that Americans continue to accept
limitations on the ownership of gold that have been in effect for more
than three decades.
This seems a very small sacrifice -- if it is a
sacrifice at all -- to make towards strengthening the U.S. economic
position in the world.
Another question
which I am sure you are interested in -- that I
woald like to ask and answer is why 'Ire have continued our restrictions
on the importation of gold coins.
As I have noted, licenses are required
for the importation of gold coins ani under the regulations these licenses
are granted only when the coin in question is considered to be of exceptional
numismatic value.
Given the general prohibition on the holding of gold by
Americans, the requirement that gold coin imports must conform to some
reasonable standard seems to me rather obvious.
If the Treasury were to
remove all restraints on the import and holding of gold coins and medals
there would clearly be a very large rise in the inflow of cheaply
produced coins and medals which would in reality be nothing more than the
sale of gold at a premium price.
I doubt that anyone who seriously pursues
COin collecting as a hobby or who is a reputable coin dealer would find this
situation to his liking.
If we can agree that in the context of the Dverall gold regulations
some standard must be applied to define an imported coin as a legitimate
collector's item rather than a piece of valuable metal, then the only
- 6 contention is over how the standard is to be defined and applied.
To
thls I can only reply that since the Treasury has the responsibility
for este.blishing this standard we must depend upon the judgment of our
resident experts.
Some of you may consider the standards we have
established as being too high or too arbitrary.
On this point I would
note that our list of eligible coins is not completely inflexible.
We
Mve made additions to this list and in certain cases removed coins that
were formerly eligible.
But in administering a program of this type it
is simply not possible to regularly reappraise the status of all the
gold coins in the world at frequent intervals.
~ll
I can only say that
vte
give careful consideration to any arguments that may be presented
for the inclusion or exclusion of any coin on the eligible list.
In this brief revievt of the history of the Gold Regulations, it is
important to consider the very substantial change that has occurred in
the private supply and demand for gold in this country over the past thirty
years.
When the Gold Reserve Act was passed, and indeed for many years
thereafter, the United States had a substantial surplus of gold production.
~ing
the
y~ars
1934
through
1941,
for example, U.S. gold production
totaled over 32 million ounces, compared with total net domestic commercial
~e
during this period of close to zero.
In other words, for these years
scrap returns were roughly equal to gross industrial use.
offer, therefore, to buy and sell gold at the
The Treasury
$35 fixed price in effect
set a floor on the gold price with the Mint a substantial net buyer of
domestic gold production.
- '7 After World War II the demand-supply situation gradually changed.
Domestic gold production declined to an annual rate of une.
2 million
ounces while the industrial consumption of gold rose steadily.
Late in
the 1950' s the Treasury became a residual supplier rather than buyer of
gold in the domestic market, and since then the gap bet...reen domestj.c
supply and demand has widened.
There have been relatively few significant changes in the Gold
Regulations over the years.
Early in the post-war period controls on
the export of gold were tightened -- the export of fine gold was prohibited
in 1947 -- and by the early 1950's the export and import of gold virtually
ceased except, of course, for monetary purposes.
Although holders of
gold licenses were free to import gold from abroad there was no incentive
to do this because of the relatively favorable Treasury price.
The last
change in the Regulations of consequence prior to this year was in
January 1961 when restrictions were placed on the acquisition and holding
of gold by U.S. nationals overseas.
But basically the system of gold control
remained much the same from 1934 through 1967.
This state of affairs continued until the establishment of the twotier gold system by agreement with the monetary authorities of seven
major industrial nations in March of this year.
As a result of this agree-
ment the U.S. Government made two major changes affecting the domestic
gold market.
First, the Treasury ceased all purchases and sales of gold
in the private market.
And second, beginning on March 18th of this
year gold producers have been free to sell their product virtually anyWhere at home or abroad at the highest price they can get.
There is no
longer a licensing requirement for the export of gold certified as from
- 8 U.S. natural deposits.
As a practical matter, it is unlikely that
much of our gold output will be exported because with the Treasury no
longer a residual supplier, the domestic price tends to be a shade higher
than in the market abroad.
Under the new arrangements it is clear that for industrial purposes
the United States will be a substantial net importer of gold.
With
annual domestic gold production still under 2 million ounces and
industrial consumption in excess of 6 million ounces, the 4 to 5 million
ounce shortfall will have to come from foreign sources.
Now, I would like to briefly review the more important changes that
have occurred in the Gold Regulations, their administration, and the
domestic gold market itself over the past few months.
On March 18th of
this year a domestic industrial gold market to all intents and purposes
first came into being -- at least wi thin the memory of most of us.
I
recall on that day receiving a seemingly endless succession of phone calls
from gold users and producers.
The general theme of the users was
considerable anxiety as to how and where they could buy gold with the
Mint no longer in the market.
Gold producers on the other hand were
equally in the dark as to who buys gold in the United States outside of
llie Mint.
In this situation there was an obviOUS pressing need to establish
as quickly as possible a private trading function in the
I!la~ket
to bridge
the gap between sellers and buyers -- a job that had been largely performed
by the Treasury alone for more than thirty years
From the beginning the Treasury gold licensing system included an
authorization to certain licensees to buy and sell semi-processed gold.
- 9~is
authority was necessary if for no other reason than to accommodate
refiners and fabricators of gold products who acquire semi-processed gold
in one form and sell it in another form still subject to the Gold
Re~ations.
Prior to March 18th there were over 200 Treasury gold
licenses that permitted the holder to buy and sell gold.
With very few
exceptions, however, these licenses were held by small scrap dealers who
were obviously in no position to conduct a large scale trading operation
at least for the foreseeable future -- and none of these licensees prior
to March 18th had any appreciable volume of business in fine gold.
~nt
had handled the great bulk of the fine gold sales.
The
Suddenly on
March 18th the very few refiners and fabricators who had the potential to
acquire and sell a significant volume of fine gold bars took the full
bnmt of the segment of buyer demand formerly handled by the Mint.
~s
This
clearly not a desirable situation particularly since the few major
suppliers operating in the market with a capacity to acquire and sell fine
gold in quantity were actually competitors in a number of products with a
good many of the increasingly desperate buyers.
To ease the situation and to facilitate the development of a viable
gold market the Treasury decided to consider applications for trading
licenses from banks and commodity firms which because of resources, past
experience and strategic location gave promise of efficiently performing
this necessary function.
Since
mid-~~rch
over 30 of these licenses have been issued, mainly
in the major industrial gold USing areas of New York, Southeastern New
fugland, the Central ~fidwest, and California.
As a start, each of these
- 10 -
licenses has been issued for a temporary trial period intended to extend
jwtbeyond the semi-annual reporting date of June 30.
I should point
out that each Treasury gold licensee is required to submit to the
~easury
~e
semi-annual reports of his operations covering the January _
and July - December periods for each year.
In these reports the
licensee must, among other information, state his gold inventory at the
beginning and end of each period, how,much gold he acquired, where he
acquired it, how much was used and if authorized to do so, how much
gold was sold and who it was sold to.
Because the private trading function
is new, the initial short term licenses have been issued in arbitrary
amounts.
These arbitrary license figures will be revised upward or
downward depending on the reports which the licensed traders must submit
during July and August.
I want to make it clear that it has never been the intent of the
Treasury's gold licensing system to ration or restrict in any way the use
of gold in the private economy for legitimate industrial and artistic
purposes.
This long standing policy remains unchanged.
Those who use
gold in their manufacturing operations. will be authorized to acquire all
they need to properly conduct their bUSiness, including allowance for a
reasonable inventory.
What is not permitted under the licensing system
1s an accumulation of gold unrelated to the business operations of the
licensee or in excess of the amount needed to efficiently conduct his
b~iness.
The same general rule applies to thos~ who perform a gold
dealing function between suppliers and consumers in the market.
- 11 In summary, I think we can conclude that on the basis of our
e~erience
indeed.
thus far the new private gold market is working very well
The American gold producer is as free to sell his product as
his counterparts abroad
in fact freer than most -- and is assured of
a price that is as good as can be obtained by any other producer in the
world.
As far as the licensed American industrial user is concerned,
gold can be obtained for quick deli very in the amount and form required,
at prices that compare favorably with those prevailing anyYlhere.
Both
producers and users are free to seek the best price that can be obtained
ina competitive private market.
By the textbook definition as well as
the practical standards of the marketplace, I think this can fairly be
described as a healthy condition.
And finally, a few words on the current trend in the consumption of
gold by American industrial users.
~e
Treasury has licensed over 1200
individuals and firms to process, deal in, and/or use gold for industrial
and artistic purposes.
The maximum amount of gold authorized to be held
at the present time under all of these licenses taken as a whole i's about
4-1/2 million ounces.
In practice, of course, few of the licensees hold
at anyone time the maximum amount authorized.
Based on reports submitted
to the Treasury early this year, Treasury gold licensees held in inventory
about 3 million ounces of gold on December 31, 1967, an increase of only
200, 000 ounces from the previous year end.
The consumption of gold by U.S. industry has risen quite substantially
in recent years.
From 1962 through 1966, for example, annual industrial
Use of gold rose from 3.5 million ounces to 6.1 million ounces, an
- 12 -
average annual rate of increase of about 17 percent.
However, it should
be noted that the relatively high rate of increase during these years
was in very large part due to the substantial increase in Government
In 1967 with defense
expenditures for defense and space exploration.
and space expenditures tending to level out, industrial consumption of
gold in the United States increased by only about
ounces,
4
percent to
6.4
million
With Government spending for defense and space leveling out and
conceivably even declining over the foreseeable future, this sigTIificant
stimulus to the recent increases in industrial gold use will not be as
strong.
I think that many of the projections of industrial gold
have not adequately taken this key factor into
~ccount.
cons~~ption
It may vTell be
that the rise in demand for gold by industry, at least over the next
few years, will be substantially less than might be expected on the
basis of trends in the recent past.
000
-
TREASURY DEPARTMENT
,
August 21, 1968
FOR IMMEDIATE RELEASE
UNITED STATES AND JAPAN TO DISCUSS REVISION
OF INCOME TAX TREATY
Representatives of the United States and Japan will meet
in early October in Tokyo to discuss revision of the income
tax convention between the two countries.
The present treaty with Japan was signed in 1954. Though
certain provisions have since been amended, the basic treaty
reflects the tax laws of the two countries and their economic
relationship as they existed in 1954. An extensive revision
of the present treaty is therefore needed to reflect changes
both in Japanese and U. S. tax law since 1954 and in accepted
international practice with respect to income tax treaties.
Negotiations will consider the model "Draft Double
Taxation Convention" published in 1963 by the Organization
fur Economic Cooperation and Development (OECD), of which
both the United States and Japan are members. Persons
interested in the new treaty may wish to consult the OEeD
draft as well as the treaty recently concluded by the
fuited States with France, which came into effect in July
1968.
The proposed treaty is intended to avoid double taxation
and otherwise assist individuals and companies in one country
engaged in trade or investment in the other. It will be
concerned with the tax treatment of trading and other business
enterprises, investment income and income from the performance
of personal services.
Persons wishing to make comments or suggestions concerning
the proposed negotiations are invited to send their views,
before September 20, 1968, .to Assistant Secretary of the
Treasury Stanley S. Surrey, United States Treasury Department,
Washington, D. C. 20220.
000
F-1331
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
$2,700,000;000, or thereabouts, for cash and in exchange for
Treasury blils maturing August 29, 1968, in the amount of
$2,600,474,000, as follows:
92-day bills {to maturity date} to be issued
in the amount of $ 1,600, 000,000, or thereabouts,
additional amount of bills dated May 31, 1968,
mature November 29, 1968J or1ginally issued in the
$11099,821,000, the additional and original bills
interchangeable.
August 29, 1968,
representing an
and to
amount of
to be freely
182-day bills, for $ 1,100,000,000, or thereabouts, to be dated
August 29, 1968,
and to mature
February 27, 19690
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter prov1ded, 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
to the clOSing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, August 26, 19680
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even mult1ple of $1,000, aOO 1n 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 wh1ch will be supplied by Federal
Reserve Banks or Branches on application therefor.
up
Banking institutions generally may subm1t tenders for account of
customers prov1ded the names of the customers are set forth 1n such
tenders. Others than banking institutions will not be perm1tted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust compan1es 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 b1lls applied for, unless the tenders are
accompan1ed by an express guaranty of payment by an incorporated bank
or trust company.
F-1332
- 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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on August 29, 1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 29, 19680 Cash and exchange tender
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.
F-1332
000
TREASURY DEPARTMENT
August 21, 1968
FOR IMMEDIATE RELEASE
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$1,500,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing August 31,1968,
in the amount of
$1,500,511,000, as follows:
270-day bills (to maturity date) to be issued
in the amount of $500,000,000,
or thereabouts,
additional amount of bills dated May 31, 1968,
Qture May 31,1969,
originally issued in the
$1,002,2l7,000,the additional and original bills
interchangeable.
September 3,1968,
repre sent ing an
and to
amount of
to be freely
365-day bills, for $1,000,000,000, or thereabouts, to be dated
August 31, 1968,
and to mature
August 31, 1969.
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 fom only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturl ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Tuesday, August 27, 1968.
Tenders will not be
received at the Treasury Dellartment, Washington. Eac h 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 dec imals, e. g., 99.925. Fractions may not
be used. (Notwithstanding the fact that the one-year bi11.s will run
for 365 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
~Sponsible and recognized dealers in investment secun1ties. Tenders
F·1333
- 2 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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on September 3,1968, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing August 31,1968.
Cash and exchange tender
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.
F-1333
000
TREASURY DEPARTMENT
!
9
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES COUNTERVAILING DUTY PROCEEDING
ON IMPORTED ITALIAN SKI-LIFTS
The Treasury Department announced today that it is issuing
a notice of countervailing duty proceeding with respect to
ski-lifts and ski-lift parts from Italy.
The notice, which will be published in the Federal
Register of Friday, August 23, reports that the Treasury is
investigating a complaint of government subsidization of
ski-lifts and their parts exported to the United States
from Italy. The amount of the subsidy is estimated to be
$29 per long ton.
The complaint to the Treasury was filed by Hall Ski-Lift
Company, Incorporated, Watertown, New York.
Under the United States Countervailing Duty Law, if
the Treasury Department finds that a ''bounty or grant"
(within the meaning of the law) is being paid, it is required
to assess an equivalent countervailing duty.
The notice of countervailing duty proceeding will allow
30 days for submis s ion of data, views, and arguments, concerning the existence or nonexistence of a bounty or grant and
its amount.
Ski-lifts and ski-lift parts exported from Italy to the
United States during the past 12 months were valued at
somewhat less than half a million dollars.
000
F-1334
TREASURY DEPARTMENT
Washington
REMARKS OF FRANK W. SCHIFF
DEPUTY UNDER SECRETARY OF THE TREASURY
FOR MONETARY AFFAIRS
BEFORE THE FIRST ANNUAL CONFERENCE
OF
THE MUNICIPAL TREASURERS ASSOCIATION OF
THE UNITED STATES
WASHINGTON, D. C., WEDNESDAY, AUGUST 21, 1968
WINDS OF CHANGE
I greatly appreciate the opportunity to address the
first annual conference of the Municipal Treasurers Association of the United States.
It is, I think, very fitting that
the problems on your agenda will be discussed in the Nation's
capital, for the problems of the cities, and of financing
the cities, have in the recent past moved with remarkable speed
to the top line of the agenda of the Nation itself.
Let me note at the outset that Secretary Fowler greatly
regrets it was not possible for him to accept your invitation
to speak here today.
As you know, he underwent a long-delayed
operation only two weeks ago.
While his recovery has been
splendid, he is not yet able to be fully active.
Assistant
Secretary Wallace, who was scheduled to address you, had to
take on a rush foreign assignment last Thursday and is currently
in northern Africa.
I thus come before you as very much of a pinch hitter and
~very
short notice.
This is always a difficult spot to be
in, but I feel somewhat reassured on at least two grounds.
One
- 2 is that you are an audience that is obviously well prepared
for any emergency, since your advance program states that
"because of unsettled political conditions, the luncheon
speakers are subject to change."
The other is that you have
chosen the date of your meeting very felicitously, to come
at a time when we have made major progress in dealing with
many of the more immediate domestic and international financial
problems -- problems that, to quitea number of observers at
least, appeared almost insuperable only a few months ago.
It is a welcome change to have both our domestic and international finances in much better order and moving toward
balance.
But, as you know, as we make headway on old problems,
new problems demanding new solutions emerge, and other problems
that have been there all along become more visible and clamor
for increased attention.
I would therefore like to strike a
balance in my remarks today, noting problems as well as
progress, and concluding with a comment on some of the tasks
that lie ahead for all of us concerned with the financing of
an increasingly urbanized and suburbanized American economy.
Elements of Progress -- Domestic.
First, let me comment on some of the good news -- both
domestic and international.
Certainly, we can breathe a good
- 3 -
deal easier at the present time -- at least if new inter~tional
crises do not change the picture.
Passage of the
president's tax program and the associated program of expenditure restraint cleared the air.
Its significance went far
beyond the specific fiscal effects that can be expected from
the program.
Until the bill was passed, there were many
observers -- both at home and, even more so, abroad
who
had become increasingly skeptical about our ability to put any
kind of check on our fiscal and balance-of-payments deficits.
The fact that the bill was finally enacted, and in an election
year, has above all demonstrated that the American people have
an underlying determination to manage their financial affairs
~sponsibly.
And it offers a realistic basis for restoring a
substantial degree of price stability within a reasonable
period of time, assuming business and labor show some measure
of restraint in their wage and price decisias
o
Since the enactment of the fiscal package, there has been
a remarkable improvement in market atmosphere and expectations.
~y
interest rates have eased significantly in the last two
months.
As of yesterday, for example, the 3-month bill rate was
d~n about 75 basis points since the passage of the tax program
became assured, and our longer issues had declined by from
- 4 SO to 75 basis points.
down during the period.
Most other interest rates have 81so move
The recent 1/4 per cent reduction
in the discount rate, while a technical adjustment to the
changed money market conditions, should facilitate a better
policy mix in the months ahead.
As fiscal restraint works
its way through the economy, monetary easing can gradually
assist in the re-establishment of a lower, and more appropriate
structure of interest rates.
The changed financial atmosphere has also been of major
assistance to debt management.
was a very successful one.
The recent Treasury financing
We were able to place over $5 billion
in 6-year securities in the hands of the public without any
undue market strain
something that would not have seemed
possible a month or so earlier.
In the period ahead, the task of debt management will be
facilitated both by moderation in over-all demand pressures,
and by the fact that the improving Federal fiscal position should
ease Federal financing requirements and begin to relieve the
capital market pressures that have been so intense in recent
years.
To cite a few figures:
our deficit on the new unified
basis for fiscal year 1968 was $25.4 billion.
For fiscal
year 1969 -- we do not yet have a firm estimate -- the deficit
- 5 may be somewhere in the neighborhood of $3 to $5 billion.
The result will be that our borrowing requirements
=-
the
pressure the Federal Government will be putting on the
market -- will be lowered by something on the order of
$20 billion.
If, as is widely expected, there is some
lessening in over-all business demands for credit, this could
provide a fair amount of room for your financing and for
financing by other borrowers whose demands are likely to
remain high.
And it could still be consistent with some further
easing in interest rates.
In the current 6-month period -- July-December -- our
total new money financing requirements are in the neighborhood
of $14-1/2 billion.
(This includes both direct Treasury and
net agency requirements).
The largest part of this, $12-1/2
billion, is the seasonal deficit typical in the first 6 months
of each fiscal year, reSUlting from the fact that we collect
somewhat less than half of our total revenues in this period
while our expenditures are spread more evenly.
The significant point, in terms of the outlook for debt
management this half year, is that we have already accomplished
more than half of our total new money financing job.
The
- 6 Treasury part of the net new cash financing totals about $12
billion.
We have issued or announced $1-1/2 billion in 6-month
bills and raised $4 billion in tax anticipation bills in July
as well as $1-1/2 billion new cash in connection with our
August financing -- a total of $7 billion.
We have also com-
pleted about half of the cash financing allocated to agencies.
As a result, Under Secretary Deming was recently able to
indicate that the Treasury will not need to enter the market for
new money before its next refinancing and that it should
essentially be able to cover its remaining cash needs in this
half year through TAB issues.
Progress in the International Sphere
The recent improvements in the international financial
climate, and in the standing of the dollar, have been equally
or, if anything, even more -- striking.
Consider some of the elements that affected that climate
earlier this year:
•
Our balance-of-payments had shown a vetyserious
deterioration in the fourth quarter.
•
We were incurring heavy gold losses, and the
outcome of the gold cover removal legislation
was in doubt.
- 7 -
There was great doubt abroad that the United
States would take the basic fiscal measures
without which the remainder of our corrective
program could not succeed; and it was the United
States that took the lion's share of criticism
for contributing to balance-of-payments disequilibrium.
There were still many skeptics who doubted whether
final agreement on a new international reserve
facility could be reached, and whether such an
agreement would be ratified by the U. S. Senate.
And there were quite a few pessimists who
predicted an imminent collapse of the international financial system.
Today's atmosphere is entirely different.
The dollar is strong in international markets,
and there is new confidence abroad that we will
in fact manage to return to payments equilibrium.
•
The gold crisis was resolved with the establishment of the two-tier gold system, and this system
despite those who said it could never be viable -is working well.
- 8 Just 5 days ago, Secretary Fowler announced our
balance of payments results for the second quarter
a small deficit of only $150 million on the
seasonally adjusted liquidity basis and a
substantial surplus of nearly $1.5 billion ($1,450 million) on the official reserve transaction basis.
It
is true that these results were partly related to
temporary and transient factors and that our over-all
improvement occurred despite a significant deterioration
in our trade account.
Yet the better figures also
represented major elements of solid progress,
including successes in our programs to reduce
capital outflows and in negotiating military
offset agreements.
The very fact, moreover, that a country which had
long been in surplus -- that is, France -- experienced
large exchange losses and received major assistance
from the International Monetary Fund and foreign
central banks served to underline that other countries,
- 9 -
too, may be exposed to the perils of deficits, and
that all countries can benefit from the types of
international cooperative arrangements that the United
States has long espoused.
Finally, the Special Drawing Rights Agreement was
approved by the Executive Directors of the IMF and
ratified by the U. S. Senate.
Some General Problems that Lie Ahead
The solid evidence of a stronger domestic and international
position does not mean we have no problems.
Far from it.
Above all, at home, we still have the problem of inflation,
exemplified by the fact that the so-called GNP deflator has
been rising at an annual rate of about 4 percent for the past four
quarters.
While the fiscal package should lead to a definite
cooling off of the economy, we must not forget that the visible
evidence is still that of an economy with heavy demand and costprice pressures.
The fiscal restraint package had to be a
hefty one if the hectic pace of the economy is to be brought down
to a safe cruising speed.
Of course, the task of halting an inflationary process
without either throwing the economy into reverse or falling
short of the mark is a delicate operation.
We must be prepared
- 10 to deal with any pronounced departures from the course of
sustainable growth -- in either direction.
There are those who feel that we have gone too far in one
direction or the other.
Some feel that fiscal restraint,
while not yet fully effective,may, in time, slow the economy
too much.
They see "fiscal overkill" as the main risk.
risk should not be ignored.
Such a
But given the remaining momentum of
inflationary forces, I believe that this risk can well be
exaggerated.
Moreover, if evidence should accumulate that too
abrupt a decline in demand is in prospect, there should be time
to arrest such a trend through appropriate monetary or other
measures.
There are others who doubt that even with the fiscal
package,
rest~int
will be sufficient.
They point to the
strength in last month's sales and in other recent indicators,
arguing that the economy is still moving too fast and will
continue to break speed limits.
But this tends to ignore that
the fiscal program has only just been instituted, and its
chief effects should indeed be felt from here on.
The Federal
Government, in other words, is moving in a very major way
from pushing the accelerator to putting on the brakes.
- 11 -
In this connection, let me direct a few words to what one
might term the "fiscal cynics."
They are inclined to view the
expenditur e reduction part of the fiscal package with a large
measure of disbelief.
tell us.
More appearance than reality, they
In particular, they cite the fact that Congress has
recently permitted various exceptions from the employment
ceilings as evidence that the entire expenditure reduction
program will crumble before long.
I am no expert in predicting what the Congress might do.
But I do know that the Administration is very serious about
implementing the expenditure restraint program, and is moving
vigorously in this direction.
I would also caution you that
the exceptions made with regard to the employment ceilings do not
provide any occasion for believing that there could be an early
change in the legislation relating to over-all expenditure reduction.
On
balance, I would judge that the present fiscal package
is about right, given the headway that inflation has made.
The outlook, as I ,see it, is for a gradual easing of price
pressures
a defuSing of a potentially explosive II." ice
situation
without lasting adverse effects on either produc-
tion or employment.
No one, of course, can be sure that things
- 12 will work out that smoothly, and it will certainly take very
careful efforts by both Government and the private sector to
help make this forecast come true.
Achievement of noninflationary
~owth
will also be the
most important element in improving our internationruaccounts.
In addition, however, we will be putting further stress on other
measures to improve our trade balance -- through greater trade
promotion efforts and the newly improved Export-Import Bank
credit facilities.
We are also taking steps toward the
establishment of a comprehensive long-term program to promote
travel to the United States.
More generally, we need to move
vigorously toward sustained payments equilibrium as well as
further strengthening of international financial cooperation
including the formal adoption of the SDR agreement by the
reqlired majority of IMF member countries.
Some Problems in Financing the Needs of Cities
Let me now turn briefly to the problem of special
interest to you -- the financing of the cities -- and to
the financial relationships between the Federal Government
and the cities.
- 13 My colleague, Assistant Secretary Wallace, discussed
one broad aspect of this relationship with some of you last
year -- the issues of revenue sharing, of categorical versus
block grants, and so on.
I will therefore not delve into these
questions here, but confine myself to a few remarks on
financing means that involve borrowing.
As you all know, the financing demands on the cities in
coming years will be tremendous.
Many of these will come in
areas that typically have been borne by the cities alone.
But there are also burgeoning demands for many new types
of programs that will require some element of Federal assistance,
such as anti-pollution, low income housing, urban development,
~ss
transit, education, airports, and so on.
All this will happen in a period when the competition
for the Federal budget dollar will be very intense -- a point
that Secretary Barr has spelled out in detail in a recent speech.
Thus, it is likely that every effort will be made to develop
means of Federal assistance to the cities that minimize the
use of outright grants, involve some association with borrowing,
and secure the maximum benefit for every budget dollar allocated.
- 14 It would be most helpful if in your discussions today,
you gave particular attention to the types of problems
that can emerge in this changing environment, and to
possible solutions.
One problem is that the market for tax-exempt securities,
on which state and local governments have traditionally relied
for their financing, is still a relatively narrow one.
Thus,
if the growth of demands on this market should become extremely
rapid, there could be dangers to the proper functioning of the
market.
From the point of view of the cities, the risk is that
the interest rate which has to be paid on their obligations
would rise unduly and thereby greatly reduce the existing advantage
that accrues to cities from this form of financing.
This kind of threat, as you all know, has already been
evident in the recent past.
Some of the increased pressures
on the market arose from two sources of demand that were not
really consonant with the basic needs of the cities themselves.
One of these was the use of so-called municipal arbitrage bonds
and the other the greatly increased use of industrial revenue
bonds.
The latter in effect lowered the financing costs
of major corporations in a way that threatened to add to the
- 15 burdens of every city that had to finance schools, police
and firemen, etc.
In both instances, the Treasury took steps that helped
curb the serious abuses that were emerging.
In the case of
arbitrage bonds, this involved a legal ruling; in the case of
industrial revenue bonds, it involved both a change in
regulations and a major effort to make clear that in the long
run, this kind of explosive use of a financing technique will
not redound to the benefit of any of the parties concerned.
I think it has become increasingly apparent that these actions
by the Treasury Department have been in the interest of the
cities as well as the Federal Government.
Looking toward the future, however, there are potentially
more serious problems, to the extent that legitimate demands
on the cities and on the existing markets in which they operate
will rise very sharply.
Also, new problems do arise when the
Federal Government is called upon to work out,in conjunction
with the cities, large-scale additional means of financing new
needs.
I think the fact must be- faced that as financing needs
grow greatly, there will be an increasing concern with finding
the most economical methods of providing Federal assistance --
- 16 and methods that will permit the greatest amount of such
assistance -- which will at the same time be most clearly
consistent with the objectives of local fiscal independence
and flexibility.
I don't know what solution may eventually be worked out,
but I am sure that there is some road which would be to the
common advantage of the Federal Government, states and cities,
and the private sector.
One proposal, about which we may be hearing a good deal
more in the future, envisages a kind of central community
development bank, perhaps patterned to some degree after the
World Bank.
One version of this calls for an institution to
be owned and controlled by state and local governments, with the
Federal involvement limited to providing financial support.
This proposal, incidentally, could bring a solution to the
bond rating problem which I know has been of concern to many
local government officials and which you are discussing today.
As I indicated, I have no precise idea what the eventual
solution may be.
I do have confidence, however, that a
mutually beneficial resolution can be achieved if all of us, at
all levels of Government, approach these problems in the
- 17 kind of constructive and cooperative spirit that is
exemplified by your meeting here today.
--
TREASURY DEPARTMENT
BiLEASE 6: 30 P .X.,
!l August 26, 1968.
BISUL!B 0., 'mElSCRI' S WDKLY BILL OFlEBIllG
'!1e'treasury Department 8.DI1oUDced that the tenders for two series of Treasury
~, one series to be an add1 tioml issue of 'tae bills elated Ma7 31, 1968, and the
Ir series to be dated August 29, 1968, which were offered on August 21, 1968, were
l8datthe Federal Reserve BaBts tocla7. ~n4ers were invited tor $1,600,000,000,
~N~~ts, of 92-~ bills aDd for $1,100,000,000, or thereabouts,ot 182-day
~. i'he details ot the tvo serie s are as tol1ows:
92-da1 freasury bills
-turiaa Jlovellber 29.z 1968
Approx. iquiT.
Price
Almual Bate
98.686
5.14:~
98.670
5.204:~
98.678
5.17~
11
I 0'1 ACCEPlED
!fITlY! BtDS:
ngh
Low
berage
182-da¥ ~easury bills
_turing FebrlJBg 271. 1969
Approx. EquiT.
Price
97.359
97.34:7
97.350
!I
Annual Bate
5.22'~
5.24:8j
5.24:~
11
~ ExceptiDg 1 tender of $4:,000
9~ ot the amount ot 92-dq bills bid tor at the low price was aceepted
8~ ot the amount ot 182-c)q bills bid tor at the low price was accepted
~ 'IIDERS
APPLIED lOR AID ACCEP'.tED BY HDEBAL RESDVE mSmCTS:
t:1et
Applied Por
$
ton
tork
l.ladelph1a
JevelaDd
~eiloM
~ta
~eago
I. Louis
_apolis
maas City
~las
Ilrancisco
ro~
Acce~ted
22,309,000 $2,309,000
1,867,911,000
26,674:,000
32,798,000
11,748,000
4:5,668,000
152,787,000
",024:,000
20,257,000
29,119,000
23,055,000
127,923,000
1,160,951,000
19,674:,000
30,718,000
11,74.8,000
37,668,000
122,179,000
37,9",000
20,257,000
29,111,000
15,055,000
92.z-"3.z000
:
:
:
:
Applied For
$ 8,54:1,000
1,708,510,000
12,892,000
4:7,965,000
14,873,000
20,899,000
205,84:7,000
23,358,000
18,384:,000
12,605,000
17,386,000
179,620,000
*2,~,273,OOO $1,600,065,000!l $2,270,880,000
Accepted
$
3,541,000
816,076,000
4:,892,000
23,643,000
10,810,000
17,251,000
156,947,000
12,658,000
6,884:,000
11,752,000
8,386,000
31,4:14:,000
$1,10',254:,000 ~
InclUdes $266,308,000 DODCa.peUtive teJlders accepted at the average price of 98.678
InClUdes $113,129,000 DOI1c~titive teDders accepted at the aTerage price ot 97.350
!!lese rates are OD a b&IIkdi8cOW1t basis. ~ equivalent coupon i8sue yields are
5.~ tor the 92-dq b1111, aDd 5. ~ tar tbe 182-dq bills.
F-1335
TREASURY DEPARTMENT
&
- IMMEDIATE RELEASE
OR
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
Dr two series of Treasury bills to the aggregate amount of
2,700,000,000, or thereabouts, for cash and in exchange for
reasury bills maturing September 5,1968, in the amount of
2,600,409,000, as follows:
91-day bills (to matur1ty date) to be issued
the amount of $ 1,600,000, 000, or thereabouts,
d1t1onal amount of b1lls dated June 6,1968,
ture December 5,1968, or1ginally issued 1n the
,099,439,000, the additional and original b1lls
terchangeable.
September 5,1968,
representing an
and to
amount of
to be freely
182-day bills J for $I, 100, 000, 000, or thereabouts, to be dated
and to mature March 6, 1969.
eptember 5,1968,
T~
bills of both series will be issued on a discount basis under
mpetit1ve and noncompetit1ve bidding as hereinafter provided, and at
tur1ty the1r face amount will be payable without fnterest. They
11 be issued 1n bearer form only, and in denominations of $1,000,
,OOOJ $10,000, $50,000, $100,000, $500,000 and $1,000,000
atur1ty value)
0
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Daylight Saving
.me J Friday, Augus t 30,1968.
Tenders will not be
tce1ved at the Treasury De~artment, Washington. Eac h tender must
'for an even multiple of $1,000, and in the case of competitive
nders the price offered must be expressed on the baSis of 100,
thnot more than three deCimals, eo go, 99.925. Fractions may not
used. It is urged that tenders be made on the printed forms and
Named in the special envelopes which will be supplied by Federal
serve Banks or Branches on application therefor.
I
Banking institutions generally may submit tenders for account of
.stomers provided the names of the customers are set forth in such
Mers. Others than banking institutions will not be permitted to
bm1t 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
rom others must be accompanied by payment of 2 percent of the face
IOunt of Treasury bills applied for, unless the tenders are
~C~rnpanied by an express guaranty of payment by an incorporated bank
rust Company
1·1336
0
0
- 2 -
Immediately after the closing h8ur, tenders will be opened at
Federal Reserve Banks and Branches, following which public announce
ment 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, dnd his 3ction in any such respect shall be
final.
Subject to tnese reservations, noncompetitive tenders for
each issue for $200,000 or les~ 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 Bank on September 5,1968,in
cash or other immediately available funds or in a like face ~mount
of Treasury bills maturing September 5,1968. 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
FJR RELf.o\SE 6: 30 P .K.,
Tuesday, August 27, 196!.
~
RESUL'rS OF 'l!lEAS'O"RY I S MONTHLY BILL OmmiG
'IIle T,rca(1l'U·'Y Depal."'tment announced that the tenders tor two series of ~asury
one series to be an additional issue of the bills dated May 31, 1968, and the
oter series to lYe dated. Au.gllst 51" 1968, which were ottered on Augus·t 21 .. 1968, vere
opened at the J:'(;{ieral Reserve Banks tode.y. Tenders were invited tor $500~OOO/OOO, or
~eree.bouts1 of 270-day bilL~ and tor $1,000,000,000, or thereabouts, of 36S-day billa.
Tl:e details of the two series are as follows:
c~i1s,
270-day Treasury bills
OF ACCEPTED
COI,rPEnTIVE BIDS: ______
"'-'-'..................
~-.-.........~_rca:t1u'ing
*1J.k..,1~~.
Ap]n"ox. EqU1v.
ADm.1Il1 Rate
Price
BA.'iGE
1
96.085
96.056
96.066
High
Low
}.verage
!I
TOO
- Er..·2·2~
5.25~
5.245~
Y
0
•
•
..•
0
365-day
1f.:turH18
·•••
Price
••
94.777
bills
Aygurri;. ~]..l 1969 .......
~easury
-
Approx • Equiv.
Ai'!:r.n.:·~~l :Rate
-.;:~-'~
::>. ~-
9,-:789
40%
S.16S~
5.1S1~
94",763'
11
y
Exceptir;.g 1 '1:;ender ot *'00,000
5~ of the runount of 270-day bills bid for
a.t the low price was acc~=pted
4gf, of thB amount of 365-day bills b:td tor at the low pl"lee vas toccepted
TV'SIL TEllIl£'1S A2PLIED lroR .AJiiD ACCiP'lED II
;Jistrict
---!.bston
Nev York
?hilndelphia
Cleveland
RicLmlond
Atl.anta
Chicago
~t.
Louis
:·!inneapolis
::ansae City
Dallas
San Frarocisco
TOTALS
1Includes
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.&. •.:.,. " "G"
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...
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~,,",*t
,.
'<
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1,261,. 94z3, 000
•
*
:aESilWE DIS:tf<ICTS:
•• F;'!'~~?-O~
10,958;>000
89 , 000 ••
4.04:,793,000 • 1,922,427,0',,)0
'"
11" -138,000
5,459,000 •
•
24t, "/29,000
3,040,000
•
17,
5S2} 000
1l,1.1',OOO •
19,808,000
1,981,000 •
Acce;Eted
M
·
·
·
29, 4Sl, 000 •
5,509,000
19,04.0;000
1-1,174,000
7,999,000
100,491,000
8,416,000
12,100,000
7, a,dol, 000
11,137,000
•
1,,416,000 ••
l!") 0 , 4/11 z000
;1,598,416,000
~
•
353,360,000
20,875,000
11,740,000
19,265,000
11,783,000
.,
.k.cceuted
.
~
95(;f;oOiS
752,633,000
1,538,000
2,774,000
5,152,000
2,958,000
183,240,000
167 , 74:1 z.Q.QQ
3,875,000
l,505,000
5,690,,000
1,780,000
36,241 2 00.2.
500,418,000 ~ $2,591,776,000
$1,OOO,l~1,000
2, 100,000
2,04.1,000
1,131,000
39, 722,000
··•
·••
••
£I
$20 1 192,000 noncOD;let1t1w tenders accepted at the average price of 96.0G6
~ Includes $,,1,1,372,000 Xloncoapetit1:ve teZl4ezos accepted at the average price of 94.:.717
:; 1besc rates [';xc on a bank eliacount basis. !B2e equivalent coupon iosue yields are
S.,~ tor tj~o 270-day billa, am s.,,~ tor the ~-~ 'billa.
F-1337
TREASURY DEPARTMEN-t
aM
==-W6W<' =
August 27, 1968
FOR IMMEDIATE RELFASE
COST REDUCTION AND MANAGEMENT IMPROVEMENT
BRING TREASURY $97 HILLION
The Treasury Department announced today that benefits
from its cost reduction and management improvement program
amounted to $97 million in fiscal year 1968. The
Department's 1969 reduction goal is $143.3 million.
In a memorandum report to the President, Acting
Secretary Joseph W. Barr explained that $28.1 million
and 2,580 man-years in savings were realized from
improvements in internal departmental operations. The
sale of 97.7 million ounces of silver reserves at market
value above the previously established price of $1.29
per ounce produced additional revenue of $55.1 million.
Net receipts from the public sale of proof coin sets
added $3.3 million to the general funds.
An additional $10.4 million was gained because of
reduced borrowing costs based primarily on the earlier
availability of tax deposits under Treasury's improved
depository receipt system.
000
F-1338
TREASURY DEPARTMENT
Washington
FOR A.M. RELEASE
~DNESDAY,
AUGUST 28, 1968
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE GRADUATE SCHOOL OF BANKING
UNIVERSITY OF WISCONSIN
THE MEMORIAL UNION THEATER, MADISON, WISCONSIN
TUESDAY, AUGUST 27, 1968, 7:30 P.M., CDT, (8:30 P.M., EDT)
THE DOMESTIC AND INTERNATIONAL MONETARY SITUATIONS
The theme of this talk might well be -- ''When you are
Number One you have to try harder." Superpower status,
leadership of the Free World and the biggest and strongest
economy in the world bring unquestioned benefits to the
United States and its people. But they also bring great
responsibilities. In the international field, these involve
using the power and leadership wisely and constructively,
including the honoring of commitments
They involve operating
the domestic economy so that it grows steadily and sustainably,
not only for domestic benefit but also because it is a major
factor in world economic growth. In the domestic field, these
responsibilities involve just government under law and the
equitable sharing of the fruits of a growing economy.
0
These responsibilities are not easy to carry -- either at
home or abroad. They are particularly difficult to carry in
periods of rapid change. For, in such periods, attainment of
Some expectations brings greater expectations. A major tenet
of economics is that man's wants are insatiable -- this
provides the drive for economic growth. The expression of this
point in raw poli tical terms is "What have you done for me
lately?" Record breaking is an old American habit, and the
drive to surpass is a major factor in American life. All of
this is as it should be, but it does not make life comfortable
for Number One or its leadership.
F-l339
- 2 I am here to talk to you tonight on the domestic and
international monetary situations.
It seems desirable to do
this against the broad background of economic developments in
this period of rapid change and against the background of
prospective future change -- and of what needs to be done in the
future.
For what we have achieved so far provides a base for
greater and necessary achievements in the years ahead.
I need not -- in fact, I cannot -- cite all of the problerne
areas of the future.
We have made great progress over the past
several years.
But change begets change; new needs and new
problems that cannot now be foreseen will emerge.
On the domestic side, we have attained extraordinary
economic growth, and one broad economic problem now is to insure
that growth is at a sustainable rate, so as to avoid both the
problems of inflation and deflation.
But our prosperity has no
solved the problems of our urban ghettos, and we need to
improve much more the environment of our rural life. We face
ever increasing demands for better health facilities, for bette
transportation facilities, for expanded educational facilities,
for improved public safety.
On the international side, we have made great progress in
economic cooperation, in expanding world trade, and in
improving the international monetary system.
But we still have
a balance of payments problem; we need to improve our own
trade position; and the monetary system will undoubtedly need
further improvements.
THE RECORD OF THE SIXTIES
You will recall that, when this decade opened, there were
t\vO broad economic themes under discussion.
One expressed
dissatisfaction and concern.
Soviet Premier Krushchev had said in the late
1950's that Russia would "bury us" economically.
The U. S. growth rate was compared unfavorably
with that of Western Europe and Japan.
- 3 -
Economists were worried about the frequency of
recessions and the upward drift of unemployment.
People talked about the "technology gap," the
"educational gap," and the problems of automation.
The other theme was optimism over the prospects for the
"Soaring Sixties."
There was room for economic expansion.
The New Economics could insure much greater growth.
Few regarded the balance of payments as a serious
or continuing problem.
The international monetary system seemed strong,
almost impregnable.
Basically, except for views on the balance of payments
and the international monetary system, the optimists were
right. The Sixties did soar; by mid-1965, the broad economic
problem was that of preventing prosperity from becoming
inflation and the better sharing of that prosperity.
Let me give you a few details.
From early 1961 to mid-1968:
Our gross national product at current prices
rose almost $350 billion, or 69 percent.
In real terms, adjusting for price increases,
the rise was $267 billion, or 46 percent.
Jobs increased by 10-1/2 million; total employment
in July, 1968, was 77.7 million persons.
The unemployment rate fell from 6.9 percent to
3.8 percent.
Industrial production increased almost 60 percent.
After tax personal income grew by $232 billion,
or 65 percent.
After tax corporate profits rose by $26 billion,
or more than doubled.
- 4 What did we do with this growing abundance?
profligate or prudent?
Were we
Personal consumption spending rose $200 billion,
or 60 percent.
But, liquid savings of the American people
increased from $400 billion in 1960 to $675
billion today.
And nonbank business net working capital was $132
billion in 1960 and is $205 billion today.
And public and private expenditures on education
rose from $27 billion to $52 billion; on health
from $27 billion to $50 billion.
And annual investment in manufacturing rose from
$14-1/2 billion to $27-1/2 billion.
On balance, I think you would say that Americans were
prudent rather than profligate. And the record becomes even
more impressive when we consider that, in the Sixties, this
bigger economic pie that was baked enabled 13 million
Americans to move out of the poverty category and enabled 11
million more families to reach more than $10,000 in annual
income, two and a half times the number enjoying such incomes
in 1960. The benefits were shared by both blacks and whites.
Complete sharing may not have been attained, but two statistics
tell a lot. Between 1960 and 1968, the percentage of nonwhites
in poverty dropped from 55 to 35 percent, and the percentage
of nonwhite high school graduates rose from 39 to 58 percent.
These are solid achievements, and they came primarily from
American economic growth -- the bigger pie -- rather than from
income redistribution. They came from an American economy
operating efficiently and at close to capacity -- sometimes a
bit over capacity. They came from economic policies that, on
the whole, were well conceived and well-executed. We did, of
course, have delays both on tax cuts and tax increases -- the
record is not perfect -- but Federal income taxes were cut by
20 percent in 1964 and stimulated growth, and were increased
by 10 percent in 1968 and will help contain inflation.
- 5 Let me now turn briefly to the international side. Here
the basic policies established at the close of World War II
and pursued by four Presidents evolved further in the 1960' s.
~e American program was to work toward building a growing
world economy in which trade and payments can expand soundly
and move freely. The major shift in the 1960's was increased
emphasis on cooperation with the nations which we had helped
rebuild their economic strength. This development was a
natural outgrowth of our policy of help for the world, which
we had pursued almost singlehanded for many years. As other
nations could assume more responsibilities, we welcomed their
help and worked cooperatively to attain it.
In this international area, I list these achievements.
Increased resources in the International Monetary
Fund, backed up by the General Arrangements to
Borrow.
The swap networks -- the Federal Reserve network
alone is now $10 billion.
Expansion of multilateral aid through increased
resources of the World Bank, and the emergence of
the Inter-American Development Bank, the
International Development Association, and the
Asian Development Bank.
The new Special Drawing Rights -- a new form of
international reserve.
The reciprocal reduction of tariff barriers in
the Kennedy Round.
Cooperative arrangements to offset the foreign
exchange costs of our military deployments
abroad undertaken in the common defense.
Cooperative efforts to meet monetary crises
in the United Kingdom, Canada, Italy, and, very
recently, France.
This is a notable record on both the domestic and
international sides. The fact that we have not solved all of
the old problems and that new ones have emerged should not
detract from it -- but it also should remind us that we have to
continue not only to try harder but to achieve more.
- 6 -
Now, against this broad background, let us look at the
domestic and international monetary situations.
THE DOMESTIC FINANCIAL SITUATION
The key factor in both domestic and international monetary
developments recently was the passage of the tax increase -expenditure restraint legislation. The significance of this
legislation goes far beyond its specific fiscal effects, even
though these are important in themselves. The tax increase
and its accompanying expenditure restraint offer real prospect
of restoring more balance to domestic economic growth and should
help improve our foreign trade position.
If the fiscal package
can be coupled with more restraint on wage and price policies
by business and labor, it should help to restore a substantial
degree of price stability within a reasonable period of time.
But, in both domestic and international financial markets,
the tax-expenditure legislation has had effects on atmosphere
and expectations beyond its purely fiscal impact. Both here
and abroad, there had been increasing concern about the United
States' will and ability to check its twin deficits -- in the
domestic budget and the balance of payments. The long delay
in enactment intensified that concern. But the final action,
in an election year, almost magically dispelled much, if not
all, of that concern. It showed courage and responsibility
and demonstrated the will and capacity to manage American
financial affairs with prudence.
The dollar showed strength on the international exchanges,
and the domestic money and capital markets reacted with a
remarkable improvement in atmosphere and expectations. Key
interest rates eased significantly. From the highs of late
May, when confidence in passage of the legislation was at its
low point, to last Friday, the 3-month bill rate fell 77 basis
points. Treasury coupon issues declined in rate from 50 to
90 basis points. One-year agency yields dropped almost 3/4 of
a point; Aa corporates were 69 basis points lower in yield; and
municipals were down 44 basis points. Only the traditionally
sticky mortgage rates had shown little sign of downward
movement by last week.
The recent 1/4 percent cut in the discount rate of the
Federal Reserve gave further concrete evidence of an easier
monetary climate o I cannot, and would not, attempt to forecast
- 7 the course of Federal Reserve policy or interest rate developments.
Nevertheless, it seems evident that, as fiscal restraint
works its way through the economy, there will be les s need to
pursue a highly restrictive monetary policy. There is real
reason to believe that the possibility of another credit crunch
likes that of the Summer of 1966 has become highly remote.
The changed financial atmosphere has helped debt management
operations considerably, and the realities of Treasury demands
in fiscal 1969 should help it in the future. Our last financing
was highly successful. We placed more than $5 billion in 6-year
securities in public hands without undue market strain or any
visible signs of disintermediation -- and at a yield 30 basis
points below our last similar, but much smaller, offering.
In fiscal 1968, the Federal budget deficit -- on the
new unified budget basis -- was $25.4 billion. We do not yet
have a firm estimate for fiscal 1969, but the deficit will
most likely be at least $20 - $22 billion smaller, and that
measures the change in pressure the Federal budget will be
putting on the market in fiscal 1969 as against fiscal 1968.
This reduction in Federal Government demands means that much
more room to meet other demands for credit from both private
and public -- State and municipal -- sources. If there should
be -- as is widely expected -- some lessening in over-all
business credit demand, this would increase chances for further
easing of market conditions and in interest rates.
In the current half-year, July - December, 1968, our
total new money requirements are around $14.5 billion. This
includes both direct Treasury and net agency needs. The bulk
of this, $12.5 billion, is the seasonal deficit typical of the
first half of each fiscal year c Expenditures are spread fairly
evenly throughout the fiscal year, but revenue collections in
the first half are smaller than in the second half.
Not only is the Federal Government requirement smaller
for fiscal 1969 as a whole,. but we have already done a good
share of the heavy first half's needs. Of the $12 billion
Treasury new cash needs in the first half, we have done $7
billion -- $4 billion in tax anticipation bills in July,
$1.5 billion in new cash in August, plus $1.5 billion in the
current expansion in 6-month bills. We also have done about
half the new agency cash borrowing. The Treasury does not need
to go to market for new money before late October and, most
likely, will be able to cover its remaining cash needs in this
half year through TAB is sues.
- 8 All of this makes life for a Treasury debt manager
considerably easier than it was in fiscal 1968 and much easier
than during the 1966 credit crunch.
FINANCING NEW NEEDS
But, if life is easier now and prospects are for lesser
problems in Treasury and agency finance throughout fiscal 1969,
there are some major financing problems that lie ahead of us.
I have referred to the problems of the urban areas; obviously,
we must find ways to meet them and to meet them in sound
financial style.
In a talk I gave in St. Louis in November, 1965, I
discussed in some detail problems of coordinating the offerings
of the multiplicity of Federal agencies dealing directly with
the market, each with its own scheduling problems and each
with fairly specific financing objectives or requirements.
I also discussed the growth and diversity of the underlying
Federal credit assistance activities which gave rise to these
agencies.
I suggested that we give pretty free rein to the
imagination in considering alternative approaches to improve
the coordination of the financing of these activities and,
thus, to minimize the financing costs and the impact on financial
markets.
In October, 1966, in New York, Under Secretary Barr also
spoke of the problem of coordinating the financing of the myriad
Federal credit program agencies. He suggested that perhaps the
next step in this area might be the establishment of a new
central Federal lending corporation, which would obtain funds
for programs economically and efficiently by issuing its own
obligations in the private market.
On July 2, 1968, Vice President Humphrey suggested the
establishment of a National Urban Development Bank to help
solve the central problems of financing the needs of American
cities. This would be essentially a program for Federal underwriting of loans. The Bank would be financed initially by an
appropriation of Federal funds and then through subscription
of private funds.
It would issue its own obligations in the
market and would make loan funds available through affiliated
regional banks at varying interest rates to help finance publicI)
sponsored projects, especially, but not exclusively, in the inner
cities. Federal appropriations would be provided to cover the
differential between the interest rate paid in the market by the
Bank and the subsidized rate to the borr1wers.
- 9 I believe that such an approach offers a basic solution
to the long-standing problem of providing effective Federal
financial aid to State and local public bodies. The interest
on obligations issued in the market by the Bank would be subject
to Federal income taxation without involving the direct taxation
by the Federal Government of obligations issued by States and
localities themselves. This is the way we conduct our present
programs of direct loans -- since these programs are, in effect,
financed in the market with taxable Treasury bonds -- except
that direct Federal loans require immediate Federal budget
outlays.
The proposed new Urban Bank may require an initial Federal
contribution but would then require budget outlays only as
necessary for interest subsidy payments over the term of the
Bank's borrowings. Since the Bank would not require actual
Federal stock owner-ship, it would not be included in the
Federal budget
0
This broad-purpose Urban Bank would go a long way in
meeting the financing needs of the cities. It also would help
avoid further proliferation of Federal lending agencies and
would have the advantages of size and flexibility in its
marketing operations which would assure orderly financing at
the lowest possible borrowing rates.
The Urban Bank proposal may also suggest the proper future
Federal role in the necessary Federal-State-local partnership
to meet the growing credit demands for public facilities. I
believe that the Federal role should be primarily that of
~arantor.
There is no reason why the Federal Government,
itself, should be getting ever deeper into the essentially
administrative chores of loan origination and servicing which
can be performed just as well or better by existing private
financial institutions or by new non-Federal institutions
such as the proposed Urban Bank. Nor is it necessary or
practical for the Federal Government itself to build up a
large portfolio of loans. . The es sential Federal contribution
can be provided in the form of debt service subsidies over
the term of the loans and Federal assumptions of the unusual
loan risks.
While a Federal backstop behind the Bank's obligations is
an appropriate means of assuring the investor in these
obligations against loss and thus minimizing the Bank's borrowing
- 10 costs, the Federal guarantee should not be expected to be used,
or looked upon as a means of providing further subsidy of
protection to the local communities themselves. The defaults
on State and local bonds over the past several decades have
been virtually nonexistent, and I believe this record should
be maintained. The Bank can serve as a useful channel for
Federal interest and other subsidies for the benefit of local
community projects; these subsidies should be in predetermined
amounts sufficient to make the local projects economically viable
Any loan made by the Bank should have a reasonable assurance of
repayment.
The management and staffing of the Bank should be
of the highest caliber. I think these principles are essential
to the establishment of the Bank in the private market on a
business-like and fully self-supporting basis.
The Bank should also not be viewed as a substitute for
sources of credit already available in the private market. As
the Vice President stated in his July 2 speech, the funds of the
Bank would be available for programs which cannot be financed
through other means.
There should be firm control by the Congress over any
subsidies provided to local communities through the Bank. While
it would be essential to the efficient marketing of the Bank's
obligations to provide advance assurance that Federal interest
subsidies will be forthcoming in a timely manner to meet the
Bank's own debt service requirements, this can be done without
any loss of Congressional control by requiring regular approval
by the Congress of the dollar volume of new obligations issued
by the Bank with a Federal commitment to pay part of the debt
service o
THE U. S.
-- -
BALANCE OF PAYMENTS
I turn now to the international side and want to talk
first about the U. S. balance of payments. And, to provide
proper perspective, I want to go back to the World War II period
Here, for the record, I must interject a brief technical
note.
In discussing the balance of payments, I find it useful
to consolidate the various and numerous receipt and payment
accounts into three broad categories -- trade and service,
military and Government, and capital. The measurement of
deficit or surplus does not change, and I use the so-called
liquidity concept.
In the capital account, I include all
private outflows on direct and portfolio investment and all
public and private inflows. But I also include all Government
- 11 ®d public income receipts and payments and the catch-all
"Errors and Omissions." The military and Government account
includes mainly Government grants and capital plus military
transactions net of military sales, but also Government pension
payments to recipients living abroad and some Government
receipts and payments for miscellaneous services. The
trade and service account includes everything else -- nonmilitary exports and imports, both privately and publicly
financed, travel, transportation, miscellaneous services, and
pensions and remittances. The primary differences from
conventional accounting are the inclusion of income on investments
on the capital account and the consolidation of most military and
Government expenditures and receipts. From my point of view,
these groupings make it easier to see the picture.
In the 17 years from 1941 to 1957, the United States had
a cumulative deficit on the liquidity basis of less than $10
billion, or less than $600 million per year on the average.
We had a cumulative surplus on trade and services of $89 billion,
or $5.2 billion a year. We had a deficit on military and
Government transactions of $112 billion, or $6.6 billion per year.
From 1946 to 1957 alone, we extended economic assistance in
grants and loans of $42 billion net. On capital account, we
had a surplus of $13 billion, or $800 million per year. And,
despite our over-all deficit, we gained gold reserves which,
at the end of 1957, were $800 million larger than at the
beginning of 1941.
The point, of course, is that the U. S. was not in a real
balance of payments deficit throughout that period, even though,
on an accounting basis, we ran deficits in 11 out of 17 years.
Both in the war years and the postwar years, we employed our
great economic strength first to assist our allies and then to
help rebuild a wartorn world. In that process, we loaned or
gave away a lot of money which went first to buy our goods,
since only the United States had major production resources
virtually untouched by the war, and, second, to build up the
international reserves of the rest of the world. Most of that
reserve build-up was in the form of dollar claims -- as noted,
we actually gained gold reserves. The dollar was not only as
good as gold -- it was better.
- 12 We were not patsies during this period; we exercised the
responsibilities of a great power and helped rebuild the world.
We suffered discrimination against our trade, but it meant
little, for we had most of the goods to sell abroad. There
was a dollar shortage. The only reason foreigners did not buy
more from us was that they did not have more money. Our capital
markets were open and we encouraged their use. We picked up
most of the checks for insuring Free World security. We tried
to increase our foreign private investment. We encouraged our
tourists to go abroad and make substantial purchases there.
But, during this period, two things were occurring. On
the one hand, we were experiencing a fairly steady shrinkage
in net inflow on trade and services account. This was a joint
product of some decline in our trade balance, as imports rose
more than exports, and some further deterioration in our
service balance as travel and tourism rose. The net trade
and service balance averaged $6.9 billion from 1946 through
1949 but only $2.4 billion from 1950 through 1957. Theannual
average of military and Government outpayments net dropped by
$1.7 billion from 1946-49 to 1950-57, but this obviously did
not offset the trade and service decline. On the other hand,
neither we nor the rest of the world did much of anything about
the consistent deficit. The rest of the world began to
worry about the U.S. deficit but did not want to stop having
surpluses. We apparently just continued to be willing to run
deficits.
The next ten years saw a far different set of circumstances
We ran a cumulative deficit of $27 billion, or more than four
times the annual average of the 1941-57 period. We lost $11
billion in gold and financed most of the rest of the deficit
by increasing dollar claims against us. Thus, we not only lost
gold reserves but our liquidity ratio deteriorated quite sharply
By the close of 1960, it was painfully evident that the
U.S. deficit was no longer regarded as a blessing but as a
destabilizing element in the world monetary system. Our trade
and service balance had shrunk further, and our small surplus
on capital account had turned into a small deficit. Military
arid Government account deficits, which had been declining, were
moving back up to bigger figures. The over-all deficit in the
three years, 1958-60, totaled $11 billion, or $3.7 billion
per year.
- 13 With the American economy operating well below capacity
in 1960 and 1961, there was nothing to be gained and much to
be lost by following the classical remedy for balance of
payments improvement -- deflation. One thing we, and the rest
of the world, have learned is that sharp deflation is not an
acceptable balance of payments cure. It hurts the world as a
whole, as well as the deficit country. Curbing inflation, of
course, is another matter -- that is still good doctrine, and
we are trying to employ it now.
But there is mother reason for not depending solely on
sharp deflation to cure balance of payments ills for the
United States. Much of our difficulties came from adverse
balances on military account, on tourism, and on capital outflow.
The foreign exchange costs of our worldwide defense
alliances simply are not susceptible to being reduced by
general fiscal and monetary policy. Gross outlays in this
account amount to about $4.3 billion per year, and the impact
on our payments position, even after netting receipts from sales
of military goods, is about $3.3 billion. The only logical way
to reduce the net drain is to implement further -- as we are
doing to some extent -- the accepted principle that the foreign
exchange costs of common defense efforts should be neutralized.
Tourist expenditures also are not closely related to
fluctuations in economic activity but more to the growing number
of people with high incomes. Our net tourist deficit last year
was about $2 billion. And, while some capital flows are closely
related to interest rates, much capital export reflects other
factors.
The first actions to reduce the U.S. payments deficit
took the form of reducing the foreign exchange costs of
Government spending overseas. Savings in this area, plus improvement in our trade account, reduced the deficit from $3.9 billion
in 1960 to $2.2 billion in 1962. But then capital began to flow
out in increasing volume -- partly because we generated large
savings and had large capital markets; partly because of investment opportunities overseas; and partly because the long campaign
to increase U.S. foreign investment had gradually won many
converts. The net capital outflow was less than $500 million
in both 1962 and 1963; it jumped to $2.6 billion in 1964. The
Interest Equalization Tax, in 1963, and the voluntary programs
to restrain direct investment and foreign lending in 1965 turned
the net capital outflow into net inflow in 1965, 1966, and 1967
0
- 14 But the trade and services inflows were cut back sharply
~n those same years and, from mid-1965, the rising foreign
exchange costs of Vietnam increased the deficit on military and
Government accountc
Finally, the unsettled condition of the
pound sterling caused us trouble in 19670 The result was that,
after reducing our payments deficit to about $103 billion in
both 1965 and 1966, it skyrocketed up to $3.6 billion in 19670
It was in that setting that President Johnson announced,
on New Year's Day this year, a new, complete and balanced
program to eliminate the payments deficit. The program was in
two major partso
First, and of key importance, was the tax
increase and expenditure restraint to cool
off the American economy and help restore
our trade position. In addition, the
President asked business and labor to exercise
wage and price restraint and requested
avoidance of crippling work stoppages to
prevent import increases or export reductions
0
Second, five programs were aimed at particular
and vulnerable segments of our balance of
payments
Two were in the capital field and
were aimed at reducing foreign borrowing in the
Uo So and U. S. investment abroado These were
tailored selectively to have major impact on
the surplus countries of Western Europe and
least impact on the developing countrieso One
aimed at reducing the foreign exchange costs
of Government expenditures overseas, with
heavy emphasis on neutralization of military
expenditures incurred in the common defense.
One was aimed at increasing exports, and one
at reducing the net outflows on tourismo
0
The program was an over-all program, but not all of it
has been put into effecto The tax increase-expenditure restraint
program was not enacted until mid-year o Nothing has been
done to reduce tourist expenditures
The two major capital
programs came into force January 1 and have proved very effectiveo
The reduction in the foreign exchange costs of Government has
also worked out well.
0
- 15 The net result, so far, has been encouraging, but there
is no cause for relaxation of our efforts. On a seasonally
a~usted basis, the deficit in the last quarter of 1967 was
$1.8 billion. In the first quarter of 1968, it was cut to
$660 million and, in the second quarter, to $150 million.
In announcing the second quarter results, Secretary Fowler
said:
"The program to date demonstrates that bold
wise action ~ influence events and developmentso
Complete pursuit of the full program, in full
bipartisan partnership, is the only course that
will achieve and maintain equilibrium in the
U. S. balance of payments and thereby assure the
soundness of the Free World monetary systemo"
That is the real point in seeking to bring the U. S.
payments position into balance. The long string of deficits
had become a destabilizing factor in the international monetary
system and had eroded our own reserve and liquidity positiono
It is in our interest and that of the world monetary system to
come into balance.
Passage of the tax increase-expenditure reduction
legislation has improved confidence in the dollaro It has
been further improved by the strong measures taken and the
results achieved in our payments balanceo But we cannot relax
our efforts until we attain sustainable balanceo
THE INTERNATIONAL MONETARY SYSTEM
The international monetary system rests on four pillars:
A strong and well-balanced U. S. economy
with a strong dollar which holds its
purchasing power. As such, it can be
invested profitably in the U. S. money and
capital markets and, thus, can be held as a
safe international reserve or as a safe and
usable means for making international
commercial paymentso
A fixed $35 per ounce official price of gold
and a dollar convertible into gold at that
price by monetary authoritieso
- 16 Convertibility of other currencies into
dollars at stated rates of exchangeo
Adequate international reserves and credit
facilities to support the systema
I have already discussed the need to maintain a strong
and well-balanced U. S. economy and a strong dollar. The
economic record of the Sixties is a good one; the recent fiscal
legislation provides insurance for that record and for the future
0
I have also cited the achievements in international
monetary cooperation during the Sixties: the strengthening of
the International Monetary Fund, the development of the swap
networks, the rescue operations, and the new Special Drawing
Rights plan now in process of legislative ratification in the
member countries of the Fund a The U. S. took a leading
position in developing this new reserve asset; it should serve
the world well when it comes into actual existenceo
There were two major reasons why worldwide agreement
was reached on a new reserve asset -- the Special Drawing Right a
The first reason was that the world needs fairly steady and
assured growth in international reserves in order to avoid a
scramble for existing reserves and possible restrictive actions
to preserve reserve positionsa World economic growth and
international trade growth require growth in world reserves o
The second reason was that the existing sources of reserve growth
were inadequate or inappropriate to meet demand
Most of the
growth in world reserves in the postwar era has come from U. S.
balance of payments deficitso We have already noted that continue(
large U. So deficits were not desirable either from the viewpoint
of the United States or of the world o The U. S. balance of
payments program aims at equilibrium; that means that additional
dollars cannot be counted on to fulfill the demand for reserveso
And additions to monetary gold stocks have been inadequate in
amount for a number of yearso
0
Fortunately, work on the new Special Drawing Right was in
its latter stages when the international monetary system underwent
major crises in the Fall and Winter of 1967 and 1968. The
greatest factor of instability was the weakness in sterling which
culminated in devaluation at mid-November, 1967. But the
Middle East crisis and the return to large deficit in the Uo So
also added to uncertaintyo In this setting, a number of people
became convinced that the price of gold would have to be increased
and free market gold sales rose very sharply
0
- 17 'The immediate outbreaks in late November and December
were not unexpected, following the devaluation of a maj or
currency. The monetary authorities, acting quickly and with
the cooperation and efficiency gained from experience, contained
the devaluation and its direct impact to relatively few countries.,
~ey hoped that determination to hold the free market, as well
as the official price of gold, would restore stability, give
time to set firmly in place the plan for the new reserve asset,
and thus demonstrate the reduced reliance of the world's
monetary system on gold.,
But the sporadic runs into gold continued, even after the
sterling crisis subsided and the new U. S. balance of payments
program was announced. The monetary authorities operating the
Gold Pool began to question the desirability of continuing to peg
the free market price of gold
Following the renewed heavy
gold rush in March, they decided to take other action.
0
By their action in Washington on March 17, 1968, the
members of the Gold Pool effectively separated the private gold
markets from what might be termed the monetary gold market,
composed of the existing stock of monetary gold. "They no
longer feel it necessary to buy gold from the market," said the
March 17 statement, "in view of the prospective establishment of
the facility for Special Drawing Rights 0"
In Stockholm, at the end of March, the final touches were
put on the new Special Drawing Rights plan, and, as noted, it
is now in process of legislative ratification by IMF member
countries
Possibly by the end of this year, almost certainly
by early in 1969, the plan will be formally in place as the
various legislatures act.
0
Bothat Washington and in Stockholm, the monetary authorities
of the big countries re-asserted their determination to keep the
official price of gold at $35 per ounce
A large ntunber of IMF
member countries commented publicly on the Washington Communique
and pledged their backing to the official price and to the
"rules" of the two- tier gold system o Among the proposed
amendments to the Articles of Agreement of the IMF, the key
document now in process of ratification by all member parliaments,
there is one that makes it much harder procedurally to change
the gold price. This move was originally suggested by the
Common Market countries and supported by the other members of the
~. Taken all together, I think it is crystal clear that the
world's monetary authorities have nailed down hard the answer
to the gold price problem -- there will be no change in the
offiCial price.
0
- 18 The new two-tier system has worked very well. The free
market price of gold went as high as $42 60 in London in Mayo
It subsequently receded to as low as $37.50 and currently is
around $39.500 You might note that even with heavy speculation
and increased hoarding, the free market gold price did not rise
very much. Market performance certainly does not indicate
that the two-tier system is very fragileo
0
France is the most recent case to demonstrate the
strength and solidarity of international monetary cooperation
and the determination of the countries of the world to make
the world monetary system work o The riots and unrest of late
Spring and early Summer in France created another confidence
problem for the system, and the authorities moved quickly
and decisively to meet ito France drew on the IMF, and the big
countries established a swap network to ease the strain on
French reserves o U o S. participation in this network is $700
million.
Taken all together, the world monetary system has performed
well over the postwar period, and monetary cooperation has
increased and become even more effective in recent years. The
new plan for Special Drawing Rights will improve and further
strengthen the system.
CONCLUSION
To conclude this talk, I return to my opening theme
Progress brings problems but also makes possible the solutions
to problemso We must try harder both to attain continued
progress and to resolve our current problems and those that will
emerge in the future
We will not attain all we want at once o
But the way to progress is to progress o Change is the order of
the dayo It should and will come quickly, but it should and will
come in orderly and coherent form. To keep this country strong
is of key importance. This means that change will come in a
climate of fiscal and monetary responsibility.
0
0
The United States, if it is strong at home, will be strong
abroad, and the dollar will remain the key currency of the world.
And, in that world, a strong United States is an absolute must.
But, in that world, we need to foster the theme of cooperation, W
has proved so useful in the past and will, without question,
prove even more useful in the future
0
000
.TREASURY DEPARTMENT
,
FOR IMMEDIATE RELEASE
NEW SEAL FOR TREASURY DEPARTMENT
After nearly two centuries of doing business with a seal whose
Latin wording translates as "Seal of the Treasury of North America,"
the Treasury Department has a new one reading, in plain English,
"The Department of the Treasury."
Colored lithographs of the redesigned seal, which also now
bears the date "1789" to record the year of the department's
creation, can be bought from its Bureau of Engraving and Printing.
Aside from the new wording and the added date, the Treasury Seal
remains relatively unchanged, its arms depicting balance scales, a key
and a chevron with 13 stars. Since it was used by the Board of
Treasury under the Articles of Confederation, the basic design
antedates the Federal Government itself.
In 1778 the Continental Congress named John Witherspoon,
Gouverneur Morris and Richard Henry Lee to design seals for the
Treasury and the Navy. The committee reported on a design for the
~~ the following year but there is no record of a report about
one for the Treasury.
The Treasury considers that the actual creator of its seal
probably was Francis Hopkinson, who is known to have submitted
bills to the Congress in 1780 authorizing design of departmental
seals, including the Board of Treasury. Although it is not
certain that Hopkinson was the designer, the seal is similar to
others by him. Also obscured by the absence of historical proof
is the reason for original wording that embraced all North America.
Treasury Secretary Henry H. Fowler approved the present design
earlier this year.
Lithographs of the new Treasury Seal are available for 70 cents,
all charges included, from the Bureau of Engraving and Printing,
Washington, D. C. 20226. This "bureau also can supply price lists
and order blanks for copies of the Great Seal, the Presidential Seal,
and engraved portraits of the Presidents.
000
F-1340
TREASURY DEPARTMENT
fOR BEllAS! 6: 50 P eK. ,
fridaY J August 50, 1968.
-
1he Treasury DepartEnt armoUDceci tbat tbe teDders tor two series ot TreuUJ7
bills, ODe series to be an aclclitional issue of the bills dated June 6, 1968, and the
otber senes to be dated Septellber 5, 1968, which were ottered OD August 26, 1968, were
opeDe4 at the Federal Be ••ne Banks tCld.q'. Teac1ers were iDrtted tor $1,600,000,000,
or tlaereabouts, ot 91-day bills aDd tor $1,100,000,000, or thereabouts, ot 182-day
billl, Dae details ot the wo series are as follows:
UI or ACCEP'fED
calPMTIVE lIM:
91-4&y 2reasury bills
-.turi5 December 5, 1968
Approx. Iqui..,.
Price
Annual Bate
98.695
5.1nJ
98.680
5.222j
98.687
5.194r~
l82-day !reasury bills
_turiDg March 6, 1969
Approz~
Price
97.55'
97.M3
97.M6
Y
!I Excepting
5.2S~
11
1 teDd.er of $50,000
'1.' ot tbe uount ot 91-dq billa bid tor at tbe
~
!/
Iquiv.
ADDual Rate
5.234:~
5.256~
low price vas accepted
ot tbe ..aunt ot 182-4&1 bills b14 tar at the low price vas accepted
!1m IJIJIDiRS APPLIID lOR AlID ACCEPtBD HI JDlUL RISDVI mSmC'l'S:
District
Aiilied For
•
Bolton
lev York
Philaae1phia
Clevelaad
Hicbaolll
Atluta,
Chicago
St. Louis
lfiDDeapo118
laaaaa City
lalla.
San PraRcisco
~
Acce,ted
28,6'2,000 .8,216,000
1,958,808,000
26,~,OOO
28,712,000
8,208,000
46,075,000
112,296,000
70,796,000
23,981,000
18,720,000
26,951,000
142 1 °99 1 °00
·
·
1,156,258,000
18,58',000 •
28,712,000
8,208,000
34:,075,000
108,296,000
59,911,000
22,772,000
17,720,000
17,361,000
110,1622,1000
·
AEEli.. For
•
17,955,000
2,055,020,000
15,920,000
26,597,000
4:,0'2,000
25,336,000
156,735,000
53,726,000
21,165,000
18,282,000
20,'77,000
314,1630,1000
$2,491,622,000 $1,6oo,535,~ $ 2,705,885,000
~IDelude8 $24:2,34:7,000
~Include8 $103,737,000
Acee;2_d
•
3,896,000
764:,04:6,000
5,722,000
12,24:1,000
5,"2,000
8,384:,000
17,24:1,000
35,222,000
5,565,000
9,380,000
9,175,000
229,17531.°00
$1,100,039,000£1
DODccapetitiYe teJldar. accepted at tlMt averaae price ot 98.687
DODca.:pet1tift teDders accepted at the average price of 97.M6
~ bse rates are OIl a bank discount baaia. !be equivalent coupon i.a. yields are
S.~ tor the 91-4&y bills, aad 5.'~ tor tile 182-dq bills.
F-1341
TREASURY DEPARTMENT
September
4,
FOR IMMED lATE RELEAS E
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, 700,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing September 12,1968, in the amount of
$2,600,777,000, as fOllows:
91-day bills (to maturity date) to be issued
in the amount of $l, 600,000,000, or thereabouts,
addItional amount of bills dated June 13,1968,
mature December 12,1968,orlginally Issued in the
$1,100,121,000, the additional and original bills
1nter!:hangeable.
September 12,1968,
representing an
and to
amount of
to be freely
182-day bills, for $1,100,000,000, or thereabouts, to be dated
September 12,1968, and to mature March 13,1969.
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
1'1111 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
(maturi ty 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, September 9,1968.
Tenders will not be
received at the Treasury Dellartment, 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 dec imals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
fONarded 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.
- 2 Immediately after the closing hour, tenders will be opened at
Federal Reserve Banks and Branches, following which public announce
ment will be made by the Treasury Department of the amount and pric
range of accepted bids.
Those submitting tenders will be advised
of the acceptance or rejection thereof.
The Secretary of the Treas
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
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on September 12,1968,
cash or other immediately available funds or in a like face amount
of Treasury bills maturing September l2,1968.Cash and exchange ten
will receive equal treatment. Cash adjustment~ 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 exclude~
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereund~
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 th~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and th
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
any Federal Reserve Bank or Branch.
000
£QR RELEASE ~ DELIVERY
TREASURY DEPARTMENT
WASHINGTON
REMARKS OF THE HONORABLE ROBERT A. WALLACE
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE AMERICAN METAL MARKET SILVER SEMINAR
ROOSEVELT HOTEL, NEW YORK, NEW YORK
MONDAY, SEPTEMBER 9, 1968, 1:00 P. M.
I SHOULD LIKE TO EXPRESS MY APPRECIATION TO MR. TRENCH AND MR. JENSEN
FOR INVITING ME TO SPEAK AT THE .A.MERI CAl\! METAL tv1ARKET SEMINAR.
MAY BE MORE OF AN HISTORICAL EVENT THAN WE REALIZE.
THI S MEETING
IT COULD BE THE LAST --
ORPE~S
ONE OF THE LAST -- OCCASIONS ON WHICH A TREASURY OFFICIAL WILL BE
C~SIDERED
AS AN APPROPRIATE FEATURE SPEAKER ON SILVER TO A GATHERING OF
INVESTORS AND INDUSTRIAL USERS OF THIg METAL.
CERTIFICATE REDEMPTIONS ON JLNE
WITH THE ENDING OF SILVER
24 OF THIS YEAR THE LONG MONETARY HISTORY OF
SILVER IN THIS COLNTRY, TO ALL INTENTS Al\!D PURPOSES, ENDED AND SILVER BECAME
t-fRELY ONE OF A GROUP OF COINAGE METALS WITH NO MORE MONETARY S IGNI FICAI\!CE
THftN, FOR EXAMPLE, COPPER OR NI CKEL.
I VERY MUCH DOUBT THAT AT Am.
INDUSTRIAL MEETING ON THE SUPPLY AND PRICE OUTLOOK FOR COPPER OR NICKEL A
TR~URY
OFFICIAL WOULD BE VERY HIGH ON THE LIST OF AUTHORITATIVE SPEAKERS.
HOWEVER, THE LNITED STATES TREASURY IS STILL AND WILL CONTINUE FOR SOME
TIME TO BE THE WORLD'S LARGEST SUPPLIER OF SILVER TO THE PRIVATE MARKET.
IN
THIS CONTEXT TREASURY OFFICIALS HAVE A RESPONSIBILITY TO KEEP THE PUBLIC
INFORJ'.'ED AS TO VkiAT WE HAVE BEEN DOING AND, TO THE EXTENT POSSIBLE, WHAT WE
PL,6N TO 00.
I HAVE MADE SUCH PUBLIC REPORTS IN THE PAST AND I THINK IT
~PROPRIATE ON THIS OCCASION THAT I BRING YOU UP TO DATE ON THE FIGURES AND
PERHAPS ALSO CLARI FY THE PI CTURE FROM THE GOVERf\tv1.ENT'S STANDPOINT AS TO HOW
THE CH,6NGE IN THE STATUS OF SILVER FROM A MONETARY METAL TO A COINAGE METAL
~ ABOUT.
I WILL NOT GIVE YOU A LENGTHY HISTORICAL SUMMARY OF THIS
- 2 DEVELOPMENT BUT I WI LL MENTI(X\I SOM: OF THE MAJOR EVENTS IN THE PAST FEW
YC,':"RS ,AJ\lD GIVE PARTICULAR ATTENTION TO WHAT HAPPENED DURING THE PAST YEAR.
THE GRADUAL PHAS I NG OUT OF S I LVER AS A tv'ONET ARY MET AL THAT BEG,AJ\l I N THE EARLY
1960'S HAS NOT BEEN WITHOUT ITS TENSE MOMENTS, BUT ON THE WHOLE THE
TRANSITION HAS BEEN CARRIED OUT FAIRLY SMOOTHLY ,AJ\lD WITHOUT DISRUPTING THE
COMMERCE ,AJ\lD TRADE OF OUR COUNTRY
-- THE OBJECTIVE WHICH HAS BEEN OUR MAJOR
CONCERN.
AS EARLY AS 1961 THE GOVERNMENT'S TOP POLICY OFFICIALS GAVE CLOSE
ATTENTION TO THE POSSIBLE CH,AJ\lGING ROLE OF SILVER IN OUR MONETARY SYSTEM.
ALTHOUGH AT THAT TIME THE TREASURY HELD SOM:: 2 BILLION OUNCES OF SILVER WE
WERE AWARE THAT INDUSTRIAL SILVER DEMAND WAS RISING STEADILY AND WAS EVEN
THEN BEGINNING TO EXCEED ,AJ\lNUAL PRODUCTION FROM BELOW GROUND SOURCES.
IT
WAS CLEAR THAT MODIFICATIONS IN THE GOVERNMENT'S SILVER POLICY WERE NECESSARY
TO ADJUST TO PROBABLE FUTURE TRENDS IN THE SUPPLY ,AJ\lD DEMAND FOR SILVER AND
THE RESULTING IMPACT OF THESE TRENDS ON THE FREE MARKET PRICE.
,AJ\l EARLY MAJOR ACTION IN THE PROCESS OF WITHDRAWING SILVER FROM THE
MONETARY SYSTEM, EXCEPT FOR USE AS A COINAGE METAL, WAS TAKEN UNDER THE
AUTHORITY OF PUBLIC LAW 88-36 ENACTED IN JUNE 1963.
THIS LEGISLATION, WHICH
HAD BEEN RECOMMENDED BY THE PRESIDENT, ENDED THE REQUIREMENT FOR THE ISSUANCE
OF SILVER CERTIFICATES AGAINST SILVER PURCHASED BY THE TREASURY, AND
AUTHORIZED THE ISSU,AJ\lCE OF $1 FEDERAL RESERVE NOTES IN ORDER THAT SILVER
CERTIFICATES IN THIS DENOMINATION MIGHT BE WITHDRAWN FROM CIRCULATION.
THE
EFFECT OF THIS LEGISLATION WAS TO CONSERVE THE REMAINING SILVER STOCK OF THE
TREASURY FOR FUTURE GENERAL USE, EXCEPT OF COURSE FOR THE AMOUNT REQUIRED
AS RESERVE FOR THE THEN OUTSTANDING AMOUNT OF SILVER CERTIFICATES.
WITH THE RISE IN THE MARKET PRICE OF SILVER TO $1.29 AN OUNCE BY MID-
1963, THE TREASURY RESlJvtED THE OFFERI!\(; OF SI LVER BULLION TO THE PUBLIC AT
ITS MCtJETA,RY VALUE IN EXCHANGE FOR SILVER CERTIFICATES.
UNDER THE PRACTICAL
POOCEDURE THAT WAS WORKED OUT, PERSONS WISHING TO ACQUIRE SILVER BULLION DID
~T
NEED TO ACTUALLY PRESENT SILVER CERTIFICATES.
AS AN OFFSET TO DAILY
SALES OF SI LVER THE FEDERAL RESERVE BANKS SIMPLY MADE AN EQUIVALENT WRITE-OFF
~~TMENT
FROM THE UNFIT SILVER CERTIFICATES BEING RETIRED FROM CIRCULATION.
ITW~ NOT UNTIL
1967 THAT THE ACTUAL PHYSICAL PRESENTATION OF SILVER
CERTIFICATES WAS REQUIRED IN EXCH,ANGE FOR SILVER BULLION.
/IN IMPORT,ANT PARALLEL DEVELOPMENT IN THE SILVER PICTURE AROUND THIS TIME
W~
THE RAPID RISE IN THE DEMAND FOR COINS IN THE ECONOMY.
THE FIRST COIN
SHORTAGES BEG,AN TO APPEAR IN THE FALL OF 1962 AND THE PROBLEM INCREASED
~RI~
~E
1963
AND
1964.
DESPITE ROUND-THE-CLOCK PRODUCTION BY THE U. S. MINTS
SUPPLY OF COINS CONTINUED TO BE VERY TIGHT THROUGHOUT THIS PERIOD.
THE
HEAVY PRODUCTIa-J OF COINS OF COURSE CUT DEEPLY INTO THE TREASURY STOCKS OF
SILVER.
MO~
AT THE END OF
1964
THE TREASURY STOCK OF SILVER WAS REDUCED TO
1.2 BILLION OUNCES AND IT WAS OBVIOUS THAT SOONER OR LATER SOMETHING
WOULD HAVE TO BE DONE ABOUT A SUBSTITUTE COINAGE MATERIAL.
ALTHOUGH TREASURY
SILVER STOCKS WERE STILL ADEQUATE TO PERMIT THE CONTINUATION OF SUBSIDIARY
SILVER COINAGE FOR THE IMMEDIATE FUTURE, IT WAS RECOGNIZED THAT TIME WOULD
BE REQUIRED TO MAKE A DELIBERATE SEARCH FOR A SATISFACTORY SUBSTITUTE, TO
OBTAIN CONGRESSIONAL ACTION TO PRODUCE THE NEW COIN, AND TO MAKE A SUCCESSFUL
T~SITION TO THE NEW SUBSIDIARY COINAGE MATERIAL.
IN THE MEANTIME, MUCH OF
~E TREASURY SILVER STOCKS WOULD HAVE TO BE CONSUMED IN COINAGE AND THROUGH
- 4SALE IN THE MARKET TO ASSURE THAT THE MARKET PRICE OF SILVER DID NOT RISE
A POINT AT WHICH IT WOULD BE PROFITABLE TO MELT U. S. SILVER COINAGE FOR
THE VALUE OF ITS SILVER CCNTEJ\IT.
IN 1964 THE TREASURY INITIATED ITS OWN STAFF STUDY OF COINAGE MATERIALS
.Af\JD ENGAGED A WIDELY KNOiJN RESEARCH ORG,ANIZATION TO STUDY THE DIFFERENT
QUALITIES OF THE ALTERNATIVE MATERIALS.
IN CONNECTION WITH THESE STUDIES
VARIOUS COINAGE MATERIALS WERE TESTED ,AND RATED ACCORDING TO CERTAIN CRITERIA
AMONG WHICH WERE PUBLIC ACCEPTABILITY, INCLUDING APPEARANCE, WEIGHT, COLOR,
WEARING QUALITIES, OPERATION IN VENDING MACHINES, COUNTERFEITING POTENTIAL,
EASE OF PRODUCTION, ,AND COST ,AND AVAILABILITY OF RAW MATERIALS.
THERE WAS NO KNOWN MATERIAL POSSESSING ALL OF THE NECESSARY PROPERTIES,
SO COMBINATIONS OF MATERIALS WERE STUDIED -- IN THE FORM OF CLAD MATERIAL.
IT WAS DECIDED THAT THE BEST ALLOY FOR THE COINAGE WAS THE CLAD CUPRO NICKEL
MATERIAL WHICH BY NOW IS FAMILIAR TO ALL OF YOU.
THERE REMAINED THE QUESTION OF WHETHER OR NOT SILVER MIGHT BE RETAINED
IN ONE COIN SUCH AS THE KENNEDY HALF DOLLAR TO PRESERVE THE TRADITION OF
SILVER IN THE U. S. COINAGE.
AFTER SOME DELIBERATION IT WAS DECIDED TO
RETAIN A REDUCED QUANTITY OF SILVER IN THE 50 CENT PIECE.
THE
PRESI~NT
IN JUNE OF 1965
SENT A MESSAGE TO THE CONGRESS REQUESTING LEGISLATION
AUTHORIZING THE PROPOSED NEW COINAGE.
THE CONGRESS RESPONDED PROMPTLY AND
THE COINAGE ACT OF 1965 WAS SIGNED BY THE PRESIDENT ON JULY- 23 OF THAT YEAR.
SHORTLY THEREAFTER PRODUCTION OF THE NEW COINS SWUNG INTO HIGH GEM.
IT WAS RECOGNIZED THAT PERHAPS AS MUCH AS TWO YEARS OF HEAVY
WOULD BE r-.ECESSARY TO M.6J<E
~ENQU;H
HOdEVER,
PRODUCTI~
OF THE NEW CLAD COINS TO BE ABLE TO FULLY
REPLACE THE EXISTING DIMES AND QUARTERS IN CIRCULATION.
- 5DURING THIS PERIOD OF TRANSITION, FROM THE FALL OF
~965
TO THE SPRING
OF 1967, THE OUTFLOW OF SILVER FROM TREASURY STOCKS STAYED AT A SUBSTAINABLE
AATE. BUT, BY THE END OF
AP~IL
1967 FREE SILVER STOCKS -- THE SILVER NOT
REQUIRED AS A RESERVE BEHIND SILVER CERTIFICATES -- HAD DROPPED TO ABOUT
90 MILLION OUNCES.
TO INCREASE THIS RESERVE THE TREASURY ON MARCH 14, 1967
REQUESTED LEGISLATION TO WRITE OFF $200 MILLION IN SILVER CERTIFICATES WHICH
WE~
~T
ESTIMATED TO HAVE BEEN LOST, DESTROYED, OR FOR SOME OTHER REASON WOULD
SHOW UP IN COMMERCE.
~DEEM
THE LEGISLATION ALSO PROVIDED THAT THE RIGHT TO
SILVER CERTIFICATES FOR SILVER WOULD END ONE YEAR FROM THE ENACTMENT
DATE OF THE NEW LAW AND ALSO REQUIRED THE TREASURY ONE YEAR AFTER THE SIGNING
OF THE BILL TO TURN OVER 165 MILLION OUNCES OF SILVER TO THE DEFENSE STOCK-
PILE. THIS BILL WAS SIGNED INTO LAW ON JUNE 24, 1967.
MEANWHILE, DURING MAY OF 1967 DEMANDS ON THE TREASURY TO PURCHASE SILVER
~DER
THE UNRESTRICTED SALES POLICY ROSE DRAMATICALLY.
DECISICNS ON SILVL0UCY WERE CLEARLY NECESSARY.
AT THIS TIME BASIC
BUT BEFORE MAKING THESE
DECISIONS THE SECRETARY OF THE TREASURY WANTED TO OBTAIN A BROAD .AND
AUrnORITATIVE RANGE OF EXPERT ADVICE FROM BOTH WITHIN .AND OUTSIDE THE
EXECUTI VE BR.ANCH OF THE GOVERNMENT AND THE CONGRESS .
FORTUNATELY A PRACTI CAL
M:CHANISM IN THE FORM OF THE JOINT C()AMISSION ON THE COINAGE WAS AT HAND
~IOH
PERMITTED THE SECRETARY ON SHORT NOTICE TO OBTAIN SUCH CONSULTATIONS.
THIS nJENTY-SIX MEMBER COv1MISSION WHICH HAD BEEN AUTHORIZED BY THE COINAGE
ACT OF 1965 INCLUDED KEY OFFICIALS OF THE EXECUTIVE BRANCH, THE PRINCIPAL
~ETARY
AUTHORITIES IN THE CONGRESS OF BOTH PARTIES, .AND BIPARTISAN
REPRESENTATION FROM THE PUBLIC.
- 6 BEGINNING ON MAY 18, 1967 THE JOINT COt-'MISSION ON THE COINAGE HAS t-'ET
IN CONSULTATION WITH TREASURY OFFICIALS ON FIVE OCCASIONS, THE MOST RECENT
BEING IN JULY OF THIS YEAR.
AT THESE MEETINGS THE COMMISSION HAS BEEN
THOROUGHLY BRIEFED ON THE COINAGE .AND SILVER SITUATIO'J .AND THE MEMBERS HAVE
HAD THE OPPORTUNITY TO DISCUSS .AND EXPRESS THEIR VIEWS O'J ALL MAJOR POLICY
ACTIONS TAKEN OVER THE PAST YEAR.
I BELIEVE I CAN SAY WITH ACCURACY THAT ALL
OF THE MAJOR SILVER POLICY DECISIONS MADE SINCE MAY 18, 1967 HAVE HAD THE
CO'JCURRENCE OF A MAJORITY OF THE COtw'MISSION tv'EM3ERS.
I THINK YOU ARE ALL GENERALLY FPMILIAR WITH THE MAJOR GOVERNMENT ACTIONS
WITH RESPECT TO SILVER DURING THE PAST YEAR.
THE KEY ACTIONS OF COURSE
WERE THE HALT IN SALES OF SILVER AT THE $1.29 SUBSIDY PRICE .AND THE INITIATION
OF WEEKLY SALES AT A 2 MILLIO'J OUNCE RATE BY GSA UNDER A COMPETITIVE SEALED
BID PROCEDURE.
THESE ACTIONS WERE TAKEN AS SOO'J AS THE TREASURY CONCLUDED
THAT SUPPLIES OF CLAD COINS WERE ADEQUATE FOR THE NORMAL TRADING NEEDS OF
THE ECONOMY.
BEFORE THE WEEKLY GSA SALES WERE INITIATED THE COINAGE COMMISSION WAS
GIVEN TREASURY'S ASSUR.ANCE THAT THE STOCK OF SILVER WAS SUFFICIENT TO SATISFY
ALL EXPECTED EXCHANGES OF SILVER CERTIFICATES, MEET THE COMMITMENT TO TRANSFER
165 MILLION OUNCES OF SILVER TO THE DEFENSE STOCKPILE, AND TO CONTINUE WEEKLY
SALES AT THE 2 MILLION OUNCE RATE.
AS YOU KNOW, THE EXPERIENCE OP THE PAST
YEAR HAS BORNE OUT THE SOUND'JESS OF THIS ASSURANCE.
AT THE TIME THE FIRST SALE OF SILVER WAS MADE THROUGH THE GSA ON
AUGUST 4, 1967 THE TREASURY HELD ABOUT 440 MILLION OUNCES OF SILVER IN
BULLION .AND ABOUT 80 MILLION OUNCES IN ITS COIN INV8JTORIES, FOR A TOTAL OF
- 7520 MILLION OLNCES.
SINCE THAT TIME THE TREASURY HAS TRANSFERRED 165
MILLION OLNCES TO THE DEFENSE STOCKPILE, SOLD ABOUT 100 MILLION Ol,NCES
mROUGH THE GSA, EXCHANGED ABOUT 90 MILLION OU~CES FOR SILVER CERTIFICATES,
.AND USED JUST OVER 40 MI LLION OlJ'.!CES FOR COINAGE.
AS A PARTIAL IjFFsET TO
/'
'
mIS OUTFLOW THE TREASURY HAS ADDED ABOUT 190 MILLION OUNCES THROUGH THE
RECOVERY OF SILVER COINS.
AS A RESULT OF THESE OiANGES THE TREASURY NOW
HOLDS ABOlJf 300 MILLION OUNCES OF SILVER OF WHICH APPROXIMA.TELY 240 MILUCN
O~CES
CONSISTS OF SILVER IN COINS.
AT THE PRESENT TIME GSA'S WEEKLY
OFFERING CONSISTS OF 2 MILLION OlJ'.!CES OF COIN SILVER BARS PLUS ANY l,NSOLD
~UNTS
WHICH HAVE BEEN CARRIED OVER FROM PREVIOUS SALES.
IN THIS CONTEXT I WANT TO MAKE ONE POINT CLEAR.
~'TO
F~E
THE DECISION EACH WEEK
WHICH OF THE COMPETITIVE BIDS SUBMITTED ARE IN LINE WITH THE PREVAILING
MARKET PRICE IS MADE BY OFFICIALS OF THE GENERAL SERVICES ADMINISTRATION
NOT TI-iE TREASURY.
TO MAKE THIS
~IDELINES
WE FEEL THAT THE GSA PEOPLE HAVE THE INDEPENDENT EXPERTISE
JU~~NT
IN A FAIR AND EQUITABLE MANNER - WITHIN THE GENERAL
ESTABLISHED BY THE TREASURY AND THE JOINT COINAGE COMMISSION.
THIS THEN IS THE STUATION IN SEPTEMBER 1968 WITH RESPECT TO THE
GOVERNtJENT'S SUPPLY OF SILVER.
CONTEMPLATED.
NO Q-i,ANGE IN THE WEEKLY RATE OF GSA SALES IS
AS MOST Of YOU Kr-DI r-.ELTING SILVER COINS INTO BARS IS A
RELATIVELY SIMPLE PROCESS AND SUPPLIES ARE AMPLE TO CONTINUE THE SALES FOR
SEVERAL YEARS.
AT THE SAME TIME THE SUPPLY OF COINS IS STILL BEING REPLENISHED
THROUGH THE COIN RECOVERY PROGRAM WHICH WILL BE C()\JTINUED.
WITH REGARD TO
THE HALF DOLLAR, Ca-.JGRESS HAS AUTHORIZED THE MINTING OF 100 MI LLION PIECES
USING ABOUT 15 MILLION OLNCES OF SILVER DURING FISCAL 1969.
I HAVE NOT
INCLUDED THE SI LVER TO BE USED IN THE HALF DOLLAR THIS YEAR IN MY SlJM't\A.RY OF
- 8THE CURRENTLY AVAILABLE SILVER STOCKS SINCE THIS SILVER HAS ALREADY BEEN SET
AS I DE FOR COINAGE PURPOSES.
THIS IS A M.A.TTER
()\j
AS TO THE EVENTUAL FlffURE OF THE HALF DOLLAR
WHICH THE COIN.AGE CO'1MISSIO'J IS EXPECTED TO MAKE A
RECOMMENDATIO'J, PERHAPS AT THE NEXT MEETING SCHEDULED IN NOVEMBER.
WHAT ALL THIS PORTENDS FOR THE FlffURE PRICE OF SILVER I DO NOT KNOW.
I LEAVE THIS SORT OF FORECASTING FOR THE M.A.RKET EXPERTS HERE AT THIS MEETING.
I WILL SAY THAT THE TREASURY DOES NOT CONDUCT ITS OPERATIONS WITH A VIEW TO
THWARTING INVESTORS OR THOSE WHO M.A.Y HAVE GONE Olff ON A LIMB IN EITHER
DIRECTION WITH REGARD TO THE FUTURE PRICE OF SILVER.
A POSITION OF STRICT NEUTRALITY.
ON THIS M.A.TTER WE TAKE
WHILE WE DO HAVE C(J..JCERN OVER JW LNCALLED
FOR RISE IN THE PRICE OF ANY COMMODIT-Y, THE TREASURY'S CONCERN OVER
OF SILVER IS NO GREATER THAN
TH~T
THE PRIC
FOR OTHER METALS AND COw-'ODITIES USED BY
INDUSTRY.
IN CONSIDERING THE SILVER OUTLOOK, THE VERY LARGE SALE OF SILVER BY THE
TREASURY OVER THE P,l\ST YEAR OR SO SHOULD BE TAKEN INTO ACCOLNT.
JUST SINCE
MAY OF LAST YEAR THE TREASURY HAS SOLD TO THE DOMESTIC PRIVATE MARKET -EITHER DIRECTLY OR IN EXCHANGE FOR SILVER CERTIFICATES MORE THJW 230 MILLION
OlJ\lCES OF SI LVER.
TH! TOTAL AMOLNT BOLGHT IN THE MARKET WOULD BE INCREASED
BY ANOTHER 40 MILLION OR SO OUNCES OF MINING PRODUCTION.
THIS OVER-ALL TOTAL
IS FAR IN EXCESS OF ANY ESTIMATES OF INDUSTRIAL CONSUMPTION THAT I HAVE SEEN.
THE DIFFERENCE CANNOT BE ATTRIBUTED TO EXPORTS BECAUSE OVER THIS SAME GENERAL
PERIOD NET EXPORTS OF SILVER TOTALED ABOUT 40 MILLION OUNCES.
SO IT WOULD
SEEM THAT THE HOLDINGS OF SILVER BY INVESTORS AND/OR INDUSTRIAL USERS IN THE
Al'AERIC.AN MA.RKET HAVE INCREASED VERY SUBSTANTIALLY OVER THE PAST 18 f'Ja'.ITHS.
IN THIS REVIEW OF THE SILVER
SITUATIa~
FR<J-1 TH:- GOVERNt-'ENT'S STANDPOINT.
I HAVE GIVEN YOU ABOUT ALL THE INFORMATI()\l .AND FIGURES AT MY DISPOSAL.
THE
- 9PURPOSE OF COURSE IS TO fvtAKE AVAI LABLE THE KIND OF INFORMATION I THINK THE
pUBLIC HAS A RIGHT TO KNOW.
~AT
AS TO WHAT THIS MEANS FOR THE FUTURE, I LEAVE
ENTIRELY TO YOU BUT A FREE MARKET IN ANY COMMODITY CAN ONLY CONTRIBUTE
TO A STRONGER ECCl'JOMY WHEN ITS PARTICIPANTS ARE WELL INFORf'lED AND BASE THEIR
DECISI(}.JS Cl'.J FACTS RATHER THAN RUfv'OR.
I HOPE I HAVE MADE A CONTRI BUTION TO
THIS OBJECTIVE.
--00--00--
TREASURY DEPARTMENT
(
raJ JILIASI 6: 30 P.M.,
~,
Septe1lber 9, 1968.
BESOL!S OP ftE&SlJBY' S VDlCLY BILL OftIRDIG
'1!le Treasur,y Depe.rtaent amlowaced that the teDders tor two series ot 'lreasury
tilLB, ODe series to be an a4d1 tioDa1 i.aue ot the b111s dated .JUDe 13, 1968, aDd tbe
~ther series t-o be dated SepteJlber 12, 1968, waich were otte:red OIl Septeaber 4, 1968,
!ere opeDed at the Pedera1 Beaerw ...... tocJay. teDders were iDT1.ted. tor $1,600,000,000,
Dr tbereabauts, ot 9l-day b1l1s aDd tor $1,100,000,000, or thereabouts, ot 182-day
.111s. 1he details ot tbe two series are aa tollows:
WE
or ACCEPl'ED
ams:
91-day ~ea.ury b111a
_tur1y Decellber 121 1968
Approx. IquiT.
Price
ADDualRate
98.682
5.21_
98.665
5.28l~
5.24.6_
98.674.
~1'I1TlE
HIGH
UN
182-4&7 treasury b111s
_turiDS March 13& 1969
Approx. Equiv •
Price
9'.352
97.314.
97.332
Y
AVERAGE
!I
Asmual Bate
5.238J
5.313~
5.277~
Y
!I Except1Dg
1 tender ot .385,000
32j ot the uount ot 91-day billa b1d tor at the low price vas accepted
5~ at the aaount ot 182-cIq bill. bi4 tor at the low price vas accepted
mAL
I}QDERS
APPLIID lOR AlID ACCEPBD BY I'IDDAL RESERVE DIS!lIC'!S:
•
San Francisco
Applied Par
APR1ied Par
Acceyted
5,799,000
•
27,156,600 '7,156,006 •
1,608,710,000
1,119,621,000
2,154,541,000
16,375,000
22,740,000
32,74:6,000
M,949,OOO
34,214.,000
34.,21',000
5,700,000
15,257,000
15,257,000
47,007,000
19,144,000
53,183,000
185,112,000
187,652,000
129,868,000
38,187,000
54,527,000
28,917,000
30,961,000
21,4.26,000
30,981,000
4.3,638,000
20,112,000
4.3,638,000
20,063,000
20,293,000
27,7~,000
77 2 415,2000
59 2 163,2000
26,,4.l.5 .. ooo
Acce;2ted
$ 3,799,000
817,550,000
16,375,000
33,94.9,000
5,700,000
15,144,000
104,620,000
25,917,000
21,426,000
20,112,000
16,293,000
19,21632 000
'roTALS
$2,739,053,000 $1,600,397,000 ~ $1,968,456,000
$1,100,048,000
District
Boston
lev York
Ph1l.ade Iphia
Cleve laM
RicbaoDd
Atlanta
Chicago
St. Louis
-as
MilUleapol1s
City
~llas
.
~ InclUdes $322,881,000 DOllcaapetitive teDders accepted at
£I
tbe average price ot 98.674
~ InCludes $128,130,000 noncc.petitive teDders acceptecl at the average price or 97.332
':J !lese rates are on a baDk discount baais.
!be equi:va1ent COUPOIl issue yields are
S.3~ tor the 91-day bills, aDd 5.5~ tor the 182-clay bills.
,.1343
UNITED STATES SAVINGS BONDS ISSUED AND REDEEMED THROUGH
August 31, 1968
(Dollar amounts in millions - round~d and will not nocossorily odd to totals)
~
DESCRIPTION
iTuRED
Series A·1935 thru 0-\ {)41
serips F aJld 0-1941 thru 1952
series J and K-1952 thru 19,5
AMOUNT ISSUEDlI
AMOUNT
REOEEMEOl./
AMOUNT
OUTSTANOING
Y
% OUTSTANDING
OF AMOUNT ISSUED
.14
5,003
29,521
3,1,6
4,996
29,476
3,130
7
44
26
.1,
.82
1,875
8,276
13,31,
15,537
12,203
,,528
5,240
5,416
5,340
4,669
4,040
4,233
4,831
4,922
5,127
4,949
4,654
4,533
4,244
4,250
4,286
4,129
4,598
4,483
4,38,
4,714
4,665
1,920
659
1,649
7,293
11,769
13,6)2
10,,29
4,584
4,186
4,224
4,088
3,521
).,048
3,166
3,522
3,510
3,,89
3,412
3,132
2,891
2,639
2,519
2,386
2,251
2,316
2,256
2,134
2,060
1,716
321
737
226
983
1,546
1,904
1,674
94,
1,055
1,192
1,252
1,147
992
1,067
1,309
1,412
1,538
1,,)6
1,522
1,642
1,60,
1,730
1,900
1,878
2,282
2,227
2,251
2,653
2,949
1,600
-78
12.05
11.88
11.61
12.2,
13.72
17.09
20.13
22.00
23.45
24.57
24.5,
2,.21
27.10
28.69
30.00
31.04
32.70
36.22
31.82
40.71
44.33
4,.48
49.63
49.68
,1.33
56.28
63.22
83.33
1,7,020
113,081
43,939
21.98
5,485
6,754
3,146
1,364
2,338
5,389
42.63
79.79
12,238
4,510
7,728
63.1,
169,258
117,,92
51,667
30.53
,97
487
110
37,680
169,856
207,,3,
37,602
118,079
,681
77
51,777
51,854
IMATURED
series E!J:
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
Unclassified
Total Series E
Series H (1952 thru May, 1959) 11
H (June, 1959 thru 1968)
Total Series H
Total Series E and H
Series J and K (19,6 thru 1957)
r0tal
matured
All Series Total unmatured
"""-
Orand Total
'~el Q
I
I"
-
1/
d
ccruc dis count•
IFtnl red,
.,'
emption lJalue
0".104
f
lliCu !,Dw'dcbr bonds
lire
•mar
be held and will eo,n Interest for additional periods olter ori,ifIGl moluri'1 Jat.a.
onds which have not been presented for redemption.
Fo,,,, PD. 3812 - TREASURY DEPARTMENT _ Buroau of the Pultllc D.b,
18.43
.20
30.48
24.99
TREASURY DEPARTMENT
WASHINGTON. D.C.
September 10, 1968
FOR IMMEDIATE RELEASE
UNITED STATES FOREIGN GOLD TRANSACTIONS
FIRST AND SECOND QUARTERS, 1968
The Treasury announced today that net sales of monetary gold
by the United States to foreign countries in the second quarter
of 1968 were approximately $22 million.
Largest purchases by the United States were from France
($220 million), the United Kingdom ($50 million) and the
Netherlands ($30 million).
Largest sales by the United States were to Belgium
($32.5 million), Ireland ($32 million and Iraq ($28.1 million).
Other purchases and sales in the second quarter are listed in
the second column of Table 1, attached. Table 1 also indicates
c~u1ative net outflow in the first two quarters of approximately
$1.4 billion.
Table 2, attached, shows quarterly sales of gold by the
United States to other countries during the first two quarters
of 1968 to enable them to pay the gold portion of their quota
increases in the International Monetary Fund. Deposits of
like amounts of gold were made by the IMF with the United
States to mitigate effects upon U.S. gold stock of quota
increases
0
Concurrent with public release, similar data were supplied
the Congress pursuant to a commitment by Secretary of the
Treasury Henry H. Fowler to provide such information on a semiannual basis
A copy of the text of the letter sent to the
President of the Senate, Speaker of the House and appropriate
committee chairmen is attached following the tables.
0
Attachments
F-1344
TABLE 1
UNITED STATI'::S Ni.;r MONl-.'TARY GOLD TRANSACTIONS WITH
FORiIGN COm..'TRliJ AND INTEHNATlONAL INSTl'fUTlOOS
January I-June
JJ,
1968
We~Zuropc
Belgium
FrancE:
Gr'cece
I rela'1d
-25.0
-12.4
-184.0
-48.5
-25.0
Ital.)
Netherland,:;
Swi tzerla."1d
Turkey
United Kingdom
YUGoslavia
-899.6
-0.9
-1,195.5
Total
~
-32.5
+220.0
-0.6
-32.0
-25.0
+JJ.O
-25.0
-7.5
+50.0
--=.Q...2
+1?6.4
+50.0
Lat1n A!:lel'~cQ,
Argentina
Bolivia
Brazil
Chile
Costa Rica
-5.0
Domi~ica~ ~~public
Ecuador
:::1 Salvador
Guatemala
Haiti
Honduras
Nic<>.:,agua
Panama
Trinidad & l'.1baGo
To~al
*
-0.1
-0.1
*
-7.5
-849.6
-1.~
-1,019.0
+50.0
-0.1
-5.0
-0.1
-0.4
-1.9
-0.3
-0.3
-20.0
-0.1
-0.2
-0.1
-0.1
-0.1
-0.1
-1.1
-0.1
-0.1
-20.0
-57.6
+220.0
-0.6
-44.4
-209.0
-18.5
-50.0
-0.4
-0.8
-0.2
-0.1
-0.1
-0.1
*
*
*
-21. 7
-=Lu.a
-=i.&
-11.6
-33.2
-2.3
-0.1
-2.5
-0.1
*
-0.2
-0.3
-14.1
-6.0
-13.4
-0.3
-28.1
-7.5
~
Afgha.'1istElTl
Burma
Ceylon
Cyp:-us
Indonesia
Iraq
Jorda.'1
Korea
Lebal'lO"1
Ma1a:,'sia
Nepal
Pakista:l
Phi lip,t:"1es
";audi
abia
Singapore
Syria
Total
-0.2
-25.0
-23.0
---=:QJ
-§.S!
--=.S!.aJ.
-141.6
-157.3
-298.9
-1.8
-1.8
-6.5
-73.5
-8.7
..0.2
-0.1
-JJ.O
Ne!i Zeglanll
~
Burundi
Ghana
Liberia
Morocco
Nigeria
Rwanda
Somalia
Sudan
Tunisia
Total
IMF
*
Domcs~ic
;Q~gl C~lg Ou~!lQ~
.-0 no~ Ddd
fac-r..
-Under $50.000.
*
*
*
-0.1
-0.2
-0.1
-0.3
....=Q....2
-0.6
~
~
-1.'l:}9.3
-52.5
-21.7
-1. 36t.i3
-21.9
*
Transactions
-21.0
-23.5
-6.0
-0.4
-0.2
-0.2
-9.3
-0.1
-0.2
-0.5
-0.1
Iotal
*
-0.3
-13.4
-0.6
-42.2
-13.5
-6.5
-94.5
-32.3
.6.0
.0.2
-0.3
-25.0
-53.0
-0.4
-0.1
-0.2
-9.3
*
-10.5
-17.0
-0.2
ta totals because of roundine.
-11.1
-17.0
-1.331oQ
-52.7
-1.183.7
TABLE 2
UNITED STATF-3 BONETARY GOLD TRANSACTIONS
WITH F'OREIGN COUNTRIES
MITIGATED THROUGH SPECIAL DEPOSITS BY THE IMF
(1lillions of U.S.$)
=
Country
Algeria
Argentina
Australia
Austria
1965 1 1966
-0.8
-17.5
-8.3
I 1967
lIst
air.
-0.8
-O.S
Total
-0.8
-0.2
-0.1
-2.0
-0.2
-0.1
-2.0
-0.2
-0.1
-0.1
-0.1
-25.0
Burma.
Cameroon
Central African Rep. Ceylon
Chad
Chile
Congo (Brazzaville)
Congo (Kinshasa)
Costa Rica
Dahomey
Denmark
Dominican Rep.
Ecuador
Ethiopia
Ga.bon
Greece
Guinea
Haiti
Honduras
Iran
Iraq
Ivory Coast
Jama1.ca
Japan
Jordan
Korea
Lebanon
Liberia
Malagasy
Malaysia
Mali
Mauritania
Morocco
Nicaragua
Niger
Paraguay
-0.9
Philippines
Rwanda
Somalia
Sudan
Sweden
Syria
Tunisia
Upper Volta
-25.0
Venezuela
Vietnam
•
-0.2
-0.1
-4.0
-0.1
-0.1
-0.6
-1.3
-0.1
.. 8.;3
-0.1
-6.3
DEPOSIT
TarAt to date:
23:>.0
-6.3
-0.1
-0.1
-0.1
-0.1
-0.1
-0.1
-0.1
-0.1
-0.1
-2.4
-0.4
-1.3
-1.0
-0.1
-10.0
-1.0
-0.2
-1.0
-4.0
-0.2
-13.7
-0.2
-1.5
-56.3
-1.3
-0.2
-0.2
-0.6
-1.3
-1.3
-0.6
-1.0
-1.0
-1.0
-0.1
-0.9
-1.0
-0.1
-0.2
-0.1
-0.9
-0.1
-0.2
-0.6
-0.6
-2.0
...;1.8
-0.1
-0.1
-0.1
-0.1
-0.3
-1.3
-177.2
-21.6
-5.7
-1 .9
-S.S
-0.2
-0.9
-0.1
-0.9
-0.9
-0.1
-3.0
-lS.7
-8.2
+34.3 +177.2
+21.
+8.2
Figures may not add to totals because'o! rounding.
]MF
r ~qtr.1
-11.3
-3.1
September 6, 1968
Dear
In accordance with Secretary Fowler's letter of March 6,
1968, to the Chairman of the Senate Committee on Banking and
Currency, I am submitting the following data on U. S. purchases
and sales of gold and the state of the U. S. gold stock for the
semiannual period January 1, 1968 - June 30, 1968. There
will be continuing reports of this nature on or about the
first of September and the first of March each year.
The attached two tables list, by country, for each
quarter, the net monetary purchases and sales of gold made
by the united States.
In general the data require no
elaboration but a few comments may be in order.
The first point I should note is that for the first
quarter of 1968 the figure of approximately $900 shown as
sales of gold to the United Kingdom does not represent
purchases by the United Kingdom for its own account but
purchases to replenish the U. S. share of gold losses
suffered by the Bank of England in its capacity as agent
for the gold pool countries in support of the price of
gold in the London Market. Such market intervention
ceased after March 14, 1968 and subsequent data therefore
represent only transactions with the United Kingdom for
its own account.
In this connection, I also call att~ntion to the
entry entitled "Domestic Transactions" at the bottom of
the table. This entry represents the amount of monetary
gold, net of purchases of newly mined or other gold in
private hands, sold to licensed users during the period.
Both sales and purchases to or from private sources ceased
after the separation of the monetary stocks of gold from
"corrrmodity" gold called for in the Washington Communique
of March 17, 1968 issued by the gold pool countries.
There were consequently no such transactions in the second
quarter and entries under this heading should henceforth
be minimal and of a technical nature only.
I am enclosing
our press release of March 17 on this subject as attachment
A.
Finally, I would like to call attention to transactions
involving, directly or indirectly, the International Monetary
Fund. These fall into two cateqories -- one those relating
to the general quota increase of 1966 and the other day-today transactions calling for payment of gold by various
countries to the IMF.
- 2 -
Transactions of the first type are reflected on
'rable II; ~,!h ich shows cumulative data from the inception
of S1.1ch transactions as well as those for the first two
quarters of 1968. These so-called mitisation transactions
reflect gold salp-s by the Uni tcCl States to variolls countries
to be used for the payment of sorre or all of the 25 rerc~nt
portion of thpir quota increase r0~uired to he paid to the
H1F j n gold.
Sinc~ t~lCS~ transactions ~voulc1 havp. placed
an e~~ce:?tionCllly heaV'..! and cO::1centrat('d ~)urdo.n on the U. S.
gold stocks during the period in vThich these payments ",ere
being made, the n~F resolved to alleviate this burden by
depositin a equal amounts of gold back with the United States.
Snch derosi ts are to be \V'i thdra~'m over tip'c so as to relieve
the concentrated losses which ,,,,mlld otherwise have been
placed on the U. S. qold stock. The first withdrawal, in
the ap'ount of $17 million; took ~lace in June of 1968 in
connection with the use by the IMF of $182 million of its
gold to acquire currencies to be used in the drawing made
by France from the HITF.
The ~itigated transactions are shown on a separate
table since they are offset by an e1uivalent IMP deposit
and have no net effect on the U. S. gold stock. The withdra~'Tal of mi tiqation deposits by the IMF is, however, shown
on Table I as they do decrease the stock. As attachment B
I am enclosing the relevant para~raphs on this matter from
the I~F resolutions.
The other tvne of transactions involvina the n~F are
similar in that ~~ey represent gold sales by-the united
States to countries Ttlhich pay the gold to the IHF to cover
charges: repayments, individual quota increases, etc.,
required to be "!?aid in gold. They differ, however, in
that there is no offsetting mitigation deposit by the IMF.
Since they represent an immediate drain on the U. S. gold
stock, they are carried in Table I. They are generally for
relativelv small amounts but do account for the majority of
countries-listed on the table. For instance, all of the
African countries listed represent such transactions and all
of the Latin A'11p.rican save those with Ecuador and Argentina.
Turning to the aeneral status of the U. S. aold stock,
I submi t the follo,..,ing fiqures.
The stock of aold held bv the united States at the
close of business December 31: 1967, stood at $12,065 million
and on June 30. 1968, at $10,681 million, a decline of ~1,384
million. The accounting for this decline has already been
presented in T~hle I.
-
3 -
I miqht note that during the period of this report the
enactment of Public Law 90-269 signed by the President on
March 18, 1968 removing the requirement that 25 percent in
gold be held as a reserve behind Federal Reserve Notes and
the gold reserve against United States notes and Treasury
notes issued under the Act of July 14, 1890, freed approximately $10 ,530 million in gold to fulfi 11 its primary role
in the international monetary system and assured the world
that our full gold stock stands behind our commitment to
maintain the price of gold at $35 per ounce.
Sincerely yours,
(signed)
Joseph W. Barr
Acting Secretary
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
p,700,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing September 19,1968, in the amount of
~2,600,S31,000, as follows:
9~day bills (to maturity date) to be issued September 19,1968,
in the amount of $1,600,000,000, or thereabouts, representing an
add1t1onal amount of bills dated June 20,1968,
and to
mature December 19,1968,originally issued in the amount of
~1,100,8S1,000, the add1tional and original bills to be freely
interchangeable.
182 -day bills, for $ 1,100,000,000, or thereabouts, to be dated
September 19,1968, and to mature March 20,1969.
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
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the clOSing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, September 16, 1968.
Tenders will not be
rece1ved at the Treasury De~artment, Washington. Eac h 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 dec imals, 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.
up
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.
F..1345
- 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
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on September 19, 1968,in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing September 19,1968, 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
-
TREASURY DEPARTMENT
-
(
FOR D1MEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN AUGUST
During August 1968, market transactions in
direct and guaranteed securities of the Government
investment accounts resulted in net purchases by
the Treasury Department of $52,685,000.00.
000
F-1346
TREASURY DEPARTMENT
Washington
REMARKS BY THE HONORABLE WILLIAM F. HELLMUTH, JR.
DEPUTY ASSISTANT SECRETARY FOR TAX POLICY
UNITED STATES TREASURY DEPARTMENT
BEFORE THE
ANNUAL DINNER OF THE
NORTHWEST TAX INSTITUTE
AT THE EUGENE HOTEL, EUGENE, OREGON
THURSDAY, SEPTEMBER 12, 1968
The Tax Scene in 1968
The tax picture at the national level in 1968 is
interesting and different from the situation in any recent
year.
The major tax "happening" of 1968 has been the Revenue
and Expenditure Control Act, which was finally passed in June
after a long and cliff-hanging legislative journey.
The
major purpose of the 1968 Act is to restrain the growth of
over-exuberant demand in our economy, both ,to slow down the
recent high rate of increase in prices, and to assure our
friends abroad of our fiscal responsibility.
As Secretary
Fowler said recently, "The name of the game is disinflation."
Last October, Mr. Jerome Kurtz, the Treasury's Tax
Legislative Counsel, was a speaker at your annual meeting of
the Northwest Tax Institute at Vancouver.
We appreciate the
fact that you have again invited a Treasury representative.
- 2 In his talk last year, Mr. Kurtz summarized the major
tax legislation which was enacted over the period 1961 to
1967.
Then Mr. Kurtz went on to a critical discussion of
the proposals to use tax incentives instead of government
expenditures, to promote various socially desirable activities.
These tax incentives may take various forms, with tax
credits the most recent
and most popular -- version.
Tax credits are offered as the path to a solution of many of
our social, economic, educational and even health problems.
A partial list of the objectives for which bills have been
introduced in Congress to grant tax credits include:
1.
Job training for the disadvantaged and hard-core
unemployed;
2.
Location of new plants in the urban slums or in
rural poverty areas;
3.
Promotion of exports;
4.
Tuition, books, fees, and other educational expenses;
and
5.
Air and water pollution facilities.
The Treasury generally opposes such types of tax credits -in contrast to direct expenditures and other forms of government
- 3 -
assistance -- as relatively inefficient, costly, inequitable,
less subject to control, and providing an escape from an
annual review.
Tax credits represent a use of the tax system
for a non-tax purpose.
The Tax Expenditure Budget
There are many provisions in the present tax code which
provide incentives and support for various private activities.
Many of these special tax provisions represent alternatives
to direct government expenditures or loan programs to
accomplish
certain objectives.
An example of government spending and special tax provisions for the same general objective would be found in the
Federal programs to assist the aged.
The budget presents
line items for the Department of Health, Education and Welfare
detailing expenditures, including retirement benefits and
Medicare for the aged.
But the budget contains no line item
for the $2.3 billion expended through the tax side of the
budget to aid the elderly in the form of an additional personal
exemption, the retirement income credit, and the exclusion of
Social Security benefits from income tax.
- 4 Numerous other special tax provisions, which do not appear
in the budget, rather than direct expenditures or loan programs
fully presented in the budget, are used, for example to assist
natural resource industries, including timber, to encourage
homeownership, to aid financial institutions, to subsidize
charitable contributions, to reduce the interest cost of state
and local borrowing, etc.
Treasury Assistant Secretary
Stanley S. Surrey has labelled all these special tax provisions as tax expenditures.
He summarizes this idea as follows:
"Through deliberate departures from accepted
concepts of net income and through various
special exemptions, deductions and credits,
our tax system does operate to affect the
private economy in ways that are usually
accomplished by expenditures -- in effect to
produce an expenditure system described in
tax language."
A full and complete budget presentation should show the
purposes of various expenditures and the amounts for each
purpose.
Accountants especially support the idea of full,
complete, and consistent disclosure of all information.
The absence of any presentation of the tax expenditures
has several results:
Tax expenditures are hidden; they are not listed
in the budget and no dollar estimates are regularly
placed on the various special tax provisions.
- 5 -
No one knows the full cost of these provisions.
This is in sharp contrast to the usual
expendi~
ture side of the budget where each item is listed
with the amount.
The absence of full reporting reduces public
understanding, and makes policy decisions necessary
without complete information.
As most features in the tax code are permanent, these
tax expenditure provisions continue indefinitely -- even if
national priorities change or the dollar cost of such a
provision changes drastically.
review.
They are not subject to annual
And each time the tax rates change, the value of
the special provisions tends to change.
When public opinion and Congressional attention focus
on control of government spending, the itemized expenditure
side of the budget receives close scrutiny but the tax
expenditures are not subject to the same review.
For example,
earlier this year when Congress, apparently reflecting the
- 6 -
public mood, was much concerned about Federal spending and
the size of the prospective deficit, little, if any, attention
was given to review of tax expenditures.
The definition of special tax provisions is difficult and
often controversial.
And the measurement of the revenue lost
may not be an easy problem.
On the other hand, the concept
is important and the dollar amounts substantial.
In certain
budget categories, such as Commerce and Transportation and
Housing and Community Development, a major part of Federal
budget resources is probably allocated by tax expenditures
rather than by direct expenditures.
It is doubtful that an accountant would condone a private
business' income statement which paid some of its expenses by
allowing credits against its income and reported only the
remaining income.
Certainly no accountant would be satisfied
with a client which allowed its customers, for example, to
determine what the corporation would spend for advertising
by allowing customers full and unlimited· credit against
purchases for any advertising of the corporation's products
which the customer placed, at any time in any amount.
- 7 In effect, the Treasury is suggesting a full reporting
of tax expenditures on a basis consistent with outlays and
loan programs.
Such a presentation should be done annually,
presenting the tax expenditures by categories together with
direct expenditures and net lending.
Such reporting would
exhibit in a single document the full cost of each program,
including direct expenditures, tax expenditures, and net lending.
Such a presentation would lead to better understanding,
budget choices based on more complete information, and improved
control.
Identification and evaluation of the various tax relief
measures might well turn up some which should be terminated,
others which should be replaced by direct expenditures to
promote the objective more effectively, and perhaps still
others which should be expanded.
The full presentation of tax expenditures is not meant
to imply that all these special tax provisions are either good
or bad.
Just like various direct expenditures, each tax
provision has to be evaluated in terms of the value of the
benefits it achieves and its cost (in terms of revenue lost).
- 8 -
-Revenue
and Expenditure Control Act of 1968
Let me return to the Revenue and Expenditure Control
Act, which Congress passed in late June almost 18 months after
the Administration's initial request for a tax increase was
made to Congress.
Assistant Secretary Surrey described the
precarious path of the tax surcharge legislation and the role
of Secretary Fowler in these words:
"The tax increase proposal has had a tortuous
journey, and the Secretary of the Treasury throughout has had to play many roles. At times he has
been a tax Candide, seeing progress in this procedural move or that statement by a legislator
when all else saw only set back. At times he has
sorrowfully been a tax Cassandra, as crises recurred
in the international markets and gold filled the
headlines. And at many another time has been the
ambulance surgeon on the emergency call or even a
Dr. Christiaan Barnard -- always able to detect a
pulse or heart-beat when all others had put away
their stethoscopes."
The 1968 Act provides perhaps most importantly for a
temporary 10 percent surcharge on individual and corporate
income taxes.
For individuals, the increase was effective
from April 1, 1968, with an exemption from the surcharge for
those individuals in the two lowest income brackets.
For
corporations, the income tax increase was effective from
January 1, 1968.
The 10 percent rate along with these effective
- 9 dates means a 7-1/2 percent surcharge on individuals for
calendar year 1968, and a 5 percent surcharge for calendar
year 1969; and a 10 percent rate on corporations for calendar
year 1968, and a 5 percent surcharge for calendar year 1969,
the 1969 effective rates following from expiration of the
surcharge next June 30, 1969, as scheduled in the Act.
In
addition, excise taxes on telephones and automobiles, which
had been scheduled to decline to a lower rate on April 1, 1968,
were continued at their recent levels (10 percent on telephones
and 7 percent on automobiles) through calendar 1969.
The 1968 law not only increases taxes but also requires a
$6 billion reduction in Federal spending during the current
fiscal year and an accompanying reduction in Federal employment,
with certain agencies and programs exempt from these limitations.
In addition, the Act requires both a $10 billion cut-
back in new obligational authority for fiscal year 1969, and
recommendations by the President in the next Budget Message
as to $8 billion of carryover obligational authority to be
cancelled, which is intended to reduce spending in subsequent
years.
- 10 The Revenue and Expenditure Control Act has already
accomplished some of its objectives of influencing the
economy.
By increasing revenues by some $11 billion and
reducing expenditures $6 billion below what they otherwise
would have been, the Federal deficit for fiscal 1969 is
ex-
pected to be about $5 billion instead of over $20 billion,
and greatly reduced from the actual deficit of $25.4 billion
in fiscal year 1968.
This fiscal restraint has reduced
pressures in the markets for loanable funds, and made it possible
for the Federal Reserve to move toward loosening its tight
monetary policies, which were adopted earlier when the Federal
Reserve alone was bearing the full brunt of combatting inflation.
The major reason credit and monetary conditions are less
tight stems from a reduction of about $17 billion in the
prospective Federal deficit, and thereby reduced by that amount
what the Federal Government will have to borrow between now
and next June.
This easing in the capital and loan markets
has already been reflected in significantly lower interest
rates on new debt issues and a loosening of funds in the
mortgage market since late May.
The construction of new housing
is expected to benefit directly from the easier credit conditions.
- 11 -
Passage of the tax bill also has been a factor in the
decline in the price of gold in world markets from a high of
over $42 an ounce in the spring to a price in the $37 to $40
an ounce range since the surcharge was passed.
The effect has
been to strengthen the dollar as an international currency
and protect our gold reserves.
The world took the passage of
the tax bill as a signal that the United States is fiscally
responsible, i.e., we would restrain domestic inflation and
continue to work for a solution to our balance of payments
problems.
With the passage of the bill in late June, the first
effects in higher withholding on individuals and payments by
corporations occurred in July.
It was expected that there
would be time lags of several months before the full impact
of the higher taxes would be reflected in a slowdown of the
increase in demand and the rise in prices.
Retail sales
continued buoyant through July and August, and a high rate of
increase in prices continued.
It is expected that, over the
next half year, retail sales and investment plans will show
declines in the rates of growth from the trends of the past
year.
- 12 The long but finally successful battle for the 1968 tax
bill raises questions about the budget making procedures in
the Congress when the President submits his budget each
January.
As you know, any requests for tax changes go to the House
Ways and Means Committee and then to the Senate Finance
Committee.
The money bills are considered by the Appropriations
Committees in both Houses.
At no point does the Congress con-
sider the entire budget, or the relation of expenditures, loan
programs, and taxes to each other,and to the current and
projected economic situation.
The 1968 Revenue and Expenditure Control Act is unique
among recent acts of Congress because it includes expenditure
limitations, and 1imliations of obligational authority in a
tax measure.
The Congressional negotiations before this legis-
lation was passed included close contacts between the taxwriting Committees and the Chairmen and other representatives
of the Appropriations Committees.
These consultations were
on an informal basis in 1968, but they did accomplish an
important objective of coordination of revenues and expenditures.
- 13 Secretary of the Treasury Fowler pointed out earlier
this year that the Congressional Reorganization Act of 1946
provided for a Joint Legislative Committee on the Budget.
This Joint Committee was made up of all members of the House
Ways and Means Committee, the Senate Finance Committee, and
the House and Senate Appropriations Committees.
The function
of this Committee was to consider the financial position of the
U. S. Government in light of the President's budget recommendations and set a maximum figure for total expenditures.
The
Committee would present this figure as a concurrent resolution to both Houses.
If adopted, the amount in the resolution
became Congress' instruction to itself to limit total appropriations.
The Joint Legislative Committee on the Budget was
active during 1947 and 1948, and a concurrent resolution setting
an upper limit on appropriations was adopted in 1948.
then, the Committee has been inactive.
Since
In view of the increas-
ing importance of the budget for the economy and to determine
Federal programs, a revival of the Joint Legislative Committee
on the Budget -- inactive since about 1948 -- would be one
way to insure better coordination between the revenue and
appropriation legislation.
A regularization of the informal
- 14 consultations which evolved in the spring of 1968 would be
another path to coordination, without the formality of a
joint resolution required by the Congressional Reorganization
Act of 1946.
The 1968 Act also prohibited new issues of industrial
development bonds by state and local governments, with an
exemption for issues of $1 million or less.
This feature
restricts a state or local government from in effect transferring its tax exemption privilege to the private industrial
company which would use the facilities to be financed from
the bond issue.
In such cases, the private company gains a
lower interest cost by borrowing at the tax-exempt rate rather
than at the usual rate on corporate bonds.
The flood of these
bonds in the past three years diminished the value of the
tax-exempt privilege generally and increased interest rates
on borrowing by state and local governments.
Thus, although
the cost of "corporate borrowing" to finance the new industrial
plant was lower, the cost of public borrowing was higher for the
new school, fire station, sewage treatment plant, or other
capital improvement of local or state government, because of
the additional quantity of tax-exempt securities in the form
- 15 industrial revenue bonds.
In addition, the additional quantity
of these securities increased the amount of tax-exempt interest
which is not subject to tax, thus either placing a heavier
burden on other taxpayers or leading to less Federal revenue
and a larger Federal deficit.
Moreover, the competitors of the
firm which used tax-exempt bonds to finance its new plant were
at a disadvantage if all their financing was done through the
usual channels and subject to tax.
As tax practitwners in such cases, when a tax-free or
tas-sheltered method is available, you undoubtedly would advise
a client to consider using it.
your client.
This would be your duty to
All that we in the Treasury could ask in such
cases is that you look beyond the immediate private advantage
and see the full effects.
When you ascertain all the rami-
fications, you may find that what is clearly less expensive
and thus beneficial to one or a few companies,and to one or a
few local governments has substantial social costs, which outweigh the benefits, if it is widely used.
In such cases, you
might agree that modifying or removing a preference is the
appropriate and equitable move for the Administration to
recommend and Congress to enact.
- 16 One section of the 1968 Revenue Act also calls on the
President to submit proposals for a "comprehensive reform" of
the Internal Revenue Code before December 31st of this year.
fue Treasury staff has been working on various proposals for
some time.
Of course, the decisions as to which reforms will
be proposed and when a tax reform message will go to Congress
will be made by President Johnson.
Tax on Foreign Travel
In addition to the surcharge, the other Administration
tax bill in 1968 is the request for a tax on foreign travel.
This proposal is part of a broad-based program to reduce substantially the U.S. deficit in our balance of payments which
last year reached approximately $3.5 billion, a level which is
not sustainable.
Other parts of the balance of payments program
aimed to reduce lending by U.S. banks abroad, to limit investment abroad by U.S. companies financed by dollars, and to
reduce government spending abroad.
Last year U.S. tourists
spent about $4 billion abroad, about double the amount spent
by foreign visitors in the United States, thus accounting for
about $2 billion net toward the outflow of dollars and the
balance of payments deficit.
- 17 The travel tax was designed to reduce spending abroad by
knericans.
The principal features of the Administration
proposal were a 5 percent ticket tax on air travel outside
the Western Hemisphere, a reduced limit on the amount of dutyfree imports, and a tax on daily expenditures while abroad above
a moderate daily limit.
The House passed a bill including the
first two of these provisions, but excluding the expenditure tax.
The bill is now awaiting action in the Senate Finance Committee.
Tax Reform
Let me return now to the question of tax reform, which
I mentioned earlier as one provision of the 1968 Act.
Tax reform is a continuing and important goal, requiring
patience, persistence, and imagination.
Tax reform proposals
are often controversial simply because, as it has been said,
"One man's loophole is another man's living."
of tax reform often playa lonely role.
The advocates
Without claiming that
all "good" rests with the Treasury, a look at the roster of
witnesses testifying on a reform proposal usually reveals that
the line-up is the Treasury witness alone as compared with a
long list of witnesses representing those affected by the
provision.
- 18 Although no one can say just what tax reform will be
recommended later this year, a number of proposals have been
s~gested
by members of Congress, tax practitioners and
scholars, and Treasury officials.
of these proposals.
Let me describe several
Please understand that these proposals are
not limited to those on which the Treasury has taken a position
and should not be taken as a forecast of tax reform items in
1968.
Capital Gains at Death - Under present law, appreciation
on capital assets which are transferred at death is not subject
to income tax.
As you know, the heir is allowed to take the
assets' value at time of death of the donor as his basis.
Thus the appreciation in value of the securities, real estate,
or other capital assets which occurred during the deceased's
lifetime is forever
exempt from income tax.
It is, however,
included at market value in calculating the estate tax, but so
are other assets in the estate on which income tax has been
paid.
This exclusion from income tax of these gains creates
inequities between those taxpayers who hold capital assets
until death, those who realize their gains while alive, and
those who have no capital gains.
This exclusion also serves
- 19 to lock-in the middle-aged or senior citizen holding assets
which have substantially appreciated in value.
he pays capital gains tax on the gains.
If he sells,
If he holds, there
is no capital gains tax on the gains, and his heir acquires
the higher bas is .
The Treasury has called attention to the desirability of
revisions in the rules relating to the transfer of property
by death or gift, to achieve both a more rational tax treatment of appreciated assets .so transferred and a more equitable
estate and gift tax system with less tax distortion in family
disposition of property.
Tax Treatment of the Aged - The Treasury last year recommended major revisions in the tax relief granted to the aged.
As indicated earlier, the existing special provisions, including exclusion of Social Security and Railroad Retirement
benefits from income tax, the retirement income credit, and
the additional exemption allowed each person aged 65 and over,
involve a revenue cost of $2.3 billion a year.
The benefits
from the present provisions are complicated, uneven, and more
valuable to the high-income aged taxpayer than to the 10werincome senior citizen.
- 20 The tax recommendations of the Treasury in 1967 aimed to
similify and make fairer the tax provisions for the aged, and
also to eliminate the existing tax discrimination against the
aged who continue to work.
The revenue effect differed only
slightly from present law.
The proposal provided for taxation
of Social Security benefits and repeal of the double exemption
and the
retirement income credit, and in their place provision
of a special exemption of $2,300 for single taxpayers over 65 and
$4,000 for married couples when both are over 65.
Of the
4 million taxpayers over age 65, approximately 500,000 would
no longer pay any income tax and about 2.5 million would have
received tax reductions under this proposal, including all
single taxpayers with incomes below $3,222 and couples (both
over 65) with incomes below $5,777.
No action was taken on
these proposals.
Muluple Surtax Exemptions - The present corporate income
tax provides (exempt the surcharge) a rate of 22 percent on
the first $25,000 of taxable income and a 48 percent rate on
all income above $25,000.
Some firms with many retail out-
lets with each store incorporated separately obtain the
surtax exemption for each store.
The incorporated store is
- 21 really part of a single business, not a separate and independent
unit.
It competes with independent local stores, as well as
with branches of other retail chains.
In such cases, the
Treasury has stressed the need to eliminate these mUltiple
surtax exemptions.
The Tax System and Poverty - Our country is engaged in a
major effort to eliminate
poverty in our society.
Taxes (and
fiscal policy) contribute to an anti-poverty program most
importantly by helping to guide our economy on a path of high
employment, economic growth, and reasonable price stability.
Taxes also play a role in their effect on the distribution of
income after taxes.
At present, the Federal individual income tax applies
to individuals and married couples without children well below
the poverty line.
An individual, for example, becomes subject
to the Federal income tax when his income rises above $900,
although an individual is assumed by HEW definitions to be
in poverty if his income is below $1,600.
would pay exactly $100 of income tax.
At this level, he
The President has said
that when fiscal conditions permit, the burden of income taxes
should be lifted from those in poverty. (Consistent with this
- 22 view, the 1968 surcharge does not apply to the two lowest
income brackets.)
Social Security
ta~es
and excise taxes are other Federal
taxes which apply to the poor.
In recent years, the burden of
excise taxes has been reduced but the Social Security tax
rates have risen steadily.
Many employed persons with low
earnings pay Social Security greater than their income taxes,
as there are no exemptions in covered employment under Social
Security.
Although benefits of Social Security are progressive,
some have questioned whether people with incomes below the
poverty line should be required to pay taxes to provide benefits
for those currently retired, or even for their own future
retirement benefits.
In future revisions of the Social Security
system, the financing arrangements, especially as to the taxes
now levied on those with income below the poverty line, will
presumably receive attention.
Minimum Tax -
One of the most glaring violations of a
tax based on ability to pay is the present situation whereby
some individuals in the United States with high incomes pay
little or no Federal income taxes.
make this possible.
Various features in the law
Senator Russell Long, Chairman of the
- 23 Senate Finance Committee, followed subsequently by other legislators, has suggested a minimum tax so that no American with a
large amount of net income could avoid paying at least some
income tax.
The Democratic Party's Platform for 1968 also
recommends adoption of a minimum income tax.
The various
proposals for a minimum tax generally specify that the taxpayer must pay at least a specified percentage of income
defined more broadly than the present statutory income definition.
For example, in computing the base for the minimum tax,
this broader base might include some currently excluded sources
of income,such as tax-exempt interest and the half of long-
term capital gains which is now excluded.
With the broader
base, the rate schedule for the minimum tax would be lower
than the present rate schedules.
Of course, if present law
indicates a higher tax, the tax liability would remain as at
present.
Many other suggestions for tax reform have been made,
including provisions affecting private foundations and taxexempt organizations, changes in deductions and personal
exemptions, and on and on into the night.
One Congressman
- 24 -
has suggested that we start on reform by repealing the present
Internal Revenue Code effective in 1971, and begin now to write
a new tax law.
To obtain a better tax law requires time, hard work, and
the advice and support of informed citizens and members of
the tax profession.
In addition to the research and technical
work needed on reform proposals, the preparatory work also
includes the crucial phase of educating the American people
to a better understanding of our tax system.
and precious asset of our country.
It is a valuable
Clearly there is still room
for improvement.
I invite you to join in the appraisal of our present system,
using your professional competence to analyze and evaluate
carefully and logically the reform proposals when they are
presented, suggesting improvements in the recommendations you
find weak or misdirected, and supporting publicly those which
your analysis shows will strengthen and perfect our tax
system.
000
TREASURY DEPARTMENT
_
I
RELEASE 6: 50 P.M.,
!g., September 16, 1968.
WASHINGTON, D.C.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
'!be Treasury Department announced that the tenders for two series of TreasUl7
11s, one series to be an additional issue of the bills dated June 20, 1968, and the
~r series to be
re opened at the
l~nabout8, of
e details of the
~
or ACCEPTED
IIPmTIVE BrDS:
High
Low
dated September 19, 1968, which were offered on September 11, 1968,
Federal Reserve Banks today. Tenders were invited for $1,600,000,000,
91-day bills and for $1,100,000,000, or thereabouts,of 182-day bills.
two series are as follows:
91-day Treasury bills
maturins December 19,! 1968
Approx. Equiv.
Price
Annual Rate
98.684:
5.206J
98.678
5.25~
98.681
5.218~
11
Average
182-day Treasury bills
maturinS March 20o! 1969
Approx. Equiv.
Price
Annual Rate
5.238~
97.552 !I
97.341
5.26~
97.347
5.248~
11
!I
Exeepting 1 tender of $290,000
96~ of the amount of 91-day bills bid for at the low price was accepted
sCY/J of the amount of 182-day bills bid for at the low price was accepted
nAL mIDERS APPLIED FOR AlfD ACCEPl'ED BY FEDERAL RESERVE DISTRICTS:
District
lliJlnea-polis
City
1I11.a:s
San franCisco
Applied For
Applied For
Accepted
$ 51,211,000 $ 23,151,000 $ 25,573,000
1,764,592,000 1,065,256,000
1,680,513,000
18,836,000
16,128,000
34,536,000
46,517,000
47,567,000
47,567,000
20,413,000
17,596,000
31,112,000
45,354,000
35,879,000
52,588,000
164,144,000 :
185,919,000
220,937,000
41,323,000
34,229,000
63,955,000
18,006,000
22,385,000
30,186,000
19,899,000
36,940,000
43,216,000
20,970,000
20,207,000
29,247,000
142,565,000
113,!190,OOO
176, 290,!000
Acce::eted
$ 13,973,000
865,513,000
5,028,000
15,407,000
7,113,000
20,160,000
95,676,000
13,969,000
7,685,000
14,899,000
10,770,000
29,915,000
TO~S
$2,525,037,000 $1,600,825,000 ~ $2,261,515,000
$1,100,108,000
Boston
!lew York
Philade lphia
Cleveland
Richmond
AtlantEJ.
Chicago
st. Louis
_5
£I
~cludes $313,707,000 noncompetitive tenders accepted at the avera~ price of 98.681
Includes $157,794,000 noncGmpetitive tenders accepted at the average price of 97.347
1hese rates are on a bank discount basis. Tile equivalent coupon issue yields are
5.36~ tor the 91-day bills, and 5. 4 7~ for the 182-day bills.
F-1347
TREASURY DEPARTMENT
(
WASHINGTON. D.C.
September 13, 1968
FOR RELEASE SUNDAY NEWSPAPERS
SEPTEMBER 15 , 1968
CORNERSTONE CEREMONY FOR NEW PHILADELPHIA MINT
SET FOR WEDNESDAY, SEPTEMBER 18, 1968
Secretary of the Treasury Henry H. Fowler will officiate
at the cornerstone laying ceremonies for the new United States
Mint in Philadelphia at 3: 00 P.M., EDT, Wednesday, September 18.
Federal, state, city and banking officials are expected to
participate in the public ceremony at the site of the new
building on Independence Mall at 5th and Arch Streets.
The new Mint is scheduled to begin operations in early
1969. It will be the world's largest and most modern mint and
will employ completely modern equipment for coin production,
including a coin roller with a production capacity of 10,000
coins per minute, as opposed to a maximum capacity of 600
coins per minute for current equipment.
The Mint will be able to accommodate 2,500 visitors an
From a glass-enclosed, elevated gallery, visitors will
have a clear view of all coinage operations, including melting,
rolling and stamping.
~ur.
The Mint will also house a numismatic museum containing
historic U.S. coins and medals and a sales office for coins
and related items.
The Philadelphia Mint, the first in the nation, was
established in 1792. The new building will be the fourth
Occupied by the Mint since its establishment, and will replace
the present structure, located at 16th and Spring Garden Streets,
which has been in operation for over 65 years.
000
F-1348
TREASURY DEPARTMENT
Washington, D.C.
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETARY OF THE TREASURY
BEFORE THE
CALIFORNIA SAVINGS AND LOAN LEAGUE
DISNEYLAND HOTEL, ANAHEIM, CALIF.
WEDNESDAY, SEPTEMBER 18, 1968, 1:15 P.M. PST
FINANCE AND FANTASYLAND
I am happy to be with you today, and I am certain
I have chosen a most appropriate site for the comments
I am about the offer.
In a decade of public service in the Congress, the
Federal Deposit Insurance Corporation and the United
States Treasury, one particular controversy will always
stand out in my memory -- that is the development of the
Participation Certificate.
There have been occasions in
this past decade when I have espoused or developed
proposals that aroused bitter opposition.
But never have
I encountered such a storm as I met with the "PC."
This
proposal brought bitter denunciation from Liberals as
well as Conservatives, and Democrats as well as Republicans,
F-1349
-2and almost the
cial community.
unan~ous
opprobrium of the entire finan-
Yet, remarkably, as I prepare to
surrender my public responsibilities about January 20th of
next year, I find to my amazement that this same concept
is now the darling of nearly every group interested in
financing solutions to specific problems.
This is the
reason for the title of this address -- t.tFinance and
Fantasy1and lt
--
and is the reason why I think Disneyland
is an appropriate place to unburden myself of this
fantastic history.
I would like you to think back to July of 1965, when
the President announced that he was sending additional
troops to Vietnam and indicated that there would be a substantial increase in defense expenditures as a resu1to
The fiscal year 1965, ending on June 30, 1965, had just
been completed.
Total Federal expenditures had amounted
to $96.5 billion and there had been a deficit of $3.4
billion, which was a sharp reduction of nearly $5 billion
below the deficit in fiscal year 1964.
At that time, or a little later
o~
as we were putting
together the budget for fiscal year 1967 and reworking
the estimates for fiscal year 1966, it seemed awfully
important to do what could be done to keep the 1966 and
-31967 budget expenditures below a level of $100 billion.
Now, over the years the Federal Government had been
engaged in a wide variety of programs involving direct
loans -- for local public facilities, small business,
farming, housing, and other purposes.
By the end of
fiscal year 1965, the total amount of direct loans held
by the Federal Government totalled well over $30 billion.
At that
t~e,
the rules under which the Federal
budget accounts were constructed required loans to be shown
as expenditures in the year in which they were made; these
rules also treated repayments of loans, or sales of
loans to other investors, as offsets to expenditures or
"negative expenditures" in years in which the repayments
or sales occurred.
It was argued, and I believe this is
correct, that the primary role of the Federal Government
in making direct loans ought to be to assure that the
credit is made available.
Once the loan is made, however,
it is not generally necessary for the Federal Government
to continue to hold the loan on its own books if the
loan can be sold on reasonable terms to private investors.
And, in fact, loans had been sold for many years, although
the volume was relatively small -- in the range of $1 to $2
-4billion at the outside -- in part because the variety of loan
te~
and conditions, the special features of the loans,
and the types of borrowers, the lack of credit ratings
and the like, tended to make the paper unattractive to
private investors.
So here is what we saw back in 1965:
(1) There was
great pressure to hold down the total of budget expenditures.
(2)
The budgetary rules treated loan sales as "negative
expenditures. "
(3)
We had a vast amount of loans which
could potentially be sold if they could be properly
packaged to be attractive to investors.
The potential
investors, however, really had no interest in investigating the credit worthiness of the borrowers; they had no
real ability to undertake the servicing of the loans, especially for borrowers who were geographically remote; they
were unequipped to handle a large volume of relatively
small loans; and they were not able or willing to face
the reinvestment problems which arise when dealing with
amortized loans and Government loans with special prepayment or delayed payment features.
Well, we came up with a dandy idea -- or at least it
seemed so at the time.
The idea was the so-called
-5Participation Certificate.
Simply put, the idea was to
pool a number of loans, to take a look at the flow of
interest income and principal repayments, and to issue a
new piece of paper -- a Participation Certificate -- which
entitled the investor to a share in that flow of interest
receipts and principal repayments.
The individual loans
could not be marketed easily, but we could sell shares in
a pool of loans.
A government guarantee was put on the
Participation Certificate itself so that the investor did
not have to worry about the quality of the paper underlying
the Participation Certificates.
(I might add that, in
fact, this did not increase the Federal liability or
potential liability, because if we held onto the loans
and there were defaults, we would suffer the losses in just the
same way as if someone else had the paper and we had to make
good in the event of the same defaults.)
In short, we
devised a market instrument with much wider appeal than
the individual notes in the pool separately would have had,
and we assured its reception in the market by putting a
Federal guarantee on the paper.
Well, with quite some effort and some important
Committee amendments, the Participation Sales Act of 1966
was passed by the Congress and signed into law by the
-6President on May 24, 1966.
The course of the legislation
through the Congress was not entirely smooth.
Some
members argued that this was simply a giDlDick designed to
reduce the apparent deficit and to conceal the true
deficit; that it was a way of getting around the 4 1/4 percent statutory interest ceiling on Treasury bonds; and
that selling loans to pay current expenses was like using
up your capital in order to live beyond your income.
We responded that the basic prinCiple was sound
there was no reason for the Government to ''bank'' these loans
if private purchasers could be fOlmd -- and that so long
as the budget showed a loan as an expenditure, it was
reasonable to show the sale of loans as an offset to
expenditures.
In any event, after quite a bit of a fuss, the
Participation Sales Act became law, Participation Certificates
were sold, and under the rules then applying, budget
expenditures were reduced by the amount of these sales.
Next
we
move to the debt limit
hearings in 1966.
These hearings had become an annual exercise -- described
by some as "the annual flagellation of the Treasury" -during which heated arguments were exchanged about the level
-7of expenditures and related matters.
But in 1966 a new
issue was joined, and that was how these controversial
Participation Certificates ought to be treated in the
budget accounts and in the statutory debt limit.
As you all remember, of course, the issue was fraught
with political implications, and accusations of budget
g~ickry
flew through the air thick and fast.
The lines
were drawn between those who argued that Participation
Certificates were merely a form of financing budget expenditures and those who said, in line with long-established
Federal budget accounting principles, that Participation
Certificates represented a sale of an asset and therefore
should reduce the budget deficit.
It was in this atmosphere that the President decided
to form a bipartisan commission, as he put it, "to undertake a thorough review of the budget and recommend an
approach to budgetary presentation which will assist both
the public and Congressional understanding of this vital
document."
This decision to form a CODDllission on Budget
Concepts, while perhaps most directly stimulated by the
heated issue over Participation Certificates, also
cl~ed
many years, under several Administrations, of discussion,
-8-
criticism, and politteal wrangling about the inadequacy
and incomprehensibility of the Federal budget.
I can tell you from personal experience that the time
had come for a review of the way in which the Government
presents its finances.
My introduction to Federal service
came with my election to the Congress of the United States.
While I came to Washington only too aware of my shortcomings
a lJilitary expert, a diplomat, or an expert in the problema
of agriculture and labor, still I looked forward eagerly
to attacking the problema of Federal finance.
After all, I
had pursued the subject to a Master's degree; I had roughly
fifteen years of business experience behind me; and
accounting and finance were subjects that I enjoyed and I
was certain that 1 understood.
As some people enjoy read-
ing Proust, I enjoy attempting to unravel the mysteries of
financial statements.
To my shock and dismay, I discovered that Federal
finance was nearly incomprehensible, and the accounting
system seemed to have no resemblance to anything I had
ever seen before.
Congress used one set of figure ••. The
President used another set of figures.
The debt managers
used a third, and the economists used still another.
-9When I went around for help to one of the senior Members
of the Appropriations Conmittee, I was. advised to "stick
around for ten years and then you will understand."
Another Member remarked acidly to me that "this system was
good enough for General Grant, and it ought to be good
enough for you!"
I remember vividly standing up in the well of the
House one day when a $45 or $50 billion Defense appropriation
bill was being debated.
I was dimly aware of the thrust
of the debate, but I found a footnote relating to a $750
million item that puzzled me.
I arose to ask the Committee
whether the $750 million was an increase or decrease in
the amount that they were debating; whereupon I was roundly
denounced for being so presumptious as to ask foolish questions
(and perhaps questions which the Committee itself could
not readily answer).
If I was confused, with an academic and business
background largely devoted to the area of finance and
accounting, it is small wonder that the American people
were confused!
How does one explain a "negative expenditure"
to the American taxpayers?
How do you explain that making
a loan was spending money -- under Federal bookkeeping
-10-
standards?
How do you explain that the Defense Department,
with all its work in process and huge inventories, made no
attempt to accrue its accounts?
At the end of the
}e
ar I went down to the Bureau of
the Budget and found some of their old veterans who took
many patient hours to lead me through the Federal and
Congressional accounting processes.
I finally understood
the system, but at the end of the lectures I was more
outraged than ever at the barnacle-encrusted anachronism
that we called the "Budget of the United State. Goverument."
The Commission on Budget Concepts was appointed by
the President in March of 1967.
Its membership wa. drawn
from all interested segments of the Nation -- accountants,
economists, Congressmen, Senators, the Secretary of the
Treasury, the Director of the Budget Bureau -- and it
was chaired by a very able banker, David M. Kennedy, of
Continental Illinois Bank.
As you can imagine, they really had their work cut
out for
them -- not only because the issues were so
difficult, but because the Commission itself represented
a microcosm of the opposing forces.
Yet, in six months,
the Commission was able to come up with a budget format
upon which all members could substantially agree.
More
-11-
important, the Coomission' s recommendations were widely
hailed across the Nation.
The result. has been to make
life a lot easier for people like me who are charged with
S~
responsibility for the Federal budget and finances.
Not only is the budget easier for us to understand and
explain, but now we can devote ourselves to the substance
of program and budgetary issues, rather than spending our
time debating accounting practices.
What were the Commission's major recommendations?
Its greatest contribution was the unified budget
format.
This is the format which was introduced in the
FY 1969 Budget submitted by the President this past
January.
Its principal attribute is that it is comprehensive.
It shows all the elements of the Government, including the
various trust funds.
into two segments:
At the same time, it is separated
the expenditure and receipt account,
and the loan account.
Both are added together to produce
the overall budget deficit or surplus.
This separation in itself is a major contribution to
better understanding of the Government's accounts.
It
draws a clear distinction between expenditures and receipts,
which affect our national income directly, and loans, which
-12are merely exchanges of financial assets and do not have
the same economic effect.
The result is that it now is
possible to get a rough picture of how the Government
will affect the economy by looking at the receipt and
expenditure account.
This you could only do in the old
days if you had before you the National Income and Product
Account Budget, in addition to the more frequently cited
Administrative Budget.
The Coumission, of course, made many other recommendations, including the adoption of accrual accounting and
the elimination of the fantastic number of inconsistencies
and anachronisms that had developed over the years. Almost
all of these recommendations are being carried out by the
Administration, although they could not all be instituted
inmediately.
I ought to say that I do not necessarily agree
that the Commission arrived at exactly the right focus on
every single point, and I am sure that the CODIDission
members would agree that their recommendations can be
improved in future years as experience develops with the
implementation of the new rules.
I think there is no doubt,
however, that the new budget recommended by the Commission
-131s a vast improvement.
With regard to the Participation Certificates that
had started the whole battle, the Commission recommended
that these no longer be treated as offsets to expenditures,
but instead as means of financing (in the same fashion
that the budget treats issues of direct Treasury securities).
The adoption of this recommendation has had the effect of
eliminating the Participation Certificate sales program as
we knew it.
Now you might suppose that this would be the end of
the story, but it is not.
Our use of Participation
Certificates had been condemned in many quarters, and now
we were in effect denied further use of that device
o
But suddenly it seems that this idea of pooling loans
and selling participations, which so recently was attacked
as an unconscionable ginnnick, has returned in some new
incarnations and has become an impeccably respectable and
desirable financing method.
For example, responding to the "credit crunch" of
1966 and its effects upon housing, the Congress has recently
enacted, in the Housing and Urban Development Act of 1968,
a new proposal to improve the financing ltructure for
-14-
home-building and home-ownership.
What is the proposal?
To authorize mortgage lenders to pool together Federal
Housing Administration, Veterans Administration and
Farmers Home Administration insured home mortgages and
to sell Participation Certificates in the pool!
Another example!
Just a few days ago Governor Mitchell
of the Federal Reserve Board discussed a proposal which
would adopt the same procedures in the cOlllllercial banking
field as a means of getting a larger volume of business
credit in the rural and other areas of the country, in
which there is a relative credit shortage.
One final example
from both sides of the political
aisle we recently have heard new techniques proposed to
finance the tremendous needs of our urban and rural poverty
areas -- Community Development Corporations and Urban
Development Banks.
If you study these cODlDendable new
ideas, you will find that many of them involve one variation
or another upon the basic idea of pooling relatively small
loans in order to attract investors' interest in securities
(that one might be tempted to call Participation Certificates)
which are backed by the pool of loans.
-15-
As I look back now, I can see that out of the terrible
pounding we took on the issue of Participadbn Certificates,
we have a vastly improved new Federal budget, and a growing acceptance of a financing technique that may play a
major role in meeting some of our urgent domestic problems.
In the final analysis, 1 feel as though I have been
through some madhouse in Fantasyland.
But the trip had
had a happy ending -- as everything in Disneyland should.
000
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
p,700,OOO,OOO, or thereabouts, for cash and in exchange for
TNasury bills maturing September 26,1968, in the amount of
~2,600,526,000, as follows:
91-day bills (to maturity date) to be issued
1n the amount of $1,600 OOO,0001 or thereabouts,
additional amount of bii ls datea June 27, 1968,
mature December 26,1968 originally issued in the
$1,105,037,000, the additional and original bills
interchangeable.
September 26 1968
representing' an '
and to
amount of
to be freely
182-day bills, for $ 1,100,000,000, or thereabouts, to be dated
September 26,1968, and to mature March 27, 1969.
The bills of both series will be issued on a discount basis under
and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be is sued in be are r r orm only, and in denominations of $1,000,
$5,000, $10,000( $50,000, $100,000, $500,000 and $1,000,000
(maturi ty value).
co~etitive
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, September 23, 1968.
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
ro~a~ed 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
subm1t 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
~ount of Treasury bills applied for, unless the tenders are
aCcompanied by an express guaranty of payment by an incorporated bank
or trust company.
F..1350
- 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 tnese reservations, noncompetitive tenders for
each issue 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 for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on September 26, 1968,
cash or other immediately available funds or in a like face amount
of Treasury bills maturing September 26,1968. 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.
F-1350
000
TREASURY DEPARTMENT
&
FOR IMMEDIATE RELEASE
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
H,500,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing September 30 1968 in the amount of
~1,500,396,000, as follows:
"
27~ay bills (to maturity date) to be issued
in the amount of $ 500,000,000,
or thereabouts,
additional amount of bills dated June 30,1968,
mature June 30,1969,
originally issued in the
U,OOl,671,000, the addit10nal and original bills
interchangeable.
September 30,1968,
representing an
and to
amount of
to be freely
365-day bills, for $ 1,000,000,000, or thereabouts, to be dated
September 30,1968, and to mature September 30, 1969.
The bIlls of both series will be issued on a discount basis under
competitive and noncompet1tive 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,OOO, $10,000, $50,000, '100,000, $500,000 and $1,000,000
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m.,
Eastern Daylight Saving
time, Tuesday, September 24 1968.
Tenders will not be
received at ttle Treasury De:phrtment, 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 the one-year bills will run
for 365 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
subm1t tenders except for their own account. Tenders will be received
Without deposit from incorporated banks and trust companies and from
F'1351
- 2 responsible and recognized dealers 1n 1nvestment 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
accompan1ed 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 tnese reservations, noncompetitive tenders for
etch issue for $200,000 or less without stated price from anyone
Didder 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 Bank on September 30,1968,
cash or other immediately available funds or in a like face amount
of Treasury bills maturing September 30,1968. 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.
F-1351
000
TREASURY DEPARTMENT
FOR RELEASE
-
~
Washington
DELIVERY
REMARKS OF THE H~ORA8LE ROOERT A. WAL~CE
ASSISTANT SECRETARY OF TIiE TREASURY
BEFORE A Ll.t-JCHE~ OF THE S~ FRANCISCO CLEARING HOUSE BAN(S
VILLA TAVERNA CLUB, SAN FRANCISCO, CALIFORNIA
THURSDAY, SEPTEMBER lQ, lQ68, 12:15 P.M., PDT
PRESERVING PR05PERITY
1HE (JIPORTLNITY TO t-EET WIn-! n-!E LEADERS OF THE
B~I~ C~ITY
F~LER ~O
IS
~T
WELCQtJE.
S~
FR.6NCISCO
I BRING YOU GREETINGS FRCJI1 SECRETARY
REITERATE THE GRATITUDE OF THE TREASURY [l:PAR1l£NT FOR YCUR
EFFORTS IN HELPING US TO MARKET U. S. SAVINGS B(t.IOS AND FREEDOM SHARES.
THESE SAVINGS INSTRLM:NTS SERVE THE DUAL PURPOSE OF DN'PENING NATI<JW.
INFLATICNAAY PRESSURES Af\JD ENCOURAGING INDIVIDUALS TO
THROUGH WHOLES(J.£ THRIFT HABITS, Af\JD, THUS, THEIR
~
I~ROVE
PRCMlTI~
THEIR LIVES
REPRESENTS
EXTREM:LY VALUABLE NATIONAL EFFORT.
OF CClJRSE, SAVINGS
TO CMAT INFLATION.
LABOR
~D
B~OS
TI-£
REPRESENT CNLY CNE
C~n.JED
EFFORTS OF
BUSIt-.£SS MJST BE BROUGHT TO BEAR
~
WEAP~
IN CUR ARSENAL
GOVE~T ~O
THIS
EC~OMIC
ALSO OF
t-ENACE IF
WE ARE TO CARRY n-!E BURDEN OF VIElNAM WIn-! A MINIMJM OF EC(t.ICJI1IC
~SULTS
DISTORTI~S.
OF RECENT FISCAL ACTIONS
PASSAGE OF THE REVENUE AND EXPENDITURE
C~TROL
ACT OF 1968 THIS
SUMR REPRESENTS A LANDMAAK IN THE FIGHT AGAINST INFLATI(t.I.
IT CN£
NEARLY A YEAR LATER 'THAN WE WOULD HAVE LIKED, Af\JD THIS D:LAY PERMITTED
A CREEPUP IN 'THE INFLATI~ RATE ALGKi WITH CONCO'1ITNfT PRESSURES Ct4 WAGE
RATES.
NEVERTHELESS, WE ~T RECOGNIZE THAT PAYING HIGHER TAXES IS NOT
POLITICALLY POPULAR Af\JD GIVE FULL RECOGNITI~ TO THE ADMINISTRATJ(t.I PND
'TliOSE M:MBERS OF C~RESS WHO OJ 0 WHAT WAS RIGHT RATHER TH/)N WHAT WAS
F-1352
- 2 POLITICALLY EXPEDIENT.
IN 'THIS RESPECT, THE NATICJt.I ALSO (lES A [EBT
OF GRATI1'"Gre TO THE FIWtNCIAL CC»MJ.IITY FM ITS RECOGNITIa. rE 1t£
NEED FOR HIGtER TAX REVENlES N«:J FOR ITS HELP IN PERSUADING QH;RfSS
TO APPRfNE THIS CCURSE OF
IT HAS
~
ACTI~.
BEEN ~ARLY THREE ~lHS SINCE n£SE fISCAL ~UlES
WERE ENACTED.
WHAT HAVE BEEN THE RESULTS SO FAR?
HA~
E~RY
PREDICTED
FACET OF STATISTICAL
~~LOP~TS,
HAVE BEEN GENERALLY ALCNG lHE LINES JNTICIPATED.
OTHERS FAVMING n£ TAX HIKE
CESSATI~
~R
INFLATt~
INFLATI~
()E
CXlJLD
I THIN( n£ RESULTS
AOMINISTRATI~ ~D
HClrIEVER, WE DID PREDICT lHAT
C~TIN£O
RATE WOOLD ST<F, AND nilS HAS OCCURRED..
THE RATE
HAS REMAINED HIGH, BUT IT HAS NOT BEEN INCREASING.
GABWll-1 OF lHE
11£
NO
MAINTAINED 'THAT Tt£RE WClJLD BE N4 Ip.f£OJATE
rE INFLATIONARY PRESSURES.
INCREASES IN THE
~ILE
HAVING ARRESTED
n. ns
RATE, WE St-OJLD New EIPECT IT TO TILT lXJHIARD.
PRICE PRESSURES WILL PROOABLY BE WITH
us
FOR SCM: TUE, BUT WE EXPECT TO
SEE SCJE r£FINlTE Ip.f)ROVEfENTS.
ALTHOJGH IT 15 STILL TOO EARLY TO MAKE
Nt('( ~FINITIVE
JJOGI-ENTS ABOUT
ll-1E POST-TAX INCREASE PERFORMANCE OF 1l-E EC<l'J(')ofY', IT SEEMS CLEAR niAT
ll-1E STEN4V GfOIll-i OF nilS YEAR'S FIRST AND SEC(J>40 QUAATERS WILL NOT
OiARACTERIZE ll-E niIRD QUARTER.
YET, GR{)Iln-f SEEMS TO BE C~TI~ING AT
A STRCJ04G RATE -- STILL PERHAPS S~T STRONGER 1H»J WE waJLD LIKE
BUT NOT ......Oi OUT OF LItE WIn-t A HEALn-tY PATTERN.
n£ CURRENT RATE OF
INCREASES IN G()IERNM:NT EXPENDITURES IS LESS ~ IT HAS BEEN FOR
MN(f
QUARTERS, BUT PERS<J-.W.. C~Sup.pTI(J>4 EXPENDITUtES Ct'ffT1N.l! TO EXPNtm AT
A GOOD CLIP.
TI-£ RATE OF SAVINGS BY INDIVIDUALS WHIOi, BEr:a.E THE TAX
INCREASE, HAD BEEN A8N0RMAL..LV HIGH, SEEMS
NORMAL L£~LS.
N()f
TO BE t£AlED TOWARD K>RE
THIRD QUARTER STATISTICS AP£ NOT FIRM !NCJJGH TO GO MJCH
BEYOND THESE OBSERVATIONS.
- 3 AS FOR THE Ifvt£DIATE FUnJRE, THE TAX INCREASE #-JD EXPENDITURE CUTS
C.6N BE EXPECTED TO EXERT RJRTI-fER DOoINWARD PRESSURE ON THE ECONCMf DURING
THE COMING P-'ONTHS.
TAKEN BY 11-iEMSELVES, THESE PRESSURES WOJLD PROBABLY
BE STRONGER lHAN WE W()JLD LIKE.
HOttlEVER, RECENT FISCAL ACTIONS SHOULD
TAKE C(J.JSIOERABLE PRESSURE OFF CAPITAL MA.RKETS, SO lHAT TI-ERE SHOJLD BE
ENClIGH
~RTGAGE ~EY
t-t:,6»IHILE,
me
TO FINANCE A HEALlHY RATE OF HOUSING C(}4STRUCTION.
UNCERTAINTY OVER TAX RATES HAS BEEN ENDED SO THAT
INOI VI IJJALS CAN BE EXPECTED TO RESUM: A MORE NORMAL RATE OF SAVI NGS •
WHILE ECCl-JOMIC GRo.ro-t IN MJNEY TERMS SHOJLD BE APPRECIABLY La-lER
!lJRING THE NEXT NINE MCNlHS TH.AN IT HAS BEEN OORING THE PAST NINE M(J.JTHS,
THERE IS EVERY REAS(}.I TO BELIEVE 11-iAT ADEQUATE REAL GRONTH ADJUSTED FOR
PRICE INCREASES WILL C<l'ITINUE, THAT SALES AND PRODUCTION, 11-iOUGH LESS
EXUBERftNT, WILL REMAIN HIGH, THAT UNEp.pLOYM:NT WILL STAY BELa-l FOUR
PERCENT, AND THAT THE INFLATI(t.J RATE SHOJLD NOTICEABLY DIMINISH.
PROSPERITY'S PROBLEMS -- N-JD VALUES
READING ABOUT U. S. EC<l'JCJYtIC AND FINN-lCIAL WORRIES, THE AVERAGE
CITIZEN MA.Y WELL ASK WHY WE HAVE Tt-ESE PROBLEMS.
THESE ARE THE WORRIES OF PROSPERITY.
m OLD-FASHIONED
WE COJLD QUICKLY BANISH THEM WITH
RECESSION SUCH AS OCCURRED THREE TIM:S IN lHE SEVEN YEARS
BEFORE THE PRESENT EXPANSION BEGAN IN 1961.
mo
THE FACT IS THAT
A RECESSI(}4 W()JLD DRASTICALLY
SUDCENLY CURTAIL INFLATIONARY PRESSURES .AND PROBABLY PROVIDE A ~UICK
RE(lJCTION IN aJR BALANCE OF PAYM:NTS r£FICIT.
BUT FEW OF US WOULD
WILLINGLY PAY THE PRICE OF WIDESPREAD UNEWLOYM:NT, SLOttl SALES, SHRINKING
PROFITS, AND LOST PROOUCTlCJ-J.
n-uS, lHE BETTER WAY TO DEAL WITH Tt-E WORRIES
OF PROSPERITY IS WITH SELF-DISCIPLINE, AS WE HAVE DONE BY ENACTING HIGHER
TAXES N-lD CUTS I N FEDERAL EXPENDI nJRES •
- '+ OF COJRSE, THE PRESSURES CN OJR ECcr.JOMI C SYSTEM STEM VERY LARGELY
FRO'-1 TI-iE COSTS OF VIETNAM.
H~VER,
TIiE REAScr.J Tt-ESE COSTS, PER SE, ARE BUR~NSM,
IS TIiAT TI-iEY HAVE BEEN PI LED cr.J TOP OF fiN EC(J.J(Jof( ALREADY VERY
NEAR FULL Et-f'LOY~NT, WI TH LI TTLE Su\CK TO ABSORB THE EXTRA [EMA'.lDS -- BOTH
IN THE
GOVERN~NT
.AND IN THE PRIVATE SECTORS.
IN SOt-£ RESPECTS, M.ANY AMERIC.ANS MAY HAVE COM: TO FEEL A LITTLE GUILTY
ABOJT ENJOYING PROSPERITY.
BUT THE PURPOSE OF HIGH
E~lOYM:NT
OF EXISTENCE -- FAR FROM IT.
~
IT SEEMS TOO SELF-INDULGENT .AND EVEN SELFISH.
IS NOT TO PRCM:>TE A LA DOLCE VITA KIND
SI~
ll-iERE IS A POSITIVE .AND Lt-lSElFISH
EXP.ANSION WHICH MAKES ITS PRESERVATIcr.J THOROJGHLY WOR1l-fitIHIlE.
SUQ-i
~
OF
FOR
~LY
ENVI RONt-£NT PROVI DES lHE JOB OPPORruNI TI ES NEEDED FOR TI-iE POOR
,aND TI-iE DISADVANTAGED TO ESCAPE THE TRAP OF GRINDING POVERTY.
GRCPNING ECet-JOMY 00 YOJNG PEOPLE REALIZE Tt-EIR FULL
ECO'J~IC
~LY
IN A
POTENTIAL.
CNLY A HIGHLY PRODUCTIVE NATION PROVIDES ITS SOLDIERS Wln-t THE EQUIPr-£NT
.AND SERVICES lHEY NEED.
(J\JLY IN THESE SURROJNDINGS C.AN OJR CORPORATIONS
HAVE Tt-E NECESSARY INCENTIVES FOR INVESnt:NT SO
STItNDAROS .AND SCIENTI FIC
ADVANCE~NT.
I~ORT.ANT
TO RISING LIVING
O'JLY DURING SUQ-i A PERIOD 00 FU-JDS
FLCJ.tI FREELY TO SCt-roLS, COLLEGES, HOSPI TALS, HEAl n-t RESEARCH, AND OlHER
VALUABLE PURSUITS.
A STABLE AND lHRIVING U. S. EC(J\J(M( IS
nus
A SINE QUA
N~
FOR THE
SUSTAIr-.ED ADVANCEtJENT OF SOCIETY, WHEn-tER IT BE SOCIAL, SCIENTIFIC, OR
CULTURAL.
OF
~BROKEN
-
CO\ISIDER, FOR A MOM:NT, THAT IN THE PAST SEVEN .AND A HALF YEARS
EXPIWSION=
THIRTEEN MILUCl'J AfIo'ERICANS HAVE MCNED OUT OF n-tE
POVERTY CATEGORY.
-- ELEVEN MI LLION MORE F.AMILIES AO-HEVED YEARLY INC()oES
AB(NE $5,000.
- 5 -- EIGHT MILLION MORE FAMILIES ACHIEVED YEARLY INCOMES
ABOVE $10,000, MORE TH.AN DOJBLING THE NUMBER IN 1960.
-- THE OVERALL PERCENTAGE OF WORKERS WITHOJT JOBS WAS CUT
IN HALF, FROM ABOUT 7 PERCENT TO 3-1/2 PERCENT.
OF COURSE, THESE ARE OVERALL FIGURES, .AND WE KNOW THAT WE HAVE NOT
ELlMlNAn:D THE PROBLEM OF RACIAL DISCRIMINATI~.
NEVERTHELESS, THE FACT
IS lHAT BLACK AM:RIC.ANS HAVE MADE MA.RKED ADVANCEMENTS AS A RESULT OF OUR
PROSPERI TY •
FOR EXAMPLE, BETWEEN 1960 AND 1967:
-- THE PROPORTION CN
NO~ITE
FAMILIES EARNING OVER $8,000
(ADJUSTED FOR PRICE a-tANGES) ~RE THAN DOUBLED -- FROM
13 TO 27 PERCENT.
-- THE PERCENT AGE OF NOI'MHI TES BEL()oI THE POVERTY LEVEL
DROPPED FROM 55 TO 35 PERCENT.
-- THE NO'MHI TE JOBLESS RATE DROPPED FROM A 12.4 PERCENT
HIGH, REACHED IN lQ61, TO 6.8 PERCENT.
-- THE NUMBER OF NOM-IHITE CRAFTSM:N, WHITE-COLlAR WORKERS,
ftND OPERATORS JUMPED 47 PERCENT.
OVER HALF OF ALL
NONWHITE WORKERS NOW HOLD THESE BETTER-PAYING JOBS.
-- THE
EDUCATI~
GNJ BETWEEN YOUNG WHITES .!NO Na-.JWHITES,
AS MEASURED BY YEARS OF SOiOOL EXPERIENCE, HAS BEEN
CUT TO LESS THAN a-JE -HALF YEAR (12.2 YEARS FOR N(}MHI TES
COMPARED TO 12.6 FOR WHITES).
THE-PERCENTAGE OF HIGH
SCHOOL GRADUATES N-OJG YOJNG NO'MHITE ADULTS HAS
JUMPED FROM 39 TO 58 PERCENT.
- 6 Tt-£SE GAINS REFLECT SUBSTANTIAL PROGRESS BY THOSE Wt-() NEED IT ~T,
.AND WE St-OJLD FEEL PROJD THAT OJR SYSTEM HAS ~ IT POSSIBLE.
WE M.JST
Ca-ITn'JE lliIS KIND OF ADVANCEM:NT.
PROSPERITY'S BEf'.EFI TS EXTEND FAR BEYO'ID OJR SHORES.
OF OTHER
NATI~S
AlSO HAVE A STAKE IN
n. ns
THE PECFLES
SAM: STABlE EXPANSI()\I.
WERE
WE TO PERMIT ClJR EC(N)MY TO STAGNATE OR SLIDE INTO A RECESSION, IT WClJLD
rJ:STROY A SUBSTANTIAL PORTION OF THE WORLD'S fo4ARKETS AND, ALCNG WIlli IT,
I~AIR
ECCJ-001IC CPPORnJNITIES AND PROGRESS EVERYWHERE.
INFLATION OR RECESSION -- CAN HAVE DISASTROJS
EC(J.J~IC
U. S. I~ALA'4CES -
CONSEQUENCES
THR()JGHOJT n-E WORLD.
WE IN THE UNITED STATES n-tUS HAVE AN OBLIGATICJ'.I TO PROVIDE THE lIND
OF ECONeJ.1IC ENVIRONtJENT WHICH IS A RREREQUISITE TO Tt-E WELL-BEING BOTH
OF OOR CWN CITIZENS A'lD THOSE OF OTHER NATICNS.
PRESERVI~
CUR STABLE
EXP~SION
THE RECORD-BREAKING STABLE EXPN-ISION WE HAVE EXPERIENCED ruRING
THE LAST SEVEN YEARS HAS NOT OCCURRED BY ACCI CENT.
RIGHT KIND OF ENVIROf\M:NT IN ORDER TO ~RIVE.
I T HAD TO HAVE THE
WHEN UNEtwPLOYM:NT WAS
HIGH AND PROruCTlON LOW, WE f'EEDED MEASURES TO ENCClJRAGE GREATER ECCJoOo1IC
ACTIVITY, SUCH AS THE HUGE TAX
aJT
OF 1964.
(J.l T~
OTt-ER SIll: OF mE COIN
WHEN ECONeJ.1IC ACTIVITY THREATENS TO ACCELERATE TOO FAST , WE NEErl:D 'THE
COURAGE TO HCLD
()()tJN
FEDERAL EXPENDITURES AND RAISE TAXES TEMPORARILY IN
ORDER TO RESTRAIN DEMN-ID, EASE PRICE PRESSURES, N-ID PRESERVE THE STRENGTH
OF THE OOLLAR.
- 7IT ]S IRCtHC TO THIN< BACK TO ..J~ARY 1961 BEFORE TIiE CURRENT
EXP~SION BEG~.
AT THAT TI~, WE C(l\JFRONTED OOR THIRD RECESSI(l\J IN
SEVEN YEARS -- WIDESPREAD UNEfo'PLOYtJENT ~D SHRIN<ING PROruCTION ~D A
BAlN'JCE OF PAYfoENTS DEFICIT OF NEARLY $4 BILLI(J-.J, STILL THE HIGHEST
"" RECORD.
OJR GOAL?
CUR M<\IN EFFORT WAS TRYIt-.G TO GET THE CClJNTRY ~VING AGAIN.
TO
f.{)VE
n-E UNEfo'PLOYtJENT RATE BELCJrti FOUR PERCENT DEFINED AS
"FULL Efo'P LOY tJENT • tI
OH, WE THOOGHT, WOOL[l\I' TIT BE MARVELOOS I F WE CClILD
JUST REACH FULL EMPLOYtJENT?
BY MID-1965, BEFORE THE VIETNAM ESCALATION, Uf\Efo'PLOYtJENT HAD DROPPED
TO 4-112 PERCENT R-ID WAS MJVING OOWf'.trIARD.
ECO~
HAD ACHIEVED THE LONGEST
EXP~SI<l'J
IN HISTORY.
~D
BY THIS TItJe, THE NATION'S
STRONGEST UNINTERRUPTED PEACETIM:
WE REACHED OUR 4 PERCENT UNEMPLOYtJeNT GOAL BY THE
END OF 1965, BUT THEN WE CONFRONTED .AN ENTIRELY NEW SET OF PROBLEMS -HOt/ TO DEAL WITH
J}N
ECOf\X)M'f MJVI NG TOO FAST RATHER TH.AN TOO SLGI -- HON
TO AVOID INFLATION RATHER
CONSIDERING THE
TH~
STAGNATION.
~LTIBILLI(J.I
DOLLAR IWACT OF
ECQ\JOMY HAS ACHIEVED A REMARKABLE RECORD.
VIElN~,
I THII'I< THE
COOSUtJER PRICE INCREASES IN
BOTH 1966 AND 1967 WERE HELD BELOW THREE PERCENT, A BETTER RECORD OF
PRICE STABILITY
~
MOST OF THE OTHER INruSTRIALlZED COJNTRIES OF THE
WORLD, DESPITE OJR VIETNAM PRESSURES ON TOP OF A FULL EMPLOYtJeNT ECO'JOMY.
THE FISCAL tJEASURES WHICH CONTRIBUTED TO THIS RECORD OF STABILITY
INCLUDED EXPENDlruRE RESTRAINT, A SPEEDUP IN TAX COLLECTI<l'JS,
POSTPONEMENT OF SOiEDULED REDUCTIONS IN CERTAIN EXCISE TAXES.
pt.f'(
~D
A
WE AVOIDED
INCREASE IN TAX RATES, BUT IT BECPME CLEAR LAST YEAR THAT WE COULD
NOT CONTIt-lJE INDEFINITELY TO CARRY THE HEAVY BURDEN OF VIETNN-1 WITHOJT
RAISING THESE RATES.
- 8 OOES THE 10 PERCENT SUROiARGE TO I-£LP FIN.ANCE VI ETNAM, HOLD [)(»4
INFLATIONARY PRESSURES, .AND MAINTAIN CCNFIDENCE IN THE DOLLAR ASK TOO
MJCH 0= N-ERIC.ANS?
HERE WE StroLD BEAR IN MIND TWO POINTS:
PRESIDENT J(}i~~'S TAX RE£JJCTICl'J PROGRAMS OF 1964 .AND lq65
1.
REDUCED CUR lq68 TAX PAY~NTS BY OVER $23 BILLI~.
Tt£ lq66 EXCISE
TAX EXTENSIONS .AND 11-£ 1968 SURCHARGE TE~ORARILY REINSTATED $10-112
BILLICl'J OF THESE RE£JJCTIa--JS BUT TAX SAVINGS OF $12-1/2 BILLlCN RE~IN
ALL OF THE ORIGINAL SAVINGS C.AN BE RESTOR!D~\llNEN CUR VIElNAM
I N FORCE.
REQUI RE~NTS HAVE ABATED.
2.
NEIICANS HAVE ENJOYED THE La..IEST TAX
BUR~
OF .ANY OF THE MAJOR
INDUSTRIAL COUNTRIES OF EUROPE, AND THIS INCLUDES TAXES LEVIED AT
LEVELS OF GOVERNt-'ENT -- FEDERAL, STATE, .AND LOCAL.
DATA OF Tt-£ ORGANlZATIO\I FOR
EC~~IC
~
ESTIMATES BASED Cl'4 1967
COOPERATION AND
DEVELOP~NT
SHCM
THAT AS A PROPORTION OF TOTAL NATIONAL PROruCTION, FRENo-t CI TI lENS PAID
38-1/2 PERCENT IN TAXES; GERMANY, 34-1/2 PERCENT; ITALY, 29-1/2 PERCENT;
GREAT BRITAIN, 28-1/2 PERCENT; AND THE U. S. LESS THAN 27-1/2 PERCENT.
THESE FIGURES ARE NOT CITED TO
EASY.
THE
~IN
I~LY
THAT N-1ERIC.ANS ARE
HAVI~
IT
PURPOSE OF THE 1964 AND 1965 TAX CUTS WAS TO PERMIT THE
PRIVATE SECTOR OF OUR ECONOMY TO FLOURISH BY ALLEVIATING THE BURDEN OF
HIGH TAXES.
BUT THE FIGURES 00 SH)W lHAT WE CAN AFFORD TO PAY FOR OOR
RISI!'X; CEFENSE COSTS -"NO KEEP OUR RCON(M( HEALlrff.
OOR POSITION AS LEACER OF 1l-1E FREE WORLD AND 1l-1E SOLUTICJ.J OF OUR
PRESSING [X)to£STIC PROBLEMS BOTH DEMAND lHAT WE HAVE A HEALTHY .AND
GRONING EC(H)M'( CHARACTERI ZED BY FULL EMPLOYto£NT .AND PRI CE STAB I LI TY •
ALTt-O.JGH RECENT FISCAL ACTIONS CAM: LATER mAN ll-EY SHOULD HAVE, WE CAN
STI LL PRESERVE THE STABLE EXP.ANSION WHID-i WE HAVE ENJOYED FOR 7-1/2 YEARS,
CNERCOME RECENT INFLATIONARY DEVELOPt-f:NTS WHILE YET KEEPING
LCM AND ECOI'O'1I C GRONTH STEADY.
00 00 00
l.-"'E~LOY~NT
TREASURY DEPARTMENT
WASHINGTON. D.C.
September 18, 1968
FOR IMMEDIATE RELEASE
-
UNITED STATES - ISRAEL ESTATE TAX
TREATY DISCUSSIONS TO BE HELD
The Treasury Department today announced that discussions
will be held in mid-November between representatives of the
United States and Is rael on an estate tax treaty between both
countries to eliminate double taxation of estates and
inheritances. The discussions are expected to be held in
Tel Aviv, Israel.
Presently, there is no estate tax treaty between the
two countries.
Persons having an interest in such an estate tax conventi2n
who wish to offer comments or suggestions may consult a speech"
made last April by Assistant Secretary Stanley S. Surrey, and
"Draft Double Taxation Convention on Estates and Inheritances,"
a report published in 1966 by the Fiscal Committee of the
Organization for Economic Cooperation and Development (OECD).
Written comments should be submitted by November 1, 1968,
to Assistant Secretary of the Treasury, Stanley S. Surrey,
United States Treasury Department, Washington, D. C. 20220.
000
* Treasury
Department Release Number F-1228, "Recent Progress
In International Tax Relationships, Ifl:efore the American
Chambers of Commerce Abroad meeting of the 96th Annual
Meeting of the Chamber of Commerce of the United States,
April 30, 1968. The full text of the Surrey speech also
appeared in the tax treaty publications of Commerce Clearing
House, Inc., and Prentice-Hall, Inc., private tax services
F-1353
TREASURY DEPARTMENT
Washington
FOR P.M. RELEASE
FRIDAY, SEPTEMBER 20, 1968
ADDRESS OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE
NATIONAL INDUSTRIAL CONFERENCE BOARD
WALDORF ASTORIA HOTEL, NEW YORK, NEW YORK
FRIDAY, SEPTEMBER 20, 1968, 1:30 P.M.,EDT
In this closing session permit me to speak in a more
direct and personal vein than usual in availing myself of
this last of the pleasant privileges the National Industrial
Conference Board has given me to meet with you in an
official capacity.
Having just turned sixty and in the process of completing
my eighth and final year at the Treasury window, I will
demonstrate conclusively that there is a generation gap.
Indeed, in many ways, I am proud of it.
I am more than a little sick of hearing that America
is a "sick" society.
I am tired of hearing about what is wrong with our
country.
It is time somebody talked about what is right with the
United States.
Let me do my part in the area with which I am most
familiar by saying that the U.S. economy -- with its free
enterprise system and a working partnership between
business, labor and government -- is providing more
prosperity, more opportunity, more sharing in abundance,
more educational and health and cultural advances, than any
Society since the world began, and at a much higher and more
Sustained pace than ever before in its history.
F-13S4
- 2 We must not permit the sustained economic progress on
which this is based to be undermined by a loss of confidence
in ourselves and our country. But that can happen here if
our total emphasis is on racial strife, student revolt and
campus unrest, crime, and dissent over U.s. involvement in the
maintenance of free world security and development.
Of course, these problems exist, like the inflationary
pressures today that afflict our current economy. These
problems must and are being tackled but we should not be
deluded into believing that they reflect some ailment peculiar
to the United States -- some strange virus that surely will
bring our system down.
Indeed, these tensions are observable over the Free
World wherever liberty and opportunity permit the eye to see
and ear to hear and the voice to speak out. They exis t even
in areas where totalitarian order is maintained by repression
and tyranny over the individual.
These tensions exist allover the world where people of
different races live under the same flag or where young
people of relative affluence and opportunity enjoy the heady
wine of university life and are confronted with the age-old
problem of sorting out liberty from license.
Where, since Cain slaughtered his brother Abel,
has history recorded a crime-free society?
Whenever did a country stand up for the rights of others,
however far away or close by, at the cost of some blood or
treasure, that a large group within it didn't urge that,
in the words of the parable of the Good Samaritan '~e pass
by on the othe r side?"
The principal difference between the United States and
most of the rest of the world, in the perspective of these
problems, is that the United States is tackling racial
discrimination, student alienation and crime -- and doing so
within a framework of democracy, justice and order.
And the United States Government is subjected to outspoken
dissent on foreign affairs for two reasons: first, the nation
believes in the right of dissent and, second, the United States
is doing its share, with many other nations defaulting, in
providing the security from aggression that peoples everywhere
thought was guaranteed under the Charter of the United
Nations.
- 3 And the United States is doing all this in the broad
daylight of a free press and national TV networks aided by
communications satellites working hard to give the world the
news about the United States which, under the accepted
definition of news, accentuates conflict rather than
accomplishment -- what is wrong rather than what is right.
Consider what Australia's Prime Minister Gorton recently
said:
"I wonder if anybody has thought what
the situation of comparatively small nations
would be if there were not in existence a
United States -- with a heritage of democracy
and a willingness to see that small nations
who otherwise might not be able to protect
themselves are given some shield. Imagine
what the situation in the world would be if
there were not a great and giant country
prepared to make those sacrifices."
Let those who advocate a return to isolationism ponder
what would have happened to freedom and self-determination
in Western Europe, in Iran, in Greece, in Turkey, in Korea,
in Lebanon, in Taiwan, in The Congo, in India, in the
Middle East, and in Southeast Asia if United States foreign
policy had acceded to the views of dissenters -- the neoisolationists and those who would passively watch Communist
totalitarianism rollover freedom and self-determination at
will.
The recognition of these sources of divisiveness in our
society makes it all the more important to emphasize and
conserve the blessings we share in this good land which is
our heritage.
Before I attempt this emphasis in the field of economic
affairs, may I invite other chroniclers to do the same in
cultural affairs, in social welfare, in religious activities,
in private charities, in recreation, and in the youth
movements we used to hear about. That may not be the
road to winning a Pulitzer or Nobel prize, but it can give
one the satisfaction of helping to "tell it like it is".
- 4 Conserving that which is good is as important as changing
that which is undesirable. Continuity as well as change are
essential to constructive economic life and progressive
evolution in political and social affairs.
Against that background let us examine the contours of
unparalleled economic progress of recent years, its social
side effects, the proven tools that have been employed, and
some necessary proj ections of these proven policies and
programs in 1969. Otherwise, they may be overcome or lost
in the sea of change or threatened change that characteristically
en~1fu our commonwealth every four years under our
constitutional system.
II. Ninety-Two Months of Sustained and Adequate Economic Growth
Some eight years ago the American economy was sliding
~to recession -- its third within a span of a half-dozen
years. The growth rate had been anemic during this pe riod,
unemployment was trending higher in each recession, and
private investment incentives were inadequate.
In 1960, in the Report of President Eisenhower's
Commission on National Goals, appointed as a nonpartisan
body to set goals for vital areas of our national life,
there was the following recommendation on economic growth:
"The economy should grow at the maximum
rate consistent with primary dependence upon
free enterprise and the avoidance of marked
inflation. Increased investment in the public
sector is compatible with this goal.
"Such growth is essential to move toward
our goal of full employment, to provide jobs
for the approximately 13,500,000 net new
additions to the work force during the next
ten years; to improve the standard of living;
and to assure United States competitive
strength.
"Public policies, particularly an overhaul
of the tax system, including depreciation
allowances, should seek to improve the climate
for new investment and the balancing of
investment with consumption. We should give
attention to policies favoring completely new
ventures which involve a high degree of risk and
growth potential."
- 5 -
The time had come to forge new policies, adapt old ones,
and restore the sustained and adequate growth to aU. S.
economy that was essential to domestic progress and our
international position.
That task was undertaken by President Kennedy, executed
by President Johnson, with the support of both political
parties in the Congress and the leaders of business, labor
and finance.
The economic malaise of the 1950's is almost forgotten
after the 92 months of sustained and adequate economic growth
which has followed. This remarkable achievement has dispos ed
of the boast of Soviet Premier Khrushchev that he would
''bury us" economically, the concern over the increasing
frequency and length of recessions and the upward drift in
the U. s. of unemployment, the technological gap, the
educational gap, the gloomy prediction that automation and
technological advances would leave a sizeable proportion of
our work force permanently unemployed. These questions have
disappeared in large part because of the astounding
performance of the U.S. economy. In short, while the
~erican people certainly still face problems, the economic
~oom of the Fifties is not one of them.
True, old social problems have taken on a new urgency as
part of a rising tide of expectations induced by this economic
progress. The magnitude of these problems -- and the emotions
they sometimes arouse -- may seem at times to obscure the
achievements of good economic policies. But we would do well
to recall that the American economy has been, and can continue
to be, a mighty engine of social progress.
The lesson of the 1960's is the enormous difference
that public policies can make in creating an atmosphere
within which the private economy can flourish. Whatever
our political persuasion or allegiance, this is a lesson we
cannot safely ignore in meeting the challenges that lie
ahead.
A.
Domestic Economic and Financial Developments
It is hardly necessary to remind this audience that
the decade of the 1960's has been a period of domestic economic
advance without parallel in our pr-evious experience. By
mid-1965 the current expansion was already the longest and
strongest peacetime expansion on record. Most remarkable of
- 6 -
all, it had been achieved with near stability in costs and
prices. A stubborn balance of payments problem which had
emerged in 1958 seemed near solution.
After mid-1965 and the intensification of the Vietnam
effort, economic policy could no longer be determined on the
basis of economic considerations alone. The going became
tougher. Still, the economy has weathered a difficult
adjustment with less price inflation than during earlier
defense buildups, without resort to controls, and without
tailing off into recession. Our balance of payments
problem, while still very much with us, has been reduced to
manageable proportions. This, I submit, is a good record
by any standard.
The current expansion is certainly not without its
blemishes domestically. Prices and costs have recently been
rising far too rapidly for our continued economic health.
Interest rates zoomed to undesirable highs. Some sectors
of the economy have had very difficult adjustments to make
in the past few years. But despite these problems, there
has been no lasting interruption to the enormous
productive achievements of the American economy. Furthermore,
with fiscal restraints now in place and the Federal finances
moving toward balance, the most serious immediate threat to
continued expansion has been removed.
Rapid and sustained growth was not just a happy accident
in the 1960's. It resulted from a considered decision
to employ certain policy tools more actively and imaginatively
than before. Recognition of the need for more
active resort to policy tools -- particularly in the fiscal
area -- grew out of the relatively disappointing economic
performance of the late 1950's.
There will, of course, be differences of opinion as to
the relative effectiveness and timing of the policy measures
that have been taken. Much can, and should, be learned from
Our inadequacies as well as our successes. But there should
no longer be any fencing about "growthmanship" or gloomy
questioning whether the U.S. economy can realize its full
potential. Experience in this decade has contradicted the
pessimism of those who would have set our sights too low
and sentenced the American people to another decade of slow
growth and rising unemployment.
- 7 -
How much difference has faster growth made in the current
decade? From early 1961 to the present, the national growth
rate -- in terms of real gross national product -- has
averaged more than 5 percent per annum. In the previous
eight years, it averaged only a little more than a sluggish
2 percent. Yet, the average rate of price increase in the
two periods is about the same.
What did it mean to more than double the rate of advance
in real national output to over 5 percent during the more
recent period?
instead of the 4 million new jobs created
between 1953 and 1960 there has been a
10-1/2 million rise in civilian employment
during the current expansion. Vigorous growth
has made automation and technical progress
forces for productivity, not threats to
employment.
instead of the 9 percent rise of the
1953-1960 period an average income per person after
all
taxes and after allowance for price
increases there has been a rise of 29 percent.
This, despite the claim by some that taxes and
inflation have been pulling us down.
in terms of current prices, the value of the
amount added to our Gross National Product
since early 1961 is nearly $350 billion. This
increase in the value of our production approximates
the total national product of the European Economic
Community or the Soviet Union in 1967.
To be sure, our prices have risen in the past eight years,
and have risen too rapidly under the increasing pressures of
the war in Southeast Asia since mid-1965. But, among the
industrialized nations which make up the Organization for
Economic Cooperation and Development, the United States has
had the best record of price stability since 1960. On the
average, the 21 other nations experienced a 46 percent
increase in consumer prices since 1960 -- nearly three times
the increase in this country.
- 8 o~
And, the recent record compares very favorably with our
record of 1953-1960 when our growth was much slower:
wholesale prices rose by 7-1/2 percent,
compared with a 9 percent increase in the
previous seven and one-quarter years.
consumer prices rose 16 percent in the more
recent period, 11 percent in the earlier period.
the most comprehensive price index, the "GNP
deflator," rose 16 percent in the most recent
period and 18 percent in the earlier.
A table attached to the prepared text of my remarks
presents further comparisons between the two periods. So
much for the domestic record.
B. International Economic and Financial Developments
In an interdependent world economy, the better u.S.
economic performance of the 1960's has also had dramatic
effect internationally. The growth of the entire Free World
has picked up in this decade and the volume of trade has
increased impressively. Just as economic growth has not
solved all of our domestic problems, it still leaves unfinished
tasks abroad. The international gap between affluence and
poverty is still too wide. But "a dynamic international economy,
coupled with adequate flows of development finance, can help
the less developed countries to break out of the vicious circle
of poverty and inadequate investment.
I look back with pride to the fact that in 1961 I was a
member of the United States delegation to the then new
Organization for Economic Cooperation and Development. We
startled that meeting by proposing that the member nations
adopt a common goal of 50 percent economic growth during the
1960's. It is scarcely surprising that our cables home
indicated that the response of some of our European friends
was somewhat patronizing in view of the sluggish United
States performance from 1953 through 1960, when the growth
rate of the European member countries of DECD averaged 4.8
percent a year -- more than double our own growth rate.
But, the ambitious 50 percent target was accepted by DE CD
despite the other countries doubts about the U.S.
- 9 When the DEeD conducted its mid-decade review of growth
performance in 1966, it found that real output in the 21
member countries had risen by 27 percent in the period
1960-1965 -- an average rate of expansion of nearly 5 percent
a year. Excluding Japan (which was not an DEeD member in
1961) the output expansion was 4.7 percent -- well above the
4.1 percent rate required to meet the 1970 objective that
had seemed so ambitious in 1961. As the OEeD mid-decade
report stated: ". • • fas ter expansion in the United States,
which accounts for more than one-half of the GNP in the
OEeD area, played an overwhelming part in raising the rate
for the whole area."
Stronger growth among the member nations of the DEeD
and the entire world economy amounts to more than simple
addition of the separate achievements of individual nations.
The whole is more than the sum of its parts. A rising volume
of trade because of growth stimulates still further growth.
Expansion in each country means greater trade opportunities
for all others. As the world's largest trade nation the
United States obviously plays a key role. For example, the
United States absorbed almost one-fifth of the total exports
among OEeD countries in 1965.
The mutual interaction of growth at home and trade
abroad is basic to continued international economic progress.
Recognition of this fact goes back to the Reciprocal Trade
Agreements Act of the 1930's and has found recent expression
in the reciprocal reduction of tariff barriers in the
"Kennedy Round" of trade negotiations.
World Trade, as measured
an annual average rate of 7.6
has advanced from $58 billion
in 1967, an increase of about
times.
by imports, has increased at
percent since 1950. It
in 1950 to over $200 billion
246 percent, or about 2-1/2
The increase in the national product of the Free World
has been commensurate, and in real terms has more than
doubled since 1950. For the post war period as a whole it
is estimated to have grown two to three times.
But the big flaw in this record is the disparity between
the advance of the so-called developed countries and the less
developed countries -- and even between some of the latter
who have been successful in moving their economies to the
"take-off" stage and those which have not.
- 10 Ill.
Economic Growth and Social Progres s
Economic growth alone will not solve all our problems.
But the recent record demonstrates clearly that vigorous
economic growth remains the most powerful social weapon at
our disposal. Consider the benefits that have accrued
domestically as a result of the vigorous growth of recent
years, from 1960 to 1967:
thirteen million Americans have moved out of
the poverty category.
eleven million more families achieved yearly
incomes above $10,000, 2-1/2 times the number
in 1960.
five million more Americans own stock than in
1963, 23 million more have savings accounts.
home ownership has risen to 37 million from
33 million in 1960.
Economic growth does not insure social justice or end the
practice of discrimination. But, the more rapid economic
growth of recent years is bringing substantial gains to
minority groups and giving an added degree of dignity and
security to millions of Americans. As president Johnson has
pointed out, more Negroes and other nonwhites have risen
above poverty in the last two years than in all the previous
six years of the decade. Between 1960 and 1967:
the proportion of nonwhite families earning
over $8,000 (adjusted for price changes) more
than doubled -- from 13 to 27 percent.
the numbet of nonwhite white-collar workers,
craftsmen, and operators jumped 47 percent.
One-half of all nonwhite workers now hold these
better paying jobs.
and, most significantly for the future, the
education gap between young whites and
nonwhites as measured by years of school
experience, has been cut to less than one-half year
(12.2 years for nonwhites compared to 12 6 for
whites)
Statistics show that a U.S. Negro
is more likely to go on to college than any
citizen in a West European country except for
France.
0
0
- 11 While racial strife and discontent have received the
glare of publicity in recent years, vast economic gains have
been made by previously disadvantaged groupso This is one
of the real domestic "success stories" of the 1960's:
the widening of economic opportunities for all of our citizens
The vehicle for social reform has been the expansion of the
whole economy, not the redistribution of existing income.
We have not reduced the living standard of the middle-income
and upper-income families to raise the living standard of
the poor. Instead all groups have gained together. The
task of future years will be to continue, and even
accelerate, the process which has already given millions
of Americans new hope
0
Sheer economic growth does not assure advances in the
field of education and health any more than insuring social
justice. But the record is clear, the enormous income we
have earned in the past eight years has provided unprecedented
advances in these areas. Of course, we have lived quite
a bit better -- our expenditures on personal consumption
have expanded by about 41 percent. But growth has made
possible an allocation of substantially increased amounts
to education and health. Our total public and private
expenditures on education have increased from $27 billion to
$52 billion today. Our total public and private
expenditures on health have increased from $27 billion in
1960 to $50 billion today.
The impressive record of economic growth which the
United States has registered in recent years is not only
important for the domestic advantages it has yielded. In
addition, the expansion of our economy has provided
benefits for the developing nations of the world in their
struggle for self-sufficiency, self-respect and a better
life o
IV.
Proven Tools of Economic Progress
The experience of the past seven and one-half years,
and earlier experience as well, has proven the value of
the use of a range of key policy tools in the pursuit of
economic progress. Fortunately, such use is no longer the
subject of acrimonious political debate -- and it should not
be. Differences of emphasis and interpretation still remain
but there is a widening and significant area of agreement.
o
- 12 For present purposes, the key elements in our economic
strategy can be grouped under four main headings. These
are: structural policies, flexible and coordinated fiscal
and monetary policies, cooperation between labor, management,
and government, and international policy coordination and
cooperation. Each has made, and can continue to make, a
distinctive contribution to the promotion of our economic
welfare. I will comment briefly on each, before turning to
the crucial question of how continuity of proven policies
and programs can be provided in 1969.
A.
Structural Policies
One of the first steps taken by the incoming Kennedy
Administration was to redouble the incentives for greater
private domestic investment in new plant and equipment.
The Revenue Act of 1962 granted a tax credit of 7 percent
on new investment in machinery and equipment, and in that
same year the Treasury reformed and liberalized the tax
treatment of depreciation. Together with the cut in the
corporate tax rate contained in the Revenue Act of 1964,
these measures raised the profitability of a typical investment in new equipment by more than one-third. Because of
the Vietnam situation, it proved necessary to suspend the
investment tax credit temporarily and also impose the current
surcharge. However, the bulk of that extra incentive remains
with the lifting of the suspension anct t,e use of tax
reduction to stimulate investment incentives and unleash the
productive energies of the private sector has been amply
demonstrated.
For example, our total annual investment in plant and
equipment -- the creative capital goods area which is the
key to both growth and productivity -- has rapidly increased
from a level of approximately $35 bil1icn in 1960 to
approximately $65 billion today. Our total annual investment
in manufacturing has increased from $14.5 billion in 1960 to
about $28 billion today.
The reductions in Federal taxes in 1962, 1964 and 1965
amounted to approximately $24 billion in terms of 1967 income
Even with the recently enacted temporary surcharge on income
taxes less than one-half of these tax reductions have been
borrowed back, and income tax rates are much lower than they
were in 1960.
0
- 13 Despite the fact that state and local taxes have
consistently increased during this period, the reductions in
Federal taxes have kept the United States in the category of
industrial nations with the lowest percentage of gross
national product being drawn off through public taxation.
The federal tax system must be kept fair and equitable
in the light of changing conditions. We have, in the
last eight years, clearly recognized this challenge. The
Revenue Acts of 1962· and 1964 contributed more to tax
revision in the interest of fairness than the total of all
measures since the revisions of World War II. In 1965 the
excise tax revisions swept away the jumble of discriminatory
measures that had been a legacy of past needs to raise
revenues in war-time situations. Since then the Treasury
has recommended action in a number of areas, such as foundations,
acquisitions of businesses by tax-exempt organizations,
revision of the tax treatment of the elderly, and the abuse
of industrial development bonds. The Congress has taken
action in some matters such as industrial development bonds
and in other areas the problems are still on the legislative
docket.
The combination of sustained and substantial growth in
personal and corporate income, tax reduction, and higher
returns on savings have had a dynamic effect on capital
savings. The savings of the American people were $399 billion
in 1960 and are $677 billion today. The net working capital
of our non-banking business institutions came to $132 billion
in 1960 and is $205 billion today. The resources of our
commercial banks, savings and loan institutions and mutual
savings banks were $370 billion in 1960 and are $666 billion
today.
New initiative, new policies and new resources devoted
to manpower training and the provision of economic opportunities
have assumed significance as an important structural economic
policy as well as a means of showing compassion for those who
lack adequate or equal economic opportunity. In recent years,
the development of intensified public policy and imaginative
efforts in private industry in manpower training have
constituted an attack on structural unemployment. This makes
taxpayers out of tax consumers, reduces the trade-off point
between unemployment and inflation, and lessens the risk of
dependence on excessive demand as an answer to the unemployment
problem o
- 14 Sizable investment in these activities and the underlying
educative capacity that makes manpower training meaningful,
coupled with the investment in tools of production, have
become recognized as essential to the successful pursuit of the
economics of growth.
B. Flexible and Coordinated Fiscal and Monetary Policies
The adjustment and coordination of fiscal and monetary
policies to assure a stable, balanced, and dynamic economy
will be an underlying fundamental for economic life in the
years ahead -- as it has been in the years just past. During
the first two-thirds of the current expansion, fiscal and
monetary policy were geared together to stimulate the domestic
economy while keeping short-term interest rates reasonably
aligned with key rates abroad. The more active use of fiscal
policy enabled monetary policy to remain in an accommodating
posture, without the sharp swings from ease to tightness that
had been characteristic of the 1950's.
Since mid-1965 fiscal and monetary policy have faced
further difficu1 t tasks. While there was a difference of
opinion in late 1965 as to the appropriate timing of monetary
action, fiscal and monetary policies have continued to be
coordinated in the interest of domestic stability and the
balance of payments. The long legislative delay in enactment
of the recent fiscal restraint package was obviously
unfortunate. However, fiscal policy has once again assumed
a maj or role in stabilization policy.
During recent years, it has been demonstrated that fiscal
policy can be used to stimulate and to restrain. Combined
with a flexible and responsive monetary policy, fiscal action
can help insure that growth in total spending and productive
capacity will be kept in reasonable correspondence. Without
a close degree of coordination between fiscal and monetary
policy, we run the risk of returning to the old cycle of
expansion and contraction _ .. boom and bust. But, the lesson
of recent years is that the economy can be kept in steady
expansion.
Co Cooperation between Labor, Management and Government
A remarkable degree of cooperation, understanding and
mutual confidence between business and labor and government
has gradually emerged in recent years. As we have pursued
policies to fashion a better balance between the public and
- 15 private sectors, business and labor and government have moved
together in a growing partnership for progress. They have
discovered that by pulling together they can achieve much more
than by pulling apart.
A key problem remains to be solved: wage-price stability
at high levels of employment. Even with sound monetary and
fiscal policies, wage-price stability depends upon the
determination of American business and American labor to avoid
wage rises that outdistance our gains in productivity and take
the national interest into account in pricing decisions.
Wage and price stability is vital to both our balance of payments
and our domestic progress -- business and labor and government
have a joint responsibility to cooperate in its achievement.
D. International Policy Coordination and
Cooperation in Economic and Financial Areas
Recent years have seen an unprecedented degree of
cooperation in the international economic and financial fields.
Let me note just a few areas of cooperation:
The General Arrangements to Borrow that give a
much needed backstop to the resources of the
International Monetary Fund.
The huge currency swap networks, now totalling
almost $10 billion, that provide a first line of
defense against disruptive currency speculation.
The cooperative arrangements to offset the
foreign exchange costs of our military deployments
that have protected our balance of payments from
larger drains.
The expansion of multilateral aid to developing
nations through the Inter-American Development
Bank and the International Development Association,
and the creation of the Asian Development Bank.
The cooperative efforts to assist nations that
have found themselves in temporary monetary
difficulties -- Canada, the United Kingdom, Italy,
and, more recently, France o
I must take particular note of the agreement on drawing
rights. This historic development, at U.S. initiative, took
years of patient negotiation and study. It holds out promise
for the first time that eventually the world economy can be
freed from dependence upon increases in monetary gold stocks
- 16 and balance of payments deficits of reserve currency countries.
It means that the world now has a way to expand trade and finance
wong nations with confidence that monetary reserves will grow
sufficiently to make this flow of trade and finance possible.
The progress in all these areas has occurred during a period
of formidable pressures on the international financial system
and on our own balance of payments. Even though there is a
period of relative calm, let no one assume that we have solved
our own balance of payments problems or completed the work of
improving the international monetary system. This is far from
being true. But as a Nation we have come to grips with the
problem: the President laid down a forceful corrective
program on January I, the Congress has responded with action for
fiscal responsibility, and a substantial part of the remaining
elements of the program is in effect and yielding results.
Cooperation is the common thread running through these and
other accomplishments internationally. Increasingly, the
advanced countries of the world are sharing the responsibility
on a multilateral Free World scale for an improved trade and
payments system, mutual security arrangements that are soundly
and fairly financed, and an expanding system of development
aid and finance.
V.
Providing Continuity of Proven Policies and Programs in 1969
Now the future requires our attention. Even in a political
year, there is much upon which men of good will can agree. As
a nation we are committed to the defense of freedom and the
enlargement of opportunity -- at home and abroad. Great tasks
lie before us. We must keep the economy growing and productive,
the Nation's finances in reasonable balance, and the dollar sound
and respec ted.
Our basic economic objectives include: an adequate rate
of growth, reasonably full "employment, and reasonable price
stability. Because of the special role of the United States
economy and the dollar in the Free World monetary system, a
fourth fundarnen tal ob j ec ti ve has erne rged - - the achievement and
maintenance of equilibrium in our international balance of payments.
All are agreed that the foundation of all our national
efforts will be an economy moving towards these objectives,
providing ever new opportunities and an ample scope for
individual, corporate and collective initiative.
There will be substantial differences as to the choice of
means designed to achieve these obj ecti ves. These differences
will reflect certain philosophical or pragmatic preferences.
- 17 But all should agree that the immediate task is to provide
for continuity of proven policies and programs in 1969, so
that the incoming administration -- whether Democratic or
Republican -- can press ahead with the Nation's business, while
fashioning the innovations and initiatives that seem desirableo
There are a number of areas in which continuity will be
essential, and others in which continuity appears to be desirable
until and unless suitable alternatives are devised and accepted.
First, the immediate problem for 1969 will be to adapt the
fiscal and monetary mix to meaningful changes in the international situation and the process of achieving that degree
of dis-inflation at home that will move the economy steadily
toward reasonable price stability without too much of or too
long a sacrifice in the rate of growth and job creation.
The current policy of fiscal and monetary restraint is
directed toward restoring a reasonable degree of price
stability by a moderation of the rate of growth from the
excessive levels of the past year or so.
The task of monetary policy, now conjoined to the massive
shift from fiscal stimulus to fiscal restraint provided by the
recently enacted revenue act and the increases in social
security taxes, scheduled for January l, was indicated in the
recently published June statement of the Federal Reserve Open
Market Commi t tee:
" • • • it is the policy of the Federal Open
Market Committee to foster financial conditions
conducive to resistance of inflationary pressures
and attainment of reasonable equilibrium in the
country's balance of payments, while taking account
of the potential impact of developments with respect
to fiscal legislation."
Apart from the utilization of timely monetary policy, fiscal
policy options which will be available to the new adminis tration
and the new Congress in the first six months of calendar 1969 are:
(a) The extent to which there will be a fuller funding
of pressing domestic programs, as well as provisions
for built-in or unavoidable Federal spending
increases for social security and salary adjustments
for Federal employees already voted,
- 18 (b) The decision, unavoidable by reason of the fact
the. recently enacted 10 percent surcharge
exp~res on June 30, that tax must be extended
reduced or allowed to terminate
0
'
I will content myself for the present by noting that
these extremely important -- even crucial -- decisions will
have to be made very early next year and take into account
the state of the private economy and the outlook for defense
expenditures, both important variables which have a
disconcerting way of defying precise prediction well in
advance.
Flexibility is the watch word in this area, as it has
been since 1965.
A second area where continuity of policy will be highly
important in 1969, but is far from being mastered, is the
coupling of auxiliary or supplementary policies to complete the
process of dis-inflation, now the prime target of the
fiscal-monetary mix to restore reasonable price stability.
Effective price competition, a return to a closer
relationship between increases in wages and productivity,
some temporary absorption of increased costs out of profits,
attacks on some of the structural areas such as construction
and medical costs now being charted by the Cabinet Committee
on Price Stability, should be important elements of program
follow-through in 1969.
These programs for restoring price stability are also
fundamental to the achievement of a heal thy, enduring
equilibrium in our international balance of payments based
on competitive capacity in markets at home and abroad.
The association of inflation with low levels of
unemployment is clearly an unsolved problem of the first
magnitude. Every major Western nation has recognized the
unemployment-inflation problem and has experimented with
instruments of restraint. Our own experience with the
wage-price guideposts developed by the Council of Economic
Advisers was very encouraging until 1966, when excessive demand
and lower rates of productivity resulting in increased prices
and unit labor costs disrupted the previous even pattern of
expansion.
- 19 Now that the rroblem of excessive demand has been tackled,
the focus of scrutiny of the Cabinet Committee on Price
Stability is how to effect a return to a workable pattern of
wage-price stability.
Appropriate monetary and fiscal policies are, of course,
~solutely indispensable in the achievement of rapid economic
growth with reasonably full employment without inflation. But
many ask: Can we not achieve these objectives merely through
finer tuning of our monetary and fiscal restraints?
Unfortunately, the answer is "no." The world would be much
simpler were it otherwise. And, there was a time when many of us
were confident that monetary and fiscal policy could do the job
alone. But both American economic history and the experience
of every Western nation speak eloquently that monetary and
fiscal policy, alone, are not enough.
This Administration did not discover this dilemma, nor is
it a partisan issue. After having grappled with it for
seven years, President Eisenhower observed in his 1960 Economic
Report:
" ••••• Fiscal and monetary policies, which are
powerful instruments for preventing the development of
inflationary pressures, can effectively reinforce one
another.
"But these Government policies mus t be supplemented
by appropriate private actions, especially with respect
to profits and wages. In our system of free competitive
enterprise and shared responsibility, we do not rely on
Government alone for the achievement of inflation-free
economic growth. On the contrary, that achievement
requires a blending of suitable private actions and public
policies. Our success in realizing the opportunities that
lie ahead will therefore depend in large part upon the
ways in which business management, labor leaders, and
consumers perform their own economic functions."
A 1961 report to the Economic Policy Committee of the OECD
noted that "most governments have now come to believe that, under
conditions of full employment, management of the general level of
demand will often need to be supplemented by more specific
measures for promoting price stability." The report specified
policies designed to prevent acute excess-demand conditions in
particular sectors; policies designed to speed the adaption of
supply in excess-demand conditions; and policies designed to
influence determination of incomes and prices.
- 20 -
The guideposts of the Council of Economic Advisers
explicitly treated the problem of discretionary power in the
market place. They were a plea for abstention - in money
terms, an appeal to accept less than is within their power
to take. If we are free to decide, we must be content to
live with our decisions and to be judged on them. But standards
are necessary if the judgment is to be fair and constructive .•
The guideposts were an attempt to develop such standards. Can
we devise better standards? Can we create institutions that
implement them more effectively? Questions like these have
been raised in all the major Western capitals. Hard as they
are, they cannot be avoided in 1969.
A third area for policy continuity in 1969 is tax reform.
After the reforms of the Revenue Acts of 1962 and 1964 and
1965, the Treasury Department undertook a major effort to
prepare tax reform proposals of a comprehensive nature in 1966
and 1967. The plan was to launch a major legislative effort
on the heels of the enactment of the temporary surcharge
legislation. Because of the delays in enacting the surcharge
legislation and the fact that substantial tax reform requires
extensive legislative consideration, there was no suitable
opportunity to push these proposals on to the legislative
calendar.
It is clear that tax reform must be a matter of high
priority as respects tax policy and the work of the Congress.
I and my associates in the Treasury have called attention to
some of the areas that we feel should be given consideration.
As one example, there is the impact of our present tax system
on those in poverty. A country concerned about the plight of
the poor should certainly be concerned about not imposing an
income tax burden on them, and indeed the Revenue Act of 1968
made this principle clear by not imposing the 10 percent
surcharge on low income taxpayers. At the other end of the
scale is the serious problem of those taxpayers with very high
annual incomes who make little or no contribution to the
Federal Government because of the use, singly or in combination,
of many of the tax preferences adopted for particular purposes.
There is also need for an extensive, searching review of the
rules under the estate and gift taxes and the associated
question of the treatment of transfers of appreciated assets
at death under the income tax.
- 21 Two cardinal principles should guide us in considering
tax reform. One is that the standards of equity and fairness
and desirability must be applied in the context of the world
today. Tax provisions adopted to serve certain needs in the
past must constantly be tested to see if they are still
appropriate. We must ask what is the net benefit to the nation
from such a provision in terms of the present cost -- what is
the efficiency and effectiveness of the tax provision as
contrasted with other forms of Goverrunent assistance that may
not have the side-effects of income tax liberality to individuals
or corporations that accompany the use of the tax route?
The second principle is that change from yesterday's rule
to today's new need must be orderly and fair, so that those
who had planned their businesses or lives on the basis of the
earlier provisions may have an orderly transition to the new
standards. But it is orderly transition that I am emphasizing
and not stagnation or indefinite postponement of any change,
for tax preferences should not be a hereditary matter handed
down from one generation to the next o
A fourth area where a beginning has been made and more
needs to be done is in manpower training and the encouragement
to civilian technology and educationo There is still a
relatively untapped resource in those of our citizens who are
unemployed and underemployed. The wastes of unemployment are
obvious
In addition, in far too many cases people are working
in unskilled jobs and failing to utilize their full potential.
Technological change has an unsatiable appetite for higher and
higher job skills, and before many more decades have passed
there may be little demand and only meagre compensation for
the services of the underskilled or the uneducated.
0
One of the great challenges of our time is to harness
the great capacity of the private sector to our system of
public education and training, so as to make it possible for
all of our population to share in the opportunities now
available for the more fortunate. That challenge will not be
finally met within 1969. But, the stakes are so high that there
should be no interruption of the national effort in this area.
A fifth area for policy and program continuity is the
re-establishment and maintenance of stable equilibrium in the
U. S. balance of payments. This calls far a vigorous followthrough on all elements of President Johnson's New Year's Day
program, rather than a dismantling of some parts, as some
This program encompasses a series of direct action
suggest
0
- 22 -
measures on specific accounts as well as use of fiscal restraint
by the government and voluntary restraint by management and
labor in price-wage and work stoppages affecting foreign trade.
The President's program -- a stern and stiff one -- won
no cheers in an election year. It called for increased taxes,
a hold-down in domestic spending and decreased government
overseas expenditures or their neutralization by compensating
measures. It urged less spending by Americans touring foreign
lands and restrained money flows from the United States for U.S.
investment and loans abroad, while encouraging combined public
and private effort to encourage foreign tourism and investment
in the United State s .
Part of this program has been executed and in those areas
it is working. Indeed, some of the results could lead to public
overconfidence.
The last report on our balance of payments covering the
second quarter of 1968 showed a small deficit of $150 million on
a liquidity basis and a sizable surplus in the official settlements
basis. This result was in sharp contrast to the large and
unacceptable deficits in the previous quarter on both bases.
The progress achieved was in the movements of capital and
not the current account which deteriorated with a declining
trade surplus and a big tourist deficit. Welcome as it is, this
progress was unbalance~ and some elements cannot be relied upon
consistently. Some parts of the program, such as those designed
to restore a healthy trade surplus, are only getting under way,
and those dealing with the travel deficit have not been approved
by the Congre s s •
The entire program must be applied. If it is not applied
in its entirety this year, it will have to be applied next year
regardless of what national administration is in power. It is,
quite simply, a problem beyond politicso
The national objective embodied in the program must be
pursued in full bipartisanship if the nation is to assure the
strength of the dollar and the international monetary system.
The hard, gritty work of continuing to reduce our government
expenditures abroad, or neutralize them through arrangements
bilaterally negotiated, should continue unabated.
- 23 -
The nation must carry through to the full the workable
programs of combining private and public effort to increase
foreign investment and travel in the United States which have
been submitted.
Our exports must be helped to rise -- by responsible labor
and management decisions on wages and prices, by continued
negotiation of reduction of non-tariff barriers of our goods
abroad, and by following through on the special measures for
financing and promotion of American exports that have been
initiated.
By doing less than a complete job in these areas of long
term significance, w~th the future of our own prosperity and
that of the free world and delaying the time when the temporary
restraints in capital flows can be eliminated.
A sixth key area for policy continuity concerns the
persistent and steady effort to provide leadership for and participation in international financial cooperation designed
to improve constantly the working of the international monetary
system to encourage trade and economic development.
This means in the monetary field the activation in 1969
of the Special Drawing Rights machinery to provide by deliberate
decision over the years ahead new reserve assets, supplemental
to gold and dollars. This act{vation should provide the degree
of liquidity needed to accommodate a growing free world and
facilitate the working of the adjustment process in an enviroment
where monetary authorities of surplus countries are reluctant
to lose reserves steadily.
In addition to activating the Special Drawing Rights,
continuity of UoSe policy in 1969 should look to participation
in any official multilateral studies for improving the
international monetary system in a world which includes Special
Drawing Rights.
Another area of international financial cooperation calls
not merely for continuity of policy but for an acceleration of
effort to improve and increase the role and effectiveness of
~ltilateral development finance institutions and private
investment in meeting foreign exchange and developmental needs
of the less developed countriese Action in this area should go
forward to a far greater degree than has been the case thus far
~ the Sixties.
- 24 As a group, the developing countries have, during the
1960's, achieved an average growth of 4.5% per year -- impressive,
but not significantly improved from the record of growth during
the decade of the 1950's, and still slightly below the U. N.
Development Decade target of an annual 5% increase in gross
national product. Moreover, half of the growth which was
achieved was absorbed by the population increases in the
developing nations, so that on a per capita basis economic
growth has averaged only 2.3% per year for the developing world
as a whole.
But it can be misleading to try to generalize about the
area covering all of Africa, Asia and Latin America which
accounts for two-thirds of the world's population. These
averages mask wide variations in the performance of the
different countries and regions.
A number of those countries which are counted among the
wealthier and more highly developed of the developing nations
have made further rapid strides in recent years. For example,
Greece and Israel have achieved an average growth rate of
about 8~% a year or so since 1960, a rate which would double
their national production in 8~ years.
There have also been major success stories by some of
the poorer of the less developed nations. Among those with
per capita income of less thari $600 per year, there are six
countries -- Taiwan, Jordan, Panama, Nicaragua, Korea and
Thailand, -- which have achieved high growth rates during the
'60's, varying from 9.7% per year for Taiwan, to 7.2% for
Thailand. This means that those six countries can double their
1960 GNP within the decade if they maintain their rate of
advance.
These "success stories" represent in population less than
10% of the total. The remainder have seen no such spectacular
results and for many the history of the 60's has been only one
of grim disappointment.
The whole of underdeveloped Africa
has during this decade recorded a per capita economic growth
of only 1% a year. South Asia with a population larger than
the Continent of Africa and Latin America combined has
recorded per capita growth of only one-half of 1% a year.
Advancement for many countries has been depressingly slow and
some have achieved no growth at all.
- 25 -
It is perhaps noteworthy that most countries which have
achieved rapid growth have benefited from sound economic
planning, good budgetary and monetary policies and a strong
currency that has encouraged domestic savings and attracted
foreign investment. And, importantly, it is apparent that
those developing countries who have grown most rapidly have
benefited from very large amounts of foreign assistance or
other capital inflows from abroad.
Against this backdrop, an acceptance of the drastic
proposed reduction in appropriations for foreign aid and a
continued failure of the Congress to provide the United States
share of a replenishment of the funds of the International
Development Association of the World Bank would be tragic.
It would destroy world-wide hopes for significant progress in
multilateral development finance in 1969 and signal a dismal
retreat from the realities of the struggle for continued economic
progress.
VI.
Conclusion
Now summing up, in the period just ahead there will be a
transition and a time of change, irrespective of which
political party wins in November. But there should also be
a continuity in economic policy and in established national
economic objectives. Proven tools of economic and social progress
are not the exclusive property of any administration or political
party. In the economic and financial areas, we must all work
together responsibly to insure th& there is continuity, as well
as change.
000
- 26 -
Indicator
1961-1 (or Feb.1961)
to
1968-11 (orJune1968)
1953-1 (or Feb.1953)
to
1960-II(orJune 1960)
Ablolute
change*
Absolute
ehange*
Percent
change
Percent
change
,88 na tiona 1 produc t
~r~t prices ••..•..•..•.
+$349 bill
+69.6%
+$141 bill
+38.61.
l~68-11
...$268 bile
+46t
+$94 bill
+191
prices •..•.•..•...
luatdal production ....•.•
---
+59.5%
---
+18.71
+15.9%
+4,283,000
+6.91
,loyment ••••••••••••••••••
+10,456,000
IDployment rate...........
down from 6.91. to 3.8.1 up from 2.61. to 5.4%
19 months
30 months
10. of months below 4% .•..
taonal income .••...•.•••.•
+$ 272 b il .
+66 . 81
+$116 bill
+40.8~
ter-tax personal income
+$232 bill
+65.21
+101 bill
+40.61.
ter-tax personal income for
falDily of 4 ••••.•.•...••••
+$3,908
+50.31
+$1,488
+23.71
r capita disposable personal
income (1958 prices)O •••• l f d .
+$603
+32.210
+$171
+9.9%
ter-tax corporate profits
•
+$26 bill
+107.8%
+$6 bill
+28.11
•••••••••••••
"'2.0 bill
+15.61
-$1.4 bill
-10.4t
t farm income
•••
~er of recessions • • • • • • • •
brrent prices except as indica ted.
.one
Three
TREASURY DEPARTMENT
WASHINGTON, D.C.
SBEI1J.SE 6: 30 P.K.,
!!I' SepteJlber23, 1968.
BESULi'S 01' 'lm:ASURI' S WDlLY BILL OPJI:RIm
1be '!reasury Department 8DDoUDced that the tenders tor tvo aeriea ot TreaSUl7
Uls, one leries to be an additional issue ot the billa elated JUDe 27, 1968, aDd the
Ittr series to be elated Septe.mer 26, 1968, which were ottered OIl September 18, 1968, were
~ne4 at the Pe4eral Reaerve Banks today. ~DC1ers vere ilrYitecl tor $1,600,000,000,
r~Nabouts, ot 91-~ bills BDd tor $1,100,000,000, or 1bereabouts, ot 182-day bills.
~ details ot the two series are a8 tol1ows:
lIZ or ACCEPBD
1Ef!!IVE JIm:
91-day !reasur,y bills
_turiy Decellber 26.. 1968
Approx. Equiy.
Price
Almual Bate
11gb
98.703
S.131$
Low
Average
98.696
98.698
5.151j
7St/. ot
ot
~
)II,
the 8JIOWlt
the 8IIOUDt
5.15~
182-4&7 Treaaury bills
atur1"A: March 21.1 1969
Approx. Equiv.
·••
Price
97.!62
•
·
!I
91.348
91.356
Almual :Rate
5.21~
5.2~~
5.23~
!I
ot 91-day billa bid tor at tlae low price was acceptecl
ot 182-clay bills bid tor at the low price _8 accepted
BIiDERS APPLIED FOB ABO ACCIP'.SD BY :rKDDAL RESElM: DISmICTS:
SaD lraDc1sco
AEEliecl For
Acce~ted
$ 36,878,000 $0,878,000
879,980,000
1,84:3,313,000
15,019,000
32,874:,000
30, 454r,ooo
35,54:1,000
13,161,000
23,699,000
31,334.,000
52,359,000
399,938,000
4r24:,4r39,000
4:0,331,000
59,231,000
23, 64rl, 000
34r,201,000
28,099,000
54:,110,000
15,309,000
25,309,000
104r,113,000
218,64:0,000
mTALS
$2,841,200,000 $1,602,389,000
District
!olton
lev York
Phil.ade lpb1a
~evelaDd
BicbraoDd
Atlanta
~cago
St. LOUis
_apolis
lanaiS City
ttllas
AEIi!lied
•
)'or
i,SIz,MO
1,sn, 089, 000
14:,310,000
45,667,000
13,4rll,000
30,129,000
136,331,000
3',34:1,000
21, 4r23, 000
18,005,000
19,326,000
120, 554r, 000
!I $2,029,800,000
AcceEted
$
1,512,000
851,54:1,000
3,656,000
29,521,000
1,4rll,000
19,688,000
85,523,000
11,861,000
11,353,000
14:,4r92,000
9,326,000
4.5,896,000
$1,100,816,000 ~
Ineludes $309,389,000 nODcc.petitive teD4era accepted at tile anrage price ot 98.698
$128,221,000 nODca.pet1tive teDders accepted at the aYeraae pr1ce ot 97.356
'lbeae rates are on a ba.Dk. cliscount beais. !be equiYlLlent COUpOD issue yields are
5.2~ tor the 91-da;y b111s, and 5.4.5~ tor the 182-day billa.
I~ludes
F-1355
TREASURY DEPARTMENT
Washington
FOR Po Mo RELEASE
TUESDAY, SEPTEMBER 24, 1968
SPEECH OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE SIXTH INTERNATIONAL CONFERENCE
OF THE FORGING INDUSTRY ASSOCIATION
WASHINGTON HILTON HOTEL, WASHINGTON, D. C.,
SEPTEMBER 24, 1968, 9:15 A.M., EDT
The financial statesmen at Bretton Woods served us wello
The foundation they laid, on which has been built an everincreasing degree of international policy coordination in
economic and financial affairs, has helped make the past
twenty years a period of unprecedented prosperity and
development in the free world.
Next week the Ministers of Finance and Central Bank
Governors of the 111 member countries will be in Washington
to attend the Annual Meetin~of the World Bank and the
International Monetary Fund
Here ways and means of further
improving the structure of international financial
cooperation will be on the agenda for public comment and
informed discussion.
0
Gold and its relationship to the international monetary
system is part of that structute and I thought it might be
useful to explore that subject with you today.
The association of gold with recurrent crises in the
international monetary system together with its proven
inadequacy as a reliable source of international liquidity in
a growing world economy have made desirable a public
reexamination of the role of gold and the international
monetary system. Gold has had a long and honorable service
as a means of settling international payments. But the
current reexamination of the role of gold can be viewed as a
contemporary echo of passions out of the past; to paraphrase
William Jennings Bryan, the issue today is to make sure that
the international monetary system is not crucified on a cross of
gold o
F- 1356
- 2 The need to make gold the servant and not the master
of our economic destiny is part of the continuing effort to
strengthen the international monetary system. It is, and
can only be, met by putting international policy coordination
on a sufficiently consistent, persistent and flexible basis
to avoid the disruptions and minimize the risks of the
unpredictable that have characterized past crises. This
is a never-ending effort.
The adjustment of international financial cooperation
to a moving tide of events and developments is solidly
based on the common recognition by·the financial authorities
of the overwhelming majority of countries in the free world
that the international monetary system rests on four pillars:
A strong and well-balanced U.S. economy
with a strong dollar which holds its
purchasing power and can be profitably
invested in the U.S. money or capital markets
and, therefore, can be held as a safe
international reserve or as a safe and useable
means for making international commercial
payments.
A fixed $35 per ounce official price of
gold and a dollar that is convertible into
gold at that price by monetary authorities.
Convertibility of other currencies into
dollars at stated rates of exchange.
Adequate international reserves and credit
facilities to support the system.
The United States Government is solidly committed to
these principles. It is a solid~mitment because these
principles have had long-standing bipartisan support in the
United States. This bipartisan support has been essential to
the strength and position of the United States in the
international financial arena.
The bipartisan character of our position in international
financial affairs can be graphically illustrated by specific
actions over the past ten years.
- 3 -
The decisive vote, with majorities from both parties
in both Houses, under the responsible leadership of both
parties in both Houses, to enact the recent Revenue and
Expenditure Control Act of 1968, is a current example. This
action to increase taxes and cut projected public expenditures
both unpopular measures in an election year -- was designed
to keep the U.S. economy strong and well-balanced and to
strengthen the dollar at home and abroad.
In his Message to the nation last New Year's Day
President Johnson emphasized that the need for action to bring
our balance of payments to, or close to, equilibrium in the
year ahead "is a national and international responsibility of
the highest priority." This statement was paralleled by the
recent Republican Platform dommitment "that the balance of
payments crisis must be ended and the international position
of the dollar strengthened."
The policy to maintain the existing official price of
gold and convertibility of gold into dollars at that price
has been the subject of public commitments by three
administrations -- Eisenhower, Kennedy and Johnsono
When,in the last year of the Eisenhower Administration,
the flurry in the London gold market in October 1960 raised
questions about the U.S. position on the official price of
gold, the Treasury Department, on October 20, 1960, issued
the following statement:
"The United States will continue its policy
of buying gold from and selling gold to foreign
governments, central banks and under certain
conditions, international institutions, for the
settlement of international balances or for
other legitimate monetary purposes, at the
established rate of $35 per fine troy ounce,
exclusive of handling charges.
"As Treasury Secretary Anderson has stated
many times in the past, it is our firm position to
maintain the dollar at its existing gold parity!""
To close ranks with the Republican Administration on this
question, on October 30, 1960, Senator John F. Kennedy, then
the Democratic candidate for the Presidency, issued a
statement saying "We pledge ourselves to maintain the current
value of the dollar. If elected President, I shall not
- 4 devalue the dollar from the present rate. Rather, I shall
defend its present value and its soundness 0"
As President, John Fa Kennedy repeated that commitment
and devoted his second Message to the Congress to measures
designed to make good on that commitment.
In February 1965, shortly after his inauguration,
President Johnson said in his Balance of Payments Message,
"The dollar is and will remain as good as gold fully·
convertible at $35 per ounce. II
In his Balance of Payments Message on New Year's Day
last January, President Johnson repeated "The dollar will
remain convertible into gold at $35 an ounce , and our full
gold stock will back that commitment." Congress acted to
remove the remaining statutory restriction on the use of U.S.
monetary gold for that purpose in March.
It is noteworthy that legislation to authorize additional
international credit facilities through quota increases in
the International Monetary Fund in 1960 and 1965 and authorizing
participation in the General Arrangements to Borrow in 1962
have been approved with strong bipartisan support in both
Houses of the Congress.
But perhaps the most dramatic illustration of bipartisan
support for international financial cooperation was the action
of the Congress last May in the field of reserve assets.
President Johnson requested that the Congress authorize U.S.
participation in a program to build up international reserves
through multilateral arrangements looking to the deliberate
creation of Special Drawing Rights in the International Monetary
Fund as a supplement to gold and the reserve currencies.
This type of program has had solid bipartisan backing
since 1965 in the Joint Economic Committee of the Congress.
This action of the Congress providing U.S. approval and support
of an amendment to the Articles of Agreement of the International
Monetary Fund was passed by a vote of 236 to 16 in the
House of Representatives, and by a voice vote in the Senate
after overwhelming bipartisan support from the House Banking
and Currency Committee and the Senate Foreign Relations
Committee.
- 5 II
I have set out the record on the position of the
United States because there is a tendency in some foreign
quarters to misunderstand, misstate, or underestimate it.
Because of its key role in the system, the United
States has special responsibility, but it does not seek to
dictate. In dealing with the problem of gold and the
international monetary system, as in dealing with all problems
relating to the international monetary system, the United
States is dedicated to the principle of multilateral decisionmaking rather than unilateral action. Our objective is to
maintain and improve an international monetary system that
will better serve its fundamental and only valid purpose
to foster the continued growth of trade and the movement of
capital and people among nations to the benefit of allo
Our gold policies must contribute to, and be consistent
with, this purpose
This is the test by which they should be
judged o
0
In these terms, I would like to outline the central
points underlying the policies of the United States on gold o
First, the United States believes that gold has, and
will continue to have, an important role in the system.
Existing gold reserves are about $40 billion. This is more
than half of total international reserves. The loss of these
monetary reserves or a substantial diminution in their value
as monetary reserves would be undesirable. Their relative
proportion in world reserves will diminish over time, but
they will continue to be a key element in international liquidity
and in the operation of the international monetary system.
Second, the United States believes that the maintenance
of the existing official price of gold for monetary purposes
and the convertibility of the dollar into gold at that price
is the backbone of the monetary system; that to increase or
decrease the official price of gold would be a highly
destabilizing factor; that any change in the official price of
gold would result in gross inequities and would needlessly
endanger the international economic cooperation built up
over the post war period.
- 6 -
Third, the U. S. believes we can no longer rely on gold
production as a source of future additions to international
liquidity. The Special Drawing Rights facility under the IMF
is des igned to meet this need.
Fourth, the U. S. believes that neither gold, nor gold
markets, nor gold speculators should be permitted to unsettle
and interfere with international economic stability. Nor
should the international monetary system -- or the world
economy -- be placed at the mercy of arbitrary forces that would
result from sole or undue reliance on gold for monetary reserves.
We believe these points add up to a policy that safeguards
the legitimate interests of countries which hold substantial
amounts of gold in their monetary reserves as well as those who
do not. We do not believe it will cause any difficulty for
the gold-producing countries -- nor any change in their position
compared with what it has been for the past thirty years. But
the system cannot accommodate the desire of gold producers,
private gold holders and hoarders, gold speculators, or investors
in gold stocks, for an increase in the monetary price of
gold. Their desire for windfall profits is understandable but
it has nothing to do with the principles of international
financial management and it is inconsistent with the stability
of the international monetary system.
Contrary to some assertions, the United States is waging
no war with gold producers. !be commodity they produce is a
useful commodity and they are entitled to the best price they
can get for it. But I must point out that this also has nothing
to do with international financial management or the
international monetary system.
I recognize that an active and worldwide gold lobby
exists which seeks to promote the view that an increase in the
official price of gold is necessary and inevitable. I will go
into the subject of the price of gold on its merits, later on.
At this point I want only to emphasize that the existence
of this self-interested propaganda is a factor in the equation
that must be kept in mind.
- 7 -
The profits could be very high:
for the major producing countries,
for business and private banking institutions
dealing in gold,
for the stockholders of gold mLnLng
companies, where they are privately owned.
for governments, as in the U.S.S.R., where
gold production and sale is handled by a
state organization, and
for those who have hoarded or speculated in
gold on the hope or expectation of a rise in
the official priceo
In markets which are highly sensitive to rumor and
vulnerable to manipulation it is of particular importance
that one recognize these factors of self-interest when they
are at work o
The public should be aware of these influences, as are
the offica1s who deal with these problems. The public should
have the knowledge, awareness and skepticism in appraising
analyses and proposals dealing with gold and the monetary system
to separate propaganda and self-interest from the over-riding
international public interest in a viable international monetary
system.
Private gold interests would certainly gain heavily
from an increase in the monetary price of gold o It is our
conviction that the World Economy and international monetary
system would loseG In this basic point -- as in the other
central points of our position on gold -- we share a common
view with almost all the other free world countries~
III
The results of two very important monetary meetings
which took place in March of this year make clear the almost
unanimous consensus of major industrial nations on this issue o
- 8 -
I refer to the March 17 meeting in Washington of
the heads of the Central Banks of the gold pool countries
and the March 30 meeting in Stockholm of the Finance
Ministers and Central Bank Governors of the leading financial
nations known as the Group of Ten.
A key premise of both the Washington Communique
establishing the two-tier gold system and the adoption
of the Special Drawing Right proposal at Stockholm was
that the monetary price of gold would remain unchanged.
This premise, abundantly evident, has still apparently not
been understood or accepted by some.
The only reasonable justification that could
be claimed for an increase in the monetary price of gold
stems from the need for an increasing supply
of international liquidity. This argument, however,
depended upon the assumption that no preferable
way could be devised to provide for the needed increase
in world monetary reserves.
The Washington and Stockholm meetings
demonstrated that this assumption was not valid~
The Washington Communique of the Central Bank
Governors stated that "as the existing stock of
monetary gold is sufficient in view of the
prospective establishment of the facility for
Special Drawing Rights, they no longer feel it
necessary to buy gold from the market."
- 9 -
Agreement on the creation of the Special Drawing Rights
followed swiftly at Stockholm. Moreover, the Stockholm Communique was
explicit in its reference to maintaining the $35 monetary
price for gold -- paragraph 4 stated, "The Ministers and
Governors reaffirmed their determination to cooperate in the
maintenance of exchange stability and orderly exchange
arrangements in the world based on the present official price
of gold." All countries represented, save one, subscribed to
that paragraph.
Agreement on this essential point by the Central Bank
representatives of the gold pool nations meeting in Washington,
the subsequent expressions of support by most of the rest of
the Free World, the agreement among government representatives
of the Group of Ten countries in Stockholm, and the expected
ratification of the Special Drawing Rights plan by the member
nations of the IMF demonstrate the support of an overwhelming
majority of the nations of the free world for two fundamental
operating principles:
the official price of gold must remain at $35
an ounce; and
the new Special Drawing Rights facility (and
not new gold production nor an increase in the
price of gold) will provide the necessary regular
additions to international liquidity.
This agreement represents a fundamental decision on the
future of international monetary policy building strongly on
the foundation of the Bretton Woods Charter. It provides
dramatic evidence of the strength of international economic
cooperation which has developed so swiftly and pervasively
during the 1960' s.
Now let me review briefly the events and emerging forces
which led to these agreementso
Prior to the 1960's, the private gold markets operated
without intervention by monetary authorities. In the early
post-war period of the late '40s and early '50s the price
fluctuated widely, generally well above the monetary price.
- 10 -
This spread was a manifestation of the lack of confidence in
currencies in some areas of the world. There was no doubt,
however, about the strength of the dollar or the 35 to I
relationship between it and an ounce of gold.
As greater stability was attained and more newly-produced
gold became available to the market, the market price
stabilized near the monetary price and fluctuated narrowly
both above and below the $35 monetary price until the fall of
1960 when there was a brief but intense speculative outburst
in the private gold markets, including the principal one in
London.
This attack was quickly curbed. Actions, including the
supplying of gold from the official monetary reserve of the
United States through the Bank of England to the private
market, kept the price in line with the official price.
This single-handed undertaking by the United States in
late 1960 to keep the two prices in line was extended in the
fall of 1961 into a multilateral arrangement which became
known as the gold pool.
The gold pool arrangment, which encompassed the United
States and the seven major industrial countries of Europe,
was one of the first of many cooperative multilateral
arrangements to be worked out dt!ring the 1960's to deal with
speculative attacks on the markets involving gold and currencies.
The pool continued to operate in the markets from late 1961
until mid-March of 1968. Until the devaluation of sterling in
November of 1967, it successfully carried out its objectives
of smoothing out market movements and providing an orderly way
for residual supplies of newly-mined gold to enter the monetary
system o
During the years 1963 through 1965, $1.3 billion in gold
was taken off the market as a result of gold pool operations.
Without these purchases by the pool the private market price
would have undoubtedly fallen below the $35 monetary price.
Even with this offtake from the market, however, the average
addition of gold to monetary reserves in the six years from the
inception of the pool in the fall of 1961 up to November 1967,
amounted to only about $150 million annually. Thus gold in this
- 11 -
decade has not been a significant source of world reserves -- even
before the disturbances arising from sterling devaluation.
The sterling devaluation at mid-November sent shock waves
across the international monetary system. Despite the fact that
few countries followed the U. K. action, there were massive
currency flows across the exchanges and a speculative outbreak
in the private gold markets
0
These developments were not unexpected, and monetary
authorities were prepared to deal with them. Central bank
action quickly brought reasonable stability to the foreign
exchange markets and the currency flows moderated. The two
big waves of speculative gold buying in November and December
were met by determined intervention in the London market by
the gold pool countries but at a cost of about $1.5 billion in
gold from monetary reserves.
This was the classic method of meeting speculative attack.
The authorities were willing to meet this cost in order to
achieve time to set firmly in place the already well-developed
but not yet fully agreed plan for a new reserve asset -- the
Special Drawing Right. The countries of the world had worked
long and hard to produce such a plan, which would free the
world's monetary system from excessive reliance on new gold
supplies or on balance of payments deficits of reserve currency
countries for needed additions LO international reserves. The
new plan -- currently in process of legislative ratification -provides for controlled reserve asset creation by international
decision.
Dependence upon gold as a source of new reserve growth was
demonstrably uncertain and inadequate because of supply
limitations. Obviously, speculative waves such as those of
November and December intensified the uncertainty and actually
led to reductions in world reserves o The United States balance
of payments deficits were regarded as undesirable both by the
U. S. and the rest of the world -- their elimination, or even
sharp reduction, would cut back needed reserve growth
Thus,
the search for a new reserve asset had begun some years back,
and agreement on this new plan was close at hand.
0
After announcement of the new Uo S. balance of payments
program on January 1, 1968, speculative buying of gold moderated
- 12 -
considerably. It looked, for a time, as though the classic
method had worked again and there would be time for a smooth
transition to the new system. But, in March, a new and even
bigger gold buying wave was set off.
The authorities set out to meet this one with the same
~proach.
Another $1.5 billion in monetary reserves of gold
was used. But, as the speculative fever grew, it became
evident that the Pool's actions were not restoring stability
but actually seemed to be feeding the fever. And, by this time,
the new reserve plan was very close to agreement. So a new
course of action could be and was taken. The monetary
authorities decided to insulate the monetary system from
speculative activity and the private market.
As I have noted, they reaffirmed their determination to
maintain the established official price of gold and established
machinery that could protect monetary reserves while letting
the commodity market for gold go its own way. They could take
this action with some equanmity because of the now clearly
demonstrated inadequacy of gold as a stable source of reserve
growth. Also, from a pure market point of view, it was
apparent that the large speculative purchases of gold since
mid-November, 1967, constituted an overhang of supply for the
private market which probably would moderate private market
price movements.
The transition at mid-March took place with remarkable
smoothness, considering the tense atmosphere that had preceded
it, the abrupt change in conditions, and the inevitable doubts
and uncertainities about anything new or unknown in the international monetary field. The new system has worked and is
working well.
What was far more remarkable was the belief that continued
to be held, perhaps because of wishful thinking by those who
wanted a gold price rise, that the world's monetary authorities
faced with crisis -- would raise the price of gold and, thereby,
perpetuate their dependence upon that asset when they had worked
so long and hard to free themselves from that dependence.
IV
Since the idea of a price increase, despite near-unanimity
against it by monetary authorities, appears to die hard it may
- 13 -
be worthwhile to review the underlying arguments on their
purported merits
Here I shall attempt only a brief review.
0
William McChesney Martin, Chairman of the Board of
Governors of the Federal Reserve System, earlier this year
made an excellent analysis of the issues. I highly recommend
to you his address of February 14 entitled liThe Price of Gold
Is Not the Problem. II He fully developed a position which I
have fully supported as to why a price increase would be neither
necessary nor desirable o
I, admittedly, make a poor proponent of the case for an
increase. I can see the need for regular and adequate increase
in monetary reserves and the undesirability of relying on a
large expansion of reserve currency holdings for this purpose o
I can appreciate the fact that past experience shows that the
monetary system will not receive adequate increases in gold
reserves at the current price o If we did not have the good
sense and the ability to act together in our common self-interest,
perhaps we could be forced to consider an increase in the gold
price as a choice among evils.
But, the fact is the free world has already demonstrated
both the imagination and the will to arrive at a rational and
constructive solution to the liquidity problem which does not
involve the difficulties and inequities that have marked previous
experiences with gold.
Those who advocate an increased price sometimes profess
to see an intrinsic value to gold that is lacking in other
reserves.
Nothing would, however, more clearly disprove the claim
that gold has special enduring qualities than to change its
price.. Who is to determine where and by how much the price
is to be changed? Is it to be changed at long intervals and
by large amounts, or more frequently and by small amounts?
The answer must be that the decision would be a man-made
determination devoid of relationship to the intrinsic value of
gold. Gold as an international reserve"has man-made value but
the adjustment of its supply to the needs of the system is
complicated and distorted by the vagaries of gold production,
- 14 -
by the forces and fevers of speculation and by its use as a
commodity. As an international reserve, it is no less man
made than Special Drawing Rights -- but these can be closely
adjusted to the needs of the system by international analysis
and decision.
A doubling of the price, as is frequently suggested,
would add over $40 billion of new reserves to the syst~m at
one stroke. This would be an inflationary action which the
advocates think can somehow be managed even though at the same
time most of the same advocates profess great fear of the
inflationary potential of a small and regular annual increase
of liquidity -- say $2 billion or so a year -- through the
creation of Special Drawing Rights.
If smaller increases are attempted they must obviously be
much more frequent and thus keep gold and exchange markets in
a constant state of agitation -- at the cost of inhibiting the
international flow of goods and capital.
Under either of these circumstances uncertainty could
prevail
Dependence on gold for liquidity increases invites
speculation on the few remaining variables -- its price, the
ability of technology to discover and extract gold,and the
vagaries of Russian sales in the West o The international
monetary system would take on the character of a gambling casino.
0
The idea of the impartiality of supplying liquidity through
changes in the gold price is equally questionable o It would
arbitrarily benefit countries who have already maximized the
gold component of their reserves and the large gold-producing
countries -- without any regard for the stability needs of
the monetary system o It would put a premium on the maximization
of gold holdings by all countries.
Some gold producers are fond of suggesting that the fixed
price of gold for monetary use has held down the price of their
commodity.. The fact is,
however, that if one separates out
the commodity supply and demand factors, the newly-produced gold
supply even today, and without considering the hoards in either
monetary or private hands, well exceeds the legitimate commodity
demand
0
- 15 -
v
This fact,plus the agreement to provide international
liquidity through the creation of Special Drawing Rights
made it possible and timely to separate the use of gold
as a monetary reserve from its use as a commodity.
Gold may now circulate in two separate and distinct
channels. Its use as a reserve will continue as will the
purchase and sale of existing gold reserves among countries
and international monetary institutions. The existing
stock of gold reserves will be preserved and not further
diminished by its use as a commodity or for private
speculation or hoarding purposes.
World reserves may, however, grow -- and in a rational
and controlled way best designed to meet the global needs
of world trade and payments. This growth will be primarily
provided over time by the issuance of Special Drawing Rights
on an equitable basis among the members of the International
Monetary Fund.
What this means is that gold will continue to play
an important role as a reserve asset for the foreseeable
future. It s role over time will, however, diminish as
Special Drawing Rights provide the bulk of new liquidity.
The other gold market -- ~'the commodity market" -will function as any other commodity market. The price may
exceed or fall below the monetary price without official
intervent ion
0
I shall not join those who predict at what price level
the private market is most likely to trade. I have already
noted that if the purely commodity demand for gold (that is,
its present demand for industrial use, jewelry, dentistry,
etc o ) could be isolated it would be well overshadowed by
supply. New production is estimated at about $104 billion
annually outside of Russia and other Communist nations
which make no statistics availableo Commodity demand, on
the other hand, is generally estimated at about three-quarters
of a billion. These data would indicate downward pressure
on price but they are not the only factors entering into
the private market. The other factors are the demand for
hoarding and the demand for speculationo
- 16 In distinguishing the hoarder from the speculator I
define the former as one who is not primarily concerned
with the world-wide price of gold or the monetary price
in terms of the dollar but who traditionally turns
to gold as store of value and sometimes as protection
against political and economic uncertainties that
affect the currencies of his own country. This
demand is more difficult to estimate and merges with
the other categories of demand -- on one hand,
with the use of jewelry in some areas and, on the
other, with the speculative demand. Knowledgeable
but uncertain estimates place it at around one-quarter
billion dollars.
Even at the upper range of estimates, industrial
and the hoarding demand together are well within the
amount of new production, valued at the $35 price.
We are thus left with the speculative supply
or demand as a determining factor in the market.
And, it should be noted that particularly at the
present time the speculative factor may be a source
of supply as well as demand. This results from several
related causes. One is the fact that speculative
holdings built up during the buying spree following
sterling devaluation are still very large.
The workability of the two-tier system has dashed
the speculator's hopes for a c~ange in the
monetary price of gold and makes his holding more
volatileo Many speculators may find it too
costly to continue to hold a non-earning asset
such as gold and recognize they have fought a losing
battle. Furthermore, they are no longer promised
a floor on the market and must consider the risk
of loss
even with a market price at or close
to $35 per ounce
0
It is neither necessary nor desirable to
the functioning of the monetary system that this element
of risk to the speculator he removed o
- 17 VI
As with any innovation, and particularly
innovations in the monetary field where a cautious
outlook properly prevails -- some time is needed
for a full adjustment to new realities.
During this period of adjustment,we believe, as
do almost all other countries, that it would be preferable
from the standpoint of the international monetary
system for the commodity price of gold not to deviate
too far from the monetary price -- either on the upside or
the downside.
A sharp drop in price below $35 per ounce in the
private market could cause concern about the value of gold
held in existing monetary reserves.
The international monetary system has a
vital stake in maintaining the value of gold in
existing monetary reserves at $35 an ounce -neither less nor more. This provides assurance both
to the countries who hold a large proportion of
their reserves in gold and to those who hold a
small proportion of their reserves in gold. It
is clearly within the capabilities of the system to
provide such as assurance, and-the United States
believes it is important to the stability of the
system that this be done. But for gold producing
countries that assurance must run only to their
monetary reserves and only after they have
disposed of their newly mined gold, and any price
stability assurance that is provided should not apply
to newly mined gold or that held in private hands.
In giving assurance on existing monetary
reserves we will not accede to any proposal that puts
a floor ~nder the private market, thereby assuring the
speculators who have built up their hoards of gold,that
they may unload it at no less than the monetary pr~ceo
- 18 -
A sharp increase in the market price for gold could also
be destablizing. This could occur if we allow producers or
speculators to "play" the market to the detriment of the system.
To provide an outlet for newly-mined gold into the monetary
stock at the sole discretion of producers would allow precisely
such a game to be played and played by those who have expressed
publicly avowed desires of bringing about a rise in the monetary
price of gold. To bow to these interests would be to confuse
the needs and obj ectives of a commodity producer and a corrunodity
speculator with the needs and objectives of the international
~netary system and the world economy.
This would indeed be
anomalous -- and it would have unfortunate and unnecessary
consequences for us all.
The prospect is that price stability will be maintained
if the commodity market for gold is permitted to function
normally. Therefore:
newly-produced gold supplies should not be artificially
withheld from the market,
marketing should be orderly.
In short the market should not be artificially manipulated
to invite speculation and higher prices clearly designed to put
pressure on the monetary price ... - and thus on the international
monetary system itself.
Given the unique position of gold as both a commodity and
a monetary instrument, special problems could still arise in
the two-tier system. It should be possible to devise solutions
for such problems -- provided such solutions are designed to
strengthen and do not threaten to weaken the two-tier system
for gold and the monetary system as a whole.
VII
In conclusion let us take a brief look at the longer-run
view of the future as it pertains to gold.
I do not believe that the creation of the Special Drawing
Rights facility and the two-tier gold system have solved all
future problemso Some they are not designed to meet -- others
- 19 -
noW unforeseen can and probably will arise. For instance these
improvements in the system do not deal with, or remove the
necessity for, the United States to correct its balance of
payments. While they may facilitate or encourage the adjustment
process, they do not alter the need for all countries -- both
those in deficit and those in surplus -- to deal with their
payments problems.
In international finance, as in other human endeavors,
progress brings new problems in an ever evolving world. We
cannot rest on past triumphs. I feel now that the stage has
been set -- a beginning made -- for a new era of development
in the monetary field. New mechanisms of international cooperation have been set in place and tested. Sane, rational decision
making among nations has replaced the self-defeating nationalism
of earlier eras.
Our actions of the past year alleviate some very important
and fundamental problems that have plagued the system with
growing intensity in the 1960s
0
Provision has now been made for an orderly and equitable
addition to world reserves on a global bas is. We should
therefore, no longer be confronted with the threat of a
liquidity squeeze which endangers the growth of world trade
and investment. The members of the international monetary
community now will be able to a4d to world reserves by their
deliberate action in accordance with liquidity needs.
We have accomplished this through the arrangements for
the creation of the Special Drawing Rights by a means which
removes any possible need for an increase in the price of gold
with all of its short and long-term destabilizing consequences.
As a resul t of the arrangements for the SDRs and the two-tier
gold system methods have now been devised which will divorce
gold as a commodity from gold as a monetary reserve. As time
passes, we will be increasingly indifferent to the price of
gold on the commodity market for it is indeed irrelevant to
the operation of the system o
Gold will play a continuing and important role in the
monetary system but the caprices of production and private
demand should no longer bring unwelcome and unwarranted pressure
on the system itself.
- 20 -
The monetary importance of gold will gradually decline as
it forms ales ser percentage of international reserves. But,
with over $40 billion now in monetary hands, it will very
likely be a major element in reserves for much further in the
future than I would attempt to foresee o
All of our problems are not met but a more stable foundation
has been laid. The United States takes some pride in having
been a partner with other nations of the Free World in bringing
about these improvements in the world's monetary system.
000
TREASURY DEPARTMENT
WASHINGTON. D.C.
PJR RELEASE 6::30 P.M..,
~sdal, September 24, 1968.
-
RESULTS OF TREASURY'S MOImLY BILL OFFERDQ
1be 'freasury Department announced that the tenders tor two series ot Treasury
bills, one series to be an additional issue ot tbe bills dated June :30, 1968, and the
other series to be dated September 50, 1968, which were ottered OD September 18, 1968,
were opeDed at the Federal Reserve Banks today. Tenders were iDYited tor $500,000,000,
or thereabouts, ot 275-day bills and tor $1,000,000,000, or thereabouts, ot 365-day
bills. The details ot the two series are as follows:
275-day ~easury bills
maturias JUDe :3°2 1969
Approx. Equ1v.
Price
Annual Rate
96.083 !I
5.16~
96.04:6
5.214~
96.055
5.20~
PAIGE OF ACCEPTED
~OO'ETITIVE
BIDS:
High
Low
Average
565-day ~asury bills
maturing SeEteJlber :30, 1969
Approx. Equiv •
Price
Amwal18te
·
Y ·
S.08SJ
94.B"
5.12~
5.10~
94.809
94.821
11
s/ Excepting 1 tender of $20,000
- 7f1/, ot the amount ot 275-day bills bid for at the low price vas accepted
5~ of the amount of 565-day bills bid tor at the low price was accepted
1'J'llL mmERS APPLIED FOR AND ACCEPl!ED BY FEDERAL RESERVE DISTRICTS:
District
Boston
lev York
Philad.e lphia
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Applied For
Accel!ted
6,801,000
$ 11,501,000
537,427,000
96:3,427,000
478,000
5,578,000
1,5,",000
9,54:4,000
2,369,000
4,919,000
2,993,000
8,453,000
88,814,000
166,814,000
10,071,000
20,511,000
8,845,000
16,145,000
5,600,000
5,270,000
1,095,000
11,0
@FedFRASER