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AUG 2 i. 1973'
O'anuary 2, 1973
■FOR IMMEDIATE RELEASE
TREASURY’S WEEKLY RILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
of'Treasury bills to the aggregate amount of $4,300,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing
of $4,103,330,000
January 11, 1973, in the amount
as follows: i
91-day bills (to maturity date) to be issued
January n ,
1973, in the amount
of $2,400,000,000, or thereabouts, representing an additional amount of bills
dated October
12 ,
1972,
and to mature
April 12, 1973
originally issued in the amount of $1,802,170,000,
(CUSIP No. 912793 QP4)
the additional and original
bills to be freely interchangeable.
182-day bills, for $1,900,000,000, or thereabouts, to be dated January 11, 1973,
and. to mature
July 12, 1973
(CUSIP No. 912793
RK4).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern Standard time, Monday, January
8,
1973.
Tenders will not be received at the Treasury Department, Washington.
| must be for a minimum of $10,000.
[ $5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for-
j warded in the special envelopes which will be supplied by Federal Reserve Banks
I or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers
K 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
OVER)
-
account.
2-
Tenders will be received without deposit from incorporated banks and
^ WAS
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of
2
percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only thos^H
submitting competitive tenders will be advised of the acceptance or rejection
thereof.
The Secretary of the Treasury expressly reserves the right to accept or I
reject any or all tenders, in whole or in part, and his action in any such respectH
shall be final.
Subject to these reservations, noncompetitive tenders for each
issue for $ 200,000 or less without stated price from any one bidder will be acceptll
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 January 11, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing January 11, 1973.
treatment.
■9
Cash and exchange tenders will receive equal
Cash adjustments will be made for differences between the par value of i
maturing bills accepted in exchange and the issue price of the new bills.
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 considered to accru I
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
1
for the 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.
Treasury Department Circular Wo. 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.
4
|fjl
M
Department of th e fR
W ASHINGTON. D C 20220
T E L E P H O N E W04-2041
JANUARY 5, 1973
FOR IMMEDIATE RELEASE
y
thosl
1
INDUSTRIAL PAYROLL SAVINGS COMMITTEE MEETS JANUARY 11
WITH SECRETARY OF THE TREASURY GEORGE P. SHULTZ
°r I
peci;I
h
cepti
for :
>
ury
ual
.e of
e
,ccru<
ex- ;
xy
.is
paid:
The 'U. S. Industrial Payroll Savings Committee, composed of
leading executives of American business and industry, will meet
in Washington on January 1 1 with Secretary of the Treasury George
P. Shultz and other top Treasury officials to acknowledge the con
tributions of the Committee in exceeding its 1972 campaign goal
by 13 percent and to plan the 1973 program.
William M. Batten, Chairman of the Board, J. C. Penney Co.,
Inc., New York, is to be installed as 1973 Committee Chairman.
succeeds Donald S. MacNaughton, Chairman and Chief Executive
Officer, the Prudential Insurance Co. of America, Newark, N. J.,
who will continue as a member of the Committee.
Members of the 1972 Committee -- representing 26 major in
dustries and 23 geographic areas of the country -- have achieved
113 percent of the year’s goal by enrolling 2,599,396 employees
as new Payroll Savers or as continuing savers increasing their
allotments. Within the companies headed by Committee members,
462,525 new savers were enrolled and 559,094 employees increased
their allotments, for a total of 1,021,619 -- 4 4 . 4 percent of the
national enrollment goal.
Paul A. Volcker, Under Secretary of the Treasury for Monetary
Affairs, will open the meeting in the Department of State Diplomatic
Functions Suite. Mr. MacNaughton will preside.
Lounti
.e
oOo
ssue,
S-92
January 4, 1973
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY BOND AUCTION
The Treasury has accepted all competitive tenders at
prices of 99.50 and higher received for its new 6-3/4% 2 0 year bonds auctioned today. As previously announced, the
price to be paid by ALL successful bidders is the lowest
price accepted. This price results in a yield of about 6.7970.
These accepted competitive tenders amount to $546 million
out of a total of $1 , 6 6 8 million competitive tenders received.
Thus far, an additional $72 million of non-competitive tenders
have been received. Additional non-competitive tenders timely
postmarked are expected to be received, bringing the final
total of competitive and non-competitive tenders accepted to
approximately $625 million.
oOo
1
Department of th e T R E A S U R Y
j/VA$HINGTON. D.C. 20220
T E L E P H O N E WQ4-2041
FOR IMMEDIATE RELEASE
January 5, 1973
TREASURY ISSUES COUNTERVAILING DUTY ORDER
AGAINST X-RADIAL STEEL BELTED TIRES BY
MICHELIN OF CANADA
The Treasury Department announced today the issuance of
a countervailing duty order upon imports of X-Radial Steel
Belted Tires produced by Michelin Tire Ltd., of Canada.
This action was taken under section 303 of the Tariff
Act of 1930 (19 U.S.C. 1303). Under this section, the
Secretary of the Treasury is required to assess an additional
duty equal to any "bounties or grants" paid or bestowed on
merchandise imported into the United States.
Subsidies to Michelin to support a newly established
plant in Canada include Federal-Provincial grants totaling
more than §23 million, a $50 million low interest rate loan
extended for plant construction and other purposes by the
Province of Nova Scotia, and reduced local property tax
assessments. Planning for the Michelin plant contemplated
tnat the substantial majority of the production be exported for
the United States market, and sucn exports have started. In
these circumstances, the subsidies to Michelin constitute
"bounties or grants" within the provisions ot section 303
requiring the Treasury to assess countervailing duties.
Tne countervailing duty, which relates the value of the
grants to the overall value of production, is estimated at
6 .6 % of the f.o.b. factory price for 1973. The actual rate
of the countervailing duty for 1973 and subsequent years
cannot be determined until Michelin*s production output for
each year is known. Assuming Michelin's production increases,
it is anticipated that the rate of the countervailing duty
will decline in future years.
(OVER)
2
-
Michelin's production facilities in Canada, which are
located in Nova Scotia, started production in December 1971.
The value of Michelin X^Radial Steel Belted Tires imported
from Canada totaled approximately $9 million for calendar
year 1972.
The Countervailing Duty Order will be published in the
Federal Register of January 8 , 1973, and will become effective
as of February 1Ö, 1973.
###
M Departm entoftheTREASURY
I m ÌNGTON, DC 20220
TELEPHONE WO4-204Ì
FOR IMMEDIATE RELEASE
January 5, 1973
WITHHOLDING OF APPRAISEMENT OF
STAINLESS STEEL WIRE RODS FROM FRANCE
The Treasury Department announced today the withholding
of appraisement of stainless steel wire rods from France
pending a determination as to whether it is being sold at
less than fair value within the meaning of the Antidumping
Act, 1921, as amended.
The decision will appear in the Federal Register of
January 8 , 1973.
Under the Antidumping Act, the Secretary of the Treasury
is required to withhold appraisement whenever he has reasonable
cause to believe or suspect that sales at less than fair value
may be taking place.
A final Treasury decision in this investigation will be
made within three months. Appraisement will be withheld for
a period not to exceed six months from the date of publication
of the "Withholding of Appraisement Notice" in the Federal
Register.
I
Under the Antidumping Act, a determination of sales in
the United States at less than fair value requires that the
case be referred to the Tariff Commission, which would consider
whether an American industry was being injured. Both sales
at less than fair value and injury must be shown to justify
a finding of dumping under the law. Upon a finding of dumping,
a special duty is assessed.
During the period of August 1971 through July 1972,
imports of stainless steel wire rods from France totaled
approximately $2.3 million.
n r>
nnnnn
INGTON. D C 20220
U H A I C U f f l X *>0X1
TT CE IL EC PD H
O N E W04-2041
”L l \ j
■
FOR IMMEDIATE RELEASE
January 8 , 1973
TREASURY ISSUES STUDY ON ADMINISTRATION
OF TAX RULES GOVERNING RELATED-COMPANY TRANSACTIONS
The Treasury Department today issued a study of the
administration of the Federal income tax rules governing
business transactions between U.S. companies and their
foreign subsidiaries. The study was made by Treasury
and the Internal Revenue Service.
IRS is authorized by Section 482 of the Internal
Revenue Code to re-allocate income or deductions arising
out of business transactions between related companies in
order to reflect more closely the charges that would have
been made between unrelated companies dealing with each
other at "arm's length". The most common re-allocations
made by IRS under Section 482 involve intercompany pricing
of goods sold by one company to a related company, inter
company service charges, and interest charges on the inter
company loan of funds.
In the study released today, Treasury and the IRS
analyzed 871 cases involving U.S. companies and foreign
subsidiaries in which the examining revenue agent considered
or made an adjustment in the allocation of income or
deductions between the companies that would have increased
the U.S. companies' income tax liability. The study
included those cases in which the revenue agents' examination
reports were completed in 1968 or 1969.
The study includes 10 tables of data and an analysis
of the most important information contained in them. It
provides data on the frequency and dollar amounts of the
various types of adjustments made by the agents, such as
in intercompany pricing and the intercompany loan of funds,
and on the methods used in making the adjustments. Also
included are statistics on the size of the U. S. taxpayers
involved. While the study includes statistics on the
percentage of adjustments agreed to by the taxpayer on
presentation of the agent's findings, the study does not
trace the subsequent disposition of cases which were not
agreed to at that stage.
(OVER)
S-93
2
Treasury and IRS began the study in 1970 to determine
whether clarifying changes should be made in the inter
company pricing regulations. The Report of the Presidents
Task Force on Business Taxation, published in September 1970,
indicated that many taxpayers favored clarifying changes.
Treasury and IRS subsequently broadened the study to include
other cases in which the Section 482 regulations applied.
U. S. TREASURY DEPARTMENT
Summary Study of International
Cases Involving Section 482 of the
Internal Revenue Code
January, 1973
/
I
Purpose of Study
The purpose of this study was to obtain data concern
ing the administration by the Internal Revenue Service of
regulations under section 482 of the Internal Revenue
Code, as applied to international transactions and arrange
ments.
Under section 482 the Secretary or his delegate
may distribute, apportion, or allocate gross income,
deductions, credits, or allowances between or among
organizations, trades or businesses which are owned or
controlled directly or indirectly by the same interests,
in order to prevent the evasion of taxes or clearly to
reflect income of any such organizations, trades
■,
or
businesses.
Scope of Study
Included in this study were all international cases
in which the examining agent considered making one or more
section 482 adjustments and in which the revenue agent's
report of examination was completed in calendar year 1968
or calendar year 196#.
The data contained in this study
are based entirely on the revenue agent's report of
examination in each case.
Information concerning the
disposition of each case after the filing of the revenue
agent's report was not examined.
2
Compilation of Data
l|
a
total of 871 international cases were identified
in which examining agents considered making one or more
section 482 adjustments.
Where a taxpayer's returns were
audited for more than one year, or where an entity related
to the U. S. taxpayer also filed a U.S. tax return, in
general all returns were treated as one case.
2.
The 871 cases in which section 482 adjustments were
considered were first analyzed to determine in which cases
one or more section 482 adjustments were made, and in which
cases no adjustments were made (Table 1).
All section 482
adjustments that the examining agents considered making in
the 871 cases were then characterized as "potential" adjustments
and were broken down into categories showing the various
types of adjustments that were considered in the cases, and
to what extent the various types of potential adjustments
considered were actually made by the agents—^ (Table:2).
The study then made a detailed breakdown of those adjustments
1/ An adjustment was treated as having been "made" for purposes
of this study if it was written up in the revenue agent's report
of examination, even though technically an adjustment is not
"made^in an agent's report but only recommended. An adjustment
that is recommended in the report filed by an agent is made at
that point only if it is agreed to by the taxpayer. An adjust
ment that is recommended by an agent and not agreed to by
the taxpayer at that point is not actually "made" until a
later stage in the case.
<7
3
6
that were actually made in the cases by the examining agents
(Tables 4, 5, 6 , 8 , 9, and 10).
Data were then compiled
showing the effect in the cases of participation by an
International Examiner (Table 7).
Finally, data were compiled
where possible showing the size of the taxpayer in each case,
without regard to the types of adjustments that were con
sidered in the cases (Table 3).
3.
Where a transaction involving a U. S. taxpayer
and many foreign subsidiaries was concerned, in general
all potential adjustments were treated as one potential
adjustment.
For example, where the agent considered
allocating among many foreign subsidiaries a particular
expense claimed by the U.S. taxpayer, all potential
adjustments were treated as one potential adjustment for
purposes of the study.
Similarly, where the agent con
sidered making adjustments affecting a number of separate
but similar transactions between the U. S. taxpayer and
many foreign subsidiaries (such as a pricing adjustment
where the U. S. taxpayer had sold identical or similar
products to a number of different foreign subsidiaries),
all potential adjustments were treated as one adjustment.
4.
Where the study file did not contain sufficient
information to determine the exact reason that an adjustment
was made or not made, no effort was made to secure clarifying
4
information due to the cost and time that would have been
required (it is noted that only the international issues treated
in each examination report were examined in the study).
Such
adjustments are reported under the heading "Not Clear" in
Tables 9 and 10, and "Unknown" in Tables 1, 2, 4, 5, 6 , and
7.
Similarly, where information concerning the size of the
U. S. taxpayer was not readily available, the taxpayer was
included under the heading "No Category" in Table 3.
Study and Data Compilation Highlights
Adjustments were actually made in slightly more than
half of the 871 cases in which one or more adjustments involving
section 482 were considered by the examining agent (458 cases
out of 871; see Table 1).
Similarly, out of a total of 1,706
potential adjustments that were considered in the 871 cases,
slightly more than half (886 adjustments) were actually made
(Table 2).
The aggregate dollar amount of all the 886 adjust
ments made totaled more than $662 million (Table 4).
1.
Frequency of Adjustments Made (Tables 1 and 2)
Among the 1,706 potential adjustments that were considered,
a larger number of pricing adjustments were considered than any
other type of potential adjustment (591 out of 1,706 considered).
On the other hand, pricing adjustments on a percentage basis
were actually made less frequently (29.5% of potential pricing
adjustments were actually made) than any other type of adjustment
5
2/
for which the statistics were meaningful.—
The types of
H
adjustments that were made most frequently on a percentage
basis among all potential adjustments were those involving
3/
the allocation of net income—' (89.0% of all adjustments
considered were actually made) and allocation of expense
items (83.8%), followed by interest adjustments (66.5%).
Out of the total 886 adjustments made, more interest
adjustments were made (258 interest adjustments) than any
other type of adjustment.
The figures showing the number of cases in which adjust
ments were made and not made (Table 1) were broken down
further to show the "principal" adjustment that was made in
each case where one or more adjustment was made, and the
"principal" adjustment that was considered but not made in
4/ Those figures
each case where no adjustment was.made.—
2/ Adjustments involving the rental of personal property were
made less frequently on a percentage basis (27.3%). However,
rental adjustments were considered in only 11 out of the 1,706
potential adjustments that were considered (Table 2), and the
aggregate dollar amount of all rental adjustments totaled only
$555,000 (Table 4).
3/ An agent was treated as having made an allocation of net
income where he allocated particular items of gross income
from one entity to another, together with any deductions
attributable to such items.
£/ In each case where more than one adjustment was made, the
adjustment in the largest dollar amount was treated as the
"principal" adjustment made in the case. Similarly, in each
case where no adjustments were made, the potential adjustment
which the agent believed would have been the largest if it had
been made was treated as the principal adjustment considered in
the case. In each case where only one adjustment was made,
that adjustment by definition was treated as the principal
adjustment made in the case, even though larger potential
adjustments were considered but not made in the same case.
For example, if an interest adjustment of $100,000 was made in
a case and a pricing adjustment of approximately $ 1 million
was considered but not made in the same case, the interest
adjustment would be the principal adjustment made in the case.
6
parallel fairly closely the figures given in Table 2 for all
potential adjustments that were considered (discussed above).
For example, a pricing adjustment was the principal adjustment
made or not made in almost half of the cases (390 out of 871
cases), while on a percentage basis pricing adjustments
were actually made less frequently (33.3%) than any other
type of principal adjustment for which the statistics were
meaningful.
Similarly, the principal adjustments that were
actually made most frequently on a percentage basis were those
involving the allocation of net income (8 6 .1 %) and allocation
of expense items (86.4%), and interest adjustments (76.7%).
The percentage of the 871 cases in which one or more adjust
ments were made (52.6%) was also fairly close to the percentage
of all potential adjustments considered that were actually
made (51.9%).
2.
Dollar Amounts of Adjustments Made
(a)
Aggregate Dollar Amounts (Table 4)
Of the total $662,101,000 of adjustments made in all
cases, pricing adjustments totaled $312,526,000, or almost
half of the total dollar amount of all adjustments made
(Table 4).
The total dollar amount of services adjustments—
$126,996,000— was the second largest dollar amount by
category, and the total dollar amount of interest adjustments—
$75,936,000'— was the third largest.
7
The total dollar amount of adjustments made in each
category was broken down further in Table 4 into 11 different
dollar ranges showing the frequency that adjustments of
particular sizes were made in each category.
In every
category except those in which the total dollar amounts
were insubstantial (rental adjustments and gain allocations),
the overwhelming proportion (well over 90 percent) of the
total dollar amount of adjustments in each category
represented single adjustments of at least $1 0 0 , 0 0 0 in
size.
The aggregate amount of all adjustments that were
less than $1 0 0 , 0 0 0 in size for all categories totaled less
than $16,000,000 out of the total sum of $662,101,000 for
all adjustments made.
(b) Average Dollar Amounts Per Adjustment (Table 5)
The total dollar amount of adjustments made in each
category was also broken down further in Table 5 to show
the average dollar amount for each category of adjustments
made, and the average dollar amount per year for each
category of adjustments made.
The average amount per
adjustment made for all types of adjustments was $747,000.
Since the average number of years audited in each case was
slightly more than two years, the average amount per year
for all adjustments made was $330,000.
8
Pricing adjustments accounted for the largest average
dollar amounts —
$1,796,000 per adjustment made, and
$679,000 per year for each adjustment made.
These amounts
were more than twice the average dollar amounts for any
other category.
The next largest average dollar amounts
per adjustment made were for services adjustments
and allocations of net income ($847,000 average for each
category). Although interest adjustments accounted for the
largest number of single adjustments made out of all
potential adjustments that were considered (Table 2), the
average
dollar amount for all interest adjustments made —
$294,000 —
was lower than the average dollar amount in all
other categories for which the statistics were meaningful.
3.
Percentage of Adjustments Agreed To (Table 6 )
A separate analysis was made showing the extent to
which the total 886 adjustments made were agreed to or
not agreed to by the U. S. taxpayer in each case (Table 6 ).
For purposes of this study, an adjustment was treated as
"agreed" if it was recorded as agreed in the revenue
agent's report of examination.
Of the 886 adjustments
made, 51% were agreed to by the taxpayer and an additional
8 % were partially agreed to.
Cases involving interest
adjustments were agreed to most frequently (5 9 % agreed,
and 6 % agreed in part), followed by adjustments involving
9
r/
\
v|M
the allocation of expense items (57% agreed, and 11%
agreed in part).
Of the cases involving pricing adjust
ments, 41% were agreed, 11% were partially agreed, and
48% were not agreed.
4.
Participation of International Examiner (Table 7)
The 458 principal adjustments made (see Table 1) were
further analyzed in Table 7 with reference to whether an
International Examiner participated in the case or not
(where an International Examiner participated in the case
only nominally, he was considered not to have participated
5/
in the case at a l l ) I n t e r n a t i o n a l Examiners made principal
adjustments in roughly three-fifths of the cases in which
they participated (364 adjustments out of 607 cases
in which they participated), while principal adjustments
were made in slightly more than one-third of the cases in
which an International Examiner did not participate (94 out
of 264 cases in which an International Examiner did not par
ticipate) . An International Examiner participated in more
than two-thirds of the cases in which the principal adjust-
5/ in general, an International Examiner is asked by his
regional program manager to participate in a case where a
large potential adjustment with international aspects is
being considered, and where the regional manager does not
feel that the district agent has the expertise to examine
the issue properly.
10
ment that was considered was a pricing adjustment (272 out
of 390 cases), and an International Examiner participated in
almost
all of the cases in which the principal adjustment
that was made was a pricing adjustment ( 1 2 2 adjustments out
of 130 made).
However, in more than half of the cases in
which an International Examiner considered a potential pricing
adjustment, he did not make the adjustment (150 pricing adjust
ments not made out of 272 pricing cases participated in).
5.
Analysis of Most Frequent Adjustments (Tables 8 ,
9, and 10)
Data concerning three of the four most frequent types
of adjustments —
pricing adjustments, services adjustments,
and adjustments involving intangibles —
were analyzed in
detail to determine the reason that the agent did or did
not make a particular adjustment. Because both the safe haven
for interest charges contained in the regulations and the
rules to be applied in making interest adjustments are
extremely precise [Treasury Regulation §1.482-2(a)(2)], no
detailed analysis was made of potential interest adjustments,
even though more interest adjustments were made than any
other type of adjustment (see Table 2).
(a)
Pricing Adjustments (Table 8 )
The present pricing regulations [Treasury Regulation
§1.482-2(e)] provide for three methods in determining an
11
\
arm's length price for the sale of tangible property
between related entities.
In order of priority they are
the comparable uncontrolled price method, the resale price
method, and the cost-plus method.
Under the regulations
other unspecified methods can be used to determine an
arm's length price if none of the specified methods may
reasonably be applied, or if some other method is clearly
more appropriate.
Of the 174 pricing adjustments made in the study,
2 0 .7 % were based on the comparable uncontrolled price
method, 10.9% were based on the resale price method, 27.6%
were based on the cost-plus method, and 40.8% were based
on an improvised fourth method.
Where a pricing adjustment
was not made, however, the comparable uncontrolled price
method was applied in 56.1% of the cases (234 cases out of
417 in which a pricing adjustment was considered but not made),
usually on the basis of evidence of sales to third parties
offered by the taxpayer.
A fourth method was applied in
27.6% of the cases in which a pricing adjustment was not
made (115 out of 417 cases).
(b)
Services Adjustments (Table 9)
Where one entity renders services for the benefit of
a related entity, the regulations provide that an arm's
12
length charge for the services may ordinarily be determined
on the basis of the costs incurred by the entity rendering
the services [Treasury Regulation §1.482-2(b)(3) - (6 )].
If
the services are an "integral part" of the business activity
of either entity, however, an arm's length charge must be
based on the amount that an unrelated third party would have
paid.
Of the 288 potential services adjustments that were
considered, 150 (52.1% of the total) were actually made
(Table 2).
Approximately 60% of the services adjustments
were made either on the basis of the taxpayer's costs or
on the basis of third-party transactions.
(Table 9).
Approximately 40% of the services adjustments were made
by application of a hybrid method.
(c)
Adjustments Involving Transfer of Intangibles
(Table 10)
Where intangible property (such as patents or know-how)
is transferred or made available by one entity to a related
entity, the regulations provide that an arm's length considera
tion must be received [Treasury Regulation §1.482-2(d)(1)].
Where the property has been developed jointly by the related
parties pursuant to a bona fide cost-sharing arrangement, however,
each entity will be permitted to use the property free of
charge to the extent that it shared in the costs of develop
ment.
Where an arm's length consideration must be determined,
the standard to be applied is the consideration that
would have been received from an unrelated third party for
the intangible property under the same circumstances.
Where
similar transactions with third parties cannot be found, the
regulations set forth 1 2 factors that may be examined in
determining an arm's length consideration.
Of the 188 potential adjustments involving intangibles
that were considered, 100 (53.2% of the total) were actually
made (Table 2).
Of the 100 adjustments made, no consideration
had been received in 73 instances (Table 10).
In 6 instances
where no consideration had been received, the parties had
shared the research and development costs under a cost-sharing
arrangement which the agent determined had not properly
reflected the costs and risks of the parties to the arrange
ment.
Accordingly, in those cases the agent reallocated
the development costs in order to properly reflect such
costs and risks, as required by §1.4S2-2(d)(4) of the
regulations, instead of imputing an arm's length considera6/
tion from one entity to another.—
The remaining 93
r,
■
6/ in one instance where inadequate or excessive consideration had been received by the developer, and where no cost
sharing arrangement had been entered into among the parties,
the adjustment was made by allocating development costs among
the parties, rather than by imputing an arm's length considera
tion to the developer. This case is recorded under the head
ing "Cost Sharing" in Table 10 in order to reflect the manner
in which the adjustment was made.
14
adjustments were made by imputing an arm's length considera
tion to the entity that had transferred or made available
the intangible property to the related entity.
The
consideration received by the taxpayer from unrelated
third parties was used as the basis for 54 of these adjust
ments, while the various other methods prescribed in the
regulations were applied in making 24 of these adjustments.
Of the 88 potential adjustments involving the transfer
of intangibles that were considered but not made,the
existence of a cost-sharing arrangement among the related
entities was the basis for not making an adjustment for only
9.1% of the adjustments not made.
The consideration
received by the taxpayer from unrelated third parties was
relied upon as the basis for not making an adjustment in
23.9% of these cases, while the various methods prescribed
in the regulations were relied upon as the basis for not
making an adjustment in 35.2% of these cases.
6.
Size of Taxpayers Examined (Table 3)
An examination of the size of the primary taxpayer was
made for each of the 458 cases in which one or more adjust
ments were made, and for each of the 413 cases in which no
adjustment was made (Table 3).
Among the 378 primary
taxpayers that experienced adjustments and for which this
information was readily available (in other words, 458 tax
payers that experienced adjustments minus the 80 taxpayers
listed by asset size in "No Category"), more than half the
adjustments made affected primary taxpayers with more
15
than $50 million in assets (199 taxpayers out of 370).
In general, the frequency with which taxpayers experienced
adjustments increased with the size of the taxpayers.
Among taxpayers with assets of less than $50 million that
were audited in connection with a section 482 problem,
50% or less actually experienced adjustments.
The
percentage of taxpayers that experienced adjustments
increased sharply with respect to taxpayers having
assets of more than $50 million, increasing to 76.6%
for taxpayers having assets of more than $250 million.
16
TABLE 1
Analysis by Case of Principal Adjustment si/ Made and Not Made
Total
Cases
Adjustments
Made2/
No
Adjustments
Made
Percent
Made
260
33.3
m
65.7
125
38
76.7
133
6k
69
ËÈï
7
2
5
28.6
Allocation of)
Net Income )
36
31
5
86.1
Allocation of Expense
66
57
9
86.If
Allocation of Gain
5
2
3
IfO.O
Unknown
1
1
390
130
70
k6
Interest
163
Services
Pricing
Intangibles
Rental
871
U 58
100
U 13
52.6%
1/
See page
5 of the Summary for definition of "Principal Adjustments."
2/
See page
2 of the Summary for definition of "Adjustments Made."
17
TABLE 2
Analysis of All Potential Adjustment si/
Total Potential
Adjustments
Adjustments
Made
Adjustments
Rot Made
Percent
Made
Pricing
591
17b
lj-17
29.5
Intangibles
188
100
88
53.2
Interest
388
258
130
66.5
Services
288
150
138
52.1
Rental
11
3
8
27.3
Allocation of
Ret Income
55
i*8
7
89.O
Allocation of
Expense
179
150
29
83.8
Allocation of
Gain
5
2
3
k o .o
Unknown
1
1
n
1,706
866
820
1/
m
See page
51.9Î
2 of the Summary for definition of "Potential Adjustments."
TABLE
3
Number of Cases Analyzed by Asset Size of Primary U. S. Taxpayer
Asset Size of
Primary U.S.
Taxpayer
(In Thousands)
Adjustments
Made
No
Adjustments
Made
Percent
Made
Under 50
1
2
33.3
50-100
1
k
20.0
100-250
k
b
50.0
250-500
3
10
23.1
500-1,000
13
21
38 .2
1 ,000-5,000
1*7
7*1-
38.8
5 ,000-10,000
31
38
1*1*.9
1 0 ,000-50,000
79
89
1*7.0
50 ,000-100,000
1*0
22
61*.5
10 0 ,000-250,000
38
20
65. 5
121
37
76.6
80
92
I46.5
1*58
1*13
Over 250,000
No Category
5 2 .6$
I
vO
h-1
Table
i
k
Total Amounts of Adjustments (In Thousands)
Dollar Range of Adjustments
$ 0
- $ 5,000
Pricing
$
2
Intangibles
$
9
Interest
$
117
Services
$
27
Total
215
$
57
619
2,285
io£
l,0l+0
l+,2l+7
91
33^
1,576
1+50
3,575
1^,165
8,353
3,929
*h973
12,332
20,888
21,032
8,177
13^,329
U6 ,5k0
*+,000
6,931
9,065
66,536
55,252
8,536
21,1+36
6,1+92
91,716
56,581+
11,561
16,080
260,61+2
1+0,655
52,310
3*6
83
25,000
188
198
837
313
25,000
50,000
*63
512
1,335
802
59,000
- 100,000
691
1,869
1,967
1,883
100,000
- 500,000
12,101
6,790
9,013
9,696
500,000
-1,000,000
18,19^
5,683
5,5*6
1,000,000
-3,000,000
6l,ol+8
10,852
3,000,000
-6,000,000
6,000,000
-9,999,000
9,099,000
- Above
Totals (In Thousands)
$
H6
^3
-
3
Alloca
tion of
Gain
551
16
10,000
$
Alloca
tion of
Expense
66
10,000
5,000
Rental
Alloca
tion of
Net Income
118,0U1
26,168
31,908
312,526
5Z,k2 k
75,936
126,996
$
ll+
555
$ 95
8,506
*6,790
558
653
1+7,238
662,055
Type of Adjustments Unknown
Grand Total— All Adjustments
^
$662,101
"~T~
m a m
20
Average Dollar Amount, Per Year and Per Adjustment
For Adjustments Made in Each Category
Category
Number of
Adiustments Made
Total Number
of Years
(In Thousands)
Total Amounts
(In Thousands)
(In Thousands)
Average Amount
Average Amount
Per
Year
Per Adiustment Made
1. Pricing
174
460
$312,526
$1,796
$679
2. Intangibles
100
227
52,424
524
231
3.
Interest
258
480
75,936
294
158
4. Services
150
368
126,996
847
345
3
11
555
185
50
48
117
40,655
847
348
150
339
52,310
349
154
2
3
653
327
218
1
2
46
7V 7
330
5.
Rental
6. Allocation of net income
7. Allocation of expense
8. Allocation of gain
Unknown
TOTALS
886
2,007
662,101
TABLE 6
Adjustments Made
Agreed, Agreed in Part, Not Agreed
Agreed
Total.
$
Agreed
In Part
_ # _____ $
Not
Agreed
#
$
Number
#
Pricing
17^
71
bl
20
11
83
kQ
Intangibles
100
52
52
8
8
bo
bo
Interest
258
153
59
15
6
90
3b
Services
150
65
10
7
75
51
3
1
2
66
Allocation of
Net Income
1*8
Allocation of
Expense
Rent
33
—
—
21
%
__
__
27
56
150
85
57
17
11
14-8
33
Allocation of
Gain
2
1
50
1
50
__
Unknown
1
—
—
TOTALS
886
—
kk9
—
—
51$
71
8$
365
—
TABLE 7
Participation of International Examiner
(Principal Adjustments)
Participation
Adjustment
Made
Non-Participation
Adjustment
not made
Adjustment
made
Adjustment
not made
Totals
Total
Adjustments
made
Total
Adjustments
not made
122
150
8
110
130
260
Intangibles
39
17
7
7
46
24
Interest
83
22
42
16
125
38
Services
51
43
13
26
64
69
1
2
1
3
2
5
Allocation of Net Income
27
2
4
3
31
5
Allocation of Expenses
39
5
18
4
57
9
2
2
1
2
3
Pricing
Rental
Allocation of Gain
1
Category Unknown
TOTAL CASES
361+
243
94
1
170
458
413
t ,
23
TABLE
8
Methods Used for Pricing Adjustments
Totals
Percent of
Pricing
Adjustments Made
1. Uncontrolled Sales
36
20.7
2. Resale Price
19
10 .9
3. Cost Plus
bQ
2 7.6
12
6 .9
1
.6
6 . Other formula
27
15.5
7. Others
31
1 7 .8
171*
10 0 .0k
Adjustments Made
Method Used
h,
Proportionate Profit
5. Ratio of Return on Investment
Percent of Pricing
Adjustments Not Made
Adjustments Not Made
Method Used
23 b
5 6 .1
2. Resale Price
11
2.6
3. Cost Plus
57
13.7
3
.7
2
.5
6 . Other formula
32
7.7
7. Others
78
1 8 .7
1. Uncontrolled Sales
b.
Proportionate Profit
5. Rate of Return on Investment
b l7
10 0 .Qf/o
- 24 -
TABLE 9
Adjustments for Services Performed
Adjustments Made
Total
Taxpayer’s
Transactions
Taxpayer' s with other
parties
Cost
Trans
actions
between
other
parties
No Charge
77
21
19
k
Inadequate
Charge
73
1^
21
9
35
|è
13
150
(100$)
(23.3$)
(8.7$)
(26.7$)
With Unrelated
and between
Not
Unrelated
Clear
Other
l6
17
1
1
16
12
28
33
(0.7$
(22.0$)
(18.7$)
Adjustments Not Made
138
(2k.6i)
18
(13.0$)
-
3^
(2U.6$)
33
00
(13.8$)
3^
CVJ
(100$)
19
- 25 /
TABLE10
(
Adjustments Involving Transfer or Use of Intangibles
Adjustments Made
Total
Cost
Sharing
Taxpayer's
Transactions
with Other
Parties
¡No Consideration
[Received by
Taxpayer
73
6
^7
[inadequate or
[Excessive
ponsideration
[Received
27
1
7
100
7
5k
(100$)
(7.0$)
Transactions
Between
Other
Other
Parties
Method
(5^.0$)
1
1
(1.0$)
Not
LClear
11
8
13
6
2k
( 2 k .O
$)
Ik
(lU.o$)
Adjustments Not Made
88
(100$)
8
(9-1$)
21
(23-9$)
6
(6.8$)
31
22
(35.2$)
(2 5 .0^)
G P O 940-909
ATTENTION:
FINANCIAL EDITOR
January
FOR RELEASE 6:30 P.M.
RESULTS OF TREASURY’S WEEKLY
8,
1973
BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
bMlsJ one series to be an additional issue of the bills dated
October 12 , 1972 , and
the other series to be dated January 11, 1973
, which were invited on January 2 , 1973,
were opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
or thereabouts, of
91-day bills and for $1,900,000,000, or thereabouts, of
182-day
-s. The details of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
b of
& of
91-day Treasury bills
maturing April 12 , 1973
Approx. Equiv.
Price
Annual Rate
98.705
98.693
98.697
5.123$
5.171$
5.155$
1/
182-day Treasury bills
maturing July 12 , 1975
Approx. Equiv.
Price
Annual Rate
97.274
97.253
97.264
5.392$
5.434$
5.412$
1/
the amount of 91-day bills bid for at the low price was accepted
the amount of 182-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Hansas City
Dallas
Sjan Francisco ■
Applied For
$
38,670,000
2,794,780,000
54,610,000
71,100,000
7,140,000
15,200,000
270,250,000
33,150,000
42,010,000
31,675,000
32,580,000
188,935,000
Accepted
$
2,170
1,624,380
3,895
$3,750,090 ,000
$3,580,100,000
$1,900,025.
$2,400,440.,000 a/
,000
,000
,000
21,100 ,000
3,140 ,000
5,095 ,000
.71,745 ,000
18,650 ,000
13,010 ,000
14,315 ,000
7,590 ,000
114,935 ,000
o
o
o
TOTALS
Applied For
Accepted
$
68,655 ,000 $
62,245 ,000
3,034,690 ,000
1,958,320 ,000
15,640 ,000
15,640 ,000
23,790 ,000
23,580 ,000
14,245 ,000
11,315 ,000
13,305 ,000
9,755 ,000
298,595 ,000
169,565 ,000
56,330 ,000
43,005 ,000
36,490 ,000
16,700 ,000
27,830 ,000
15,275.,000
46,770 ,000
14,865.,000
113,750 ,000
60,175 ,000
includes $182,505,000 noncompetitive tenders accepted at the average price'of 98.697
^includes $100,145,000 noncompetitive tenders accepted at the average price of 97.264
^Bhese rates are on a bank discount basis.
The equivalent coupon issue yields are
|.30 $ for the 91-day bills, and 5.64$ for the 182-day bills.
Department of th e T R E A S U R Y
m o T r u i n r ononn
WASHINGTON
, D.C. 20220
|f
u o j i o a i lllIB J lU
T E LcEnPuHoOiic
N tiW
04-2O41
T ci
FOR IMMEDIATE RELEASE
January 9, 1973
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 $4,300,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing
January 18, 1973, in the amount
of $4,080,590,000, as follows:
91 -day bills (to maturity date) to be issued
January 18, 1973, in the amount
of $2,400,000,000, or thereabouts, representing an additional amount of bills
dated October 19, 1972,
and to mature
April 19, 1973
originally issued in the amount of $1,800,300,000,
(CUSIP No. 912793 QQ 2)
the additional and original
bills to be freely interchangeable.
182 -day bills, for $1,900,000,000, or thereabouts, to be dated January 18, 1973,
and. to mature
July 19, 1973
(CUSIP No. 912793 RL2 ).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern Standard time, Monday, January 15, 1973.
Tenders will not be received at the Treasury Department, Washington.
must be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded 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
OVER
-
account.
2
-
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only those!
submitting competitive 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 a.11 tenders, in whole or in part, and his action in any such respect I
shall be final.
Subject to these reservations, noncompetitive tenders for each
issue for $ 200,000 or less without stated price from any one 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
January 18, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing
treatment.
January 18, 1973.
Cash and exchange tenders will receive equal
Cash adjustments will be made for differences between the par value of I
maturing bills accepted in exchange and the issue price of the new bills.
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 considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
for the 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.
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.
Department of th e fR [A $ U R Y
MINGTON, D C 20220
T E L E P H O N E W04-2041
§§ I
1 7 89
FOR IMMEDIATE RELEASE
JANUARY 11, 1973
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE MEETS;
SETS 1973 GOAL OF 2.4 MILLION SAVERS
The U. S. Industrial Payroll Savings Committee met today,
in its annual session, with Treasury Secretary George P. Shultz,
in the Diplomatic Functions Suite of the State Department.
The purposes of the meeting were to report on the success
of the Committee’s 1972 Savings Bonds campaign, to install its
new 1973 campaign Chairman, and to plan its course of action toward
meeting the 1973 campaign goal |j? to sign up-2.4 million new Pay
roll Savers or those who increase their allotments.
William M. Batten, Chairman of the Board, J. C. Penney Co.,
Inc., New York, is Chairman of the 60-member 1973 Committee, which
includes representatives of 26 major industries and 23 geographic
areas.
He succeeds Donald S. MacNaughton, Chairman and Chief Execu
tive Officer, The Prudential Insurance Co. of America, Newark.
Sales of Savings Bonds in the $25-to-$200 denomination range, which
are bought chiefly by Payroll Savers, reached $4.15 billion in 1972 $1.5 billion higher than in 1962, the year the Committee was formed.
MacNaughton stated that -- ’’The impressive statistics resulting from
the campaign can be calculated. But the patriotism, involvement
and leadership of our Committee members -- characteristics that made
the achievements possible -- are incalculable.” During 1972, the
Committee’s campaign signed up 2.6 million new or increased^allotment
savers, compared to a goal of 2.3 million, he reported.
Certificates of Appointment, signed by Secretary Shultz, were
presented to the 29 new 1973 Committee members. Appointments are
for one year.
,,
Special awards were given to outgoing Chairman MacNaughton and
to all 1972 Committee members -- the Treasury's Gold Medal of Merit
to MacNaughton and Silver Medals of Merit to Committee members. Past
Chairmen were presented twin-seal plaques, containing the Great Seal
S-94
(OVER)
2
of the United States and the seal of the Treasury Department.
Secretary Shultz’s citation to Chairman MacNaughton read,
in part, "Under his leadership and inspired by his example,
American industry far exceeded its goal of enrolling 2,300,000
savers in 1972 and raised the sale of Series E Bonds through the
Payroll Savings Plan to the highest dollar total in 27 years.
This contribution to the security of both individuals and the
Nation is an impressive result of his efforts. His dedicated ser
vice is in the finest tradition of the volunteer spirit which
characterizes the Savings Bonds program and gives strength and
vitality to the American way of life.”
Past Chairmen of the Committee are: 1963, Harold S. Geneen,
Chairman and Chief Executive Officer, International Telephone §
Telegraph Corp.; 1964, Frank R. Milliken, President, Kennecott
Copper Corp.; 1965, Dr. Elmer W. Engstrom, then President, RCA
Corp.; 1966, Lynn A. Townsend, Chairman of the Board, Chrysler
Corp.; 1967, Daniel J. Haughton, Chairman of the Board, Lockheed
Aircraft Corp.; 1968, William P. Gwinn, then Chairman and Chief
Executive Officer, United Aircraft Corp.; 1969, James M. Roche,
then Chairman of the Board, General Motors Corp.; 1970, Gordon M.
Metcalf, Chairman of the Board, Sears, Roebuck and Co., and 1971,
B. R. Dorsey, Chairman of the Board, Gulf Oil Corp.
Lists of 1972 and 1973 Committee members are attached.
oOo
Attachments
3
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
1972 MEMBERSHIP
Ex Officio General Chairman
The Honorable George P. Shultz
Secretary of the Treasury
Washington, D. C.
Chairman
Donald S. MacNaughton
Chairman and Chief Executive
Officer
The Prudential Insurance Co.
of America
Newark, N. J.
Chairmen 1963-1971
1971
1966
B. R. Dorsey
Chairman of the Board
Gulf Oil Corp.
Pittsburgh, Pa.
Lynn A. Townsend
Chairman of the Board
Chrysler Corp.
Detroit, Mich.
1970
1965
Gordon M. Metcalf
Chairman of the Board
Sears, Roebuck and Co.
Chicago, 111.
Dr. Elmer W. Engstrom
Past President and Chief
Executive Officer
RCA Corp.
New York, N. Y,
1969
1964
James M. Roche
Past Chairman of the Board
General Motors Corp.
Detroit, Mich.
Frank R. Milliken
President
Kennecott Copper Corp.
New York, N. Y.
1968
1963
William P. Gwinn
Past Chairman
United Aircraft Corp.
East Hartford, Conn.
1967
Daniel J. Haughton
Chairman of the Board
Lockheed Aircraft Corp.
Burbank, Calif.
Harold S. Geneen
Chairman and Chief Executive
Officer
International Telephone and
Telegraph Corp.
New York, N. Y.
4
1972 GEOGRAPHIC MEMBERS
BALTIMORE
William P. Coliton
President
Western Maryland Railway Co.
Baltimore, Md.
DETROIT
Kenneth J. Whalen
President and Chief
Executive Officer
Michigan Bell Telephone Co.
Detroit, Mich.
BOSTON
Gerhard D. Bleicken
Chairman of the Board and
Chief Executive Officer
John Hancock Mutual Life
Insurance Co.
Boston, Mass.
HARTFORD
Arthur E. Smith
Chairman
United Aircraft Corp.
East Hartford, Conn.
CHICAGO
Robert C. Gunness
President
Standard Oil Co. (Indiana)
Chicago, 111.
HOUSTON
Herbert J. Frensley
President and Chief
Executive Officer
Brown § Root, Inc.
Houston, Tex.
CINCINNATI
Francis L. Dale
President and Publisher
The Cincinnati Enquirer, Inc.
Cincinnati, Ohio
INDIANAPOLIS
Charles A. Barnes
President and Chief
Executive Officer
P. R. Mallory § Co., Inc.
Indianapolis, Ind.
CLEVELAND
Willis B. Boyer
President and Chief
Executive Officer
Republic Steel Corp.
Cleveland, Ohio
LOS ANGELES
Justin Dart
Chairman and President
Dart Industries Inc.
Los Angeles, Calif.
DALLAS
William H. Seay
President
Southwestern Life
Insurance Co.
Dallas, Tex.
MIAMI
Charles H. Kellstadt
Chairman of the Board and
Chief Executive Officer
General Development Corp.
Miami, Fla.
DENVER
Robert K. Timothy
President
Mountain Bell
Denver, Colo.
MILWAUKEE
Robert V. Krikorian
Pres ident
Rex Chainbelt Inc.
Milwaukee, Wis.
5
7
^
MINNEAPOLIS-ST. PAUL
J. P. McFarland
Chairman of the Board and
Chief Executive Officer
General Mills, Inc.
Minneapolis, Minn.
ST. LOUIS
David S. Lewis
Chairman and Chief
Executive Officer
General Dynamics Corp.
St. Louis, Mo.
NEW JERSEY
Richard B. Sellars
President-Worldwide and Chairman
of the Executive Committee
Johnson § Johnson
New Brunswick, N. J.
SAN FRANCISCO
Rudolph J. Drews
Chairman of the Board and
Chief Executive Officer
Foremost-McKesson, Inc.
San Francisco, Calif.
NEW ORLEANS
G. Frank Purvis, Jr.
President and Chief
Executive Officer
Pan American Life
Insurance Co.
New Orleans, La.
SEATTLE
James G. McCurdy
Chairman of the Board
Lockheed Shipbuilding and
Construction Co.
Seattle, Wash.
NEW YORK
David L. Yunich
Vice Chairman
R. H. Macy § Co., Inc.
New York, N. Y.
PHILADELPHIA
William C. Musham
President and Chief
Executive Officer
I-T-E Imperial Corp.
Spring House, Pa.
PITTSBURGH
Edgar B. Speer
President
United States Steel Corp.
Pittsburgh, Pa.
WASHINGTON, D. C.
Joseph B. Danzansky
President and Chief Executive
Officer
Giant Food Inc.
Landover, Md.
6
1972 INDUSTRY MEMBERS
INDUSTRY MEMBERS
AEROSPACE
James R. Kerr
President and Chief
Executive Officer
Avco Corp.
Greenwich, Conn.
FOOD MANUFACTURING
William A. Buzick, Jr.
Chairman and Chief
Executive Officer
Consolidated Foods Corp.
Chicago, 111.
AIR TRANSPORTATION
Samuel L. Higginbottom
President and Chief
Operating Officer
Eastern Air Lines, Inc.
Miami, Fla.
GLASS MANUFACTURING
General Lauris Norstad
Chairman of the Board
Owens-Corning Fiberglas Corp.
Toledo, Ohio
AUTOMOTIVE
Lee A. Iacocca
President
Ford Motor Co.
Dearborn; Mich.
INDUSTRIAL EQUIPMENT
William A. Marquard
President and Chief
Executive Officer
American Standard, Inc.
New York, N. Y.
BANKING
William I. Spencer
President
First National City Bank
New York, N. Y.
INSURANCE
Richard R. Shinn
President
Metropolitan Life Insurance Co.
New York, N. Y.
CHEMICALS
C. B. McCoy
Chairman and President
E. I. duPont de Nemours § Co.,
Inc.
Wilmington, Del.
MEN'S APPAREL
Henry H. Henley, Jr.
President
Cluett, Peabody and Co., Inc.
New York, N. Y.
ELECTRICAL EQUIPMENT
Melvin C. Holm
Chairman of the Board
Carrier Corp.
Syracuse, N. Y.
MOTION PICTURES
Leo Jaffe
President
Columbia Pictures Industries,
Inc.
New York, N. Y.
ELECTRONICS
Robert W. Sarnoff
Chairman of the Board and
Chief Executive Officer
RCA Corp.
New York, N. Y.
NON-FERROUS METALS
C. Jay Parkinson
Former Chairman and Chief
Executive Officer
The Anaconda Co.
New York, N. Y.
7
OFFICE AND COMPUTER EQUIPMENT
Frank T. Cary
(
Chairman of the Board and
President
International Business
Machines Corp.
Armonk, N .Y .
tt rr •x? j
PAPER
Karl R. Bendetsen
Chairman and Chief
Executive Officer
•t
Champion International Corp.
New York, N. Y.
PETROLEUM
R. 0. Anderson
Chairman of the Board
RUBBER
Russell DeYoung
Chairman of the Board
The Goodyear Tire § Rubber Co.
Akron, Ohio
STATE GOVERNMENT
The Honorable
Linwood Holton
Governor
Commonwealth of Virginia
Richmond, Va.
STEEL
William R. Roesch
Chairman and President
Jones § Laughlin Steel Corp.
Pittsburgh, Pa.
Atlantic RichfieId Co. t
Los Angeles, Calif.
PUBLIC UTILITIES
A. H. Aymond rol .A any*!
Chairman of the Board and
President
Consumers Power Co.' ;
Jackson, Mich.
RAILROADS
Hays T . Watkins ■;H j' ,n«1
President and Chief r? :
Executive Officer
The Chesapeake and Ohipy*
Railway Co.
The Baltimore and Ohio
Railroad Co.
Cleveland, Ohio
RETAIL FOOD
*
Robert F. Longacre
President
^
The Great Atlantic § Pacific Tea
Co., Inc.
':v ;
New York, N. Y.
RETAIL MERCHANDISING
William M. Bat ten
•a
Chairman of the Board
J. C. Penney Co.,, Inc.
New York, N. Y.
t
TELECOMMUNICATIONS
Robert D. Lilley
President
American Telephone and
Telegraph Co.
New York, N. Y.
TEXTILES
:!
Charles F . Myers, Jr.
Chairman
Burlington Industries* Inc.
Greensboro, N. C.
8
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
1973 MEMBERSHIP
Ex Officio General Chairman
The Honorable George P. Shultz
Secretary of the Treasury
Washington, D. C.
Chairman
William M. Batten
Chairman of the Board
J. C. Penney Co., Inc.
New York, N. Y.
Chairmen 1963-1972
1972
1967
Donald S. MacNaughton
Chairman and Chief
Executive Officer
The Prudential Insurance Co.
of America
Newark, N. J.
Daniel J. Haughton
Chairman of the Board
Lockheed Aircraft Corp.
Burbank, Calif.
1971
Lynn A. Townsend
Chairman of the Board
Chrysler Corp.
Detroit, Mich.
B. R. Dorsey
Chairman of the Board
Gulf Oil Corp.
Pittsburgh, Pa.
1970
Gordon M. Metcalf
Chairman of the Board
Sears, Roebuck and Co.
Chicago, 111.
1966
1965
Dr. Elmer W. Engstrom
Past President and Chief
Executive Officer
RCA Corp.
New York, N. Y.
1964
1969
James M. Roche
Past Chairman of the Board
General Motors Corp.
Detroit, Mich.
Frank R. Milliken
President
Kennecott Copper Corp.
New York, N. Y.
1963
1968
William P. Gwinn
Past Chairman
United Aircraft Corp.
East Hartford, Conn.
Harold S. Geneen
Chairman and Chief
Executive Officer
International Telephone and
Telegraph Corp.
New York, N. Y.
9
1973 GEOGRAPHIC MEMBERS
ATLANTA
Carl J. Reith
President
Oxford Industries, Inc.
Atlanta, Ga.
BOSTON
Alan L. Haberman
President
First National Stores, Inc.
Somerville, Mass.
CHICAGO
Frederick G. Jaicks
Chairman
Inland Steel Co.
Chicago, 111.
CINCINNATI
Philip 0. Geier, Jr.
Chairman
Cincinnati Milacron Inc.
Cincinnati, Ohio
CLEVELAND
Willis B. Boyer
President and Chief
Executive Officer
Republic Steel Corp.
Cleveland, Ohio
DALLAS
John V. James
President and Chief
Executive Officer
Dresser Industries, Inc.
Dallas, Tex.
DENVER
Ralph J. Becker
President
Chevron Oil Co.-Western Division
Denver, Colo.
DETROIT
Robert E. Dewar
Chairman of the Board and
Chief Executive Officer
S. S. Kresge Co.
Troy, Mich.
HARTFORD
Arthur E. Smith
Chairman
United Aircraft Corp.
East Hartford, Conn.
HOUSTON
E. Clyde McGraw
Chairman of the Board
Transcontinental Gas Pipe
Line Corp.
Houston, Tex.
INDIANAPOLIS
Charles A. Barnes
President and Chief
Executive Officer
P. R. Mallory § Co., Inc.
Indianapolis, Ind.
LOS ANGELES
Forrest N. Shumway
President and Chief
Executive Officer
The Signal Companies
Beverly Hills, Calif.
MILWAUKEE
I. Andrew Rader
President
Allen-Bradley Co.
Milwaukee, Wis.
MINNEAPOLIS-ST. PAUL
Robert H. Engels
Chairman and Chief
Executive Officer
Northern States Power Co.
Minneapolis, Minn.
10
NEW JERSEY
Richard B. Sellars
President-Worldwide and Chairman
of the Executive Committee
Johnson § Johnson
New Brunswick, N. J.
SEATTLE
Zane E. Barnes
President
Pacific Northwest Bell
Telephone Co.
Seattle, Wash.
NEW ORLEANS
Robert H. Boh
President
Boh Bros. Construction Co., Inc.
New Orleans, La.
WASHINGTON, D. C.
Joseph B. Danzansky
President and Chief
Executive Officer
Giant Food Inc.
Landover, Md.
NEW YORK
Richard R. Shinn
President
Metropolitan Life Insurance Co.
New York, N. Y.
PHILADELPHIA
William C. Musham
President and Chief
Executive Officer
I-T-E Imperial Corp.
Spring House, Pa.
PITTSBURGH
Edgar B. Speer
President
United States Steel Corp.
Pittsburgh, Pa.
ST. LOUIS
A. S. Alston
President
Southwestern Bell Telephone Co.
St. Louis, Mo.
SAN FRANCISCO
Charles R. Dahl
President and Chief
Executive Officer
Crown Zellerbach Corp.
San Francisco, Calif.
11
1973 INDUSTRY MEMBERS
AEROSPACE
Robert Anderson
President and Chief
Operating Officer
North American Rockwell Corp.
El Segundo, Calif.
FOOD MANUFACTURING
William A. Buzick, Jr.
Chairman and Chief
Executive Officer
Consolidated Foods Corp.
Chicago, 111.
AIR TRANSPORTATION
Samuel L. Higginbottom
President and Chief
Operating Officer
Eastern Air Lines, Inc.
Miami, Fla.
GLASS MANUFACTURING
John W. Fisher
President and Chief
Executive Officer
Ball Corp.
Muncie, Ind.
AUTOMOTIVE
Brooks McCormick
President and Chief
Executive Officer
International Harvester Co.
Chicago, 111.
INDUSTRIAL EQUIPMENT
William A. Marquard
President and Chief
Executive Officer
American Standard, Inc.
New York, N. Y.
BANKING
Gabriel Hauge
Chairman of the Board
Manufacturers Hanover
Trust Co.
New York, N. Y.
INSURANCE
J. Henry Smith
President
The Equitable Life Assurance
Society of the U. S.
New York, N. Y.
CHEMICALS
C. B. McCoy
Chairman and President
E. I. duPont de Nemours § Co.,
Inc.
Wilmington, Del.
MEN’S APPAREL
John D. Gray
Chairman of the Board and
Chief Executive Officer
Hart, Schaffner § Marx
Chicago, 111.
ELECTRICAL EQUIPMENT
Melvin C. Holm
Chairman of the Board
Carrier Corp.
Syracuse, N. Y.
MOTION PICTURES
Leo Jaffe
President
Columbia Pictures Industries,
Inc.
New York, N. Y.
ELECTRONICS
Robert W. Sarnoff
Chairman of the Board and
Chief Executive Officer
RCA Corp.
New York, N. Y.
NON-FERROUS METALS
George B. Munroe
President
Phelps Dodge Corp.
New York, N. Y.
12
OFFICE AND COMPUTER EQUIPMENT
Charles L. Davis^
President and Chief
Executive Officer
Addressograph Multigraph Corp.
Cleveland, Ohio
RUBBER
Raymond C. Firestone
Chairman and Chief
Executive Officer
The Firestone Tire § Rubber Co
Akron, Ohio
PAPER
George J. Kneeland
Chairman of the Board and
Chief Executive Officer
St. Regis Paper Co.
New York, N. Y.
STATE GOVERNMENTS
The Honorable
John A. Love
Governor
State of Colorado
Denver, Colo.
PETROLEUM
R. 0. Anderson
Chairman of the Board
Atlantic Richfield Co.
Los Angeles, Calif.
STEEL
William R. Roesch
Chairman and President
Jones § Laughlin Steel Corp.
Pittsburgh, Pa.
PUBLIC UTILITIES
E. R. Eberle
President and Chief
Executive Officer
Public Service Electric
and Gas Co.
Newark, N. J.
TELECOMMUNICATIONS
Robert D. Lilley
President
American Telephone and
Telegraph Co.
New York, N. Y.
RAILROADS
Hays T. Watkins
President and Chief
Executive Officer
The Chesapeake and Ohio
Railway Co.
The Baltimore and Ohio
Railroad Co.
Cleveland, Ohio
TEXTILES
John E. Reeves
Chairman of the Board
Reeves Brothers, Inc.
New York, N. Y.
RETAIL FOODS
Robert F. Longacre
President
The Great Atlantic § Pacific Tea
Co., Inc.
New York, N. Y.
RETAIL MERCHANDISING
Lester A. Burcham
Chairman and Chief
Executive Officer
F. W. Woolworth Co.
New York, N. Y.
Department of th e fR E A S U R Y
¡TON, D C. 20220
TEL EP HON E WÖ4-2041
'XZ>-
J anuary 10, 1973
FOR IMMEDIATE RELEASE
FINAL RESULTS OF TREASURY BOND AUCTION
The Treasury received $1,749 million of tenders for the $625 million
of 6-3/4io 20-year bonds it offered.
Tenders totaling $627 million were
accepted, composed of all competitive tenders at prices of 99.50 and
higher, amounting to $546 million, and all noncompetitive tenders, amount
ing to $81 million. There were $1,122 million of competitive tenders at
prices below 99.50 which were not accepted.
Of the competitive tenders, $244 million were at prices of 99.75 or
higher, $302 million were at prices of 99.50 through 99.74, $248 million
were at prices of 99.25 through 99.49, and $278 million were at prices of
99.00 through 99.24.
Tenders submitted and accepted by Federal Reserve Districts were as
follows:
Submitted
Accepted
55,653,000
1,288,328,000
36,937,000
32,392,000
10 ,102,000
26,927,000
141,808,000
25,798,000
7,329,000
9,439,000
14,261,000
97,335,000
2;327,000
$ 32,193,000
471,922,000
27,422,000
8,132,000
8,742,000
17,427,000
15,203,000
14,293,000
2,329,000
7,889,000
7,260,000
13,809,000
327,000
$1,748,636,000
$626,948,000
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Totals
$
a
U N ITED S T A T ES SAVINGS BONDS ISSUED AND R E D E E M E D THRO U G H
( D o l l a r a m o u n t s in m i l l i o n s D E S C R IP T IO N
M lTU R ED
AMOUNT
is s u e d
! /
AMOUNT
r e d e e m e d
4 ,9 9 8
29,497
3,745
1,72 9
7,620
12,276
1 4 ,2 5 6
11,0 76
. 4,891
'
4,5 27
1960
1,9 19
3,465
13,603
1 5 , S77
12,503
5,697
5,427
5,626
5 ,5 8 1
4,89 5
4 ,2 3 5
4 ,4 3 7
5,080
5 ,179
5,398
5,219
4,922
4,816
4,5 18
4,544
1961
4,631
Seri e« F and n -1 9 4 1 thru 1952
¿eries J and K -1 9 5 2 th ru 1957
December 3 1 , 19 72
rou nd ed and w ill not n e c e s s a rily a dd to to ta ls )
5,003
2 9 ,5 2 1
3,754
Series A-1935 thru D -1 94 1
//~0
H.
! /
AMOUNT
J
o u t s t a n d in g
! /
% O U T S T A N D IN G |
O P A M O U N T IS S U E D l
.10
.0 8
.2 1
5
24
8
UNM ATURED
Series
E - ^
:
1941
190
9 .90
9 .9 8
9.76
10 .2 2
11.4 1 '
14.15
16.60
17.9 7
19 .3 7
20.4 3
20.45
20.96
22.54
23 .5 8
24.32
. 24.99
25.97
2 7.9 7
2 8 .8 2
30.88
33 .56
3 5 .5 4
39.51
39.42
40.15
42.33
43.04
4 3.97
4 6 .3 8
53.69
63.21
80.36
12.50
4 ,5 0 2
5,055
4,9 27
4,80 7
5 ,1 6 9
5 ,118
4 ,8 6 0
4 ,5 6 9
4 ,779
5,493
5,005
336
4 ,5 0 0
3,895
3,369
3,507
3,935
3, 958
4 ,085
3,915
3,645
3, 469
3,216
3 ,14 1
3,076
2,90 2
3, 058
2, 9 8 4
2,876
2,981
2,915
2,723
2 ,4 2 0
2,212
2,02 0
983
295
845
1,3 2 7
1,6 22
1 ,4 2 7
806
901
1 ,0 1 1
1,0 8 1
1,000
866
930
1,14 5
1,2 2 1
1,3 13
1,3 04
1,2 78
1,3 4 7
1,302
1,403
1,5 5 4
1,600
1,9 9 7
1,9 42
1,930
2,188
2 ,2 0 3
2,13 7
2,119
2,566
3^472
4,022
42
187,192
13 7,0 72
5 0 ,1 2 0
26 .77
5,485
8,769
3,92 6
2,870
1,558
5,900
28 .40
67.28
14,254
6 ,7 9 6
7,458
5 2. 32
T o ta l S e r ie s E an d H
20 1, 4 4 6
14 3 ,8 6 8
57,578
28 .58
( T o t a l m atu red
B A H S e r ie s 7 T o t a l u n m atp red
3 8 ,2 7 8
2 0 1 ,4 4 6
239,724
38,24 0
143,868
37
57,578
57,615
.10
28 .5 8
24.0 3
1942
1943 _______________________________________________
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1962 I
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
U n c la s s ifie d
T o ta l S e r ie s E
■ Series H (1952 thru M a v , 1 9 5 9 1 ^
H ( J u n e . 1959 thru 19721
T o ta l S e r ie s H
L
\ G ra n d T o t a l 1
4,615
182,108
bit,.
B
8 a c c ru e d d is c o u n t.
redemP t‘ on v a lu e .
■
on of o w n er b o n d s m a y b e h e ld a n d w i l l e a rn i n t e r e s t to r a d d it io n a l p e r io d s a l t e r o r i g in a l m a t u r it y d a t e s .
'
Form PD 3812 (Rev. Feb. 1972) —Dept, of the Treasury —Bureau of the Public Debt
Wm
.
m
D e p a rtm e n to fth e TR EAS U R Y
IfASHINGTON. D C. 20220
T ELEP H O N E W04-2041
F O R R E L E A S E IN P M ' S
T H U R S D A Y , J A N U A R Y 11,
1973
E X C E R P T S F R O M R E M A R K S B Y J A Y N. W O O D W O R T H
D E P U T Y T O T H E A S S I S T A N T S E C R E T A R Y OF T H E T R E A S U R Y
FOR ECONOMIC POLICY
B E F O R E T H E S E R T O M A C L U B OF C H A T T A N O O G A
CHATTANOOGA, TENNESSEE
J A N U A R Y 11, 1973, 1 : 0 0 P.M. E S T
T h e b u s i n e s s o u t l o o k for 1973 c o u l d n o t b e m u c h b e t t e r .
W e e n t e r t h i s y e a r w i t h a g r e a t d e a l of m o m e n t u m , as r e
f l e c t e d in t h e s t r o n g r i s e in r e a l e c o n o m i c a c t i v i t y d u r i n g
1972 of a p p r o x i m a t e l y 7 - 1 / 2 p e r c e n t .
I have heard many
b u s i n e s s e c o n o m i s t s e x p r e s s t h e i r v i e w s on the 1 973 o u t
l o o k in r e c e n t w e e k s , a n d t h e i r f o r e c a s t s u n a n i m o u s l y c a l l
f o r a n o t h e r l a r g e g a i n in r e a l o u t p u t , g e n e r a l l y m o r e t h a n
6 percent. The pace of the current e c onomic expansion,
w h i c h b e g a n a t t h e e n d o f 1970, a l r e a d y e x c e e d s t h e a v e r a g e
r i s e in t h e o t h e r p o s t w a r b u s i n e s s r e c o v e r i e s , a n d t h e
p r o s p e c t s f o r 1973 s u g g e s t t h a t a n e w r e c o r d w i l l be s et
b e f o r e t h i s y e a r is out.
W h a t is, p e r h a p s , as i m p o r t a n t as t h e r e c o r d - s e t t i n g
e x p a n s i o n in r e a l o u t p u t is t h a t t h e r a t e of i n f l a t i o n h a s
been significantly reduced.
My w i f e and m y n o n - e c o n o m i s t friends
would seri o u s l y q u e s t i o n that statement, and u n d e r s t a n d a b l y
so, b u t a m o n g e c o n o m i s t s a n d o t h e r s w h o w a t c h t h e s t a t i s t i c s
c l o s e l y t h e r e is w i d e a g r e e m e n t t h a t b o t h p r i c e s a n d w a g e s
a r e i n c r e a s i n g at a s l o w e r r a t e t h a n b e f o r e t h e c o n t r o l s w e r e
p u t i n p l a c e 17 m o n t h s ago.
S i n c e t h e E c o n o m i c S t a b i l i z a t i o n P r o g r a m b e g a n in A u g u s t
1 9 7 1 w i t h t h e 9 0 - d a y f r e e z e , the c o n s u m e r p r i c e i n d e x h a s
r i s e n a t a 3.2 p e r c e n t p a c e , w h i c h is p r e t t y c l o s e to t h e
A d m i n i s t r a t i o n ' s g o a l of s l o w i n g i n f l a t i o n to 3 p e r c e n t or
less b y t h e e n d of 1972.
This slower rise contrasts w i t h
t h e h i g h 6.1 p e r c e n t i n c r e a s e in t h e C P I d u r i n g 1969, 5.5
p e r c e n t d u r i n g 1 970, a n d 3.8 p e r c e n t f o r t h e 8 m o n t h s of
1 9 7 1 l e a d i n g u p to t h e fre e z e .
2
V i r t u a l l y a l l o t h e r m e a s u r e s of p r i c e s h a v e d e m o n s t r a t e d
a similar slowdown.
The so-called gross nat i o n a l pr o d u c t
p r i c e d e f l a t o r , f or e x a m p l e , w h i c h is t h e b r o a d e s t m e a s u r e
a v a i l a b l e of i n f l a t i o n t h r o u g h o u t t h e U. S. e c o n o m y , h a s
s l o w e d t o a 2- 3/4 p e r c e n t p a c e o v e r t h e l i f e of t h e s t a b i l i
zation program.
This compares w i t h a 5 pe r c e n t rate from
1 9 6 9 t h r o u g h e a r l y 1971.
O n t h e w a g e side, t h e v a r i o u s m e a s u r e s of c o m p e n s a t i o n
s h o w a m a r k e d slowdown.
T h r o u g h o u t 1972, w a g e i n c r e a s e s
h a v e c o n s i s t e n t l y z e r o e d in o n t h e P a y B o a r d ' s 5 - 1 / 2 p e r
cent w age standard.
A l t h o u g h t h i s r e c o r d of o u r f i g h t a g a i n s t i n f l a t i o n is
e n c o u r a g i n g , n o b o d y has y e t d e c l a r e d a v i c t o r y a g a i n s t the
disease.
I n d e e d , t h e r e is c o n s i d e r a b l y m o r e w o r k t h a t r e
m a i n s to b e d o n e t h i s y e a r in c o m b a t i n g e x c e s s i v e p r i c e a n d
wage increases.
O n e a r e a t h a t h a s b e e n a p e r s i s t e n t s o r e to t h e
sta b i l i z a t i o n p r o g r a m has been food prices.
The large
r i s e s in A m e r i c a n s ' g r o c e r y b i l l s h a v e far o u t s t r i p p e d t h e
p r i c e i n c r e a s e s of n o n - f o o d it e m s .
Most agricultural
pro d u c t s are exempt from price controls, b e c a u s e we believe
i t w o u l d b e i m p o s s i b l e to a r r e s t i n c r e a s e s in f a r m p r i c e s
w i t h o u t a giant p r i c e - c o n t r o l s b u r e a u c r a c y and w i t h o u t stiff
rationing.
E v e n so, " b l a c k m a r k e t s " f o r m a n y f o o d s w o u l d
appear in short order.
I n s t e a d of t h e s e p a n i c - b u t t o n actions,
t h e A d m i n i s t r a t i o n h a s g o n e t h e r o u t e o f t r y i n g to i n c r e a s e
d o m e s t i c food supplies.
In f act, w e n e e d to i n c r e a s e p r o
d u c t i o n t o m e e t t h e l a r g e d e m a n d s for f o o d in w o r l d m a r k e t s .
T h i s w i l l b e o n e of t h e c o n t i n u i n g c h a l l e n g e s of 1973, b u t
I think we can make real progress.
The benefits from our new less-inflationary environment
are b e c o m i n g in c r e a s i n g l y widespread.
F r o m 1965 t h r o u g h
1 9 6 8, t h e A m e r i c a n w o r k e r w a s o n a t r e a d m i l l , s c o r i n g o n l y
s m a l l i n c r e a s e s in h i s r e a l w a g e s .
S i n c e A u g u s t 1971,
h o w e v e r , h i s r e a l w a g e s h a v e r i s e n at a r a p i d 2.8 p e r c e n t
pace.
T h i s r e p r e s e n t s r e a l p r o g r e s s a g a i n s t i n f l a t i o n -p r o g r e s s t h a t t h e A d m i n i s t r a t i o n is c o m m i t t e d to m a i n t a i n .
oOo
S T A T E M E N T O F W I L L I A M E. S I M O N
B E F O R E THE S E N A T E F I N A N C E C O M M I T T E E
10 A .M . , T H U R S D A Y , J A N U A R Y 11, 1 973
Mr. C h a i r m a n a n d m e m b e r s o f t h i s d i s t i n g u i s h e d
C o m m i t t e e , I am h e r e t o d a y as the P r e s i d e n t ’s n o m i n e e
for the p o s t of D e p u t y S e c r e t a r y o f the T r e a s u r y .
A s m y b i o g r a p h i c a l s t a t e m e n t w i l l show, I was
b o r n in P a t e r s o n , N e w J e r s e y , a n d a t t e n d e d N e w a r k
A c a d e m y in L i v i n g s t o n , N e w J e r s e y .
In 1951 I r e c e i v e d
a B a c h e l o r of A r t s d e g r e e f r o m L a f a y e t t e C o l l e g e in
Easton, Pennsylvania.
I
b e g a n w o r k i n g w i t h U n i o n S e c u r i t i e s in 1952
in 1955 b e c a m e A s s i s t a n t V i c e P r e s i d e n t a n d M a n a g e r of
the M u n i c i p a l T r a d i n g D e p a r t m e n t .
and
F r o m 1 9 5 7 to 1 9 6 4 I s e r v e d as V i c e P r e s i d e n t of
Weeden and Company, after w h i c h I joined Salomon Brothers
§ Hutzler.
In O c t o b e r of 1 9 6 4 I b e c a m e a P a r t n e r a n d
in 1 9 7 0 an E x e c u t i v e C o m m i t t e e M e m b e r of the firm.
I
s e r v e d in t h e s e p o s t s u n t i l n o m i n a t e d b y the P r e s i d e n t
to b e c o m e D e p u t y S e c r e t a r y of the T r e a s u r y on D e c e m b e r 7,
1972.
My resignation from Salomon Brothers will become
o f f i c i a l u p o n m y c o n f i r m a t i o n b y the S e n a t e .
In the pa s t , in m a n a g i n g the P u b l i c F i n a n c e
D i v i s i o n o f the I n v e s t m e n t B a n k e r s A s s o c i a t i o n , I h a v e
b e e n p r i v i l e g e d to w o r k w i t h y o u r C o m m i t t e e , a n d I h a v e
b e n e f i t e d g r e a t l y f r o m o u r e x c h a n g e of v i e w s .
I int e n d ,
as D e p u t y S e c r e t a r y , to w o r k c l o s e l y w i t h y o u a n d y o u r
o u t s t a n d i n g s t a f f as w e l l as w i t h y o u r c o l l e a g u e s in
the S e n a t e .
In a c c o r d a n c e w i t h y o u r p r o c e d u r e s , I h a v e p r o v i d e d
the C o m m i t t e e w i t h a b i o g r a p h i c a l s t a t e m e n t as w e l l as
w i t h a c o p y of the b l i n d t r u s t a g r e e m e n t u n d e r w h i c h m y
f i n a n c i a l a s s e t s are m a n a g e d b y M o r g a n G u a r a n t y T r u s t C o m p a n y
of N e w Y o r k as T r u s t e e .
Kpgjiii
Upon the announcement of my nomination, I removed
myself immediately from any and all economic interests
in Salomon Brothers. I also resigned from all outside
directorships and related responsibilities. Finally, I
have also supplied the Committee with a letter from my
attorney, Howard G. Wachenfeld of Lum, Biunno and Tompkins,
550 Broad Street, Newark, New Jersey, which provides his
opinion that my financial arrangements are in conformity
with the conflict of interest statutes.
All of my personal assets, including the cash
settlement from Salomon Brothers, have been turned over
to the blind trust. I have placed restrictions on the
trust even more severe than what is required to comply
with the letter of the law and have restricted the
Trustees so that they cannot invest in U.S. Government
or agency securities.
I stand ready to respond to any questions which
you may have.
STATEMENT OF EDWARD L. MORGAN
ASSISTANT SECRETARY OF THE TREASURY DESIGNATE
FOR ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS
BEFORE THE SENATE FINANCE COMMITTEE
January 11, 1973
10:00 AM EST
Mr. Chairman and members of this distinguished committee,
I am here today as the President's nominee for the post of
Assistant Secretary of the Treasury for Enforcement, Tariff
and Trade Affairs, and Operations.
As my biographaphical statement will show, I was born in
Lorain, Ohio, on March 6, 1938. A few years later my family
moved to Tucson, Arizona.
I
attended the University of Arizona where I received a
Bachelor of Arts degree in political science in 1960 and an
LLB in 1963. I was admitted to the State Bar of Arizona in
1963 and was president of the Young Lawyers section in 19681969. I am also a member of the American Bar Association,
the Federal Bar Association, the State Bar of Arizona, and
the District of Columbia Bar and have been admitted to practice
before the Supreme Court of the United States.
Upon graduation from college, I served in the United States
Army, Adjutant General's Corps,and was honorably discharged in
1965 with the rank of Captian.
After leaving the service, I joined the law firm of Gust,
Rosenfeld, & Divelbess in Phoenix, Arizona, and remained with
that firm until January, 1969, when I joined the President's
staff at the White House as Deputy Counsel to the President.
In October of that year, I was promoted to the post of Deputy
Assistant to the President for Domestic Affairs and also held
the post of Assistant Director of the President's Domestic
Council. The President appointed me to the Council of the
Administrative Conference of the United States in 1969. In
1970, the President designated me as Vice Chairman of the
Conference. During 1971, until my nomination to be Assistant
Secretary of Treasury, I have also served as Executive Director
of the President's Cabinet Committee on Education.
In accordance with your procedures, I have provided the
Committee with a biographical statement and a financial
2
statement of assets and liabilities.
I will be happy to answer any questions you may
BRIEF BIOGRAPHY OF EDWARD L. MORGAN
Mr. Morgan was born in Lorain, Ohio, March 6, 1938.
A few years later his family moved to Tucson, Arizona.
He
attended the University of Arizona (at Tucson) where he was
a member of Phi Gamma Delta social fraternity and Phi
Delta Phi legal fraternity.
He received a B.A. in Political
Science in 1960, was awarded the Freeman Award as the
University's outstanding male graduate.
He received his
LLB in 1963 and was admitted to the State Bar of Arizona the
same year.
in 1968-69.
He was President of the Young Lawyers Section
Mr. Morgan is a member of the American Bar
Association, the Federal Bar Association, and the State
Bar of Arizona.
He is also a member of the District of
Columbia Bar Association and has been admitted to practice
before the Supreme Court of the United States.
Shortly after graduation, Mr. Morgan entered the armed
services of the United States, where he served in the
Adjutant General's Corps.
He received an honorable discharge
in 1965 with the rank of Captain.
After his discharge from service, Mr. Morgan associated
with the law firm of Gust, Rosenfeld & Divelbess in Phoenix,
Arizona, and remained with that firm until January, 1969, when
he joined the Presidents staff at the White House as Deputy
Counsel to the President.
In October of that year he was
elevated to the post of Deputy Assistant to the President
for Domestic Affairs and also holds the post of Assistant
Director of the President's Domestic Council.
The President
appointed Mr. Morgan to the Council of the Administrative
Conference of the United States in 1969.
In 1970, the
President named Mr. Morgan to the post of Vice Chairman
of the Conference.
During 1971 to present, Mr. Morgan has
also served as Executive Director of the President's Cabinet
Committee on Education.
Mr. Morgan is single, and has a daughter by a prior
marriage.
JANUARY 11,1973
Department of
■H1NGT0N. D C. 20220
tlieT
S
a
TELEPHONE W04-2Q41
J 7 89
v
FQR IMMEDIATE RELEASE
January
11,
1973
RECORD CHANGERS FROM THE UNITED KINGDOM
ARE NOT BEING SOLD AT LESS THAN
FAIR VALUE UNDER THE ANTIDUMPING ACT
The Treasury D e p a r t m e n t a nnounced today a final
determination that r e cord changers from the U n ited K i n g d o m
a r e n o t b e i n g , n o r l i k e l y to be, s o l d a t l e s s t h a n fail? v a l u e
w i t h i n t h e m e a n i n g o f t h e A n t i d u m p i n g A c t , 1 921, as a m e n d e d .
N o t i c e of the d e t e r m i n a t i o n will be p u b l i s h e d
F e d e r a l R e g i s t e r o f F r i d a y , J a n u a r y 12, 1973.
in t h e
A "Notice of Tentative Negative Determination" was
p u b l i s h e d in t h e F e d e r a l R e g i s t e r o f N o v e m b e r 2, 1 972.
This
notice invited int e r e s t e d persons to submit w r i t t e n views
o r a r g u m e n t s , o r r e q u e s t s f o r a n o p p o r t u n i t y to p r e s e n t t h e i r
views orally.
No submissions or requests were received.
D u r i n g t h e p e r i o d o f J a n u a r y t h r o u g h S e p t e m b e r 1972,
imports of r e c o r d c h angers f r o m the U n i t e d K i n g d o m w e r e
v a l u e d a t a p p r o x i m a t e l y $48 m i l l i o n .
# # #
M C E FOR RELEASE
IsjSunday, J a n u a r y
14,
1973
TREASURY AGENTS SEIZE
FROM DRUG TRAFFICKERS
-Treasury/IRS
Narcotics
$16 M I L L I O N
D U R I N G 1 972
Trafficker Program
The T r e a s u r y D e p a r t m e n t r e l e a s e d t o d a y c a l e n d a r y e a r 1 9 7 2 s t a t i s t i c s
)r the T r e a s u r y / I R S N a r c o t i c s T r a f f i c k e r P r o g r a m w h i c h s h o w t h a t d u r i n g
lelyear the p r o g r a m b e c a m e f u l l y o p e r a t i o n a l , n a t i o n w i d e in sc o p e , a n d
sgkn to i m p a c t s i g n i f i c a n t l y o n t h e n a r c o t i c s t r a d e b y s e i z i n g t he
irking c a p i t a l a n d i l l e g a l g a i n o f n a r c o t i c s s m u g g l e r s , f i n a n c i e r s , a n d
rafcfickers.
During 197 2 ,
avenue S e r v i c e :
(1 )
(2)
(3)
Treasury Agents
and
support per s o n n e l of the
seized and collected nearly
fickers
(See T a b l e I I ) ,
made a s s e s s m e n t s of
1,406 m i n o r targets
$16 m i l l i o n
$72,880,286 against
(See T a b l e II),
Internal
from narcotics
298 m a j o r
traf
targets
and
s e l e c t e d an a d d i t i o n a l 907 m a j o r t a r g e t s - t h e r e b y i n c r e a s i n g
t h e n u m b e r o f m a j o r t a r g e t t a x i n v e s t i g a t i o n s t o 1,2 3 5 .
In
a d d i t i o n , 1 , 4 0 6 m i n o r t a r g e t s a r e u n d e r t a x a c t i o n (See T a b l e
(4)
r e f e r r e d 137
action, and
(5)
e x p a n d e d t h e p r o g r a m to 46 s t a t e s a n d 82 m e t r o p o l i t a n a r e a s a n i n c r e a s e o f 20 s t a t e s a n d 45 m e t r o p o l i t a n a r e a s (See T a b l e
convictions
+
41
cases
Indictments
to t h e J u s t i c e D e p a r t m e n t
+
74 P r o s e c u t i o n
I) ,|
for criminal
Recommendations=
137
I Of
the 137 c a s e s r e f e r r e d to t h e J u s t i c e D e p a r t m e n t , 22 c a s e s r e ■ted in c o n v i c t i o n s on c r i m i n a l t a x c h a r g e s .
A t y e a r ' s end, 41 o t h e r
iminal t a x c a s e s w e r e p e n d i n g in F e d e r a l D i s t r i c t C o u r t s in A t l a n t a ,
ami, Det r o i t , L o s A n g e l e s , S a n F r a n c i s c o , a n d in o t h e r ar e a s ; a n d a n o t h e r
Biases w e r e a w a i t i n g g r a n d j u r y a c t i o n .
(See T a b l e III).
I At y e a r ' s end, 560 T r e a s u r y A g e n t s a n d 112 s u p p o r t p e r s o n n e l w e r e c o n these i n v e s t i g a t i o n s .
T h e n u m b e r o f a g e n t s w i l l i n c r e a s e to 648
B-ng 1973 d u e t o t h e p a s s a g e o f a s u p p l e m e n t a l a p p r o p r i a t i o n o f $ 4 . 5 m i l !m Proposed b y t h e P r e s i d e n t in t h e f a l l o f 1 972 a n d p a s s e d w i t h f u l l
C rtisan s u p p o r t b y t h e C o n g r e s s .
I)J
3
COMPLETED
INVICTIGATIONS
TATE
METROPOLITAN AREAS
isgissippi
Gulfport
|is$ouri
St.
eblraska
Omaha
3
evada
Las V e g a s - R e n o
5
ew Hampshire
Portsmouth
O
L
2
ew Jersey
Newark-Camden-Trenton
52
10
ew Mexico
Albuquerque
4
5
Albany
1
JjfP l#i Buffalo-Rochester
N ew Y o r k City
12
1
15
88
3
55
orth Carolina
Greensboro-Charlotte
18
3
hio
Cincinnati-Dayton-Columbus
Cleveland-Toledo
17
27
Iklkhoma
O k l a h o m a City
regon
Portland
18
4
!ennsylvania
Philadelphia
Pittsburgh
55
35
6
ew York
Louis-Kansas
TAR G E T S
3
City
8>
18
3
ho.de Island
Providence
6
°uth Carolina
Columbia
4
outh Dakota
Aberdeen
1
■ennessee
Nashville-Memphis-Chattanooga
6
bias
Austin-Houston-El
Dallas-Ft. Wo r t h
Paso
34
7
3
2
13
2
6
ftah
Salt Lake City
^ginia
Richmond-Norfolk
Arlington-Alexandria
27
2
fashington
Sea t t l e
20
5
es| Virginia
Parkersburg
1
isponsin
Milwaukee
6
907
f r Ce of Law
■^ury
Enforcement
Department
1
244
2
TABLE
DE P A R T M E N T OF THE T R EASURY
I
T R E A S U R Y / I N T E R N A L R EVENUE SERVICE N A R C O T I C S T R A F F I C K E R PROGRAM
FOR C A L E N D A R Y E A R 1972
RESULTS
pVTE
issis
issou
COMPL E T E D
INVESTIGATIONS ebras
STATE
M E T R O P O L I T A N AREAS
Alabama
Mobile
Alaska
Ancho r a g e
Arizona
Phoe n i x - T u c s o n -Y uma
A r kansas
Little Rock
C a l i fornia
Los A n g e l e s - S a n Diego
San F r a n c i s c o - O a k l a n d
24
24
21
7
C o lorado
Denver
10
2
C o n n ec t i c u t
Hartford-Bridgeport
13
2
Delaware
Wilmington
1
D i strict of C o l u m b i a
Washington
18
5
klaho
Florida
Miami-Jacksonville
Tampa-Orlando
53
23
bgon
Hawaii
Honolulu
6
1
Georgia
Atlanta-Augusta
21
13
node
Illinois
Chicago-Springfield
Peoria
57
9
puth
Indiana
Indianapolis - Gary
9
2
Iowa
Des Moines
4
Kansas
Lawrence
1
K e n tucky
Louisv i lie-Covington
New p o r t
6
Louisiana
New Orleans
Maine
Bangor
Maryland.
B a i t i m o r e -Annapolis
13
4
est V
M a s sachusetts
Bo s t o n
18
5
ispon
Michigan
D etroit
50
12
Minnesota
St.
TARGETS
13
2
pvada
1
1
Ha
54
9
pw Je
3
pw Me
pw Yo
prth
hio
pnnsy
puth
pnnes
.
exks
tah
irgin
Paul-Minneapolis
12
4
ashin
1
5
i-|Ce
¡ y
TARGETS
3
COMPLETED
INVESTIGATIONS
8
18
3
5
L9
2
52
10
4
m
12
15
88
i
3
55
18
3
17
27
3
18
4
55
35
3
6
6
4
2
1
6
34
7
13
2
6
27
2
20
5
1
6
1
907
244
2
DE P A R T M E N T OF THE TREA S U R Y
TABLE
I
T R E A S U R Y / I N T E R N A L REVENUE SERVICE N A R C O T I C S T R A F F I C K E R PROGRAM
FOR C A L E N D A R Y E A R 1972
RESULTS
TARGETS
COMPLETED
INVESTIGATIONS
STATE
M E T R O P O L I T A N AREAS
Alabama
Mobile
A l a ska
A n chorage
Arizona
Phoenix-Tucson-Yuma
A r kansas
Little Rock
C a l ifornia
Los A n g e l e s - S a n Diego
San F r a n c i s c o - O a k l a n d
24
24
21
7
Col orado
Denver
10
2
C o n necticut
Hartford-Bridgeport
13
2
Delaware
Wilmington
1
District of Colu m b i a
Washington
18
5
Florida
Miami-Jacksonville
Tampa-Orlando
53
23
Hawaii
Honolulu
6
1
Georgia
A t l a n t a-Au g u s t a
21
13
Illinois
Chicago-Springfield
Peoria
57
9
Indiana
Indianapolis - Gary
9
2
Iowa
Des Moines
4
Kansas
L awrence
1
K e ntucky
L o u i s v i l l e -Covington
New p o r t
6
Louisiana
New Orleans
Maine
B a ngor
Maryland
Baltimore-Annapolis
13
4
M a s sachusetts
Boston
18
5
Michigan
D etroit
50
12
Minnesota
St.
Paul-Minneapolis
13
2
1
1
54
9
3
.
12
.
4
1
5
Pi S. Treasury Department
Office cf Law Enforcement
TABLE ITI
RESULTS FOR CALENDAR YEAR 1972
I
Major Target Program
^
'
p.
Metropolitan Areas
s\ \
W‘
Number
Assessments . Dollars Seized >P.R.,
C. u Number
I.
Assessments ,Dollars Seized
Collections
. z t Zz
Atlanta, Ga.
Austin-Houston-El Paso, Tex.
' Baltimore, Md. - Washington, D.C.
Boston, Mass»
Euffalo, N.Y.
Cleveland, Ohio
Chicago-Springfield, 111»
Detroit, Mich®.
Charlotte-Greensboro, N.C.
Miami-Jacksonville-Tampa, Fläi
Los Angeles-San'Deigo, Calif.'
Newark-Canden-Trenton, N
New York City
Philadelphia^ Penna.
Fhoenix-Tucson, Ariz.
Pittsburgh, Pènna.
San Francisco-Gakland, Calif.
Seattle-Tacoma,"Wash
St. Louis, Mo. .
Richnond-Norfglk-Arlington, Va.
Other
». }
/. p
»J.
*
Minor. Target Program
§
•
Totals
$ v- a6l,866 $ '
28,511
19 •
5a , 220
1,895,399
19
-01,000,862
10
22,183
laj "556,815
3
-016,383
3 if •
-0-,
-0-o- m
16,850
11
311,713
13,555
20
1,£50,873
15,2!»9. !
1 163,933
3
2,300
.U,763,862
32
i
m , aai
23
1,656:
3,721,619
15
6,313,906
1 ,099,0 9 3 ,
55
16,000;;
206,195
5
3a , 720
520,a86
1U
6
1,038,690
79 ,68a
18
137,838 .
35,000
1,000,862
7 ,1 3 3
9
1 1 27
122,28 6
3,a57,l58
2U
.
5
a
298
5
a
0
2
2
1
1
0
0
3
3
0
0
6
1
^o
2
2
1
J®
6
6
: 2.
.0
0
2
1 1 60
116
13
70 - %
; 21
ia.
; 83
81;
39"
58:;
212:
3Q
II6
50
5ai,879 $
1,777,593
238 ,83 a
2,156,088
. l5a,U5o
..,723,280
2,539,<818
l,a65,!91
358,639
896,683
10,833,075
1,536,868
.8,a35,031
79 a,162
1,570,771
a71,ll6
2,673,389
22a,932
575,850
26 880
; v8,082,665
$
.
.
x
■
, V
.
£
: .2, j- 8 • a ,
2
32,236:I 2 \ 1
i
0.. 2 12 1
1
2
i
-10..
..
0
0
1
:2
68
1
5
i1
1
ia*
378,6ia
2,ea3
7
72,
b0
5
3
m
2
2
i1
13
S
12
2 .
1
2
a,
"0
0
1
7
, a
ia3,73a
1
2M a
257
iao6. $a6,3l5,19a
22
$26,565,092 $ i,59a,795 : ;7aJ ai
Dpilars Seized includes both property;. anci. currency
P.R. - Cases-Récomraended for Prosecution - I. - Criminal Cases in U'. S. Courts awaiting Trial
G. - Criminal Convictions •
$
ia3,268
853,700
aa,879
$
67,872 §
195,026
550,009
87,012
11 5 ,8 7 7
C-
196,983
8 7 1 ,55 a
692,000
1 5 ,1 3 6
6 3 ,5 17
, a
7 7 8 32
i,aa9,9a6
881,a59
3,879,85.2
3a3,39a
375,731
1 3 3 ,ea3
ia2,877
•
e,iaa
5 7 5 ,5 18
, a
1 2 2 20
U9,913
15,836
2,na,aa3
I3,2a7,l62
$
l,ia7,950
1
- 4 Table
II
Cale n d a r Y e a r 1972 Results of the T r e a s u r y / I R S
Narcotic Traffickers Program
Number
M a j o r Target A s s essments:
R egular A s s e s s m e n t s
J eo p a r d y A s s e s s m e n t s
Tax Year T e r m i n a t i o n
Total
Amounts
221
43
34
$12,368,9^4 4
6,390 , 1 2 2
7 , 806,02 6
298
$26,565,092
95
1311,
$ 2,920,898
43,394,296
1406
$46,315,194
M i n o r Target Assessments:
Jeopardy Assessments
Tax Y e a r Termination:
Total
Total A s s e s s m e n t s
Seizures
invol v i n g N a r c o t i c T r a f f i c k e r s
invol v i n g N a r c o t i c Trafficker:
C urr e n c y
P rop e r t y
Maj or Targets
M i n o r Targets
$ 1 ,578,916
15,879
$11,111,133
2,136,029
Total
Cases
Dollars
Seized
R e c o m m e n d e d for P r e s e c u t i o n
C r iminal Tax Cases
a w a i ting Trial
C r iminal
$72,880,286
in U.
_
Tax C o n v i c t i o n
Total C riminal
Cases
Treasury Department
O f f i c e of Law E n f o r c e m e n t
S. Courts
;,
§ Collected
$15,989,907
74
41
22
137
SECRETARY GEORGE P. SHULTZ
LUNCHEON
U . S. DEPARTMENT OF THE TREASURY
SECRETARY 8E0R8E P. SHULTZ: Bo yea fenow how laany —
pat the dollar voluae of outstanding savings bonds is?
c
«
HAH :
'Not right Off*hand, I wo aIdft’t.
*SECRETARY SHULTZ2
right?
HA'N:
I ms
astounded. $08 billion 'worth
S a le s s t i l l are ©fti ~~ outrunning the redemption
SECRETARY SHULTZ: Yg | , they a r e . But anyway, i f
ion8re sort o f g e t t i n g s t a r t e d on our annual d r iv e or something.
HAPI: tfhat's the average r a te o f return 00 the savings
konds -currently being s o l d e ¿ s o rg e f
SECRETARY SHULTZ: Hell, I think it’s five and a half
percent, isn’t it? That's t l m ~~ now, of course, the rate ef
return you actually get depends upon how long you hold the bends
And if you cash it in right away,of course there’s no return.
Mt that was yppeds and so'that 1 think now, fr©i? the standpoint
ofthe Individual, It is a reasonably c.ofipetit.lvé rate, whereas
Mare was a time when It wasn’t..
•
HAW: lib«huh.
SECRETARY SHULTZ: ...such a good deal.
HAH
So you* 11 s t i l l be in the bond market.
SECRETARY SHULTZ:
Yes.
2
[Laughter]
■soaring,
SECRETARY SHULTZ':
P v e never been In i t without i t
[La u g h te r]
HAN: Georgs * I don’ t know how you u s u a l l y handle
■these luncheons. Are we formal and on the record from row on?
SECRETARY SHULTZ:
[ U n i n t e l l i g i b l e ! what we h a v e . . .
[Laughter]
HAN:
Is t h a t savings bonds f i g u r e ors the record?
[Laughter]
SECRETARY SHULTZ:
MAR:
It Is.
Hell» vie accep t the same r u le s [phrase u n l r i t e l l i g l b
SECRETARY SHULTZ: The trouble with having d i r e c t
■quotation* when m have a rambling luncheon-type d is c u s s io n i s
tnat my syntax and everything i s l i a b l e to get so bad t h a t Pm
lsha$|d of — o f i t .
B u t...
HAH:
Thank you.
SECRETARY SHULTZ:
. . . i f somebody has a d i r e c t quote
[that you think i s — could co me to f e e l i s o f real i n t e r e s t s
Ithg^r i f you could check i t with ¿1m Donnelly» why* maybe we
v*% do- t h a t .
MAH: W e l l 9 i f nobody e l s e leaps 1o, l w i l l , George»
ask' you a s t a r t e r . f®rn going to take an ea$: one,
f was
|°lBg to ask how you saw the .wage/price control f u t u r e .
L
SECRETARY SHULTZ: Wall» we w i l l
the P resident
I pas stated h is i n t e n t io n to ask f o r an extension o f the a c t .
Thank you.
II.
The P resident s t a t e d his in t e n t i o n to ask f o r an e x t e n ■ *?J o f the a c t , And we W ill do t h a t . He lias- s ta ted h is I n t e n t io n
I
ron ©w
snd f i s c a l p o l i c i e s t h a t are c o n s i s t e n t with
reasonable p r ic e s t a b i l i t y » to behave* in government» i n s o f a r
I? 5?"v®rnraent wage r a t e s are concerned» in a manner th a t Is
stent * and has in s t r u c t e d us to c o n s u l t widely about what
prehio th a t framework makes sense in - - in a control., mechanism
that iri11 be„ ss he has p u t It* the most effe- itive use of the
controls that we can come up with for the coming period.
And we have now consulted with over 400 people in
¡oneway o r another, lie had a meeting with the joint congressional
leadership Friday morning,, part of which
devoted to this
subject. And I think we non fe-al that we've more or less completed
the consultation stage «*«*not that we area*t ready to hear further
ideas if anybody has thorn 9 but on the whole b y this time I would
say as «- as people do rush in with something that they feel
lisa bright observation that we — b y and large9 by this time
IfeVve heard it before. That is» after a while things start
repeating and there£s only so mush to be said and it's been
said. So we are now at that stage. And tàiflêtimé before long
the President will decide what he thiaks the ‘
right structuré
pv the control system is and also what he thinks the right
recooendafioti ip Congressamore preci-seny v 1s on the Economic
Stabilisation Act
flew the act a
s s written is permissive o f a fairly
hUo r
ange of possible control systems. It'was addressed t o the one that was put In place'in Phase II9 b u t i t
It permits
fcuite a |of of variation. And we are considering ~~ all of
the%things that people have suggested that might be dona are
Ido-able within the framework of the act» that is» the act we
have.
HAH: Hell» do you think» Hr. Secretary,you*11 just
pfc for an extension of that — of the act that is expiring?
pr m i y o u come up with specific...
SECRETARY SHULTZ: Hal1» ff you ask me wftat is the
President going to decide» then I have to say wait and see.
pd Idon’t know; he hasn’t decided yet.
HAH* Hfi&t do you recommend...
I
SECRETARY SHULTZ: But we knew that -« we know that
Nr{problems are la food prices. If you — you•ve — I*m sure
roy,ve all looked through the various price Indices...
HAH? (Jh-hub.
L
SECRETARY SHOLTZ; . .and seen that» for example»
1* you^take year over year the nièst recent year on the GflF deflator
J;|Q
private nonfarsvas compared with he prior year that
r,
)
e
Y
w
e
r
e
down to era and a half percant the-most recent full
Ifoar »whereas food is up 20 perc©fttorso^etfttng 11ke that.
in ©cher words« 1 you look at 6« overall average only» you
a
4
don * t see the ria t u r f o f the problem.
So food is a problem.
We think t h a t the medical area c o n s t i t u t e s a problem' ~~
not that the p r ic e s d o n 't seem to have come down 1ft t h e i r rate
of Increase a 1 i t t i e b i t » but the c o sts haven’ t ; and you have
a sort o f ,a c l a s s i c c o n t r o l-t y p o profiles! where the s e r v ic e s
rendered change and you don’ t make the impact on c o s t 0 Which
is what people r e a l l y care about» th a t you think you a r e . So
v;a see t h a t as a problem. A n d . . ;
HAH:
Georgs» wouldn't t h i s be aft a p p r o p r i a t e . . .
pi kind o f p n - a a i p r a i t i i i e n ,
m a t ?$» tne t y p i c a l a n a l y s i s i s
i f you look a t the p r ic e performances t h a t I s n ’ t where the
problems are» big labor and big management.
HAH: I n t e r e s t r a t e s are never mentioned in t h i s r e c i t a tion. Are you p r e t t y happy with the way the c o n tro ls have worked
on In te re st r a t e s ?
* SECRETARY SHULTZ: He had a -•» we’ ve thought a lo t
labout th e t, And Arthur Burns convened a meeting o f fin a n cia l
[people to discuss the question of whether the Committee On latere
jAnd Dividends was a
a useful de-vice. The general impression
[seemed to ha that I t was. And we have ~~ fe e l that we’ ve gotten
I some use out of i t . And ce rta in ly t h a t ’ s an area that can stand
continued scru tin y .
HAH: In your talks with the 400
[of Phase III...
go
— on the structure
SECRETARY SHULTZ: I would say the con str u ctio n area
p ©ns where we’ ve had» we think» q u it e a l o t o f s u c c e s s . And
[the — that seems to be going on p r e t t y w e l l .
HAH: In your t a l k s » what met In points have emerged»
| s you talked with a range o f people» labor» b u s in e s s , congressional
Readers» and so on?
<pr&prA&v sum ??•
yp.il . fir**.
this
5
monetary p o l i c y * you can f o r g o t f t , because there i s n ’ t any
way that the c ontrol system w i l l contend with u n d is c ip lin e d *
government behavior on fundamental m a t t e r s ." And honest to
goodnesss 1 d i d n ’ t prompt anybody to say t h a t , but people say
that a l l tha tim e. And so 1 - - I think th a t i s one t h i n g .
There 1s s — 1 t h in k a -•* c e r t a i n l y from the comments
a lo t of awareness o f the c o s t s ov the c o n t r o ls program as well
as the b e n e f i t s , from both la bor and management comment on t h a t - the anomalies created by p r ic e c o n t r o l s and p r o f i t margin c o n t r o ls
(you car. have endless examples o f them); the delays and d i f f i c u l t l y
and the p o t e n t i a l d e b i l i t a t i o n o f -« o f the c o l l e c t i v e bargaining
[process t h a t goes with too long adherence to wage c o n t r o l s ,
and so on: these kinds o f problems are on p e o p le ’ s minds. At
the same t im e , I would s a y , with a few e x c e p t i o n s , there was
very general agreement with the P r e s i d e n t ’ s notion t h a t we should
continue^some form o f c o n t r o ls f o r now and n o t , s a y , drop the
whole t h i n g , f o r
f o r example; there were very few people
¡that suggested t h a t . There were some people t h a t suggested
th a t. So t h a t in a sense people s a i d , "Hal1 , here are problems,
snd^we see l o t s o f them, but don’ t get so bowled over by the
¡problems t h a t you drop the whole e n t e r p r i s e . The - - the task
ps to so .c o n s tru c t the system, or r e c o n s t r u c t i t , so th a t we —
j$e raanags to g e t away from some o f these prohVstas and s t i l l
preserve the — the b e n e f i t s t h a t we have been G e ttin g from
it,«
MAH:
George, were y o u . . .
L
SECRETARY SHULTZ: There were l o t s o f p a r t i c u l a r t h i n g s .
|rne people come and they have some
o fte n they have soma p s r t i c r ,ar thing t h a t a f f e c t s them and they want to beef about i t ,
and so wf have t h o s e ; but those a r e n ’ t o f i n t e r e s t here.
MAN:
1 H -s
Da your p r o f i t .margins [words u n i n t e l l i g i b l e ] ?
SECRETARY SHULTZ: H e l l , what - - what the President
do we’ l l s e e .
I. — 1 don’ t want to prejudge t h a t .
MAM: What’ re - - what are your options on - - i f I
pan put I t t h i s way, what are your options on food?
I,
.
SECRETARY SHULTZ: There are two dim ensions, I t h i n k ,
t ? f | | ; 0^s about a nyth ing. One dimension i s p r o c e d u r a l. And
| h®
1$ s u b s t a n t i v e . On the - - on the procedural s i d e ,
to do with the process through which whatever c o n t r o l s ,
pr whatever, are generated. And the question I s , can you c o n str u ct
k r l v ' ? ^ Ji*8 t h a t , on the one hand, taps the i n s i g h t and the
i n i s IP -of people who know the most about the s u b j e c t , and,
^ne o t h e r , by v i r t u e o f t h a t tapping e n l i s t the maximum p o ss ib le
responsiveness to whatever the outcome Is? That8s one element
of procedure I think that we — obviously, the whole argument
1n the Tabor-management side about trlpartitism is the •- 1s
the same kind of thing. And then the other procedural element
has to do with government policy. And In many ways In this
field we have — we have government policy on controls trying
to hold prices down * and we have government poll -- other ranges
of government policies trying to get prices up In the agriculture
area. And we need to sort of mediate between these two legitimate
objectives9 one having t© do with farm Income and the other
having to do with — with consumer prices. And we need procedures
for that.
HAH: Well, wouldn't this be an appropriate time to
do something ©n the agricultural front? Farm Income 1$ up.
Fars? prices are up a hell of a lot. And every good economist
Including you and all your old colleagues have talked for years
about reforming agricultural programs. Arthur Borns has now
said this. I % that something that you would consider on the agenda for the year?
*
W l %
SECRETARY SHULTZ:
the -- I think the trick
Is to -« i f «.« i f th is is true» to take advantage of the situation
rjiere demand has risen greatly and see If we can't, have arrangements
¡that w ill hi low income to stay high through serving expanded
fceraaRd, rather than through c u r ta ilin g supply. And of course
|tns present programs give opportunities for that within at le a s t
I®8*® lim its . But ns have - - fo r example, l think that the - extension 9 the «*« the increase in acreage allotm ents that
has taken place in the continuation fo r the year 1973 ©f suspension
01 ?|1 q u an titativ e r e s tr ic tio n s on the import o f meat are two
|jp&mp]as ©f -« of p o licy actions that we have soma control over*,
but I think th is can - - th is can a ll be done i f we can devise
a way to do i t without destroying the accomplishments In getting
pang Income up.
I f you drop back on t h a t , then yoy wind up
ing al 1 the things you've been trying to do
I
s w HAM: Of course you could put d i r e c t c o n t r o l s on raw
P9Heii1 tiara 1 produ cts. But l guess t h a t ' s out **- t h a t ' s o u t .
I f
^ SECRETARY SHULTZ: You could do i t p ro c e d u r a lly * whether
|you^could do i t e f f e c t i v e l y , or whether you would get a r e s u l t
|M.ac would be d e s ir a b le - - bat we f e l t the answers to those
■<ast two questions are no, you c a n ' t . And I d o n 't see any - I ?Vs
to hear a reasonable argument i n the other d i r e c t i o n ; pnd we find anomalies o f one kind or another every time you
HAH: George, how do you react to the profit margin
■rule argument? -Nany businessmen are arguing now that they're
being badly hampered» and p r o d u c t i v i t y ' s being hampered* by
the p r o f i t margin r u l e . Do you see merit In t h a t ease? And
1f so8 what kind ©f © p r o f i t margin rule change could you Imagine?
SECRETARY SHULTZ: H e ll» I think I t ' s j u s t a matter
which only confirms common sense 9 th a t
p o s i t io n where t h e i r p r o f i t s are constrained
and the y're r i g h t up a g a i n s t the c o n s t r a i n t * they w i l l - - they
p i l l ease^off in t h e i r e f f o r t s to control c o s t s / Which i s j u s t
exactly what we d o n ' t want to see happen. And th a t has always
been what's happened when you
when you had a long-term c o n s t r a i n t
(that was t i g h t . And 1 think by and l a r g e people understand
that.
of escort observation *
jlfyou put people In a
The question Is whether or not there i s sc?ms way to
use p r o f i t c o n s t r a i n t s or. a temporary basis® so t h a t you don’ t —
so that people d o n 't make long-term changes t h a t would In the
Hong-term be bad fo r t h e m in ©refer to meet something t h a t you
define as not l a s t i n g f o r very lo n g . And t h a t ' s been the s t r a t e g y
fig h t along. The - - but I think t h a t the — these eounterpreducP«vs p r a c t ic e s are emerging* and probably I f people began to
think that w@ had a permanent sys tern o f p r o f i t c o n t r o ls t h e y 'd
emerge in* a g re a t rush. S© we have to avoid t h a t .
I «— the business community was very hot f o r c o n tro ls »
[&s you know. They have mostly f e l t t h a t what needed to be control
pas labor» but I think they have discovered t h a t In a p o l i t i c a l
fsmecracy i t ' s p r e t t y hard to control one e le g a n t o f the p ic t u r e
fptgout doing something about the o t h e r . And you get driven
1 ° , [inaudib le due to cou.9h1.ng3 the p r o f i t s i d e . However what
I s re r e a l l y I n t e r e s t e d In c o n t r o l l i n g i s p r i c e s . And we're
Beany in t e r e s t e d in c o n t r o l l i n g i t through the market and using
| ; ‘^ ° ^ s r l a y o f a c ontrol system as much as one can to accomplish
Ted
L
HAH; Hhon might the
the ~™ well» when might the - jo t s — the P r e s i d e n t ' s proposal bs going to the H i l l ? And
I ? ??y
any doubt t h a t the Congress w i l l approve an e x te n sio n
p* the — o f the a c t and your -« your ideas?
1 t
SECRETARY SHULTZ; H e ll» I *vo talked t© q u ite a l a r g e
lumber ©f people on the H i l l , There's been . I - - I th in k i t ' s
| r lr to say» a g e n e r a ll y fa v o ra b le response to what the P r e s i d e n t ' s
guested.
, if . - But t h e y ' r e w aiting f o r s p e c i f i c s * both in terms
Q x a ctly i s he going to request In the l e g i s l a t i o n and
@ ^ e t l y i s going to be put io p l a c e . And l think I t appeals
iw
Congress* as I ' v e experienced i t » anyway» t h a t
l/Z
*^s*ident
should
put in place whatever it i s he th in k s Is
the
p
g
h
t
system
f
o
r
the coming year and have i t there so I t
can be' looked at-» pointed to» and examined as you consider what
8
¡to do with t h e l e g i s l a t i o n » r ath e r than s a y 9 " I f the l e g i s l a t i o n
1s extended* then we would contemplate p o s s i b ly doing t h i s or
possibly doing t h a t or p o s s ib ly doing something e l s e . 1
'1 I t would
Is preferable as f a r as they *re concerned to know j u s t what
It Is t h a t the P resident would do,
I
don’ t , on the other - - 1. — q u it e a few have said
to tse — o t h e r s would perhaps have a contrary view» but q u it e
a few have s a id to me t h a t they f e e l I t I s a mistake to try
to wMte a h i g h l y d e t a i l e d b l u e p r i n t f o r a control system In
l e g i s l a t i o n ; t h a t t h a t 1s a -» hot a d e s i r a b l e r o u t e ! th a t there
has to be sosae a d m in is t r a t iv e f l e x i b i l i t y . But I w i l l not attempt
to speak f o r the Congress; they speak for themselves continuously
Ini
all wisdom.
Bid you get in your t a l k ! ; with congressional
¡loaders any l in k a g e between e xtension of c o n t r o l s » on the one
p&idi and the c o n f l i c t over impoundment?
SECRETARY SHULTZ: Hot p a r t i c u l a r l y — except t h a t of course to t h è e x te n t t h a t the Congress accepts the idea th a t
the federal budget has something to do with the problem o f —
Is an — i s an economic matter o f s i g n i f i c a n c e and t h a t i t ’ s
¡possible f o r i t to be too big» there I s a j o i n i n g o f the i s s u e ,
N t s© much in terms o f the l e g a l i t i e s o f the Impoundment processa
p|t how do m s c o n s tr u c t an e x s c u t i ve-1 egi s i a t i ve process tha t
out .somewhere on purpose. And the j o i n t committee t h a t
N s formed» or was put in to p la c e as a r e s u l t o f the — in the
p b t c e i l i n g 1agi s i atIon » I hops w i l l r e a l l y cerne to g r ip s with
this hard. And the P re s id e n t has I n s t r u c t e d ins and everybody
l ì s M t h a t l know o f t h a t m s should bs as .coop era tive as m p o s s ib ly
can be with t h a t congressional e f f o r t .
I f t h e r e ' s anything
|«®y want from us# we’ l l provide i t
without t r y i n g to t o i l
P w hew to do t h e i r j o b . But I think
I think t h a t ’ s the
essence o f the problem» r a th e r than ths s o r t o f t e c h n ic a l debate
Bevel that 1 t es been put on.
[S e v e ra l raen begin to speak a t c u e s . ]
I * /
SECRETARY SHULTZ: Yen see» th s Congress» both houses
**}© Congresse voted t h a t i t would bo d e s ir a b le to hold o u t la y s
P f i s c a l *73 to 250 b i l l i o n . They both voted t h a t . Mhers
I f Jj&S not p o s s i b l e to f i n i s h . t h a t b i l l o f f was on ths how do
to t h a t d e s i r a b l e o b j e c t i v e . However in ths b i l l i t s e l f
pane is included a whole s e c t i o n t e l l i n g what
the President
■uat he should do when he impounds funds. So we consider th a t
K f ^111 & on the one hand» endorses ths o b j e c t i v e s and, on the
guier hand, acknowledges i m p l i c i t l y t h a t the P resident i s going
r$ ’impound forads.
HAH:
rip. S e c r e t a r y , t h i s committee that, provided
9
for I t * J o i n t eommities en the debt c e l l i n g — I s n ’ t t h a t r a th e r
boot, though* now i n the budget? The Senate never got around
Jto appointing t h e i r members u n t i l l a s t week. And as a matter
(of facto by the time they get to having any s e ss io n s a t a l l - Ithay haven’ t e le c t e d a chairman over there y e t - - t h e y ’ l l be
lEora concerned with' the budget '-for f i s c a l ‘ 74 than f o r f i s c a l
|'7S; t h a t ’ l l be a thing o f h i s t o r y by then to a l a r g e degree.
SECRETARY SHULTZ:
MAH:
And the th in g i s only temporary» I f you r e c a l l .
SECRETARY SHULTZ:
MAH:
W e ll, I think t h a t the C o n g r e s s . . .
H e ll» I t I s . b u t . . .
There’ s no date f o r I t b e y o n d . .,
SECRETARY SHULTZ: Ho. there i s a date s e t . X b e l i e v e ,
[for when the committee i s supposed to report to the Congress.
MAH: Yes. But they had to change t h a t . And now
the best they c&n hope f o r Is some s o r t o f an Interim report
by February 15th.
*
’ SECRETARY SHULTZ: W e l l . X would hope they would keep
[the pressure an themselves. Everyone agrees t h a t there Is a
[big problem t h e r e , and i t ’ s up to the Congress to solve i t .
|And I was asked on a number o f occasions In testimony did 1
[think I t was a d e s i r a b l e way to proceed to - - to get to the
I2SQ billion by herloc a c t io n taken on the part, o f the P r e s id e n t .
■And X ~~ l responded th a t no. I d id n ’ t think t h a t was a d e s i r a b l e
■way to proceed, but i t was necessary under the present circumstances
|b@eaus@ the d e s ir a b le way d id n ’ t y i e l d a d e s i r a b l e r e s u l t » and
■that the - - the process needed to be reconstru cted so t h a t there
Iwss soma chance o f g e t t i n g to a d e s i r a b l e r e s u l t .
S e e . t h e r e ’ s always t h i s d is c u s s io n about p r i o r i t i e s .
Bveÿtÿbedy wants to argue about p r i o r i t i e s . Hell » ï — X do.
N o . And ï t h in k t h a t ’ s a good argument. And «- and i t . i s
sort of the essence o f the budget p ro c e ss . But the way in which
fhe «» the budget 1s done by the Congress i s not a p r i o r i t y «
petting method a t a l l .
I t j u s t takes each piece as i t comas
pjd votes æore or l a s s or whatever. And you only s e t p r i o r i t i e s
P f you s a y 9 "Hare i s what the t o t a l i s going to be. And now
f U h i n that t o t a l , where are we going t o go? a And t h a t means
f n$t de sirab le as A may b e . we*re e i t h e r going to do without
C \ er without B. or without something, in order to reach the
P Q$sl. T h a t’ s what p r i o r i t y s e t t i n g i s .
I
HAH: A l l r i g h t . But wouldn’ t you agree t h a t the
Iverall end i s not a given expenditure l e v e l n e c e s s a r i l y but
a given o v e r a l l f i s c a l p o l i c y .
X noticed in your response to
the l e t t e r from. J a c k d a vits' t h a t y o u s aid the ad m in is tra tio n
[is thinking about the tax side o f the budget as well as the
expenditure side f o r next y e a r . Do you see some o p p o r t u n it ie s
for r a i s i n g a d d i t io n a l revenues out of a ta x reform proposal?
SECRETARY SHULTZ:
MAH:
hi death a n d . . .
Uo.
Even in any of these areas l i k e c a p i t a l gains
SECRETARY SHULTZ: Well# there are a l l kinds o f ways
In «bleb, you could change the tax system t h a t would r a i s e revenues.
The - - the P r e s i d e n t : s view Is t h a t we are h e a v ily taxed enough*
and that i f w@ have a -- i f we have tax changes t h a t rearrange
things9 they - - t h a t ’ s what they should do: they should rearrange
plugs# and not r e s u l t in a net tax i n c r e a s e .
In other words#
the m y to solve the budget problem i s not to take more money
p | y from the American people but to do a b e t t e r job o f d i s c i p l i n i n g
government spending. And I must say I - - X think t h a t the p o l i t i c a l
MAH: Hell# taxes are going up neverth eless f o r a
lot o f people t h i s next month# something l i k e $11 b i l l i o n as
J P ssa K o f S o c ia l S e c u r i t y In c r e a s e s . J u s t within the given
tax deal# do you think there ought to be s h i f t s In the I n t e r e s t
of combating r e g r e s s ! v i t y ?
SECRETARY SMOLTZ: Hell# as you may remember# much
to everyone’ s s u r p r is e the P re s id e n t was — cautioned a g a i n s t
I ”® 20 percent in c rea s e in S o c ia l S e c u r i t y and the increa se
[*R tsxes. Me went along with I t once I t got done. But I think
P f l the continuing increase in p ayroll fa xe s represents a problem.
|P j when people b l i t h e l y increase b e n e f i t s t h e y ’ d b e t t e r be
^■‘inking about t h a t . And we c a l l e d t h a t to everyone’ s a t t e n t io n
very strongly.
MAM:
Mr. Sec reta r y . . .
SECRETAR? SMOLTZ: See# we get moro and m o r e in the
position there where you «— you ~~ you have to say we ~~ we
pavo In the fe d e ra l budget a g i g a n t i c t r a n s f e r mechanism from
|P0S® v/tio are working to those who a r e n ’ t working, and 11 *s
W ñ . sca^? ©f i t Is s t a g g e r in g a t t h i s p o i n t .
And one has to - L®^ysstion th a t scale# and a ls o question the methods used to
raise the money,
11
U did I understand you to say t h a t you f e l t t h a t the navi c o n t r o l s *
whatever they slight be* should b e , In e f f e c t * [Word u n i n t e l l i g i b l e ]
bythe Congress* or do you think soma congressmen have f e l t
that?
SECRETARY SHULTZ: H e l l * I 1m saying t h a t the — the
p o s s ib ili t y t h a t the P re s id e n t would make up his mind about
the s tru ctu re o f the control systems t h a t he thinks 1s the most
e ffe c tive f o r 1973 f a i r l y promptly* so th a t when they are c o n s id e r
ing t h i s * there i t i s , t h a t ' s very a t t r a c t i v e to a l o t o f congres
sional people*
HAH: Do you a n t i c i p a t e , th e n , in -« what? the next
few weeks or months t h a t the shape o f t h i s w i l l be announced
by the White Bouse?
SECRETARY SHULTZ: H e l l . I d o n 't want to - - to make
any statement t h a t hems the P re side nt in in time or substance.
And he's got t h i s matter new; we've f i n i s h e d our c o n s u l t a t i o n $ 3
j&a're g e t t in g our material to him, and h e 's going to have to
decide what he decides*
*
HAH: In your rec e n t g o l f se ssions with George Hoary,
have you gotten any i n d i c a t i o n Whether h e 's going to accept
the i n v i t a t i o n to suggest names f o r s u b -s e c r e t a r y posts?
i
SECRETARY SHULTZ:
I t ' s been too cold l a t e l y f o r g o l f *
[Laughter]
B u t..*
HAH: I d i d n ' t mean to l i m i t the question to the g o l f
course*. I'm asking in a general Way do you think t h a t he W i l l * . .
SECRETARY SHULTZ:
MAH:
W e i l, I — I . . .
...a c c e p t that invitation*
SECRETARY SHULTZ: W e l l , I ' v e always made i t a p o l i c y
P0* to try to speak f o r George Nesny*.*
[Laughter]
L
, _ . . . b e c a u s e ha speaks f o r h i m s e lf . And so he w i l l
i^y t??natevar he wants on t h a t . But m y
my general impression
I *n$t ha's net going to j u s t s o r t o f g ive you a l i s t o f SO
B^as^to choose among, or something l i k e t h a t , but i f there
|bn>f-st^°^ th a t you want him to think erf p o s s ib le names f o r , , why,
I n t - h e ' l l be c o o p e r a t iv e ; ha always has been. And. I ' v e
12
talked t© him about p o s s ib le people f o r one thing and another
a great deal when I was S e c r e ta ry o f t a b o r . And so 1 don’ t
see what's so d i f f e r e n t .
flAH;
wasn't I t c l e a r l y t h a t s p e c i f i c a request
for names f o r [word u n i n t e l l i g i b l e ] jo b s ?
SECRETARY SHULTZ:
MAN:
Not t h a t I know o f .
Mho's the b e t t e r g o l f e r ?
[Laughter]
MAN: You mentioned t h a t you were Impressed with the
bright o f the burden ©f the S o c ia l S e c u r i t y l a x without any
suspensions or reductions f o r 1ow->wsge workers» even without
a national he a lth insurance program. Is the a d m in is tra tio n
cosing around to the Idea o f tapping the Treasury f o r some of
the revenues to support these programs?
SECRETARY SHULTZ: No. I d o n 't
administration p o s i t io n » but f t does seem
the p a yroll ts&es now 1s a «« I s q u it e
p e needs' to think about t h a t f a c t as you
want to suggest any
to me that^th e s i z e
substantialw And
consider o t h e r . . .
HAN: I s the a d m in is tra tio n a g a i n s t tapping the Treasury
pvsnue - - Treasury f o r revenues f o r t h i s proposal?
SECRETARY SHULTZ: He6re not ta k in g a p o s i t io n on
jhat^at t h i s p o i n t . That i s 8 wssra th in k in g over these things»
f n<* J'ra net ready to pounce.
I.
HAN: H e ll» I s the admin1s t r a t i o n developing proposals
Bn any other d i r e c t i o n f o r reducing the r egress!vifcy o f the
focial S e c u r i t y t a x ?
I .
Intern.
SECRETARY SHULTZ: Me have been reviewing the ta x
I gyess the Treasury does t h a t p e r p e t u a l l y .
But» anyway
i^ncs Isvs been here in «Jons we've had an I n t e n s iv e e f f o r t going
l n.[fviewing cosaprehensi v e ly our experience with the ta x eft ¡nge
I t «*nk t h a t ' s an important t h i n g : t h e r e ' s - - th e re *vs beer?
■srriflc changes in *69 and *71, And so the question 1s» what
isppenad as a r e s u l t o f t h a t ? And we've been t r y i n g to f i g u r e
out as best we can» end then review a wide range o f p o s s ib le
|nang@$ th a t have been suggested o r can be thought up. And
mu
f i n i s h e d t h a t p ro c e ss .
L
HAN: lias your jo b o f g e t t i n g clown to 2S0 b i l l i o n s
■*e‘R s u b s t a n t i a l l y worsened by the resumption o f bombing when
1
jths pese© t a l k s broke down?
SECRETARY SHULTZ: Well» the ~~ ob vio u sly t h a t c o s t s
poney. Buts t h a t whole Vietnam s i t u a t i o n I s 1n s very d e l i c a t e
|i@g.0i1$tin<g § t a t e e and X a s p ir e not to have anything whatever
[to say about i t t h a t might cause Mr. K is s in g e r to have to spend
Ian éfxtra h a l f an hour e x p l a in in g i t away ©r something, s© I'* 11
Hus-t pass on t h a t .
MAH: H a l l , t h i s Ï d o n 't think w i l l embarrass Fir.
Kissinger, being a s t r a i g h t f i s c a l q u e s t i o n . Are you s t i l l
holding to the $250 b i l l i o n c e i l i n g ? Which would Imply t h a t
1f defense expenditures did r i s e as a r e s u l t o f whatever happened,
[that something e l s e would have to go down even f u r t h e r than*
[presently planned,
SECRETARY SHULTZ: H e ll» I wouldn't — I wouldn't
accept a i l the I n t e r n a l s o f your question but to say t h a t the
President; intends to send up a f i s c a l *73 budget w ithin the
$250 b i l l i o n l i m i t .
MAH: tlhat happened to the P r e s i d e n t ' s statement t h a t
na \miü d ,«*« he would t a l k about a tax reform program before
the end o f *72?
SECRETARY SHULTZ:
M o l l , we did t a l k a b o u t . . .
■'HAN: Or send up a program I guess maybe i s a b e t t e r
p y ©f p u ttin g i t .
• - ^ * <i «(7 ^ t j
# ■» y »v >v *
v r«
Ei'^^vW 'K
BU irvUbtüi
» > ir w i» iw n s
s Vi t 1 C C o
p a set of'proposals, as yey know. And they have done that,
pnd there was a meeting about a month ago, I believe, or something
N that' order , and we did not only listen to the suggestions
fhat were put forward there - - we did put forward so me of our
Pgi^hlch were not greeted-warmly, but nevertheless they were
fut forward. And Ï think In the light of their reactions that
rs «aye to — to think about that seme more. He are also trying
coordinate our efforts with those of the Congress and gain
t?Qf whatever hearings the Congress may hold, as well as eontribut
f°«eyonc! the proposals for a federal efreu1t«breaker or for
|,“
f support for state cireult~breakers, on the one hand, and
| rÊ s1d to private school on ihe other, ws haven't put forward
Inexplicit proposals — beyond the most important tax proposal :
keep taxes down by keeping spending down.
MAH:
I f 1t became obvious t h a t there i s needed a
tax In srea se in 174 , or even *75, Would you 'rather Congress
hold o f f . , .
SECRETARY SHULTZ: I t h i n k i t ’ s q u it e obvious we*re
not going to have a
a ta x Increase t h a t w i l l have an Impact
In f i s c a l *74.
And
and we think the way to proceed i s to have d i s c i p l i n e
on spending; t h a t the f e d e ra l budget i s g i g a n t i c , and I f any - [if people r e a l l y rsean what they say about p r i o r i t i e s , w-a ought
[to bq able to f i n d a way to do the t h in g s people want to do
p i t bin t h i s g i g a n t i c s u b .
HAH: H e l l , on — on ta x reforin, Mr. S e c r e t a r y , Uays
and Hsans o b v io u s ly i s going to have sons tax reform h e a r in g s .
SECRETARY SHULTZ :
Right.
H&fi: E a rly — probably f a i r l y soon. How, do you
psisalig© your sending up o f your own s u g g e s t i o n s , your own
reform program?
SECRETARY SHULTZ:
MAfv2
H ell, « M l
hays to see
In time f©
SECRETARY SHULTZ: . . . w h a t w i l l be most h e lp fu l in
the hearings process as the Hays' and ilsans Committee decides
m put i t forward.
And i don’ t know- t h a t they have determined
that precise format y e t . But « ' r e in the p o s i t i o n o f wanting
to work f u l l y and c o o p e r a t iv e ly with the committee in consider
that Issue.
NAB:
Is there a r u le o f thumb — and t h i s could
sdd
I
v.
months^ & y e a r s or w hat, th a t a t which — a t which p o in t you
nave to pony up the money, no m atter how 1©ng?
.
,
SECRETARY SHULTZ:
|°sve to pony i t up.
HAff:
H e l l , i f you spend i t , you c e r t a in ly
Y e s , but a t what point in time?
SECRETARY SHULTZ :
What we spend our time -.fiere doing
15
is finding i t so t h a t 1t can bo ponied up,
HAN: R i g h t . But a t what p oint 1n time do you a c t u a l l y
have to put I t on the books and — and account f o r I t ? Obviously»
the Increased bombing Is o f course to be r e f l e c t e d In the current
budget. But — and I*m — l *m -asking the question on a r e a l l y
broad fraise to Include th in gs l i k e hurricane Agnes r e l i e f or
kny ~~ any sudden Increase over; - - over a normal l e v e l .
SECRETARY SMOLTZ: There i s a f a i r l y good s iz e d amount
of room f o r maneuver w ithin the budget» f o r the'most p a r t ,
taithir» defense» f o r e x a m p l e .; .
HAM:
Certainly.
SECRETARY SHULTZ: . . . w e can move money from t h i s
account t© t h a t account with congressional approval * and t h a t *3
Ml done in a proper m y *
And the same i s true w ithin other
budgets» within l i m i t s . So t h a t some sums» some changes» can
be accommodated to without changing your t o t a l . Obviously»
¡there comes a point when - • when the s i z e can get so g r e a t th a t
jelther you have to go bask in'and change the law or impound
or do something l i k e t h a t In order to accommodate an in c rea s e
someplace. And t h a t i s varied with the amount and the timing
ff things.
HAM: To keep f i s c a l 873 within 250 b i l l i o n » how mush
p r e Impoundment in b i l l i o n s o f d o l l a r s 1s needed? And i s there
Fly room f o r maneuver In s h i f t i n g programs — not Impounding»
p t s h i f t i n g Into another budget the next budget year?
I
SECRETARY SHULTZ: Tip,re’ s > - there i s always some
p b llit y to s h i f t funds from one budget year to the n e x t , lie*vs
| b th® whole t r i e d to — a t — a t a time when the economy was
fo'c ioving as r a p i d l y as I t 1s now» i f you remember» we t r i a d
| 9 §st as mush spending as we could and we — and we s o r t o f
|ook. from the f u t u r e and -sp en t•and speeded up c o n s t r u c t io n p r o je c t s
|««p.r acts resent and whatnot» which I think i s a sound economic
I® ncy8 and
and are t r y i n g now t© — a side frora t h i s b i g '
Impoundment e x e r c is e » to — t o . t r y to cool a t l e a s t some areas
■ fr »■
HAM;
H e l l , how de you m a k e . ..
L
SECRETARY SHULTZ: So l think t h a t t h a t i s — t h a t
ps a — that i s a process t h a t you go throu gh» and so there
Is &OBiB movement from one f i s c a l year to the - - the o t h e r .
| ^ 9 as we look ahead» however» we see *74» f i s c a l *74» as o n •
|Pe ^»ole a t i g h t e r » more prosperous year than f i s c a l *73 in
ene sense o f being c l o s e r to f u l l employment. And we would
16
hops the economy Mould continues and we could s o r t o f work an
orbital p a th 'o u t where mo can kind o f got. to something t h a t ' s
sustainable. So I t d o e s n 't make a l o t o f sense to push spending
from *73 to *74«, because i t ' s a — 1« some Mays i f you've got
to spend i t * y o u 'r e b e t t e r o f f to spend 1t In '73.
HAM:
Which lea ve s how much l e f t to be Impounded?
SECRETARY SHULTZ: You mean from f i s c a l *73 to get
to the $2S8 b i l l i o n l e v e l ? H e l l* f t 1s an Imprecise kind of
pusher * because I t depends on what you count In your o r i g i n a l
base. And In some o f the f i g u r e s t h a t have been carried,, j u s t
to give an example, the f u l l y e a r payments o f revenue sharing
m i f counted; an'!'* as you know* cur process i s t h a t we pay the
chock fo r t h i s quarter and by law In the f i r s t f i v e days
viftlif
the f i r s t f i v e days o f the next q u a r t e r » so t h a t l i t e r a l l y the
final revenue-sharing payment f o r f i s c a l 973 w i l l take place
In the f i r s t f i v e days o f f i s c a l *74, Now, t h a t ' s the way the
law I s . Mow, f o r some reason or another* t h a t revenue-sharing
amount^was c a r r ie d f o r f i s c a l *73 in seme d e s c r ip t io n s o f the
situation. And I t was r e a l i s e d t h a t t h a t was not going to be*
the way it was* so you save y o u r s e l f a b i l l i o n d o l l a r s - - in
quotation marks " s a v e . ° And r e a l l y — so t h a t ' s hot s part
of the base; th a t - - t h a t d i d n ' t require any .«*» any e f f o r t to
do that^ t h a t j u s t was a - - a r e c o g n it io n of the s i t u a t i o n .
So l would say t h a t something .on the order o f seven to e ig h t
pillion d o l l a r s or so had to be found* in one way or another.
HAM:
Has y e t .
MAM:
Uo
v
h a d ...
SECRETARY SHULTZ: U ® 11* had to be found in order
to ¡sake the $268 b i l l i o n f i g u r e .
,
RAH: But t h a t h a s n 't ye‘t happened* George - - . i s th a t
**¿§^1? I mean* t h i s second h a l f o f the year doubles the r a t e s
0f ©spenditure* making I t 14 or 16 b i l l i o n d o l l a r s a year o f
ia| | | | l r a t e s .
Is th a t r i g h t ?
SECRETARY SHULTZ:" No* t h a t ’ s not' r i g h t .
Because
J ’hf way the budget process works* the Executiv e Branch d o e s n 't
budget f o r the f i s c a l - - f o r a. — « given f i s c a l year
i o u ’ re wall Into t h a t f i s c a l y e a r . And you teed to move
t c°ht1nuifsg r e s o l u t io n f o r four to s i x months of the f i s c a l
the con tin n in g r e s o l u t io n * on the whole* i s l a s t
| l e v e l . So t h a t t h i s process o f — o f p r o c r a s t in a t io n
th- s *a^ or whatever in j*jst «« j u s t the process o f g e t t i n g
^*|s* wappropriations b i l l s out and -« and so on means th a t on
r W ^st you don’ t s t a r t in a t the l e v e l o f the new f i s c a l ye a r;
7
[you don't have t h a t a uthor1t y y e t . You have to w a i t . And since
dMn*t r e a l l y get the au i h o r l t y to do t h i s spending u n t i l
[the spending c e l l i n g debate was In f u l l swing» we do n 't have
the prospect o f having b sen up and then having to corns down;
It's a question o f hot? f a s t you go up. And as you know, the
2S0 b i l l i o n i s IS b i l l i o n a bov© what was spent In f i s c a l *72.
you're not t a l k i n g about - - a l l o f ©ur language I s the language
of cuts 9 but What we*re t a l king about Is an in c rea s e o f $18
bil lion. I t ' s only a quest Ion o f how much o f an Increase * and
whether or not t h e r e ' s goln g to be any d i s c i p l i n e on the amount
of the in c r e a s e t h a t we're t a l k i n g about.
HAM: fir. Secretary,, In view o f the higher than a n t i d p a t
Increases in personal Income5 corporate p r o f i t s » e t c e t e r a » e t c e t e r a
have you got m y more recent r e v i s i o n s o f r e c e i p t s f o r f i s c a l
*73 than the -«• the l a s t th in g we had , which I think was —
what? May or August?
o u r...
SECRETARY SHULTZ?
RAH:
Vie w i l l — we w i l l have whatever
Then you were*t3.T$lR$ about 2 2 5 . . .
SECRETARY SHULTZ: Whatever our than current estimate
of revenues i s w i l l be published as part o f the budget.
tell us?
. MAH:
But as o f now have you got any t h a t you can
SECRETARY SHULTZ:
p0n*t sort o f . . .
HAUs
Well » we d o n 't -« we — we - - we
I know you don't» but I wondered i f y o u . . .
SECRETARY SHULTZ:
and elsewhere. And I . . .
. . . g i v e thasa r e v i s i o n s here* there»
MAH: y e l l - - well» B i l l ' s predecessor when hs talked
[before the SI A in F lorida» C h a r l i e Walker, he said t h a t the —
the^deficit would probably be somewhere in the range o f maybe
|*6 to 20s r ath e r than 25 [ w o r d s u n i n t e l l i g i b l e ] ? and then l a t e r
PjJ 1 made a few i n q u i r i e s here and I was t o ld t h a t those were
|| a r H @ 's own e s t im a t e s . Se I wondered i f you had some estim ates
ai§t go along with t h i s .
SECRETARY SHULTZ:
MAH:
L4
Or in c o n f l i c t with t h i s .
SECRETARY SHULTZ:
f 1 ?® t h a t way.
No. l n e v e r . . .
I hope I never wander o f f the reserve«
picture f o r next y e a r , Mr. $ h u l t 2 ?
SECRETARY SHULTZ:
MAM:
revenues.
*74?
Yes.
SECRETARY SHULTZ:
MAPI:
Fiscal
I t w i l l be w ithin the f u l l employment
do you have s o m e ...
SECRETARY SHULTZ: And I think - - 2 •na
I don't want
to name a number» but you know f a i r l y well what - - What th a t
nuiubsr I s . People a l l around are e s tim a tin g I t . And t h a t i s
one of the good tilings about t h a t c once p t, t h a t I t I s something
M t p r o f e s s i o n a l l y equipped people can come within a — a h a l f
or one percent o f each other on without much d i f f i c u l t y .
HAM:
Do you - - do y o u . . .
MAM; I f f i s c a l c?4 ¿is going to be such a good y e a r ,
shouldn't you be aiming f o r a d e f i c i t f u l l employment - - a f u l l
Np!oymen,t d e f i c i t ?
SECRETARY SHULTZ:
The — no.
He'd have t o . . .
[Confusion o f v o ic e s ]
SECRETARY SHULTZ:
«,
MSN-i
* m sorry.
S u r p lu s , y e s .
You mean a f u l l employment s u r p l u s .
S u r p lu s , I'm s o r r y .
Yes, r ig h t.
L
SECRETARY SHULTZ: Me, I d o n 't know t h a t we - - we
P - jj® think the b a t t l e f o r expansion i s t h a t completely
0(^4 *
w a n t - - in other words.., we want the expansion to; continue
i t . i s going to have to taper i f i t ' s going to be
^ s r a in a & ie s because i t i s going up at a t e r r i f i c c l i p now,
[ ; * a javel two t h i r d s above or In some quarters t w i c e ’ what the
|]il!Pi v a^ ° ? growth o f the economy i s .
So as you get up
K
a f t l l use o f r e s o u r c e s , you have to — you have to
growth r a t e down, so t h a t i s more o r l e s s in l i n e
L
natural growth r a te o f the economy. Otherwise you
l i h U f w M? through and you d o n 't ~ you d o n 't have a s u s t a i n a b l e
* jS® f® gating to f a l l back down a g a i n . That was what
ill*«'- ■' to us b e fo r e . Mot# - - so we want to keep s u s t a i n i n g
w®
withdrawing the amount o f government
fad r i 5 55
stimulus a c c e l e r a t e s and as you get c l o s e r
s ! 1°| eL t0 fy<n employment. And as you — i f y o u get in to
then l J u V ^ P ^ Y m e n t o r b i t , sa to speak, t h a t 1s s u s t a i n a b l e ,
|bnt
probably — there may very well be years in which you'd
* 4,1
employment s u r p l u s , depending upon what's
rlth
in s t a t e and l o c a l governments what's happening to savings
and things o f t h a t kind.
MAN: Can you give ts$ some mileposts to look forward
to between now and then on f a l l employment i t s e l f ? How..*
SECRETARY SHULTZ:
MAH:
Khan m ®Id w e . . .
...c lo s e t o ...
SECRETARY SHULTZ:
. . . w e might get there?
MAH: Hell» how f a r - - how are we going to get along
the way. Obviously» one month from the next you*re not going
to go from f i v e to no - - to f u l l employment, tfhen ars you going
[to start seeing some progress on t h i s ?
SECRETARY SHULTZ: W e l l , we've seen q u ite a l o t o f
progress in the l a s t year and a h a l f ©r so. The «« the only
Indicator t h a t has lagged a t a l l has been the gross unemployment
rate. But many other I n d ic a t o r s o f labor market c o ndition s
have shown in c r e a s in g t i g h t n e s s . 'The l a y o f f rate In manufacturing»
for example. Is - - I'm sorry -« and the accession r ate are both
N?H or l a s s at the l e v e l s they were around 1968. Hours o f
work in manufacturing are very high . Employment has been expanding
st an extraord inary pace. And unemployment has coma down.
Unemployment among married men I s down to 2,4 p ercen t. And
so on. So 1 think t h a t a l o t o f these In d ic a t o r s in the employment
market...
MAH: Is the gross r a te there u se le ss f o r a l l in t e n t s
Purposes? Mhat's • - what's your — what importance does
the gross r ate have any more?
SECRETARY SHULTZ:
The growth r a te ?
MAH: The gross r a t s o f unemployment, the o v e ra ll
BJHtoloyment r a t e .
SECRETARY SHULTZ:
MAH:
H e l l , I t ' s the s o r t o f . . .
Everyone seems to Ignore i t .
j
s
SECRETARY SHULTZ: I f you have a number» one, i t ' s
Probably the best number you can g e t . On the other hand» looking
r%
problem l e s s as an economist and more s o rt o f as a *»«
\l? a * ; a p o lic y problem t h a t you want to do something a bout,
#hat you have to ask y o u r s e l f I s : hare i s t h i s person *~
u
a very personal and human thing — why I s t h a t person
f
6 and what can be done about i t ? And I think 1 t ' s
fv^.c'ty obvious t h a t in many cases the answer 1s not pump up
the economy8 because* i f ycu remember* a l l through the l a t e
1960s& when we had a.n extra ord ina ry labor market the unemployment
rate among ghetto y o u th , f o r example* was up around 25 percents
so that was not the answer to th a t problem. There have to be
some other answers* and apparently we d o n 't know a l l those answers
Bat anyway t h a t — 1t seems to me you have to work at the problem
that way. B u t t h a t 8s a d i f f e r e n t issue than the issue o f what
yqur sort o f proxy number f o r f u l l employment I s ,
MAN:
Wol1 * Mr. S h u l t z . . .
SECRETARY. SHULTZ: As an economic p roposition and
as a guide to f i s c a l and monetary s tim u lu s .
MAN: Even so* i s f u l l employment s t i l l o f f i c i a l l y
defined as four percent unemployment?
SECRETARY SHULTZ: T h a t 's the — t h a t ' s the d e f i n i t i o n
p ejrl using In i n s t r u c t i n g t h e . . .
|^1t h i n . . .
MAN:
Mr. Sh u ltz* i s there any hope o f reaching th a t
SECRETARY SHULTZ:
HAN:
Fiscal
8?4?
. . . t h e l i f e t i m e of the people here?
SECRETARY SHULTZ:
I t has seldom
1i has seldom
N i g achieved in peacetime.
And I « « I ~~ i t was r e a l l y l a s t
done by in the middle o f the Eisenhower a d m in is t r a t io n .
I think
that the path we Were on in the e a r l y . . .
MAN:
[Ifords u n i n t e l l i g i b l e ] o f f i c e , , ,
f
SECRETARY SHULTZ: . . . e a r l y 1960s was g e t t i n g there
►«on the combination o f big domestic spending and war spending
r*®?.the — the best opportunity we've had f o r a long time in
9@tting t h e r e . And we new are approaching another op p o rtu n ity.
N e ll * I *s$ s o r r y .
Y o u ...
¡, . „
MAN: I - - I 9m sorry* I — w e ll* maybe I'm wrong,
f t t I thought t h a t the unemploymont r ate was 3,9 percent in
l a r l y ’ §9.
SECRETARY SHULTZ: Gh, i t was lower than t h a t . It
r as a^out 3.4 p erc en t. But there was a war on« remember?
MAN:
Mr. S h u l t z * . .
SECRETARY SHULTZ:
Don't you remember the war?
21
MAHi
Hr. S h u l t 2 , y o u *>- you [words u n i n t e l l i g i b l e ] * •>.
SECRETARY SHULTZ:
May I have th a t cream, please?
HAH: Before [words u n i n t e l l i g i b l e ] domestic economic
p olicies o f the President«, Kenneth Downs works - - or w i ll foe
ultimately working In the White House f o r you on t h a t . Gould
you address y o u r s e l f to his c a p a c it y f o r t h i s and what he w i ll
be doing?
SECRETARY SHULTZ: H e l l , f i r s t o f a l l , he 1s an e x t r a o r
din arily able person. He was f i r s t in h i s c l a s s in law s c h o o l.
He's a Supreme Court c l e r k - t y p e guy, so you know t h a t - - th a t
he has the mental a g i l i t y . He i s experienced in t h a t both having
worked in p r i v a t e p r a c t i c e and In the academic community with
great success he knows a gr e a t deal about in t e r n a t i o n a l economic
matters. And some o f h is w r it in g s on the gap and so fo r t h I s - is leading work in the f i e l d , j u s t as a matter o f s c h o la r s h ip .
I might say he's f l u e n t in German and French as well as E n g l is h .
He Is one o f those lawyers a t the U n iv e r s it y o f Chicago., where
there I s a t r a d i t i o n o f t h i n k i n g of y o u r s e l f not as being a t
the law school or a t the medical school or a t the business school
or whatever but as being a t the u n i v e r s i t y , there I s an - - a
real e f f o r t there to have a u n i v e r s i t y community - - and within
that framework, h e ’ s one o f those lawyers th a t spent a great
deal of time with the e con om ists; and In t h a t process he has
acquired a - - - - a very good knowledge o f economics and holds him - Hold bis own very wel.l in t h a t f i e l d . How, beyond t h a t he spent
a year and a h a l f as the person In the O f f i c e o f Management
and Budget worrying ab o u t, on the one hand, the na tion a l s e c u r i t y
area, on the other the area o f -in te r n a tio n a l a f f a i r s and f n t e rn a tlc n »
§1 economics; so he has seen those areas and has become knowledge
able' about how government works and how to get something -accomplish;;:
and'-- and so on. So I f e l t t h a t he was e x t r a o r d i n a r i l y Well
qu alified.
HAH: How w i l l he f u n c t io n ? Is there anything you
can say about t h a t s p e c i f i c a l l y a t t h i s s t a g s ?
SECRETARY SHULTZ: W e l l , h e #l l f u n c t io n as my deputy
over there in the - - in the White House. A n d . . .
MAH:
Will he concentrate p rim a r ily on —
Tt
SECRETARY SHULTZ: . . . h e ' l l do a l l the th in gs t h a t
* ® not good enough to do but he 1s. And he
h e 's t e r r i f i c .
Have you ever met him?
HAN:
Not y a t .
SECRETARY SHULTZ: You ought to t a l k to him. He's
We're lucky to have him in the/government.
a sensati onal guy.
22
HAN: S e cr e ta ry Shultz.» I wonder 1f you'd answer j u s t
three questions on [words u n i n t e l l i g i b l e ] . One» do you think
the economy would have reached t h i s point now without c o n t r o ls ?
SECRETARY SHULTZ:
You mean in the expansion?
MAH: In terms o f the expansion» the f i g h t a g a in s t
in fla tio n * l e v e l ©f unemployment [words u n i n t e l l i g i b l e ] ?
SECRETARY SHULTZ: M a l l , t h a t Is a — Pm tempted
to bite on th a t question» Reuben» but I think 1 w i l l r e f r a i n .
The -« we have worked along a t t h i s problems and. In one way
or another, we have got to where we a re . A n d . . .
[Laughter]
. . . n o w the question Is» where do we go from hers?
Now, I think I t 1s important to t r y to learn from your e xperience.
And goodness knows P v e t r i a d to do t h a t .
I mean, I d o n 't have
the same ideas l did four years ago. But I f » - i f the question
comas down to the f a c t do 1 think th a t the economic system responds
basically to the fundamentals» then I think the answer Is y e s .
'
MAH:
Rather than to c o n t r o ls ?
SECRETARY SHULTZ: M a l l , I — I d o n 't m n i to say
"rather than” because I think t h a t we have gotten some mileage
out of the c o n t r o l s . Me have a ls o gotten some mileage out of
the tax changes t h a t ware mads in *71» and we*ve gotten some
niilsage out ©f the changed i n t e r n a t i o n a l economic arrangements.
So — arid l think th a t f o r t u i t o u s l y to seme e x te n t I f we were
going to Impose c o n t r o ls our timing could not have been b e t t e r .
MAH: My second question y o u alluded to a b i t by speaking
of foreign trade m a tte rs. I t seems th a t the d o l l a r devaluation
really hasn’ t had the impact on our f o r e ig n trade balance t h a t
had boon hoped f o r . Be you foresee a d d it io n a l measures to bring
that around? Or do y ou share the premise?
SECRETARY SHULTZ: I was never as — you — you w i l l
find no statements on the record from me p r e d ic tin g a gigantic^
turnaround from changes 1u exchange r a t e s , because I think t h a t - 1 do think t h a t you get value from changes in exchange rates»
don’ t misunderstand me; but I think t h a t the
the t y p i c a l
calculation's have been made on the b a s is o f - - o f e l a s t i c i t y
studies-that s a y , " L e t ' s change the p r ic e o f t h i s product* and
then trace through the trade e f f e c t o f that® everything e l s e
the same." And s© you get — you get those In d ivid u a l type
things and then they were aggregated and an o v e ra ll c a l c u l a t i o n
made. Hell» there i s 1ra economies, as you know, a s o - c a l l e d
f a ll a c y of composition” th a t you can get Into by assuming that
23
i f you add everything up you can l i t e r a l l y aggregate Ind ivid u a l
things without having an Impact t h a t r e s u l t s from the — from
the very f a c t o f - - o f having aggregated. And what happens
fefben you do t h a t * o f c o u r s e * i s t h a t t h e r e ’ s - - t h e r e ’ s a l o t
of adjustment w ithin the system and s lip p a g e t h a t takes place *
so you don’ t get r e a l l y the f u l l impact t h a t you — you might
have assumed!
But n e v e rth e le s s I think m have gotten a s i g n i f i c a n t
and d e f i n i t e Impact* and I t was s very good thing to have done.
And I think the impact has been masked by the f a c t — by oor
very success in expansion o f the Ö . S . economy* But we have - our - - our — I f you s t a r t with l a s t - - with two years ago,
say5 and then s t a t e r e l a t i v e changes 1h r ate o f growth by c o u n t r i e s t
there5s no question about the f a c t t h a t our r e l a t i v e Increase
1n growth has been f a r g r e a te r than anybody e l s e ’ s . And th a t
has the well-known impact o f drawing in im portss r e l a t i v e l y
speaking. And - - and I f you -« i f you p l o t ' t h e trade balance
and chancres In i t according to p ro s p e r it y and rece ssion In the
U.S.* you see t h a t i t — i f you r e a l l y want a strong trade balance
the way to get 1t I s to have*a r e c e s s i o n , and then you don’ t
have imports and t h a t looks g r e a t . Except t h a t t h a t i s n ’ t what
we want:
The growth in the d e f i c i t from two b i l l i o n In
‘ 71 to s ix b i l l i o n In *72 c a n ’ t be Something th a t yeti look at
with pleasures» even though I t i n d i c a t e s a prosperous U . S . economy
which Is purchasing a- l o t o f im ports.
®pMz
SECRETARY SHULTZ; 1 don’ t look a t I t with p le a s u r e .
I think t h a t t h e r e ’ s a big problem* as we have been a t unending
pal ns t© point out to the r e s t of the world — not only our
problem* but t h e i r problem. And ws think t h a t I t has to coma
Into equilibrium some hew or other* or b e t t e r than th a t* and
that the adjustments needed t o - b r i n g t h a t about have
have
not yet been made.
HAN:
My next' q u e s t i o n . . .
SECRETARY SHULTZ; So t h e r e ’ s - * t h e r e ’ s* w e l l , l o t s
of work to d© In o u r proposals f o r monetary reform. The r e l a t i o n
ship of that to other aspects o f I n t e r n a t i o n a l economic p o l i c y
?.|Pe part o f I t ; our e f f o r t s to get the Japanese to .recognizetheir problem are part o f I t ; and so on. And I t ’ s a continuing*
v'try important* d i f f i c u l t b a t t l e .
Do you
MAR; And t h i s i s on q u it e another s u b j e c t ,
o
see any reason why your present p o s it io n as Se cr e ta ry f the
Treasury should be s u b je c t to confirm ation and th e '* -, your former
position as D ir e c t o r c f the 0MB should not? J u s t take the question
24
gs r e a l l y why s h o u l d . . .
SECRETARY SHULTZ:
MAN:
Well* I don't think t h e . . .
. . . t h e 0MB not b e s u b je c t to confirm ation?
SECRETARY SHULTZ: Are you suggesting' t h a t the Se cr e ta ry
of the Treasury should not be s u b je c t t© confirm ation?
HAN:
No®
I*ra p o s i t i n g q u it e the rev e r se .
SECRETARY SHULTZ: Hell® l e t ' s leave the S e cre ta ry
of the Treasury out o f I t . That poor f e ll o w has to endure enough
misery. Go tbs question -of the budget and whether there should
be confirmation there» I n o t ic e t h a t ~~ one o f the things you
notice - - and 1 puzzled about t h i s myself when I was there»
because I - - I had been unhatched as Se cr e ta ry o f Labor and
was observing #haf p o l i t i c s was l i k e and f in d i n g i t I n t e r e s t i n g
and then a l l o f a sudden I became D ir e c t o r o f OHB and since
you^re not on the Unite House p a y ro ll and you a r e n ' t confirmed
by the Senate y o u 'r e hatched» and th a t was nice jn some ways
and not so good in others» and so l speculated about — but
I have noticed every time a m u i President comes fn* what's the
f i r s t story? well» 1t u s u a l l y i s he appointed so-and-so Budget
Director and t h a t gentleman has gone to work immediately In
the executive o f f i c e o f the President? he 's there and he’ s working
on the budget f o r t h w it h . And I t i s the P r e s i d e n t ’ s budget With
the aid o f t h i s person who organises the work f o r him. I t i s
bound t© Involve him in a g i g a n t i c amount o f I n t e r a c t i o n with
the President on a l l manner o f things across the board9 and
with a l e t o f the work having to be done before January 20th;
so that you gat a running s t a r t . And so when the new Cabinet
coses i n 9 I reeiember one o f the f i r s t th in gs t h a t happened to
®® was Bob Mayo» who had been appointed D ir e c t o r o f the Budget»
&sfced me to emse over to the EOB and ha had his budget bureau
people there and they to ld me a l l about the Department o f Labor
and how to chango 1t a l l around and so on. And each c y c l e the
budget bureau takes a crack a t every agency a l l over a g a in ;
that’ s the t r a d i t i o n . And I think t h a t t h a t process i s probably
a®?ped fey the f a c t t h a t the Budget D ir e c t o r has a l i t t l e d i f f e r e n t
spot. On the other hand» the Budget D ir e c t o r by t r a d i t i o n always
t e s t l f 1 es before the Congress. And l spent a great deal of
t e s t i f y i n g as Budget Director» and others have to o ; so
that to the e x t e n t t h a t anybody wants' to question him» they
wav® ample opportunity to do so.
MAN: Hr. Secretary» t h i s 1$ a — I assure you» a
P«|y on words» but r i g h t now y o u ’ re something ©f a bastard in
sbls sense: you h a v e . . .
SECRETARY SHULTZ:
I ’ m not the Budget D ir e cto r anymore.
[Laughter]
I used to be a b a s ta rd .
MAH::
But I 6m not anymore.
Ho* y o u . . .
SECRETARY SMOLTZ:
never8ve dorse.
And what them guys did I would
MAM: You have a p ortfo — you have your p o r t f o l i o
as Secretary of the T rea su ry 9 hut a lso you have another job^
now as Sp ec ia l Counselor to the P r e s id e n t .
In your contemplative
process* do you foresee any d i f f i c u l t y de a ling with t h i s new
Congress'? At what point do you take o f f your hat as Se cr e ta ry
of the Treasury and s t r e t c h the umbrella o f e x ec u tive p r i v i l e g e
to your other iiat?
SECRETARY SHULTZ: I — I tlrïïïk the execu tive p r i v i l e g e
Issue i s a phony I s s u e . I t i s - » i t i s not a - - or* dén8t write
that down * because I don’ t want to sound in fla m a t o r y .
Ï have
been t e s t i f y i n g f o r four years in the context o f s u b je c t s about
which l have had many c lo s e 'conversations with the P r e s id e n t .
I ’ ve neyer had a problem with the e x e c u tiv e p r i v i l e g e issue
st a l l . ' Twice l have been asked by somebody In Congress* -When
you met with the President on t h a t s u b je ct» what did you recommend?
And what were the other a l t e r n a t i v e s he considered? And what
arguments' weighed with him on t h i s or t h a t ? ” - - I was asked
a question l i k e t h a t a couple o f times* and l j u s t said» 88He 11 »
I think t h a t ' s a matter between the President ami I 9U and ~~
and they backed r i g h t o f f ; there was no problem. And I d o n 't
think anybody expects t h a t you should answer a question of th a t
kind.
MAM:
Issue.
But t h i s . . .
SECRETARY SHULTZ :
So I don’ t see t h a t t h e r e ’ s ah
MAM: I t 9?; a l i t t l e d i f f e r e n t now» I s n ' t I t ? I m m 9
you «« you weren't; an a s s i s t a n t to the P re side nt t h e m you were
s Cabinet o f f i c e r who normally t e s t i f i e s * were you not?
SECRETARY SHULTZ: M e l ! * l was a — I was D ir e cto r
©f 0MB. I was In t h a t Cabinet on t h a t place» but* as you pointed
©at* I was not — did not stand f o r confirm ation in t h a t j o b .
I testified a lo t .
MAM: I a p p r e cia te t h a t . But yea were s t i l l not an*
you know* a s s i s t a n t to the President in - - 1n a job other men
have the t i t l e and they do — they d© not t e s t i f y . But you
26
don’ t see t h a t day coming?
SECRETARY SHULTZ:
HAN:
Why?
No.
Because o f the nature o f the — o f your
fields?
SECRETARY SHULTZ: Ho, I — I think th a t what Is happening
1s that — t h a t one can see — you knew* when you are kind o f
subject to testimony you - - you have to be c a r e f u l t h a t you
find time to d© your jo b and — because you can spend so much
time* l i t e r a l l y * p h y s i c a l l y * g i v in g testimony and preparing
for I t and so on t h a t you j u s t c a n ' t do anything e l s e . How*
the President has to have - - and — and t h i s l w i l l have to
work at — but the P resident has to have some people who are
there and when he has something come up th a t he knows t h e y 'r e
there* they are under h1s control and he can t e l l them» "B©
this* do t h a t .
I d o n 't care 1f you have to t e s t i f y tomorrow.
I want you to work ©n t h i s . And my word 1s the word t h a t ' s
going to p r e v a i l . " He has to have some people around who are
1n that posture.
$
Now* with resp e ct to Henry, where t h i s has a l l come
up so much» a gr e a t e f f o r t 1$ being made to accommodate the
problem by providing s e t t i n g s In which ha t a l k s with members
of the Congress and they ask him questions and so f o r t h . And
I - - I do n 't - - I think t h a t probably t h a t kind o f a compromise
can work o u t.
HAN: Hr. Se cr e ta ry * 1s 1t true t h a t Chairman H i l l s
has suggested he would be w i l l i n g to take up trade l e g i s l a t i o n
before any tax reform proposals? And 1f I t 1s try© [words u n i n t e l
l ig ib le ]? "
SECRETARY SHULTZ: X - - X d o n 't know whether — whether
He has said t h a t or no t. He h a s n ' t said t h a t t© me. But he
have.«.
HAN:
I thought he had said the o p p o s it e .
SECRETARY SHULTZ:
He may h a v e . . .
HAN:
He said the o p p o s it e .
HAN:
He said the o p p o s it e .
SECRETARY SHULTZ: My impression 1s s o r t o f . the o p p o s it e .
8ut I don't - - X d o n 't — I'm not n e c e s s a r i l y a bre a st o f every
utterance.
HAN:
Apart from the question of what V111bur H i l l s
Is up t o , 1s there going to be a ' t r a d e b i l l t h a t the a d m i n i s t r a t i o n 1s
going to prepare and submit?
SECRETARY SHULTZ: Mell» we’ re working on t h a t s u b j e c t ,
and when we get through, the President w i l l d e c id e ; and then
we’ l l know.
HAHi Have you d e f i n i t e l y decided to put in a b i l l
to r estructure f i n a n c i a l I n s t i t u t i o n s ?
SECRETARY SHULTZ:
MAN:
You mean fo llo w in g the Hunt Commission?
Yes.
SECRETARY SHULTZ: M a l l , we have the Hunt Commission.
We’ ve r e c e n t ly gotten a Consumer Finance Commission report - last week, as a matter o f f a c t - - which 1s a d i f f e r e n t s u b je c t
in some ways,* but a lig n e d in o t h e r s . And we have had a strong
task group working on the Hunt Commission recommendations, and
we hope i© bring t h a t to a conclusion some time t h i s spring and come forward with recommendations from the a d m in is t r a t io n .
fe.
HAN:
There’ s no d e c is io n y e t s then* on t h i s ?
SECRETARY SHULTZ: Mel!* there won’ t be a - - there
won’ t be a d e c is io n u n t i l the group t h a t ’ s working on i t has
figured out what they think and we take i t to the P re sid e n t
and m t a l k about 1t and f i n a l l y determine what he t h i n k s , and
then we’ l l have a d e c i s i o n .
MAN:
But there seems t© be a . . .
SECRETARY SHULTZ: T h a t ’ s one — one o f the problems
and I recognise t h a t you would l i k e t© get an answer on
things; one o f the problems i s there a re n ’ t Intermediate p oints
that we’ re able to report to you t h a t there are f i v e people
#hp think t h i s and ten people who think t h a t and so on. I t ’ s
sort of you work a t I t u n t i l the P re s id e n t decides and then
got a d e c is io n worth r e p o r t i n g .
MAN: In speaking of unemployment a few minutes ago,
yoij said t h a t so f a r as ghetto p eop le, f o r example, were concerned
stimulation o f the economy i s not an answer.
Programs, as I understand them, a r e . . .
But I — the Manpower
SECRETARY SHULTZ: I t may be - - i t — i t f a l l s in .
the category* p robab ly, o f a necessary bat not s u f f i c i e n t c o n d it io n .
HAH: R i g h t . But adding to t h a t , then* come the Manpower
programs which are designed s p e c i f i c a l l y to help disadvantaged
people. Is 1t t r m t h a t there Is going to be a cutback in the
Manpower funding?
SECRETARY SHULTZ: The - - I think one would have to
say that l e a v in g a side the s t r a i g h t Income-maintensncs aspects
of m n p o m r programs» # h f l o ~~ while I b e lie v e sosis have been
quite s u c c e s s f u l * others have not* They're l i k e most o f the
programs: they have varying degrees o f success* And I t I s n ' t
necessarily so th a t because something was designed t© achieve
sn o b j e c t iv e t h a t I t s e x is t e n c e th e r e fo r e achieves the o b j e c t i v e .
And I think what we see I s a problem t h a t has been p e r s i s t e n t
over a long period ©f titse with varying e f f o r t s . And I think
we need t© keep a t 1 t .
MAN:
How
how 8b o u t . . .
, +
SECRETARY SHULTZ: Manpower programs* with &T1 o f
their f a u l t s » are one o f the loading c a n d id a t e s . He think t h a t . . .
MAN:
Candidates f o r what?
» SECRETARY SHULTZ: For doing something f o r a way to
work at the problem. There are other aspects o f the problem.
«tier© 1s 9 f o r example» the problem ©f the youth minimum that
we talked about a l o t . . .
HAN:
Uh-huh.
SECRETARY SHULTZ: . . . l a s t y e a r . And - - and other
things that are r e l a t e d to t h a t area o f p o l i c y on t h i s .
..
HAH: In t h a t same a re a : what about the area of r a c i a l
«1 si-rialnation? You were y o u r s e l f I n v o l v e d . . .
area...
SECRETARY SHULTZ:
T k a t 8s another — t h a t 8s another
.MAR a . . . I n the P h il a d e lp h ia Plan and a l l t h a t . Does
adm inistration intend to push In the area o f r a c i a l discriniina^»cnB and in the c o n s t r u c t io n area?
tftere.
ne
P«s
eff
^
SECRETARY SHULTZ:
T h e ...
MAN:
I don’ t see soy change in a t t i t u d e
Knowing y o u r views» 1s t h a t good news or bad
SECRETARY SHULTZ: Hall» I think t h a t the P h il a d e l p h ia
* 8
~~ I would de scribe the P h il a d e l p h ia Plan as an
to say to a group o f people® "Here i s a problem. You
r
29
gh@y1d work oil the s o lu t io n o f i t . And 1n order to work ©n
the s o lu tio n e f t h a t problem® namely® la ck o f equal opportunity®
you should do what «« what The Hew York Times does when I t t r i e s
to get out I t s d a l l y newspaper or - - ©r whatever: have a plats®
have a program,, where you «« where you say® *Xf I *m going to
get from A to 8® 1 t #s not going t© happen I f l j u s t do what
f-f« been doing; I 8ve get to do some d i f f e r e n t t h i n g s , . Mbit
are they? And I f I do olie® two® and three® maybe I can get
there6” and to have - - to have t h a t kind o f a — a t h i n g . Mali®
n m * th a t Is not a quota system. That I s an e f f o r t to s e t reason
able o b j e c t i v e s . And m always said In the Labor Department —
I always said «« t h a t the t e s t was - - was a g o o d -f a it h e f f o r t
t© solve the problem. T h a t 8s not a quota system.
Now® t h a t 1s what
t h a t i s where the b a l l 1s. That
Is what i s re q u ir e d . I think t h a t ’ goe0«fo1th e f f o r t s are being
©ade very w id e ly.
I think we *ve made a l o t o f headway ©n t h a t .
flow® as f a r as s t r a i g h t quota systems are concerned®
we were never f o r them. But l think the — the e f f o r t to s e t
goals has probably been s e t bask somewhat® l a r g e l y because of
the Democratic c o n v e n t i o n w h i c h made a mockery o f t h i s kind
of g o a l« s e t t in g process and j u s t turned people o f f . That combined
with the Hy Bookbinder [ ? ] l a t t e r and s© f o r t h has — has made
f t Impact in t h i s whole a r e a . But as f a r as the a dm inistra tion
1s concerned® we think t h a t 1 t ss Important to have equal opportunity
and 1t*s Important to have programs t h a t are a f f i r m a t i v e to
get there.
HAN: Could I ask you about Governor Brim-mar8s l a t e s t
state report on m u lt in a t io n a l corporations and whether or not
y©is feel the m u ltin a tio n a l «- American m u lt in a t io n a l corporations
m
In c r e a s in g ly thwarting government economic p o l i c i e s ? How
d© you view the *a u 1 t in a t io n a l threat®" in quotation «arks?
SECRETARY SHULTZ: Ob® i t #s s o r t o f too big a to p ic
for an offhand c-omani • 1 think t h e . . .
Big enough f o r l e g i s l a t i o n t h i s year?
SECRETARY SHULTZ: There -« there are — l mean, i t
af big topic to understand properly and — and® depending on
wsat your a n a l y s i s ©f i t 1s®. to f i g u r e out p r e c i s e l y what to
do. 26v@ been ~~ I t ' s been an education f o r $e to work on t h i s
tag roble'iB. I t 1s the m o s t complicated thing X*v@ ever worked
on I and X4ve not p re v io u s ly worked on i t very much. But you —
y©u8d b e tte r have a r u le th a t when you have - - you - - you think
y°u
got your mind a l l made up® sleep on i t ; and the next
sjWfn'ng somebody w i l l think o f ten other things you haven*t
thought of that you b e t t e r think o f . A n d . . .
HAN:
You mean the m u ltin a tio n a l t a x . . .
30
SECRETARY SHULTZ:
MAH:
The nu?1 t l n a t i o n a l fo r e ig n tar, problem..
Yes* t h a t Is com plicated.
SECRETARY SHULTZ: . . . I s u s u a l l y put forward as problem
of rescuing f o r America jo b s th a t are abroad* on the one hand*
and* on the other hand* as s o r t o f a p u n it iv e I n s t i n c t t h a t - that somehow or other t h e r e ' s something here t h a t i s allowing
people to escape t a x e s .
MAH:
Did you find t h a t . . .
SECRETARY SHULTZ: And I'm convinced t h a t th a t —
that whatever there say be to those two problems* those - - those
ari$*t the main problems as we address t h i s I s s u e . But I don't
el&1ü to have a c l e a r conception in m y mind now j u s t e x a c t l y
how to formulate t h a t I s s u e .
I think 11 1s. very complicated
Indeed.
MAH: H e l l* I mean you ~~ you’ — Governor Brimmer1«
remarks were d ir e c t e d s p e c i f i c a l l y , a t the banks and t h e i r fo rd in g
of c r e d it r e s t r i c t i o n s .
Is the re a n y . . .
SECRETARY SHULTZ:
Federal R e s e r v e . . .
I never — 2 never comment on the
MAH: H e ll* Is there any movement w ithin the adm inistra
tion to address i t s e l f to the r o le o f the m u lt in a t io n a l corporation
or bank in I t s d e a lin g s in the upcoming fo r e ig n trade t a l k s
o r ...
SECRETARY SHULTZ: l d i d n ' t say we have -« I d o n 't
say we have i© think about t h a t s u b j e c t . . .
HAH:
Is there a problem there?
SECRETARY SHULTZ:
of think about I t .
MAH:.
Formally?
SECRETARY SHULTZ:
MAH:
Is there a formal mechanism?
You mean do ws have a c o m m i t t e e ...
Yes.
SECRETARY SHULTZ :
HAN:
[Herds unintelligible] to sort
. . . t h a t i s s e t up to look a t i t ?
Uh«huh.
SECRETARY SHULTZ:
have people who are. working
31
on the s u b j e c t .
X don’ t know whether - - I suppose we could
say t h e y 'r e a committee» but they work on other th in gs to o .
MAH; On the I n t e r n a t io n a l monetary side® you made
you
made your proposals or sug ge stions a t the IMF meetings
last year® and you 're heading toward N a i r o b i . What 1s your
sense of ©vents? And do y©y think t h a t motion toward a major
International monetary reform and the trade s t u f f t h a t you've
always r e la t e d to 1 t , or S e c r e ta ry Connally did® has.been s e t
back by European and other fo r e ig n r e a c t io n to the change in
the war?
SECRETARY SHULTZ: öh9 I would say t h a t as f a r as
monetary reform I s concerned - - and you keep wanting me to t a l k
about the war® and I'm not going to® unless i t ' s . . .
MAH:
A ll r i g h t .
SECRETARY SHULTZ:
MAN:
Okay.
He - - w e ' l l be c l e a r about t h a t *
*
SECRETARY SHULTZ: The — as f a r as monetary reform
1s concerned9 I think we would say so f a r so good.
MAH:
Uh»huh.
SECRETARY SHULTZ: He have constructed a committee
of 20
©r® there has been one constructed® we ha ve n 't constructed
11 — and the deputies have met in a - and they had a pro forma
Resting, so to speak® here. But then they had a s u b sta n tiv e
nee tin g ; 1t seemed to go along q u it s w e l l .
I t ' s well organized .
think Mr. Morse [ ? ] has gotten 1t o f f to a good — very good
start. The nature ©f the d is c u s s io n I s p r o f e s s i o n a l and substanAnd we are® as a group o f countries® t r y in g to ~~ s t r u g g l i n g
.$Rt a mutually agreeable dates t h a t ' s always d i f f i c u l t for
a ®®fet1ng ©f the committee, but w e ' l l have one sometime t h i s
spring® I'm sure. So I think from t h a t standpoint th in gs are —
moving a lon g. And — and what w i l l be done by the time
y *hs next annual meeting obviously remains to be seer.® but
x continue to think i t 1s u s e f u l , j u s t as we were t a l k i n g about
Philadelphia Plan® In t h i s effort® too® to have an o b j e c t i v e
have i t — a point in time and say® B8y t h a t tim e , we should
"7 üe should t r y to have some general p r i n c i p l e s l a i d o u t which —
^nich are g e n e r a ll y a c c e p t e d ."
MAN:
Would the a d m i n i s t r a t i o n . . .
.
SECRETARY SHULTZ: And I — I hope t h a t we w i l l ,
ftnd we're c e r t a i n l y working very hard from the U . S . standpoint
32
fu rth e r th a t end.
HAN: Would the a d m in is tra tio n s t i l l
Scftfeltsar replaced?
l i k e to see Hr.
SECRETARY SHULTZ: Weil* vs® - - we have never had anything
against Mr. Schweitzer as a person. He's a very n ic e and able
person. We continue to reel t h a t the ns^t D ir e c t o r o f the IMF
should be a person whose — whose p o t e n t i a l time in the job
1s long enough so t h a t he can in a sense move in to a s i t u a t i o n
that we think w i l l be - - w i l l - - w i l l be d i f f e r e n t from the
present ©n@* i n s t i t u t i o n a l l y d i f f e r e n t as well as — as con ce p tu a lly
different» and adm inister 1t with the - - the notion t h a t he 's
going t© be around f o r a while to reap the b e n e f i t s or the consequent g
of how good a jo b he does.
MAW:
Thank you® s i r .
SECRETARY SHULTZ:
MAW:
. MAM:
In f i s c a l *74?
#**
We h a v e . . .
Will we get a fo u r percent unemployment rate
One l a s t s p e c i f i c q u e s t io n .
[Laughter]
for a...
SECRETARY SHULTZ:
HAH:
Well® i t ' s very f a c t u a l and c a l l s
Yes or n© answer.
SECRETARY SHULTZ: . . . Q u a l i t y o f c r y s t a l b a l l t h a t
to s a y I d o n ' t p o s s e s s .
But w e ' r e - - w e ' r e moving in
that d i r e c t i o n .
And I h a v e . . .
1
HAH:
I s there s t i l l such a t h in g as a yes or no answer?
[Laughter]
.. „
SECRETARY SHULTZ:
1f I said y e s .
HAH:
.
Wel l ® what would you w r i t e down
I ' d wri t s down " y e s . H
# SECRETARY SHULTZ: And 8somebody does - - somebody
s t r y i n g to ki d me: he d o e s n ' t knew."
[Confusion o f voice s as the lunch breaks up® then
recording e n d s .]
Department of th e T R E A S U R Y
kHINSTON/D.C. 20220
THERMO^W04-2041
FOR I M M E D I A T E
January 15, 1973
RELEASE
W I T H H O L D I N G OF A P P R A I S E M E N T OF
HIGH-SPEED TOOL STEEL FROM SWEDEN
The Treasury Department
of appraisement of high-speed
a determination as to whether
fair value within the meaning
as amended.
announced today the withholding
tool steel from Sweden pending
it is being sold at less than
of the Antidumping Act, 1921,
The decision will appear in the Federal Register of
January 16, 1973.
Under the Antidumping Act, the Secretary of the Treasury
is required to withhold appraisement whenever he has reasonable
cause to believe or suspect that sales at less than fair value
may be taking place. High-speed tool steel produced by
Stora Kopparberg of Falun, Sweden, is excluded from this
action since 100 percent of Swedish export sales during the
period under consideration were examined and no sales by
Stora Kopparberg were found to be at less than fair value,
nor is there any likelihood they will be at less than fair value
A final Treasury decision in this investigation will be
made within three months. Appraisement will be withheld for
a period not to exceed six months from the date of publication
of the "Withholding of Appraisement Notice" in the Federal
Register.
Under the Antidumping Act, a determination of sales in the
United States at less than fair value requires that the case
be referred to the Tariff Commission, which would consider
whether an American industry was being injured. Both sales at
less than fair value and injury must be shown to justify a
finding of dumping under the law. Upon a finding of dumping,
a special duty is assessed.
During the period of January 1971 through August 1972,
imports of high-speed tool steel from Sweden were valued at
approximately $3.7 million.
# # #
Departmentof t h e T R E A S U R Y
T E L E P H O N E W 04-2041
ISHINGTON, D.C. 20220
■
n
BENTION:
FINANCIAL EDITOR
January 15, 1973
RELEASE 6:30 P.M.,
RESULTS OF TREASURY'S WEEKLY
BILL OFFERING
| The Treasury Department announced that the tenders for two series of Treasury
ills, one series to he an additional issue of the hills dated
October 19, 1972 , and
he other series to he dated
January 18, 1973 > which were invited on
January 9, 1973,
iere opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
Dr[thereabouts, of 9 1 -day hills and for $1,900,000,000, or thereabouts, of
182 -day
Dills. The details of the two series are as follows:
pGE OF ACCEPTED
lOMPETITIVE BIDS:
High
! Low
Average
91 -day Treasury bills
April 19, 1973
maturing
Approx. Equiv.
Annual Rate
Price
98.678
98.655
98.666
5.230#
5.321#
5.277#
1/
182 -day Treasury bills
July 19, 1973
maturing
Approx. Equiv.
Annual Rate
Price
97.206
97.182
97.199
5.527#
5.574#
5.540#
1/
[ 24# of the amount of 91 -day bills bid for at the low price was accepted
651 of the amount of 182 -day bills bid for at the low price was accepted
[TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
■istrict
■ o s ton
■ e w York
M h iladelph ia
■jfleveland
■ichmond
■tlanta
■ h i e ago
1 St. Louis
Minneapolis
B^nsas City
itallas
| San Francisco
TOTALS
Accepted
Applied For
43,660,000
$
45,660,000 $
1,929,965,000
2,902,165,000
12,745,000
12,745,000
22,620,000
22,620,000
15,625,000
17,625,000
17,145,000
17,220,000
162,650,000
234,650,000
51,755,000
56,615,000
31,975,000
31,975,000
27,510,000
35,270,000
22,540,000
38,060,000
62,305,000
97,065,000
$3,511,670,000
$2,400,495,000 a/
Applied For
$
46,845,000
2,890,780,000
68,150,000
37,105,000
14,725,000
15,020,000
344,350,000
35,505,000
20,970,000
’ 25,010,000
33,475,000
140,950,000
$3,672,885,000
Accepted
$
3,845,000
1,624,930,000
32,600,000
10,910,000
6,725,000
13,020,000.
90,375,000
16,305,000
8,970,000
18,760,000
7,475,000
66,250,000
$1,900,165,000 b/
■Includes $191,315,000 noncompetitive tenders accepted at the average price'of 98.666
■ Includes $ 104,465,000 noncompetitive tenders accepted at the average price of 97.199
■These rates are on a bank discount basis. The equivalent coupon issue yields are
1.42 for the 9 1 -day bills, and 5.78# for the 182-day bills.
Removal Notice
The item identified below has been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Transcript
Number of Pages Removed: 4
Author(s):
Title:
"The Today Show" Interview with Secretary Shultz
Date:
1973-01-15
Journal:
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
fo p a rtm e n to fth e T R EA S U K Y jÿ
mSSU n
r 20220
SHINGTON.
D.G.
T E IE P H O N E W Û4-2041
WA
FOR RELEASE P.M. NEWSPAPERS
TUESDAY, JANUARY 16, 1973
\
\ //
GRAHAM Wo WATT SELECTED AS
DIRECTOR OF REVENUE SHARING
Graham Wo Watt, Deputy Mayor of the City of Washington, D 0C 0,
has been selected as Director of Treasury*s Office of Revenue
Sharing, Treasury Secretary George P, Shultz announced today»
The 46 year-old native of Elizabeth, New Jersey, has been
Deputy Mayor since 19700 He will direct the program of Federal
revenue sharing which will disburse more than $30 billion to
state and local governments in a little more than five years,
Mrc Watt expects to assume his new responsibilities on
February 1, He replaces Acting Director Edward A» Fox who has
been on loan to the Treasury from the Federal Home Loan Bank
Board»
Secretary Shultz said he regarded the new Director as
"ideally suited for the job,"
"He has a background as a public administrator, having been
city manager of three cities before moving to Washington. He has
been active in national professional associations and is well
known by state and local officials throughout the nation and by
their Washington associates. He will bring great strength to this
new program."
Mr» Watt received an A.B. degree from Washington College,
Chestertown, Maryland, and a Master's degree from the University
°f Pennsylvania. He was named "Man of the Year" by the Wharton
Graduate Business School Club of Washington in 1971. He has been
city manager of Dayton, Ohio; Portland, Maine; and Alton, Illinois.
Mr. Watt and his wife, Mary, live at 3001 Veazey Terrace, N.W.,
in Washington, They have two children, Terrance G., age 16, and
Laurie F., age 14.
Attachment:
S-96
oOo
Statement by Graham W. Watt on
Revenue Sharing
Statement of
Graham W. Watt
upon his s e le c tio n as
Director, Office of Revenue Sharing
Department of the Treasury
J c ' k ' k ' k ' k ' k ' k ' k J c
.
•fft-J- f£
-'■ ¡¿.'p,--■
From the beginning, revenue sharing has been planned and presented
as an exciting breakthrough in federal-state-local relations.
President Nixon
made it the cornerstone for building his new federalism.
Revenue sharing, which relies upon the revenue-producing capacity of
the federal tax system and the decision-making capacity of state, county
and city governments, is a major step in governmental decentralization.
It
puts the money where the problems are.
Revenue sharing is in being. Since President Nixon signed the State
and Local Financial Assistance Act of 1972 last October 20 at Independence
Hall in Philadelphia, the Office of Revenue Sharing has made two distributions
totaling about $5.2 billion to nearly 39,000 states, counties and local governments.
These monies are already working to relieve the fiscal crises which have become
endemic in state and local budget-making. Responsible local and state officials
ell across the Nation are considering their alternative needs and planning the
m°st effective use of these funds crs they see their priorities.
(OVER)
2
Revenue sharing must not become "another federal grant-in-aid
program" with restricting and often unrealistic guidelines, regulations,
and criteria.
The essence of the revenue sharing approach is "no strings"
and "keep it simple. " The Office of Revenue Sharing is committed to
that concept.
I join enthusiastically in that commitment. The Office of
Revenue Sharing must not become another pocket of federal bureaucracy.
We shall work to keep the staff lean and highly effective.
When we return to the Congress to report our progress in administering
the program which it has enacted, I expect to join with governors, mayors,
and county officials in reporting full success in implementing both the
letter and the spirit of Revenue Sharing.
January 16, 1973
Department of t h e f R E A S U R Y
SHINGTON, D .C . 20220
T E L E P H O N E W 04 2041
it
FOR IMMEDIATE RELEASE
January 16, 1973
STATEMENT BY SECRETARY SHULTZ ON RESIGNATION OF
UNDER SECRETARY OF THE TREASURY EDWIN S. COHEN
The resignation of Under Secretary of the Treasury
Edwin So Cohen was announced today by the President0
I had
urged Mr. Cohen to stay on at the Treasury, and although
I understand his desire to return to private life, we shall
certainly miss him here at Treasury0
The President, two former Secretaries of the Treasury,
and I have been most grateful for the tremendous contribution
Ed Cohen has made to this Administration and to the nation.
In the face of extraordinary demands on his time and energy,
Ed Cohen has shown complete dedication to his country and
has always performed his duties with the highest degree of
excellence»
His keen intellect and fine wit are admired by
all of us who have worked with him»
We at Treasury shall call upon him often for his wisdom
and guidance.
FOR IMMEDIATE RELEASE
January 16, 1973
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 $4,300,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing
January 25, 1973, in the amount
of $4,101,200,000, as follows:
9 1 -day bills (to maturity date) to be issued
of $
2,400,000,000, or
dated
January 25, 1973, in the amount
thereabouts, representing an additional amount of bills
October 26, 1972, and to mature
April 26, 1973
originally issued in the amount of $1,800,705,000,
(CUSIP No. 912793 QR0 )
the additional and original
bills to be freely interchangeable.
182-day
and to mature
bills, for $ 1,900,000,000, or thereabouts, to be dated
July 26, 1973
(CUSIP No. 912793
January 25, 1973,
RM0 ).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern
Standard time, Monday, January 22, 1973.
Tenders will not be received at the Treasury Department, Washington.
rcust be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
fflay not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded 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
(OVER)
-
account.
2-
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only those
submitting competitive 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 any one 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
January 25, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing
treatment.
January 25, 1973.
Cash and exchange tenders will receive equal
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.
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 considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
for the 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.
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.
Department of th e T R E A S U R Y
INGTON, 0.C .# 0220
T E L E P H Q N I W O4 2041
FOR IMMEDIATE RELEASE
January 17, 1973
TREASURY ANNOUNCES THREE ACTIONS
UNDER THE ANTIDUMPING ACT
The Treasury Department announced today three actions taken
under the Antidumping Act of 1921, as amended.
In the first two cases there is a withholding of appraise
ment pending completion of the antidumping investigations, and
in the third case there is a final determination of sales at
not less than fair value. These decisions will appear in the
Federal Register of January 18, 1973.
In the first two cases the Treasury announced that it is
withholding appraisement on printed vinyl film from Argentina
and Brazil* Printed vinyl film is produced in a variety of
colors and pattern designs and is used for shower curtains,
draperies, and many other purposes. Under the Antidumping Act,
the Secretary of the Treasury is required to withhold appraise
ment whenever he has reasonable cause to believe or suspect
that sales at less than fair value may be taking place. A
final Treasury decision in this investigation will be made
within three months. If a determination of sales at less than
fair value were made in this investigation, the case would be
referred to the Tariff Commission, which would consider whether
an American industry was being injured. If both sales at less
than fair value and injury were shown, dumping duties would be
assessed as of the date of witholding of appraisement. During
the period of January 1971 through June 1972, imports of
printed vinyl film from Argentina totaled approximately $225,000
During the same period, imports of printed vinyl film from
Brazil were valued at approximately $58,000.
OVER
-
2-
In the third case the Department announced that a final
determination has been made that card clothing from the
United Kingdom is not being, nor likely to be, sold at less
than fair value. Card clothing is an item used to comb
cotton, wool and other fibers to prepare them for spinning
purposes. A tentative negative determination was published
in the Federal Register on November 2, 1972. This notice
invited interested parties to submit written views or
arguments, or requests for an opportunity to present their
views orally. No submissions or requests were received.
During the period of January through September 1972, imports
of card clothing from the United Kingodm were valued at approxi
mately $140,000.
# # #
i-
Department of t h e T R U S U R Y j
ÉMfiiftèk "D X 20220
KSHINGTON,
TÉLÉP H O N É WQ4-2D41
jj
Mi
Of
3
J
January 17, 1973
FOR IMMEDIATE RELEASE
Treasury Amends Public Law 91-508
The Treasury Department announced today adoption
of amendments to the regulations implementing Public Law
91-508, the Financial Recordkeeping and Reporting Act of
1970, proposed on October 25th, 1972 with minor changes
which are detailed in the attached introduction to the
regulations.
The regulations, which will be published in the
Federal Register, become effective today.
A copy of the regulations is also attached.
oOo
S-98
H
v..f
TITLE 31 - MONEY AND FINANCE:
TREASURY
CHAPTER I - MONETARY OFFICES, DEPARTMENT
OF THE TREASURY " : « M 3
PART 103 - FINANCIAL RECORDKEEPING AND REPORTING OF
CURRENCY AND FOREIGN TRANSACTIONS
On October 28, 1972, a notice of proposed rule mahing
containing proposed amendments to various provisions of
this Part was published in the Federal Register (37 F.R.
23114 (1972)).
In accordance with the notice^interestedt u
persons were afforded an opportunity to siibmit writtenp ivs
comments. After consideration of all such relevant matters
as were presented by interested parties regarding the rules
proposed, the following amendments are hereby adopted,
effective January 17, 19^
General Counsel
Assistant Secretary
QS
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• ;:.Î
S'l.pliJ,IS.y’i
p l :a,£ o. a a a :: p. :f I
rf:f Ag|agi h 9; a £>P WM s
•ap.p
PREAMBLE
The key provisions of the proposal were essentially as
follows :
1.
Eliminate the requirement that banks keep microfilm
copies of checks drawn for $100 or less.
2.
Require that information made available to other
departments or agencies under this part shall be received
in confidence and not disclosed except for official purposes.
3.
State Specifically that these regulations do not
authorize the Secretary or any other person to inspect or
review financial records maintained under this part.
4.
Eliminate operators of credit card systems from the
definition of a financial institution subject to this part.
5.
Delete a phrase which allows the Secretary by
written order or authorization to impose additional record
keeping; Or reporting requirements.
After careful consideration of the comments received,
it has been decided to exempt checks of $100 or less from
the copying requirement.
With regard to disclosure of information, the proposed
change is intended to ensure that information resulting froni
the recordkeeping and reporting requirements will be made
available to other departments or agencies of the United
States solely for the purposes intended.
Various comments
suggested that the proposed language did not go far enough/
and that the change should forbid disclosure to any other
2
department or agency.
Such a restriction would mean that
cases involving information obtained from this Department
could not be referred to the Department of Justice for
prosecution until the Secretary gave his approval.
This
would simply cause further delay without serving any
worthwhile purpose.
Every federal department or agency
has sanctions against the unauthorized disclosure of
official information, and those sanctions have proved
effective.
Accordingly, the proposed language has been
adopted unchanged.
Certain of the comments ori the proposed regulation
dealing with access to records maintained under this paft
suggested that the proposal is inadequate to protect the
rights of bank customers; however, the proposal is intended
merely to point out that these regulations do not authorize
access to customer records, but that access to such records
is governed by other applicable law.
The supervisory agencies
which have been given responsibility for assuring compliance
with the regulations may, of course, have access to these
records as necessary to assure that they are being kept as
required.
The proposal to eliminate operators of credit card systems
from the definition of a financial institution for purposes of
this part met with general approval, except that some doubt
arose as to its effect upon the operation of bank credit card
*
3
systems.
Since it was agreed that all credit card operators,
including banks, should be removed from the scope of the
regulations, the definition of a financial institution has
been amended to exclude bank credit card systems, as well
as operators of credit card systems, from the definition.
Comments on the proposed deletion of the phrase which
allows the Secretary by written order or authorization to
impose additional recordkeeping or reporting requirements
were favorable to the proposal; however, one comment
suggested that the phrase "or otherwise modify" the require
ments of this part also should be deleted.
This suggestion
is consistent with the intent of the proposed amendment,
and it has been adopted.
Part 103 of Title 31 of the Code of Federal Regulations is
amended as follows:
-Subpart A is amended by deleting frpm§103,llsubparagraph
(5 ) of the definition of a financial institution, renumbering the
following subparagraphs so that the definition of financial insti
tutions will read as follows:
^
;
“Financial institution» Each agency, branch or
office within the United States of any person doing business in one or more of the capacities listed below:
(1 ) A bank (except bank credit card systems );
(2 ) A broker or dealer in securities;
(3 ) A person who engages as a business in
dealing in or exchanging currency as, for -èxati^jlé/-'
--
a dealer in foreign exchange or a person engaged
primarily in the cashing of checks:
(k) A person who engages as a business in the
issuing, selling or redeeming of travelers
checks,
money orders, or similar instruments, except one who
does so as a selling agent exclusively Ôr as ah
incidental part of another business;
(5 ) A licensed transmitter of funds, or other
person engaged in the business of transmitting funds
abroad for others.“
r-
2
Subpart C is amended by amending §103*3^ t° read as follows:
"§ 103.34
(a)(1)
Additional records to be made and retained by banks.
With respect to each deposit or share account
opened with a bank after June
30,
1972, by a person residing
or doing business in the United States or by a citizen of
the United States, such bank shall, within forty-five days
from the date such an account is opened, secure and maintain
a record of the taxpayer identification number of the person
maintaining the account; or in the case of an account of one
or more individuals, such bank shall secure and maintain a
record of the social security number of an individual having
a financial interest in that account.
]n the event that a bank has been unable to
secure the identification required herein with respect to an
account within the 45-day period specified, it shall neverthe
less not be deemed to be in violation of this section if (i)
it has made a reasonable effort to secure such identification,
and (ii) it maintains a list containing the names, addresses,
and account numbers of those persons from whom it has been
unable to secure such identification, and makes the names,
addresses, and account numbers of those persons available to
the Secretary as directed by him.
C
V
3
(2)
The 45-day period provided for in paragraph
(1 ) shall be extended where the person opening thé account
has applied for a taxpayer identification or social security
number on Form SS-4 or DS-5> until such time as the person
maintaining the account has had a reasonable opportunity to
secure such number and furnish it to the bank.
(3) A
taxpayer identification number for a deposit
or share account required voider subsection (1 ) need not be
secured in the following instances ;
(i) accounts for public
funds opened by agencies and instrumentalities of Federal,
State, local or foreign governments, (ii) accounts for aliens
who are (a) ambassadors, ministers, career diplomatic or
consular officers, or (b) naval, military or other attaches
of foreign embassies and legations, and for thé members Of
their immediate families, (iii) accounts for aliens who are
accredited representatives to international organizations
which are entitled to enjoy privileges, exemptions and immuni
ties as an international organization under the International
Organization Immunities Act of December 29, 19^5' (22 U.3.C•
sec. 283), and for the members of their immediate families,
(iv) aliens -temporarily^ residing in the United "Stands1-Tor a
period not to exceed l8o-days, (v) aliens not engaged in a
7
!
k
trade or “business in the United States who are attending a
recognized college or university or any training program,
supervised or conducted “by any agency of the Federal Govern
ment,
(vi) unincorporated subordinate units of a tax exempt
central organization which are covered “by a group exemption
letter, (vii) interest hearing accounts maintained by a
person under
18
years of age opened as part of a school
thrift savings program, provided the annual interest does
not exceed $10, and (viii) Christmas Club, vacation club and
similar installment sayings programs provided the annual
interest does not exceed $10.
In instances (vii) and (viii),
the bank shall, within fifteen days following the end of any
calendar year in which the interest accrued in that year
exceeds $ 10, use its best efforts to secure and maintain.the
appropriate taxpayer identification number or application form
therefor.
(1)
The rules and regulations issued by the Internal
Revenue Service under Section 6109 of the Internal Revenue
Code of 195^ shall determine what constitutes a taxpayer
identification number and whose number shall be obtained in
the case of an account maintained b y one or more persons.
(b)
Each barJi shall, in addition, retain either the
original or a microfilm or other cox^y or reproduction of each
of the following;
5
(1 )
Each document granting signature authority over
each deposit or share account;
(2)
Each statement, ledger card or other record on
each deposit or share account, showing each transaction in,
or with respect to, that account;
(3)
Each check, clean draft, or money order drawn on
the bank or issued and payable by it, except those drawn for
$100
or less or those drawn on accounts which can be expected
to have drawn on them an average of at least
100
checks per
month over the calendar year or on each occasion on which such
checks are issued, and which are (i) dividend checks,
payroll checks,
claim checks,
(iii) employee benefit checks,
(v) medical benefit checks,
(ii)
(iv) insurance
(vi) checks drawn on
government agency accounts, (vii) checks drawn by brokers or
dealers in securities,
(viii) checks drawn on fiduciary accounts,
(ix) checks drawn on other financial institutions, or (x) pension
or annuity checks;
(4)
Each item in excess of $100 (other than bank charges
or periodic charges made pursuant to agreement with the customer),
comprising a debit to a customer’s deposit or share account, not
required to be kept, and not specifically exempted, under subparagraph (b)(3) of this section;
6
(5)
Each item, including checks, drafts, or transfers
of credit, of more than $ 10,000 remitted or transferred to a
person, account or place outside the United States;
(6)
A record of each remittance or transfer of funds,
or of currency, other monetary instruments, checks, investment
securities, or credit, of more than $ 10,000 to a person, account
or place outside the United States;
(7)
Each check or draft in an amount in excess of $10,000
drawn on or issued by a foreign bank, purchased, received for
credit or collection, or otherwise acquired by the bank;
(8)
Each item, including checks, drafts or transfers
of credit, of more than $ 10,000 received directly and not through
a
domestic financial institution, by letter, cable or any other
means, from a bank, broker or dealer in foreign exchange outside
the United States;
(9)
A record of each receipt of currency, other monetary
instruments, investment securities or checks, and of each trans
fer of funds or credit, of more than $10,000 received on any one
occasion directly and not through a domestic financial institution,
from a bank, broker or dealer in foreign exchange outside the United
States; and
(10) Records prepared or received by a bank in the ordinary
course of business, which would be needed to reconstruct a demand
deposit account and to trace a check in excess of
$100
deposited
7
in such account through its domestic processing system or to
supply a description of a deposited check in excess of $3.0Çr
*
..........
.
- ¿ T l i t i fo r n i t e * - T
-
a
i
'
O
This subparagraph shall be applicable only with respect to
demand deposits,1
%f'islamasi; fG1■(li)
.
.
.
«*sl&ar■
W? xaLati
Subpart C is further amended by amending §103*35 by deleting
"paragraph (l)n in subparagraph (a)(2), and substituting therefor the
vords
.. .bt r£>000 3-d -yam
subparagraph (a)(1) of this section"; and by deleting "subsection
(l)u in subparagraph (a)(3)* and substituting therefor the vords
T p fs s m u ^ t$ m
rseri3
"subparagraph (a)(1) of this section, "
¿iso
m
00B
rrtàk
Subpart D is amended by amending §103*^3 to read as follows
f: H
"§103•^3
Availability o f information. '
The Secretary may make any information set forth in any
14
report received pursuant to this part available to any other
department or agency of the United States upon the request of
'v,.v ...„.,.,^..-1 :U
the head of such department or agency, msde ^
.................i
,•
x i r - p f t j " /-ji - S¿gr*
<%i
•$r£. ¿-'E.f
ia t9
yritiiig' and
W S X f t i ;-3 ^
■
t aTS'O'X’J .
stating the particular information desired, the criminal, tax
r
.. ,
',.«■■■-ynl
b n z . «■S's&n
or regulatory investigation or proceeding in connection with
.......
£r-hn•
’®ri£qea&ibfltsi
which the information is sought and the official need therefor.
Any information m a d e ;available under this section to other
departments or agencies of the United States shall be received
hy them in confidence, and shall not be disclosed to any person
except for official purposes relating to the investigation or
proceeding in connection with which the information is sought."
8
Subpart D is further amended by amending §103.45 to read as follows:
"§103.45
(a)
Exceptions, exemptions, and reports.
The Secretary, in his sole discretion, may by written
order or authorization make exceptions to or grant exemptions
from the requirements of this part.
Such exceptions or exemptions
may be conditional or unconditional, may apply to particular
persons or to classes of persons, and may apply to particular
transactions or classes of transactions.
They shall, however,
be applicable only as expressly stated in the order of authorization,
and they shall be revocable in the sole discretion of the Secretary.
(b)
The Secretary shall h^ve authority to further define all
terms used herein."
Subpart D is further amended by adding a new §103.51 as follows:
"§103.51
Access to records.
Except as provided in 103.34(a)(1) and 103.35(a)(1) of this
part, and except for the purpose of assuring compliance with the
reco^dkeeping and reporting requirements of this part, this part
does not authorize the Secretary or any other person to inspect
or review the records required to be maintained by subpart C
hereof.
Other inspection, review or access to such records is
governed by other applicable law."
S E C R E T A R Y OF T H E T R E A S U R Y GEORGE S H U L T Z
U«S«
I N D U S T R I A L P A Y R O L L SA V IN G S COMMIT TEE M E E T IN G
January 1 1 , 1973
H V
nFPARTMFNT OF THF TRFASIJRY
'
S E C R E T A R Y OF T H E T R E A S U R Y GEORGE S H U L T Z :
The pro g ram
to c o n t r o l i n f l a t i o n , w h i c h we wade some ann oun cements a b o u t
this m o r n i n g , i s , I t h i n k , i n t i m a t e l y r e l a t e d t o t h e p ro g r a m
which you p e o p l e w ork so h a r d o n , because 1 t has t o do w i t h
savings and t h e i r r o l e i n o u r s o c i e t y .
I t has t o do w i t h r a t e s
of r e t u r n and i n t e r e s t r a t e s , and so f o r t h . - So I t h i n k i t i s
a good c o n j u n c t i o n o f e v e n t s t h a t I ' m a b l e t o t a l k w i t h you
at the same t i m e t h a t t h i s p ro g r a m I s a n n o u n c e d .
I g u e s s , as
a matter o f f a c t , t h i s w i l l be t h e f i r s t g r o u p , o t h e r t h a n ,
of c o u r s e , t h e p r e s s — w h i c h has t o come b e f o r e e v e r y t h i n g —
the f i r s t g r o u p t o be t a l k e d t o a b o u t t h i s p r o g r a m .
And so
I'm going t o r o l l up my s l e e v e s and g e t r e a d y t o e x h o r t you
and c a l l f o r y o u r c o o p e r a t i o n .
So be r e a d y .
B u t b e f o r e d o i n g t h a t and v e r y much r e l a t e d t o i t ,
as I s a i d , i s t h e s a v i n g s bond p r o g r a m .
And t h * t p ro g r a m w ork s
p a r t ly because o f i t s c o n t e n t , because o f w h a t « t does f o r i n d i v i d
« a l s , and f o r w h a t i t does f o r th© U n i t e d S t a t e s and t h a governmen
So t h a t t h e c o n t e n t I t s e l f I s a good p r o d u c t , b u t I t a l s o i s
¡Im p o r ta n tly d e p e n d e n t on t h a e f f o r t t h a t p e o p l e h a r e and y o u r
colleagues h a v e made and w i l l make.
And I * m Imp assed w i t h
the sense i n w h i c h t h e r e i s n o t o n l y an e f f o r t t o be made t h i s
coming y e a r , w h i c h v/111 be i m p o r t a n t i n and o f I t s e l f , b u t by —
I have e x a m in e d t h i s p r o g r a m , anyway - - t h e sense I n w h ic h
•t is a s o r t o f cumul s t i v e e f f o r t ,
klhst was dene t e n y e a r s
a9o by H a r o l d Geusen I n g e t t i n g t h i s g o i n g 1s b e i n g drawn upon
today. And w h a t y o u do t o d a y w i l l be drawn upon i n t h e f u t u r e
ay people who f o l l o w y ou i n t h e s e r e s p o n s i b i l i t i e s .
.
So I t h i n k t h a t t h e f i r s t t h i n g t o do and t h e p l a c e
to put p r i m a r y em phasis i n t h i s p ro g ram I s on t h e p e o p l e who
/i
¿i
2
work a t 1 t .
And we a r e g o i n g t o h o n o r t h r e e I n d i v i d u a l s 1n
a very p e r s o n a l way h e r e .
B u t i n each c a s e , I t h i n k t h e y w ou ld
be the f i r s t t o s a y h o n o r i n g them s t a n d s f o r h o n o r i n g o t h e r
people who v/ork w i t h them as w e l l .
And 1 t i s a p e r s o n a l h on o r
and also a s y m b o l i c h o n o r t h a t goes t o ma ny.
N o w , f i r s t , I w o u ld H k e t o have my f r i e n d M 1 l t B a t t e n
(?) come up h e r e .
And he 1s awarded t h e S i l v e r Medal o f M e r i t .
And I ' l l read t h e c i t a t i o n , w h ic h I s i g n e d .
But I d i d n ’ t sign
1t the way I w o u ld a d o l l a r b i l l , so i t r e a l l y I s n ’ t as much.
I t 's j u s t " G e o r g e . “
" D e a r M i l t , my warm c o n g r a t u l a t i o n s on
the r e s u l t s o f t h e 1 9 7 2 s a y i n g s bond c a m p a i g n .
Sales o f the
small d e n o m i n a t i o n b o n d s , w h i c h r e f l e c t p a y r o l l s a v i n g s a c t i v i t y ,
were f o u r b i l l i o n one hundred f i f t y m i l l i o n ; one b i l l i o n f i v e
hundred m i l l i o n g r e a t e r th a n when t h e c o m m i tte e began I t s annual
nationwide campaigns i n 1 9 6 3 .
The e n r o l l m e n t o f p a y r o l l s a v e r s
far exceeded t h e c o m m i t t e e ’ s g o a l o f two m i l l i o n t h r e e hun dred
thousand."
I t h i n k , as a m a t t e r o f f a c t , 1 t was a b o u t two m i l l i o n
six hundred t h o u s a n d .
" Y o u as t h e c ha irm a n f o r t h e r e t a i l m e r c h a n d i s i n g
industry and y o u r f e l l o w members o f t h e U . S . I n d u s t r i a l P a y r o l l
Savings Committee a r e , 1n l a r g e p a r t , r e s p o n s i b l e f o r t h e s e
outstanding a c c o m p li s h m e n t s w h ic h b e n e f i t t h e i n d i v i d u a l c i t i z e n
and the n a t i o n .
" W i t h g r e a t p l e a s u r e , I p r e s e n t t o you t h e a t t a c h e d
Medal o f M e r i t .
P l e a s e a c c e p t i t as a symbol o f y o u r g o v e r n m e n t ' s
deep a p p r e c i a t i o n .
"Sincerely y o u r s ..."
MILT BATTEN;
Thank y o u , Ge o rge .
[A p p la u s e .]
SECRETARY S H U L T Z :
Now I ’ d l i k e t o ask H a r o l d G e n e s «
[ i f he would j o i n me h e r e .
And I s a i d e a r l i e r t h a t I t h i n k what
is accomplished t h i s coming y e a r draws on t h e e f f o r t s t h a t have
come b e f o r e .
And In h o n o r i n g H r . Ge nssn as t h e p e r s o n who p i c k e d
up t h i s b a l l te n y e a r s a g o , I g u e s s , has w ork e d a t 1 t s i n c e ,
I would l i k e t o n o t o n l y h o n o r him b u t a l l o f t h e p a s t c h a i r m e n .
And we have here a r a t h e r l o v e l y p l a g u e w i t h t h e j u n c t i o n o f
U . S . Seal and t h e D e p a r t m e n t o f t h e T r e a s u r y S e a l .
We
always I d e n t i f y o u r s e l v e s w i t h a n a t i o n a l g o v e r n m e n t a l I n t e r e s t .
And t h i s p la q u e 1 s f o r H a r o l d S . G e n e e n , 1963 c h a i r m a n , 1n a
notable decade f o r A m e r i c a , by t h e U . S . P a y r o l l - - I n d u s t r i a l
Payroll S a v i n g s C o m m i t t e e .
And t h e n I s i g n e d t h e f u l l t r e a t m e n t ,
ju s t l i k e on a d o l l a r b i l l , H a r o l d , so y ou can cash i t 1 n .
3
Thank you v e r y much.
[A p p la u se*]
And t h e n Don M c N a u g h t o n , 1 f y o u ' d t a k e t h e l o n g s t r o l l
up here.
He 1 s a d o u b l e w i n n e r .
T h e r e ' r e two d i f f e r e n t t h i n g s
here. Why d o n ' t we s t a r t w i t h t h i s one? T h i s 1 s a c i t a t i o n
to Donald S . M c N a u g h t o n , C h a i r m a n , U . S . I n d u s t r i a l P a y r o l l
Savings C o m m i t t e e , “ f o r e x c e p t i o n a l a c h i e v e m e n t i n t h e 1 9 7 2
'Take S t o c k 1n A m e r i c a ' p a y r o l l s a v i n g s c a m p a i g n .
“ U n d e r h 1 s l e a d e r s h i p and i n s p i r e d by h i s e x a m p l e ,
American i n d u s t r y f a r e xce e d ed I t s g o a l o f e n r o l l i n g two m i l l i o n
three hundred t h o u s a n d s a v e r s i n 1 9 7 2 and r a i s e d t h e s a l e o f
Series E bonds t h r o u g h t h e P a y r o l l S a v i n g s P l a n t o t h e h i g h e s t
dollar t o t a l 1n t w e n t y - s e v e n y e a r s .
T h i s c o n t r i b u t i o n t o th e
security o f b o t h I n d i v i d u a l s and t h e n a t i o n 1s an I m p r e s s i v e
result o f h 1s e f f o r t s .
H 1 s d e d i c a t e d s e r v i c e 1s 1n t h e f i n e s t
tr a d i t i o n o f t h e v o l u n t e e r s p i r i t w h ic h c h a r a c t e r i z e s t h e s a v i n g s
bond program and g i v e s s t r e n g t h and v i t a l i t y t o t h e A m e r ic a n
way o f l i f e . “ G i v e n u n d e r my hand and s e a l t h i s e l e v e n t h d a y
of J a n u a r y , 1 9 7 3 .
[A p p la u s e .]
And t h i s 1s a ccompanied by a s p e c i a l medal o f m e r i t
[Which we award 1n t h e T r e a s u r y , awarded t o D o n a l d S . McNaughton
¡for d i s t i n g u i s h e d l e a d e r s h i p as 1 9 7 2 c h a i r m a n , U . S . I n d u s t r i a l
¡Payroll S a v i n g s C o m m i t t e e .
The b o x 1s a l m o s t as n i c e as t h e m e d a l .
[ L a u g h t e r and a p p l a u s e . ]
I ' m s u r e I d o n ' t ha ve t o s a y a n y t h i n g t o e m p h a s i z e
the Impoir t a n c e o f t h i s p r o g r a m .
We see I t , I s r ^ p o s e , most
closely 1n t h e T r e a s u r y , because w h i l e e v e r y b o d y e l s e i n t h e
§overnment spends m o n e y , we ha ve t o g e t a h o l d o f I t somehow
or o th er t h r o u g h t a x a s and t h r o u g h b o r r o w i n g and f i n a n c e t h e s e
e f f o r t s . W e ' r e q u i t e c o n s c i o u s o f t h e f a c t t h a t t h e r e a r e now
f i f t y - e i g h t b i l l i o n d o l l a r s w orth o f these s e c u r i t i e s o u t s t a n d in g .
That's a b o u t a q u a r t e r o f o u r d e b t , p r i v a t e l y h e l d d e b t .
And
|Jt makes a tr e m e n d o u s c o n t r i b u t i o n t o t h e o v e r a l l p ro g r a m o f
«fiht management.
So we f e e l t h a t 1 t ' s v e r y I m p o r t a n t t o u s .
And ws
t h a t t h e o n l y r e a s o n w h y , f u n d a m e n t a l 1 y , t h i s v o lu m e o f
s e c u r i t i e s a r e h e l d i s t h a t I t i s a good d e a l .
I t 1s s o m e t h i n g
-hat is w o r t h w h i l e f o r t h e i n d i v i d u a l s ; I t 1s s o m e t h i n g t h a t
encourages' t h r i f t .
As we l o o k t o t h e y e a r 1 9 7 3 and some o f
4
lour broad economic p r o b l e m s , t h e e x t e n t t o w h ic h we can e n c o u r a g e
people to save I n t h i s manner I t h i n k 1s g o i n g t o be v e r y h e l p f u l .
So t h i s 1 s
a v e r y I m p o r t a n t p ro g ram f o r u s . And we
appreciate y o u r e f f o r t s and u n d e r s t a n d t h a t i t 1s a l o t o f w o r k ;
fthst t h i s 1s a v o l u n t e e r o r g a n i z a t i o n .
And H k e some, b u t u n l i k e
many v o l u n t e e r e f f o r t s , p e o p l e h e r e r e a l l y w o r k a t 1 t .
And
pore than t h a t , t h e work 1s p r o d u c t i v e and a r e s u l t 1s a c h i e v e d .
[And I was s a y i n g t o Don as we were t a l k i n g h e r e , one o f t h e
p n e r v in g t h i n g s sometimes a b o u t w o r k i n g I n a f i e l d c o n n e c t e d
pith f i n a n c e I s t h a t most o f t h e t i m e when you u n d e r t a k e s o m e t h i n g ,
Ht's p r e t t y e a s y t o t e l l w h e t h e r o r n o t y o u s u c c e e d e d .
And
p e record 1 s u n a m b ig u o u s .
Now l e t me t u r n t o t h e s u b j e c t o f Ph ase I I I .
And
as I s a y , I t h i n k 1 t
1s a p p r o p r i a t e t o t a l k a b o u t t h a t h e r e ,
because I t i s r e l a t e d t o y o u r e f f o r t s .
And t h e e x t e n t t o w h i c h
pe are s u c c e s s f u l 1n Phase I I I w i l l , 1n p a r t , d e t e r m i n e how
good a deal f o r . t h e I n d i v i d u a l t h e s a v i n g s bond 1 s .
So I w i l l
foresutne t o j u s t d e s c r i b e t h e announ cements t h a t t h e P r e s i d e n t
was made and t o s a y where 1 t seems t o me b u s i n e s s 1n t h i s c o u n t r y
f i t s I n t o t h e p r o g r a m , w h a t I s e x p e c t e d o f y o u , and w h a t I know
will be pro d uc e d by y o u .
I
The P r e s i d e n t announ ced t o d a y a g o a l f o r us a l l , so
p r as I n f l a t i o n 1s c o n c e r n e d , o f g e t t i n g t h e r a t e o f I n f l a t i o n
down to two and a h a l f p e r c e n t o r b e l o w .
We r e c o g n i z e t h a t
js an a m b i t i o u s t a r g e t .
Most o f y o u r e c o n o m i s t s d o n ’ t t h i n k
[ t 11 get t h a t l o w .
So i t ' s a m b i t i o u s .
We f e e l t h a t 1 t I s
attainable.
I t 1s a t t a i n a b l e 1 f , f i r s t , the f e d e r a l government
nas the c a p a c i t y t o e x e r c i s e d i s c i p l i n e i n t h e c o n d u c t o f I t s
own a f f a i r s .
T h a t 1s t h e p r i m a r y and f i r s t p r e c o n d i t i o n .
The
President 1s l a y i n g down a f i s c a l ' 7 3 b u d g e t w h ic h w i l l come
in o u t l a y s , u n d e r two h u n dre d and f i f t y b i l l i o n and a f i c a l
F™ budget t h a t w i l l come in u n d e r t h e r e v e n u e s t h a t o u r t a x
pystsm would p r o d u c e when we g e t t o f u l l e m p l o y m e n t .
So he I s p u t t i n g f o r w a r d a d i s c i p l i n e d e f f o r t f r o m
¡the
l
®Keeut1ve b r a n c h , and we h o p e , and we e x p e c t , and we p l a n
P call t o a c c o u n t t h e C o n g r e s s t o e x e r c i s e s i m i l a r d i s c i p l i n e
[n c o n t r o l l i n g s p e n d i n g , so t h a t we can c o n t r o l i n f l a t i o n and
bn»
we caR a v o ^ — and we ha ve no i n t e n t i o n o f a s k i n g f o r
pne - - so
can a v o | cj a t a x i n c r e a s e .
L .
So I t h i n k t h a t i s o u r f i r s t and f u n d a m e n t a l p l a n k
fn at ws t a l k e d a b o u t and t a l k e d a b o u t , and we r e i t e r a t e .
And
dp HR€‘ e r s ^an d t h a t i s t h e g u t o f any e f f o r t t o d e a l w i t h t h e
P obieni o f e x p a n d i n g p r o s p e r i t y w i t h r e a s o n a b l y s t a b l e p r i c e s .
No w, we have been t h r o u g h Phase I .
We have been t h r o u g h
5
■Phase I I .
And as we have come up t o t h e y e a r 1 9 7 3 , we have
■tried to l e a r n I n t e r n a l l y fr o m o u r own e x p e r i e n c e s .
And wa
■have had w id e c o n s u l t a t i o n w i t h p e o p l e fr o m l a b o r , fr o m b u s i n e s s »
■from a g r i c u l t u r e » f r o m consumer g r o u p s » members o f C o n g r e s s ,
■economists.
I have p e r s o n a l l y c o n s u l t e d » one way o r a n o t h e r »
■with around two hun dre d and f i f t y p e o p l e .
We have r e c e i v e d
■written c o m m u n i c a ti o n s fr o m a w id e number o f p e o p l e .
Many o f
■you, I k now , have been i n v o l v e d I n t h a t e f f o r t .
Now w ha t have we l e a r n e d ?
I w o u ld s a y f o u r t h i n g s
■have coma home t o me f r o m t h e c o n s u l t a t i o n s t h a t w e ' v e h a d .
■First — and I r e g a r d i t as somewhat e n c o u r a g i n g t o have been
■lectured so many t i m e s by p e o p l e fr o m a w id e a r r a y o f w a l k s
l o f l i f e on t h e f u n d a m e n t a l p o i n t t h a t l f i r s t made; n a m e l y ,
Iwe got p e o p le t o g e t h e r t o c o n s u l t a b o u t t h e wage and p r i c e c o n t r o l
■system, and t h e y s h ook t h e i r f i n g e r s a t u s , and t h e y s a i d , “ L o o k ,
Iwe want t o be r e s p o n s i b l e .
We w a n t t h i s t h i n g t o w o r k .
But
■in the e n d , we c a n ' t do a n y t h i n g 1 f y o u d o n ' t do s o m e t h i n g . ”
■And so I t h i n k t h e r e i s a c o n s c i o u s n e s s o f t h e i m p o r t a n c e o f
■monetary and b u d g e t a r y d i s c i p l i n e as p a r t o f t h i s p r o c e s s .
■And an I n t e r e s t i n g r e s u l t o f o u r c o n s u l t a t i o n s was t o see how
■deep t h a t how i s .
S e c o n d , we were t o l d a b o u t many p r o b l e m s w i t h th e
■current program - - p r o c e d u r a l p r o b l e m s o f v a r i o u s k i n d s i n v o l v i n g
■delays, m i s u n d e r s t a n d i n g s » d i f f i c u l t i e s o f one s o r t o r a n o t h e r
■with the red t a p e and t h e b u r e a u c r a c y ; I m i g h t s a y » a t o t a l l y
■predictable a s p e c t o f t r y i n g t o run c o n t r o l s » I m p o s s i b l e n e t
■to have i t , d o i n g t h e b e s t y o u can w i t h good p e o p l e - - and we
■feel wa have had v e r y good p e o p l e on t h e j o b .
But n e v e r th e le s s ,
l a l o t o f p r o c e d u r a l p ro b le m s t h a t p e o p l e have t a l k e d a b o u t .
I
And s e c o n d , a n d , I s u p p o s e , 1n many r e s p e c t s t h e more
■Im porta nt, s u b s t a n t i v e p r o b l e m s . And t h e r e ' r e a g r e a t v a r i e t y
■of s o r t s . The l a b o r p e o p l e , f o r e x a m p l e , compls ned a g r e a t
■deal about w h a t t h e p ro g r a m was d o i n g t o t h e c o l l e c t i v e b a r g a i n i n g
■process, a b o u t t h e p r o b l e m o f t h e u n i o n t h a t comes i n t o I t s
■management end makes demands.
And t h e management s m i l e s and
■says, f i n s , and t h e n s h i f t s t h e package down t o W a s h in g to n t o
|oe d e a l t w i t h on a r e a l i s t i c b a s i s .
And t h e y r e g a r d t h a t as
I® process w hic h w i l l b e f o r e l o n g u n d erm ine t h e I n t e g r i t y o f
■the r e l a t i o n s h i p between u n i o n snd management. And t h e y c o m p l a in
■ ab ou t i t .
Me have a t e l e p h o n e book f u l l , i f y o u ' l l p a rd o n t h e
|®^Pr e s s 1 o n , J o h n , o f e xa m ple s o f a n o m a l i e s o f one k i n d o r a n o t h e r
■that seem t o be d e v e l o p i n g w i t h some i n c r e a s i n g r a p i d i t y .
I
■Jon t t h i n k t h e p r o b l e m has been s e r i o u s , and p r o b a b l y I s n ' t
■too s e r io u s now; b u t I t was on I t s way t o b e i n g a v e r y s e r i o u s
■Problem, In w hic h t h e s t r u c t u r e o f t h e program I t s e l f - - and
6
various e x a m p l e s w e ' v e had — p r o d u c e s a r e s u l t t h a t , fu ndamenta 1jy we d o n ' t w a n t ; b a s i c a l l y , a c o s t I n c r e a s i n g r e s u l t , o r a
[result w hich w in d s up r e d u c i n g t h e s u p p l y a v a i l a b l e o f some
commodity o f w h i c h t h e demand 1 s r i s i n g and t h e p r i c e 1s r i s i n g
and the p r e s s u r e s a r e t h e r e , and so o n .
And t h e s e k i n d s o f
anomalies, a l s o p r e d i c t a b l e , a l s o a c co m p a ny in g any pro gram o f
mandatory c o n t r o l s t h a t goes on f o r a l o n g t i m e , a r e a l m o s t
Inevitable.
We have many e xa m ple s o f t h o s e .
So t h e r e was t h a t
note o f t h e p r o b l e m s w i t h t h e e x i s t i n g s i t u a t i o n t h a t must be
dealt w i t h .
T h l r d , h o w e v e r , I w o u ld s a y we f o u n d a v e r y g e n e r a l
[and w id e s p r e a d v i e w t h a t d e s p i t e t h e p r o b l e m s , t h e s y s te m o f
c o n t r o ls , 1n some m a n n e r , must go o n .
I t w ou ld be a m i s t a k e
not to c o n t i n u e and t o do o u r b e s t t o c o m p l e t e t h e j o b , i n s o f a r
as c o n t r o l s can c o n t r i b u t e t o t h e c o m p l e t i o n o f t h e j o b . T h e r e
were some who a d v i s e d t o j u s t d r o p t h e w h o le t h i n g .
B ut I would
guess n i n e t y p e r c e n t o f t h e p e o p l e we t a l k e d t o c o u n s e l e d t h a t
that would be a m i s t a k e .
B u t , we were t o l d , I t ' s v e r y i m p o r t a n t
what the P r e s i d e n t has s a i d , t h a t he r e g a r d s t h i s as t e m p o r a r y .
People w i l l do t h i n g s 1n a s p e c i a l way f o r a s h o r t p e r i o d o f
time which t h e y w o u l d n ' t be w i l l i n g t o do 1 f t h e y t h o u g h t t h i s
was a perm a n en t way o f l i f e .
And so y o u must keep s a y i n g t h a t
and mean 1 t , and show t h a t y o u mean 1 t , so we were a d v i s e d .
And also 1n t h i s same v e i n , t h e r e was a good d e a l o f s e n t i m e n t
that the p r o g r a m , i n I t s t o t a l l y m a n d a t o r y a s p e c t , c o u l d be
cut down, and we c o u l d r e l y t o a g r e a t e r d e g r e e on t h e v o l u n t a r i s m
In the A m e r ic a n s o c i e t y t o do t h e j o b .
F i n a l l y , I w ou ld s a y e v e r y b o d y , even t h e a g r i c u l t u r e
groups, s a i d t h a t we have a t e r r i f i c p r o b l e m in t h e a r e a o f
[food p r i c e s and t h a t wa s i m p l y must be a b l e t o do s o m e t h in g
about t h a t , o r e l s e a l l t h e o t h e r p a r t s o f 1 t t h a t seemed t o
be going r e a s o n a b l y w e l l w i l l come a p a r t .
In o t h e r w o r d s , on
U sort o f a n a l y t i c a l b a s i s a b o u t where do vie s t n d a n d , t h e r e b y ,
what needs t o be d o n e , t h e e x a m i n a t i o n o f t h e p r i c e I n d i c e s
pn v a r io u s s e c t o r s o f t h e economy s u g g e s t s t h a t a e r o s s a b roa d
range o f p r i v a t e , n o n fa r m a c t i v i t y , t h e p r i c e p e r f o r m a n c e 1s
[ f a i r l y good.
But then th e farm a c t i v i t y , th e p r i c e performance
[has been so d i f f e r e n t , and i t 1 s o f such i m p o r t a n c e t o t h a t
■housewife who 1s 1n t h e r e s h o p p i n g e v e r y week o r e v e r y d a y o r
o t h e r d a y - - i t ' s t h e most v i s i b l e a s p e c t o f p r i c e s - t h a t t h a t has been b a d l y o u t o f k i l t e r .
So
t h a t 1 s w h a t we have g o t t e n o u t o f t h e s e c o n s u l t a t i o n s
r sort o f an a n a l y s i s o f where we s t a n d , and w h a t i s g o o d , bad
and I n d i f f e r e n t a b o u t t h e c o m b i n a t i o n o f Phase I and Phase I I .
I
So on t h e b a s i s o f t h a t a d v i c e and o u r own t h i n k i n g
Qhout th e s u b j e c t , t h e P r e s i d e n t , who has t h o u g h t a b o u t t h i s
program a g r e a t d e a l and t h i s p r o b l e m a g r e a t deal o v e r t h e
bears, has now d e c i d e d on t h e f o l l o w i n g k i n d o f program f o r
H973. And as we see 1 t , t h e r e 1s no r i g h t p rogram f o r a l l ti m e
of t h i s k i n d .
I t I s n ' t as t h o u g h t h e r e 1s a r i g h t way t o do
It i f you can o n l y r i n d i t , and y o u keep l o o k i n g , and th e n a l l
lof a sudden y o u f i n d I t .
R a t h e r , 1 t 1s a p r o c e s s o f l o o k i n g
at the t o o l s y o u ' v e g o t , e x a m i n i n g t h e p ro b le m s t h a t y o u ' v e
got, and s e e i n g h e w , p e r i o d i c a l l y , y o u can r e - a r r a n g e y o u r use
of the t o o l s t o meet t h e p r o b l e m s as t h e y a r e e m e r g i n g .
And
so we are l o o k i n g f o r t h e most e f f e c t i v e way t o use t h e s e t o o l s
!ln 19 73 .
W e l l , f i r s t o f a l l , we a r e g o i n g t o make a s te p p e d
up e f f o r t in t h e f o o d a r e a .
Mandatory c o n t r o ls a f t e r a product
has come o u t o f t h e raw a g r i c u l t u r a l s t a t e a r e r e t a i n e d .
We
are s e t t i n g I n t o p l a c e some p r o c e d u r a l changes i n t h e fo o d a r e a .
And we have announ ced t o d a y a s e t o f t h i n g s , w h ic h I ' l l m e n tio n
¡1n a l i t t l e w h i l e , s u b s t a n t i v e l y d e s i g n e d t o g e t a t t h e essen c e
of the p r o b l e m ; n a m e l y , s u p p l y , and how can y ou i n c r e a s e s u p p l y .
S e c o n d , as we have a n a l y z e d t h e p r o b l e m , t h e r e i s
a l o t o f work t o be done on h e a l t h c o s t s .
I s a y " c o s t s , “ because
as 1n so many a r e a s , i t I s n ' t j u s t p r i c e s t h a t c o u n t ; I t ' s p r i c e s
but the s e r v i c e r e n d e r e d f o r t h e p r i c e .
And vie have had p r e t t y
good s u c c e s s , a p p a r e n t l y , 1n Phase I I w i t h h e a l t h p r i c e s , and
we've had v e r y l i t t l e s u c c e s s w i t h h e a l t h c o s t s , w h ic h have
continued t o r i s e a t a v e r y , v e r y r a p i d r a t e .
So we w i l l p rocedu
ally have a s t e p p e d up and m a n d a t o r y pro gram i n t h e h e a l t h f i e l d .
B o th o f t h e s e f i e l d s , I t h i n k i t i s w o r t h n o t i n g ,
a£e c h a r a c t e r i z e d n o w , on t h e one h a n d , by a c o n t r o l mechanism,
which wa seek t o i m p r o v e ; on t h e o t h e r h a n d , by a g r e a t deal
° f in v o l v e m e n t by g o v e r n m e n t a l programs
program s.
And ws w a nt t o work
these two t h i n g s t o g e t h e r t o g e t a b e t t e r r e s u l t th a n w e ' r e
now g e t t i n g .
We w i l l c o n t i n u e w h a t we r e g a r d as s u c c e s s f u l and
worthwhl] e e f f o r t s 1n t h e c o n s t r u c t i o n in d u s t r y and w i t h ou r
CofnraUtee on I n t e r e s t and D i v i d e n d s , w h ie h o u r f r i e n d A r t h u
cha i r s .
Beyond t h a t we a r e c h a n g i n g t h e n a t u r e o f t h
program. And i t ' s a l i t t l e h a r d t o know q u i t e how t o d e s c r i b e
I f f I t ' s a q u e s t i o n o f 1s i t h a l f f u l l o r h a l f e m p t y , s o r t
of. You d o n ' t know w h i c h p a r t o f i t t o d e s c r i b e .
But I ' l l
Ju st s t a t e t h a t we w i l l t a k e t h e s t a n d a r d s t h a t have been d e v e l o p
by the Pr 1ee Commissi on and t h e P a y Board , m o d i f y them somewhat
where we t h i n k t h e y p ro d u c e a n o m a l i e s o f one k i n d o r a n o t h e r ,
an<3 then say t o a l l o f y o u — KW e ' r e a l l engaged I n a p ro c e SS
of t r y i n g t o r e a c h t h e goal t h a t t h e P r e s i d e n t has s e t o u t .
And we wa n t fr o m y o u r e s p o n s i b l e b e h a v i o r t o t h a t e n d . And
8
responsible b e h a v i o r can be I d e n t i f i e d by f o l l o w i n g 1n a r e a s o n a b l e
way these s t a n d a r d s .
And we e x p e c t y o u t o do so on a s e l f - a d m i n i s
tering b a s i s . "
Mow we w i l l make I t m a n d a t o r y f o r l a r g e f i r m s t o r e p o r t
to us p e r i o d i c a l l y , and medium s i z e d , s o - c a l l e d t i e r two f i r m s
to keep r e c o r d s 1n s p e c i f i e d ways so t h a t vie can r e a d i l y f i n d
out w h a t’ s g o i n g o n .
We w i l l m a i n t a i n a s t a f f c a p a c i t y 1n t h e
Cost o f L i v i n g C o u n c i l , and we w i l l m a i n t a i n a good f o r c e i n
the I n t e r n a l Revenue S e r v i c e t o h e l p us t o s t a y a b r e a s t o f w ha t
1s going o n .
And we r e s e r v e t h e r i g h t In t h e C o s t o f L i v i n g
Council t o r e a s s e r t j u r i s d i c t i o n w here ws f e e l u n r e a s o n a b l e
behavior 1s t a k i n g p l a c e and t o go t h r o u g h w h a t e v e r p r o p e r p r o c e d u r
Is c a ll e d f o r , a n d , 1 f n e c e s s a r y , t o Impose m a n d a t o r y p r i c e
or wage s t a n d a r d s In t h a t a r e a .
B u t we d o n ’ t w a n t t o do t h a t .
We don’ t e x p e c t t o have t o do t h a t .
We e x p e c t p e o p l e w i l l w a nt
to do what 1s r e a s o n a b l e .
Now i n s o f a r as t h e s t a n d a r d s f o r p ay a r e c o n c e r n e d ,
we have c o n s t r u c t e d a L a b o r - M a n a g e m e n t A d v i s o r y C o m m it te e t o
the Cost o f L i v i n g C o u n c i l .
And t h a t c o m m i tte e w i l l t a k e t h e
Pay B o a r d 's s t a n d a r d s , w h i c h r e m a in 1n e f f e c t u n t i l t h e y a r e
changed, 1 f t h e y a r e c h a n g e d , and w i l l r e v i e w them and w i l l
'advise us on w h a t 1s r e a s o n a b l e b e h a v i o r I n t h e f i e l d o f w a g e s .
And I m i g h t s a y t h a t , 1n t h e s p i r i t o f v o l u n t a r i s m
and o f t r y i n g t o make t h i s t h i n g go on i t s ov/n. I t was q u i t e
In te r e s t i n g t o me t h a t on s o m e t h i n g l i k e t h i s , w h ic h i s c o n t e n t i o u s
and d i f f i c u l t , t h a t each o f t h e t e n p e o p l e t h a t we a sked t o
[Serve on t h a t c o m m itte e a g r e e d t o do s o .
We d i d n ’ t ha ve t o
[go to the n e x t c h o i c e I n any c a s e .
i
i*ra s u r e y ou i i r e c o g n i z e t h e names o f t h e p e o p l e
■Involved. On t h e manages e n t s i d e , S t e v e B e c h t e l o f t h e B e c h t e l
■Corporation; Ed C a r t e r o f H a l e ( ? ) B ro a d w a y S t o r ; J l s Roche
prom General M o t o r s ; H e a t h L a r r y ( ? ) f r c m U . S . S t e e l ; and W a l t
IJtsten from t h e F i r s t N a t i o n a l C i t y B a n k .
On t h e l a b o r s i d e ,
■George M a n y , head o f t h e A F L - C I O ; P a u l H a l l fr o m t h e m a r i t i m e
■trades; I . w. A b e l fr o m t he s t e e l w o r k e r s u n i o n ; F r a n k F i t z s i m m o n s ,
Inead o f t h e T e a m s t e r s Un i o n ; and L e o n a r d W o o d c o c k , head o f t h e
I d Il f
ft! ^ K 4 ^ ^
_______
T h i s gr o u p w i l l coma t o g e t h e r and
sndards.
The a d m i n i s t r a t i o n o f th e
»KWGords, h o w e v e r , w i l l be done by t h e C o s t o f L i v i n g C o u n c i l ,
|5o we w i l l have t h e case by c a s e , o r w h a t e v e r y o u w a n t t o c a l l
lu * P e s p o n s i b i 1 i t y .
And t h i s a d v i s o r y g r o u p w i l l coma t o g e t h e r
pnd a d vis e us a b o u t w ha t t h e s t a n d a r d s a r e .
L .
I sup pose 1n some c a s e s , 1n some w a y , one m i g h t s a y
j m s is s o r t o f l i k e w h a t a c t u a l l y happened 1n Ph ase I I ; t h a t
9
1s, we had a t r i p a r t i t e c o m m itte e w h i c h d e v e l o p e d t h e s t a n d a r d s ,
p d then a f t e r some members o f l a b o r and t h e n management l e f t
p e b o a r d , I t was a d m i n i s t e r e d 1n t h e s p i r i t o f t r i p a r t i t i s m ,
¡but t a k i n g o v e r t h o s e s t a n d a r d s and a d i f f e r e n t p a t t e r n o f a d m i n i
stration.
You a l l k n o w , I ' m s u r e , t h a t Oon R u m s f e l d , who has
been the d i r e c t o r o f t h e C o s t o f L i v i n g C o u n c i l , has been n o m in a te d
py the P r e s i d e n t t o be A m bassa dor t o N A T O .
And ha w i l l be succeeded
as d i r e c t o r b y J o h n D u n l o p , a p r o f e s s o r a t H a r v a r d and who has
done such an o u t s t a n d i n g j o b as c h a i r m a n o f t h e c o n s t r u c t i o n
industry c o m m i t t e e , and who 1 s , I t h i n k , one o f t h e most k n o w le d g e
able and e x p e r i e n c e d p e o p l e i n w o r k i n g a t t h i s c l a s s o f p ro b le m s
that we have 1n t h e w o r l d , l e t a l o n e I n t h e c o u n t r y .
Now l e t me J u s t s a y one word a b o u t t h e a re a o f f o o d
costs, because 1 t i s o f such g r e a t i m p o r t a n c e .
And I t h i n k
I t is k in d o f a t e s t i n g o f d e t e r m i n a t i o n :
w h a t , among t h e t h i n g s
that you can d o , w i l l y ou a c t u a l l y do? And vie a r e g o i n g t o
work a t t h i s v e r y h a r d .
B u t we have been w o r k i n g a t 1 t .
And
l e t me j u s t m e n t i o n some o f t h e t h i n g s t h a t have been done and
fire underway.
F i r s t o f a l l , i n t h e a re a o f c r o p p r o d u c t i o n f o r f e e d
grains - « so yb eans and so on - - we have a b o u t t h r e e hun dred
Million a c r e s , I ' m t o l d , t h a t a r e s o r t o f p o t e n t i a l l y a v a i l a b l e ,
l a s t y ear we had s e t a s i d e s i x t y m i l l i o n a c r e s .
T h i s y e a r in
Ine programmatic a s p e c t s o f 1 t , t h a t was r e d u c e d t o f o r t y m i l l i o n
seres. T h a t happened some t i m e a g o .
Y e s t e r d a y d e c i s i o n s wore
taken to re du ce t h a t down t o somewhere I n t h e ra n g e o f t w e n t y Iwo or so m i l l i o n a c r e s .
And on J a n u a r y 1 9 t h , we e x p e c t t o
get r e p o r t s on p l a n t i n g p l a n s and so f o r t h .
And a f t e r we r e v i e w
|no$s,
w i l l see 1 f we s h o u l d t a k e more a c r e a g e o u t o f t h e
|et-a§ides.
So t h a t i s a v e r y l a r g e amount o f a c r e a g e , a d d i t i o n a l
Planting, t h a t is being p ut i n t o p la c e .
And o f c o u r s e , I t h i n k ,
i s a g e n e r a l i z a t i o n , we have an o p p o r t u n i t y r i g h t now as t h i n g s
pave gon e, w i t h t h e demand t h e r e 1s f o r a g r i c u l t u r a l p r o d u c t s ,
r j mainta in fa rm Income t h r o u g h a p r o c e s s o f g r e a t e r volume
| t reasonable p r i c e s .
And 1 t m y be t h a t we can c h a n g e , 1n
I H 4 ?Se#
p s y c h o l o g y o f r e s t r i c t i n g s u p p l y a l l th e t i m e I n t o
I
e r e n t p s y c h o l o g y i n t h e a g r i c u l t u r e a r e a , and t h e f a r m e r s
P O . 0? w e l l 1n t h e p r o c e s s , and o u r e x p o r t s i t u a t i o n can do
r e , J in th e p r o c e s s , and o u r consumers can do w a l l i n t h e p r o c e s s .
L
We have t a k e n a s t e p a d m i n i s t r a t i v e l y t o see t h a t
passed by t h e C o s t o f L i v i n g C o u n c i l a l l o f t h e s tr e a m
V
R a t i n g o r d e r s and a g r e e m e n ts and m a r k e t i n g g u i d e s , and
I i h Ü?9
are
c o n s t a n t l y by t h e A g r i c u l t u r e D e p a r t m e n t ,
iwiuing th e - - i n e f f e c t , an e f f o r t t o g u i d e s u p p l y t h r o u g h
®
10
pis process.
And t h i s 1s an e f f o r t on o u r p a r t t o see t h a t
be consumer I n t e r e s t 1 s r e p r e s e n t e d as a l l o f t h e s e g u i d e s
are put f o r w a r d .
Mat t h a t t h e a g r i c u l t u r e I n t e r e s t w on ’ t b e ;
but t h i s 1s an e f f o r t t o see t h a t t h e consumer I n t e r e s t g e t s
a special l o o k a t I t .
We have announced i n l a t e s e v e n t y - t w o a v a r i e t y o f
boves: th e re m ov a l o f q u a n t i t a t i v e r e s t r i c t i o n s on meat I m p o r t s
jfor a l l o f s e v e n t y - t h r e e ; t h e t e m p o r a r y s u s p e n s i o n o f q u o t a s
on imported n o n f a t d r y m i l k ; and a v a r i e t y ©f o t h e r pro g ram s
of t h a t k i n d .
We a r e 1n t h e p r o c e s s o f a c c e l e r a t i n g t h e d i s p o s a l
bf stocks owned by t h s C ommodity C r e d i t C o r p o r a t i o n and g e t t i n g
■hem o u t i n t o t h e m a r k e t .
And t h a t has gone q u i t s f a r ; t h e r e
is not - - I d o n ' t w a n t t o s u g g e s t t h a t t h e r e 1s a tr e m e n d o u s
[amount t h e r e , b u t t h e r e a r e - - t h e r e a r e soma s i g n i f i c a n t s u p p l i e s
and they w i l l be s o l d .
We have announced t h e t e r m i n a t i o n o f e x t e n d e d CCC
Roans on fa r m s t o r e d g r a i n , e f f e c t i v e May 3 1 , 1 9 7 3 .
So t h i s
again 1s an e f f o r t t o move t h a t p r o d u c e I n t o t h e m a r k e t , s i n c e
the government w i l l n o t p a y t h e s t o r a g e c o s t s .
We have e l i m i n a t e d ,
virtually e lim in a t e d , a l l e x p o rt s u b s id ie s .
And y e s t e r d a y we
took an a c t i o n , t h e D e p a r t m e n t o f A g r i c u l t u r e d i d , t h a t s h o u l d
to expand l i v e s t o c k p r o d u c t i o n b y snaking 1 t p e r m i s s i b l e , w hereas
ea rlie r I t was n o t a l l o w e d , p e r m i s s i b l e t o use s e t - a s i d e a c r e s
[for y e a r - r o u n d g r a z i n g o f l i v e s t o c k .
And t h a t i n c r e a s e s by
a l o t t h e amount o f a c r e a g e on w h i c h y o u can g r a z e .
W e l l , I - - I b r i n g t h o s e o u t because t h e y a r e subs t a n f c i v e im portant.
B u t I t h i n k t h e y s u g g e s t t h e n a t u r e end t h e cl e t e r a i n a pticn o f o u r e f f o r t .
And I t 1$ an e f f o r t g u i d e d f u n d a m e n t a l ! y
py ® r e s p e c t f o r w h a t y o u can and y o u c a n ' t d o .
In the f i e l
pf econom ics, as t h e y s a y , y o u c a n n o t s h o u t a t t h é t i d e and
N p e c t I t t o go b a c k .
You - - I n e c o n om ic s you have t o work
pith the s i t u a t i o n ; you h a v e t© I m p a c t t h e s u p p l y and Im p a c t
r j * demand, and a t t h e same t i m e t r y t o g o t some m i l e a g e o u t
of a s t r u c t u r e o f c o n t r o l s t h a t we f e e l h ave - - h a v e been ha 1 p f u !
| o « s 1n t h e p a s t y e a r and a h a l f and can be h e l p f u l t o us 1 n
P9/3, and a t t h e same t i m e w i l l be most h e l p f u l i f we t e n d a w
P"e same ti m e t o t h e f u n d a m e n t a l s .
And t h e f u n d a m e n t a l s hav 2
to oo w i t h b u d g e t p o l i c y ; t h e y ha ve t o do w i t h m o n e t a r y p o l l c y ;
P©y have t o do w i t h b a s i c m a t t e r s t h a t have an Im p a c t on su P P l
PRd demand.
So I w ou ld s a y I n s o f a r as m ost o f t h e p e o p l e h e r e
c o n c e r n e d , as t h i s a f f e c t s y o u d i r e c t l y , y ou no l o n g e r have
¡;? tpke a p p l i c a t i o n t o t h e P r i c e Commissi on 1n o r d e r t o do s o m e t h i n g
jnat you t h i n k i s c o n s i s t e n t w i t h t h e P r e s i d e n t ' s g o a l s .
It
P$ up to you t o s e l f - a d a i n i s t e r .
The P r e s i d e n t f e e l s t h i s 1s - -
/
(
11
very i m p o r t a n t t o make a s t e p l i k e t h i s 9 because we d o n ’ t
to get i n t h e h a b i t i n t h i s c o u n t r y o f s e t t i n g up a s i t u a t i o n
fehlch more and more p e o p l e a r e f o r c e d t o and th e n f i n d i t
beabls t o go t o g o v e r n m e n t t o g e t i s s u e s s e t t l e d .
We have
lake r e s p o n s i b l l I t y o u r s e l v e s f o r o u r own b u s i n e s s e s * o u r
[co llec tiv e b a r g a i n i n g .
We a r e t r y i n g t o p u t f o r w a r d here
[enable s t a n d a r d s by w h i c h y o u can j u d g e y o u r c o n d u c t , and
say to you i t i s y o u r s
s e l f •adm inister.
We w i l l be w a t c h i n g .
We do b e l i e v e t h a t c o n s c i e n c e
In part t h a t s t i l l s m a ll v o i c e t h a t sa ys somebody may be
thing. So w e ' l l be w a t c h i n g .
And we can come i n w i t h o u r
Ibat and s w i n g , i f we t o - - n o t i n th e p u n i t i v e s e n s e , b u t
the p r o s p e c t i v e s e n s e ; and we w o n ' t h e s i t a t e a m i n u t e t o
It. But we e x p e c t t h a t t h e r e w i l l be a v o l u n t a r y e f f o r t
It as t h e r e was i n Phase I , as t h e r e was i n Phase I I .
We
[deeply c o n v i n c e d t h a t t h e m i n u t e one o f t h e s e p rogram s becomes
l jn wh1 eh a l l o f you p e o p l e i n i n d u s t r y , who a r e so much
[ter than we a r e and w o r k a t i t so much m o r e , s a y , “ A l l r i g h t ,
[sovernmant has s e t up t h i s p r o g r a m .
Wow how can we b e a t
I — as soon as t h a t p s y c h o l o g y t a k e s h o l d , you c a n ' t —
te done f o r .
I t must be v o l u n t a r y .
We must have c o o p e r a t i o n ,
¡now y e ' r e t a k i n g a s t e p and s a y i n g , "Yo u a d m i n i s t e r 1 t .
• Here are t h e g u i d e s , t h e s t a n d a r d s t h a t have been p u t
IN. You a p p l y them t o y o u r s e l v e s . " And i n t h i s p r o c e s s
ook f o r y o u r c o o p e r a t i o n , and we f e e l t h a t t h i s i s o u r c h a n c e ,
*s your c h a n c e , t o show t h a t we can make fr e e d o m w o r k .
I
Department of t h e J R E A S U l ì Y
SHINGTON, D.C. 20220
T E L E P H O N E W 04-2041
FOR IMMEDIATE RELEASE
January 18, 1973
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for
$1,800,000,000, or thereabouts, of 349-day Treasury bills for cash and in exchange
for Treasury bills maturing
January 31, 1973
The bills of this series will be dated
January 15, 1974 .
, in the amount of $ 1,700,320,000.
January 31, 1973
, and will mature
(CUSIP No. 912793 SLl).
Wie bills will be issued on a discount basis under competitive and noncom
petitive 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 $10,000, $15,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing
hour, one-thirty p.m., Eastern
Standard time, Thursday, January 25, 1973.
Tenders will not be received at the Treasury Department, Washington.
must be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
not be used.
Fractions may
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 wil^L 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.
(OVER)
-
2-
Immediately after the closing hour, tenders will be opened at the Federal Resell
Banks and Branches, following which public announcement will be made by the Treasuj
Department of the amount and price range of accepted bids.
Only those submitting
competitive tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final]
Subject to these reservations, noncompetitive tenders for $200,000 or less without
stated price from any one bidder will be accepted in full at the average price (in
three decimals) of accepted competitive bids.
Settlement for accepted tenders in
accordance with the bids must be made or completed at the Federal Reserve Bank on
January 31, 1973
5 in
cash or other immediately available funds or in a like
face amount of Treasury bills maturing
tenders will receive equal treatment.
January 31, 1973
.
Cash and exchange
Cash adjustments will be made for difference
between the par value of maturing bills accepted in exchange and the issue price of]
the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the amoJ
of discount at which bills issued hereunder are sold is considered to accrue when tl
bills are sold, redeemed or otherwise disposed of, and the bills are excluded from
consideration as capital assets.
Accordingly, the owner of Treasury bills (other t
life insurance companies) issued hereunder must include in his income tax return, ai
ordinary gain or loss, the difference between the price paid for the 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.
Treasury Department Circular No. 418 (current revision) and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
Department of t h e T U [ j ( S U R Y
tSHINGTON, D.C. 20220
T ELEP H O N E W04-2041
FOR IMMEDIATE RELEASE
January 18, 1973
TREASURY ANNOUNCES FIVE NOTICES
UNDER THE ANTIDUMPING ACT
The Treasury Department announced today five notices under
the Antidumping Act of 1921, as amended.
In the first two cases antidumping investigations are being
initiated, and in the other three cases an extension of time is
necessary to complete the antidumping investigations.
In the first case the Treasury announced the initiation of
an antidumping investigation on imports of polypropylene
strapping from Japan. Polypropylene strapping is a non-metallic
plastic industrial strapping which is a ‘substitute for steel or
rope as a banding or strapping material. This announcement
follows a summary investigation conducted by the Bureau of
Customs after receipt of a complaint alleging that dumping was
taking place in the United States. During the calendar year
1972 imports of polypropylene strapping from Japan were valued
at approximately $1.5 million.
In the second case the Department announced the initiation
of an antidumping investigation on imports of iron powder
(excluding alloy and sponge iron powders) from Canada. Iron
powders are used for the fabrication of gears and various parts,
particularly in the automobile industry. This announcement
follows a summary investigation conducted by the Bureau of
Customs after receipt of a complaint alleging that dumping
was taking place in the United States. During the period of
January through September 1972, imports of this merchandise
from Canada were valued at approximately $1.5 million.
In the third, fourth and fifth cases the Treasury
announced that an extension of time was necessary to complete
antidumping investigations involving papermaking machinery from
Finland, papermaking machinery from Sweden, and sulphur from
Canada. These cases could not be completed within the 9-month
time limit specified in the recent amendments to the Antidumping
Regulations. An additional period of time, not to exceed 3
months, will be necessary before the appropriate actions can be
OVER
-
2-
taken.
T h i s a d d i t i o n a l t i m e is n e c e s s a r y b e c a u s e c e r t a i n
c o m p l e x iss u e s r e l a t i n g to the t r e a t m e n t of p o s s i b l e sales
b e l o w c ost of p r o d u c t i o n h ave no t y e t b e e n resolved, and
a d e q u a t e c o n s i d e r a t i o n m u s t b e g i v e n to t h e p o s s i b l e i m p a c t
of these issues on these current investigations.
# # #
Department of t h e f R E A S l I R Y
fcSHINGTON. D .C 2 O 2 2 0
FOR
T ELEP H O N E W04-2041
January
IMMEDIATE RELEASE
22,
1973
TREASURY ISSUES DUMPING FINDING
W I T H RESPECT TO NORTHERN BLEACHED
HARDWOOD KRAFT PULP FROM CANADA
T h e T r e a s u r y D e p a r t m e n t a n n o u n c e d t o d a y t h a t it h a s i s s u e d
a d u m p i n g f i n d i n g w i t h r e s p e c t to p r i m e g r a d e a n d o f f —g r a d e
northern bleached har d w o o d kra f t pulp from Canada.
The
finding will b e published
in t h e F e d e r a l R e g i s t e r o f J a n u a r y
23, 1973.
On September 30, 1973, the Treasury Department advised
the Tariff Commission that northern bleached hardwood kraft
pulp is being sold at less than fair value within the meaning
of the Antidumping Act of 1921, as amended.
O n J a n u a r y 3, 1973, t h e T a r i f f C o m m i s s i o n i s s u e d a
d e t e r m i n a t i o n t h a t a n i n d u s t r y i n t h e U n i t e d S t a t e s is b e i n g
a n d is l i k e l y t o b e i n j u r e d b y r e a s o n o f t h e i m p o r t a t i o n o f
such m e r c h a n d i s e
into the U n i t e d States.
A f t e r these two determinations, the finding of dumping
a u t o m a t i c a l l y f o l l o w s as t h e f i nal a d m i n i s t r a t i v e r e q u i r e m e n t
in a n t i d u m p i n g
investigations.
During the period of January 1971 through September 1972,
imports of prime grade and off—grade northern bleached hardwood
kraft pulp from Canada were valued at approximately $59.2 million.
# # #
Department of th e T R U S U R Y
ÌHINGTON,
D.C. 20220
TELEPHONE W04-2041
J789
MEMORANDUM TO CORRESPONDENTS:
January 22, 1973
Treasury Secretary George P. Shultz today sent to the
President of the Senate and the Speaker of the House proposed
legislation extending the Interest Equalization Tax for
2 years beyond its present expiration date of March 31, 1973.
A (copy of the letter to the President of the
Senate, and the draft bill, are attached. (Identical
letter sent to the Speaker of the House.)
The Interest Equalization Tax (IET) has been in effect
since July 1963 as a means of reducing the outflow of
portfolio capital from the United States to developed
countries. By raising the cost to foreigners in developed
countries of borrowing or raising equity funds in the United
States, the IET provides Support for the U.S. balance of
payments during the period before full equilibrium is restored
The present IET law gives the President the authority
to vary the effective rate of tax between zero and the
equivalent of \ \ percent per annum on purchases of securities
subject to the tax. The President has set the present tax
rate at 3/4 percent.
The IET has been extended on four previous occasions
since initial enactment. It was last extended in March 1971
for a two-year period.
oOo
Attachment
S-99
THE SECRETARY OF THE TREASURY
W A S H I N G T O N . D .C . 20220
Dear Mr. President:
On behalf of the Administration, I am requesting the
Congress to extend the Interest Equalization Tax for two
years beyond its scheduled expiration on March'll, 1973,
to March 31, 1975. I urge that this be done prior to the
expiration of the tax on March 31, 1973.
Since its inception in 1963, this tax has contributed
significantly to one aspect of the United States balance
of payments position by restraining outflows of U.S. capital
for portfolio investment in foreign stocks and debt obliga
tions. In addition, the Interest Equalization Tax continues
to reinforce the two other capital restraint programs — the
Foreign Direct Investment Regulations which apply to direct
investment outflows by U.S. companies and the Voluntary
Foreign Credit Restraint Program which applies to*loans to
foreigners by U.S. financial institutions.
A similar communication has been addressed to the
Speaker of the House of Representatives.
We have been advised by the Office of Management and
Budget that there would be no objection to the presentation
of this proposal to the Congress and its enactment would be
consistent with the Administration's objectives.
Sincerely yours
George P ..Shultz
The Honorable
Spiro T. Agnew
President of the Senate
Washington, D. C. 20510
Enclosure:
Draft Bill
A BILL
To provide an extension of the interest equalization
tax.
Be it enacted by the Senate and House of
'
Representatives of the United States of America in
Congress assembled. That Section 4911(d) of the
Internal Revenue Code of 1954 (relating to the
expiration of the interest equalization tax) is
amended by striking out "March 31, 1973" and insert
ing in lieu thereof "March 31, 1975"..
Department of the T R E A S U R Y
iwcTfiw D.C.
n r* 20220
*>noon
WASHINGTON,
TELEP H O N E W04-2041
i'l
.isa1"~n0
■
S
/
[ENTION:
FINANCIAL EDITOR
|R RELEASE 6:30 P.M.
January' 22, 1973
RESULTS OF TREASURY'S WEEKLY
BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
[ills, one series to he an additional issue of the hills dated
October 26, 1972 , and
lie other series to be dated January 25, 1973
, which were invited on January 16, 1973,
[ere opened at the Federal Reserve Banks today.
Tenders were invited for $ 2,400,000,000,
r thereabouts, of 91-day hills and for $ 1,900,000,000,or thereabouts, of 182 -day
ills
The details of the two series are as follows:
H G E OF ACCEPTED
pPETITIVE BIDS:
I
High
Low
Average
91-day Treasury bills
maturing
April 26, 1973
Approx. Equiv.
Price
Annual Rate
98.589
98.572
98.576
5 .582$
5.649$
5.633$
1/
182-day Treasury bills
maturing July 26, 1975
Approx. Equiv.
Annual Rate
Price
97.094 a/
97.081
97.088
5.748$
5.774$
5.760$
1/
a/ Excepting four tenders totaling $245,000
91$ of the amount of 91-day bills bid for at the low price was accepted
73$ of the amount of 182-day bills bid for at the low price was accepted
■CAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
¡District
P o s to n
* e w York
Philadelphia
■leveland
Pichmond
Atlanta
phicago
■t. Louis'
■Minneapolis
■knsas City
Pallas
■aji Francisco
TOTALS
Applied For
’
44,920,000
3,276,090,000
25.800.000
25.250.000
17.780.000
18.370.000
254.315.000
43.870.000
30.500.000
34.735.000
38.310.000
151.825.000
Accepted
I
35,380,000
2,108,140,000
15.775.000
24.900.000
7,780,000
13.145.000
101,130,000
28.190.000
12.495.000
18.005.000
11.860.000
25,545,000
Applied For
!
47,640,000
3,075,960,000
36.600.000
46.435.000
14,000,000
14.340.000
446.755.000
22.690.000
27.515.000
24.535.000
37.080.000
159.400.000
Accepted
i
2,640,000
1,724,440,000
6,600,000
10.770.000
3.900.000
$3,961,765,000
$ 2,400,345 ,000 b/
$3,952,950,000
$1,900,810,000 c/
.
10 110.000
94.955.000
12.690.000
5.460.000
12.605.000
7.340.000
9.500.000
^/includes $195,370,000 noncompetitive tenders accepted at the average price of 98.576
,^Jcl^ e s $104,605 ,000 noncompetitive tenders accepted at the average price of 97.088
I es^ rates are on a bank discount basis.
The equivalent coupon issue yields are
■ .79$ for the 91-day bills, and 6.02$ for the 182-day bills.
Departm entoftheTREASURY
.àirmui
INGTON.
n
r 20220
i n m ."i g fr TT eE iL Ec Pd H
u h m c u/n/i onai
D.C.
O N E W 04-2041
JJ
M V-
V
FOR I M M E D I A T E
January 22, 1973
RELEASE
CUSTOMS
U.S. - G E R M A N
REPRESENTATIVES
MEET
R e p r e s e n t a t i v e s of the U n i t e d States and the F e d eral
R e public o f G e r m a n y o p e n e d t o d a y a r o u n d o f t a l k s b e t w e e n t h e
Customs o r g a n i z a t i o n s o f t h e t w o c o u n t r i e s t o e s t a b l i s h a b i
lateral a g r e e m e n t t o h e l p b o t h G o v e r n m e n t s in e n f o r c i n g t h e
Customs laws.
The meeting results from adoption by the Customs Coopera
tion Council of a model bilateral convention on mutual
administrative assistance for the prevention, investigation
and repression of Customs offenses at its meeting in June, 1967.
In a subsequent meeting in June, 1971, the Council adopted a
recommendation for the Spontaneous Exchange of information con
cerning Illicit Traffic in Narcotic Drugs and Psychotropic
Substances. The latter included an invitation to consider
the possibility of concluding bilateral or multilateral agree
ments on the subject based on the Council's model. The United
States and the Federal Republic of Germany accepted the recom
mendations and today's meeting is the result.
The c o nference was o pened by A s s i s t a n t Sec r e t a r y of the
T r e a s u r y E d w a r d L. M o r g a n , w h o w e l c o m e d t h e G e r m a n D e l e g a t i o n
led b y H a n s H u t t e r , C h i e f o f t h e C u s t o m s D i v i s i o n , M i n i s t r y o f
Finance.
A l s o a t t e n d i n g the m e e t i n g are r e p r e s e n t a t i v e s of
the T r e a s u r y D e p a r t m e n t a n d its B u r e a u o f C u s t o m s , t h e D e p a r t
ment of S t a t e a n d t h e J u s t i c e D e p a r t m e n t ' s B u r e a u o f N a r c o t i c s
and D a n g e r o u s D r u g s .
The Customs Cooperation Council d.s a 68-member international
organization concerned with the harmonization and simplification
of technical procedures between the Customs services of member
nations. The U.S. became a member in November, 1970.
###
Department ofthe TREASURY
ASHINGTON.
P,C. 2.0220 ..
TELEPHONE W04:2Q4t
FOR IMMEDIATE RELEASE
January 25, 1973
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 $4,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing February 1, 1973,
of $4,200,775,000
in the amount
as follows:
91-day bills (to maturity date) to be issued
February 1, 1975, in the amount
of $2,400,000,000, or thereabouts, representing an additional amount of bills
dated
November 2, 1972, and to mature
May 3, 1973
originally issued in the amount of $1,901,175,000,
(CUSIP No. 912793
QS8)
the additional and original
bills to be freely interchangeable.
182-day
bills, for $1,800,000,000, or thereabouts, to be dated February 1, 1973,
and. to mature
August 2, 1973
(CUSIP No. >912793
RN8).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern Standard time, Monday, January 29, 1973.
Tenders will not be received at the Treasury Department, Washington.
must be for a mininmm of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms, and for
warded 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
(OVER)
-
account.
2-
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of
2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only those)
submitting competitive 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 any one bidder will be accept
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 February
1,
1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing February
treatment.
1,
1973.
Cash and exchange tenders will receive equal
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.
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 considered to accrue)
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
for the 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.
Treasury Department Circular Wo. 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.
The Treasury Department, "by this public notice, postpones the closing
hour for the receipt of tenders for the 349~day Treasury bills to be issued
January 31, 1973.
The new closing hour is 1:30 p.m., EASTERN STANDARD TIME,
Friday, January 26, 1973.
The receipt of tenders had previously been
scheduled for 1:30 p.m. on Thursday, January 25.
No other changes are
being made in the terms of the public notice inviting tenders, which was
issued on January 18, 1973.
Department of i h e T R E A S U R Y
ASHINGtON, D .C. 20220
TELEPHONE W 04-2041
¡¡I
Ú
U L
January 24, 1973
FOR IMMEDIATE RELEASE
GENE A. KNORR RESIGNS AS
DEPUTY SPECIAL ASSISTANT TO THE SECRETARY
Treasury Secretary George P. Shultz has accepted,
"with great personal regret," the resignation of
Gene A. Knorr, Deputy Special Assistant to the Secretary
of the Treasury for Congressional Relations« Mr. Knorr
will join Charls E« Walker Associates, effective
February 1, 1973«
In accepting Mr« Knorr* s resignation, Secretary Shultz
cited his four years of outstanding service to Secretaries
Kennedy, Connally and himself during a period of "unprecedented
magnitude and diversity" in Treasury*s legislative program«
As one of the Treasury Department*s principal
legislative representatives, Secretary Shultz listed
Mr« Knorr*s contributions to the enactment of major
legislation in the fields of tax reform, monetary reform,
economic stabilization, banking reform, international
development assistance, and Federal assistance to state
and local governments«
"You should be 'deservedly proud of the role you have
played in this most significant record of legislative
achievement," Secretary Shultz said, in expressing appre
ciation for a job "exceedingly well done«"
Before coming to Treasury, Mr« Knorr was legislative
assistant to Rep« Tom Kleppe (R«-N«Do)e Previously he had
been associated with the Chicago law firm of Peterson,
Lowry, Rail, Barber and Ross«
A native of Sawyer, N«D«, Mr« Knorr graduated from
St« Olaf College of Northfield, Minnesota, and holds a law
degree from the Northwestern University School of Law« He
and his family reside in McLean, Virginia«
oOo
S-100
EMBARGOED:
NOT TO BE RELEASED UNTIL 12 NOON EST Jan. 29
STATEMENT
OF
SECRETARY OF THE TREASURY GEORGE P. SHULTZ
BUDGET BRIEFING: JANUARY 27, 1973
The revenue estimates contained in the 1974 budget show
total receipts of $225 billion for fiscal year 1973 and
$256 billion for fiscal 1974.
Coupled with the expenditure
estimates that will be discussed shortly, these revenue
totals will result in deficits of about $25 billion in 1973
and about half that -- just under $13 billion -- in 1974.
This sharp reduction in the deficit is consistent with
our overall policy objective.
This objective is to prevent
a new outbreak of inflationary pressures by maintaining a
balance in the budget at full employment, with a decline in
fiscal stimulus as full employment is approached.
-
2
-
Our revenue estimates thus call for a substantial gain
in receipts of $16 billion in fiscal year 1973 and a very
large gain of $31 billion in fiscal 1974.
These increases
reflect the strong growth that the economy has experienced
in calendar 1972, and which we expect again in 1973.
Our
present forecast for fiscal 1973 revenues, $225 billion,
is the same as in our last official projection in September
1972.
The vigorous economic expansion that we anticipated
at that time is taking place, which explains why the
revenue estimate has not changed.
The much stronger gain in receipts expected for fiscal
1974 compared to 1973 is the result of the various tax
changes that have been made in recent years, as outlined in
the table attached.
In particular, the Revenue Act of 1971
reduced 1973 tax receipts.
The change in revenues traceable
to economic growth is only slightly higher in 1974 than in
1973 .
Projected Changes in Budget Receipts
Fiscal Years 1073 and 1974
Fiscal 1973
from
Fiscal 1972
Fiscal 1974
from
Fiscal 1973
(billions of dollars)
Revenue changes
traceable to:
Economic growth
+ 22.0
+ 23.8
Tax Reform Act of 1969
-
2.7
-
1.6
Revenue Act of 1971
-
7.7
+
1.6
Changes in depreciation
regulations
-
0.2
-
0.6
Social security changes
+
6,6
+
8.1
Other changes
-
1.6
-
0.3
Total
+ 16.3
+ 31.0
Department of th e T R E A S U R Y
INGTÖN,
Ö.C. 20220
TEUPHONE WÖ4-2041
ATTENTION; FINANCIAL EDITOR
FOR RELEASE 6:30 P. M.
January 26, 1973
RESULTS OF TREASURY’S MONTHLY BILL OFFERING
The Treasury Department announced that the tenders for $1,800,000,000,
or thereabouts, of 349-day Treasury hills to he dated January 31, 1973
, and
to nature
January 15, 1974
which were offered on
January 18, 1973
, were
opened at the Federal Reserve Banks today.
The details of this issue are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
High
Low
Average
94.261
94.144
94.197
(Excepting 2 tenders of $630,000)
Approx, equiv. annual rate
Approx, equiv. annual rate
Approx, equiv. annual rate
5.920$ per annum
6.041$ per annum
5.986$ per annum 1/
( 67 $ of the amount hid for at the low price was accepted)
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
Total
Applied for
$
40,540,000
2,434,490,000
32,675,0Q0
27,975,000
11,900,000
2,275,000
275,970,000
27,560,000
7,490,000
29,175,000.
25,890,000
155,345,000
$3,071,285,000
1/ Tliis is on a bank discount has is.
Total
Accepted
$
20,540,000
1,485,490,000
8,675,000 .
7,975,000
4,900,000
2,275,000
142,220,000
21,060,000
7,490,000
23,175,000
5,890,000
70,345,000
$1,800,035,000
2/
The equivalent coupon issue yield is 6.35$.
2/ Includes $42,960,000 entered on a noncompetitive basis and accepted in full
PM
average price shown above.
Tthe R EA S U=3R Y
Department of
¿SHINGTON. D C 20220
T ELEP H O N E W04-2041
FOR RELEASE AT 10:00 A,M,, EST
STATEMENT OF THE HONORABLE GEORGE P c SHULTZ
SECRETARY OF THE TREASURY
BEFORE THE SENATE COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
MONDAY, JANUARY 29, 1973, AT 10:00 A„M0, EST
Mr«, Chairman, I am pleased to appear before this
Committee today to discuss the Economic Stabilization
Program«, I am accompanied by Dr, John Dunlop, who has
served as Chairman of the Construction Industry
Stabilization Committee since it was established and who
has been designated by the President to be Director of
the Cost of Living Council«,
The President has asked the Congress to extend the
Economic Stabilization Act of 1970 for one additional
year beyond its April 30, 1973, expiration date. He has
asked that this request for extension of the Act be given
early consideration by the Congress so that the Economic
Stabilization Program can be continued without the creation
of uncertainty or confusion which would be damaging to
confidence in continuing progress in reducing inflation.
The attached materials describe the Economic Stabilization
Program as it was modified by the announcement of Phase III
on January 11, 1973, I'm sure that you are already familiar
with the nature of the program«, The materials attached
include copies of: 1) The President's message to Congress
announcing Phase III and his request for a one-year
extension of the Act, 2) The Executive Order establishing
the modified program of controls, 3) The release containing
information on the main features of Phase III, 4) The
S-102
2
release on the membership of the Labor-Management Advisory
Committee established to advise the Cost of Living Council
and 5) A statement on recent actions that should help
stabilize food prices by increasing their supply«,
I
will draw from this material to highlight here the
main features of the stabilization program as they are^
contemplated for 1973 0 In extending the Act, it is this
program, and the stability inherent in it, that you would
be authorizingo
Background
The anti-inflationary policies of the last four years have
sharply reduced the inflation rate. Whereas four years ago
prices were rising, according to various measures, around 5 or
6 percent a year, by the end of 1972 the rate had been cut
nearly to half that level. This progress has given the
United States the lowest inflation rate of any free
industrial country.
The decline of inflation in the past year was
accompanied by the largest rise of civilian employment in
history and a substantial drop in the rate of unemployment.
All-in-all, 1972 was a very good year for the American economy,
The main element leading to this good performance was a
balanced use of fiscal and monetary policy. The excess demand
which generated the 1965-68 inflation was first removed;
thereafter a steady expansion was promoted so as to reduce
unemployment without reviving inflationary demand conditions.
Since August 15, 1971 these fundamental measures have been
supplemented by price and wage controls.
Prospects are exceedingly favorable for further economic
expansion and reduced inflation in 1973 and 1974. These can
be the best years in America*s economic history. But there are
two trouble spots in this prospect.
One is that Federal spending may be so pumped up that
the same forces are released that caused the earlier inflation,
The other is that food prices may continue their recent rapid
rise. The Administration will resist both of these dangers
vigorously.
3
The President submitted today a Budget in which
expenditures do not exceed $250 billion in the current fiscal
year and do not exceed the revenues that the existing tax
system would yield at full employment in the next fiscal year.
To stay within these totals is the essential requirement of
sound economic policy in 1973.
The National Goal in the Fight Against Inflation
Our goal is to reduce the rate of inflation further
in 1973 and to establish general confidence in the
reasonable stability of prices beyond 1973.
Specifically, we propose as a guide to the policies of
government as well as to private behavior that the rate
of inflation should be reduced to 2-1/2 percent or
below by the end of 1973. The Government’s fiscal and
moætary policies willbe directed to that goal. The
Government will manage its own actions that affect prices
in particular sectors, such as food, so as to help
in this effort. Government will provide guidance as to
private behavior that would be most consistent with the
goal. And where necessary the Government will take further
steps to assure that private behavior is consistent with
the national goal.
- 4 The Place of Controls
The system of controls that began on August 15, 1971
with the 90-day freeze and continued with Phase II made
a valuable contribution to the economic record of 1972»
It helped to reduce inflation and put a damper on
inflationary expectations» It also helped to bring about
a situation in which wages were in better balance with
living costs and the wages of the workers coming up for
new wage decisions were in better balance with the wages
of those who had previously obtained increases» Much has
been done to pave the way for price stability»
These results were achieved in a manner that was
fair, that did not impair production or productivity
in any significant degree and that did not impose large
administrative costs»
To help in assessing the place of controls in the
future, an extensive consultation process was undertaken»
Sixty-three consultation meetings were held» The over
400 individuals who participated represented a complete
spectrum of interests» The views and comments obtained
were most helpful»
After reviewing the results of this consultation
process and the experience gained from operating the old
system it was clear that the burdens of the controls would
have mounted m the coming period if the old system had continued for long unchanged in an expanding economy. Red tape
and administrative burdens, both for the Goverment and for the
public would have expanded. Delays and interferences with the
normal conduct of business would have become more serious.
Inequities in the treatment of different individuals and
businesses would have multiplied.
Incentives to efficiency
and investment would have weakened.
Features
Therefore the system was modified to achieve a
continuing contribution to the anti-inflation effort
with less danger of injury to the economy» The main
features of the modified system are:
- 5 -
«
The Government will develop standards for
private conduct that would be consistent
with the national anti-inflat ion goal«,
The wage standard will be developed with
the advice of management and labor«,
o
The standards will be self-administered»
That is, businesses and workers will be
able to determine by themselves what
conduct conforms reasonably to the guides
and will not require prior approval for
their actions»
»
Voluntary behavior consistent with the
standards and the goal will be expected»
»
Procedures will be established which will
permit the Government to see whether
conduct is reasonably consistent with the
standards»
«, The Government will retain authority to
set mandatory rules, controlling future
conduct, where it appears that voluntary
behavior is inconsistent with the goals
of the program» We expect the cooperative
spirit of Phase I and Phase II to continue
to sustain our efforts in Phase III. But,
we will not hesitate to use this authority
if that be necessary.
•
Special programs will be maintained for
food, health service, construction and
interest and dividends.
.
The Pay Board and the Price Commission are
terminated. The Cost of Living Council
will manage the Economic Stabilization
Program during this phase.
Mr. Chairman, we believe this program can make a
significant contribution to future progress in the fight
against inflation in 1973» I pledge to you that it will
be administered with fairness and with determination.
0 O0
Attachments
Departm entoftheJREASlIRY
ASHINGTON, D.C. 20220
T I L I P H O N l W 04-2041
S M
FOR RELEASE AT 12:00 NOON, EST
January 29, 1973
STATEMENT BY THE HON. WILLIAM E. SIMON
DEPUTY SECRETARY OF THE TREASURY
ON THE
DEPARTMENT OF THE TREASURY BUDGET
FOR
FISCAL YEAR 1974
MONDAY, JANUARY 29, 1973
Treasury's budgetary request for FY 1974 totals $34.4
billion.
While this represents 12 percent of the total
Federal budget, 95 percent of Treasury's budget consists of
permanent and trust accounts— uncontrollable items that do
not require action by Congress.
For instance, gross interest
payments of $26.3 billion, primarily on the public debt, take
up the lion's share of these accounts.
The real story of the Treasury budget is in the 5 percent
that goes to finance the department's daily operations.
Treasury,
unlike other departments, is similar to a business in that we
spend money to^make money.
And we do all right, thank you!
With an operating budget of $1.8 billion, less than 1 per
cent of the Government total, Treasury will return $237 billion
in FY 1974, or more than 92 percent of all Federal revenues to
be collected during the year.
Our request for an increase of $79 million is just to
roeet the increasing mandatory workloads in all bureaus and to
S-103
2
provide the needed strengthening of the revenue operations
of both IRS and Customs.
In other words, an increase in our
budget does not add to the Federal deficit, but actually
lowers it.
That's because at the rate we are going now the
more we spend in certain areas at Treasury, the more we con
tribute to the Government's revenue.
As a businessman new to government, that is a very
pleasing concept with which to open a briefing on our budget.
Now some details on how we raise all this money and some in
sight into the non-revenue producing areas of Treasury opera
tions such as law enforcement.
The budget request for IRS is $1,189 billion, an in
crease of $41.8 million over last year.
In comparison,
gross tax revenues before refunds are expected to total $260
billion in FY 1974, up from $210 billion in 1972 and $231
billion this year.
The IRS administers a tax system that is the envy of the
world.
The efficiency of IRS itself stood out this year in
the way it squeezed its assigned compliance responsibilities
under the Economic Stabilization Program out of an already
heavily burdened staff.
New funds are needed for IRS's frontline programs to help
taxpayers prepare and file their returns and to improve tax
payer compliance.
The increased workload for processing 2-1/2
million additional tax returns, 117 million in all, is expected
to be met solely through increased productivity.
3
As part of the effort to increase the availability and
responsiveness of IRS to taxpayers' needs, we plan for the
\
extension nationwide of Centiphone (a system providing tax
payers toll free telephone access to IRS offices staffed to
help them).
A computerized instant data retrieval system will
become fully operative in FY 1974.
offices open
We will keep many IRS
evenings and Saturdays during the filing season.
Taxpayer service is not being expanded to the point where it
represents competition with the returns preparation industry,
but to a point where the IRS is effectively meeting legitimate
taxpayer requests for information and assistance.
Additional IRS manpower will be devoted to expanding the
audit of returns, fraud investigations, and collection of
delinquent taxes.
£he tax laws.
.Most all Americans voluntarily comply with
The tax dollars going unreported and unre
covered is cause for increasing alarm.
This represents not
only a loss of revenue but a danger to the efficiency of the
system itself.
Significantly, it is estimated that every extra
dollar requested for IRS in the new fiscal year will generate
over $6 in revenue, not to mention the inestimable return from
a voluntary tax system bolstered by increased future compliance
The budget request for Customs is $236.4*million, up
$24.7 million over last year.
In comparison, Customs duty
collections in 1974 are expected to be $3.3 billion, up from
an expected $3 billion this year.
4
Through improved collection and enforcement procedures,
Customs is coping with an unprecedented expansion in inter
national travel and trade.
In FY 1972, for example, com
mercial aircraft passengers arriving from foreign ports
increased over 18 percent.
million persons —
United States —
In total, Customs processed 225
more than the entire population of the
through U.S. ports of entry last year alone.
While the vast majority of importers comply with the
tariff laws, the increase in trade has brought about a sharp
increase in the incidence of attempted Customs frauds.
Pres
ent examination and investigation efforts against fraud are
restricted by limited manpower.
The emphasis on Customs'
investigative and enforcement capability will be broadened.
At the same time, the Bureau has been highly successful
in the use of trained detector dogs for screening mail par
cels, vehicles, and cargo.
From the beginning of the program
in April 1970, through November of last year, the seizures
of 38,000 pounds of marijuana, 4,000 pounds of hashish, and
16 pounds of heroin at a street price of a quarter of a
million dollars a pound, can be credited to the dog program.
The training of dogs to detect hard drugs has been a
recent breakthrough and has prompted our present request to
increase their number by 95.
For Treasury's newest bureau, Alcohol, Tobacco and Fire
arms, the budget shows a request for $73 million.
5
While AT&F is our second largest revenue producer, with
the taxes on alcohol and tobacco expected to exceed $7-1/2
billion next year in IPS receipts, over half the AT&F budget
is spent on law enforcement.
The bureau made 6,000 arrests
last year in enforcing Federal firearms and explosives laws.
It renders substantial assistance to state and local govern
ments in law enforcement training, particularly in the area
of bombing investigations, in laboratory support and in
tracing the ownership of almost 1,000 weapons a month used
in serious crimes.
To further strengthen the entire range of Federal law
enforcement efforts, Treasury is requesting $6 million to
continue contracting for the construction of a new $50 million
Consolidated Federal Law Enforcement Training Center in
Beltsville, Maryland.
The campus-like center will provide
facilities and equipment for all types of law enforcement
training for personnel of 19 separate participating agencies.
A major new undertaking during the current fiscal year was
the establishment of Treasury's Office of Revenue Sharing.
A
staff of only 27 has been responsible for already paying out
over $5 billion of Federal funds to 38,000 state and local
governments.
Additional personnel will be required as the
audit and evaluation functions of the program increase, but
we're talking about a total of less than 80 people.
6
The Office of Revenue Sharing is within the Office of
the Secretary which provides supervision to all Treasury
bureaus and staff support to the Secretary.
the Secretary has a
The Office of
FY 1974 budget of $17 million.
The Secret Service FY 1974 request for $64 million
shows a slight decrease from its election year budget.
The
release of agents engaged in candidate and nominee protection
permits the channelling of additional resources into criminal
investigations of increased counterfeiting and forgery of
Government checks and bonds.
_
Treasury's Bureau of the Mint will be required in FY 1974
to produce nearly 9 billion new coins for circulation, with a
monetary value of more than $523 million, at a budgetary, cost
of $24.5 million.
Similarly, Treasury's Bureau of Engraving and Printing
will, among other items, produce 3.2 billion new dollar bills
for the Federal Reserve System and 28.8 billion U.S. postage
stamps for the U.S. Postal Service.
Engraving and Printing
is fully reimbursed for its services by its Government agency
customers.
The Bureau of the Public Debt's FY 1974 budget of $79.4
million will cover the administration of U.S. debt operations
and the promotion ano
ale of U.S. Savings Bonds.
There are
currently 585 million individual Treasury securities outstand
ing.
In the next fiscal year, it is anticipated that Government
securities issued or retired will total more than 283 million Piece
7
The FY 1974 budgetary request for the Bureau of Accounts
is $71.1 million.
The Bureau, as the disbursing office for
nearly all civilian Federal agencies, will issue and mail 581
million Government checks during the fiscal year, 61 million
more than this year.
Much of the increase is due to the added
workload created by the Social Security Amendments of 1972.
The budget request for the Office of the Treasurer of
the United States in FY 1974 is $12.7 million.
The Treasurer's
Office is responsible for the payment and reconciliation of
checks issued by all Government agencies.
In the next fiscal
year, they will pay and reconcile 725 million Government checks
and process 770,000 claims related to checks that are lost,
stolen and forged.
This highlights the Treasury budget for FY 1974.
In
brief, it shows handsome returns to the American taxpayers
for their investment in the Department of the Treasury and
its work.
DEPARTMENT OF THE TREASURY
SUMMARY STATEMENT
1' ; •
A.
Operating Accounts
B.
Miscellaneous Permanent
and Indefinite
Appropriations
C.
Interest
D.
Trust Accounts
E.
General Revenue Sharing
F.
Advances and Reimbursements
TOTAL TREASURY
Offsetting Receipts
NET TREASURY
$ in Mil.
$1,696.7
5%
88,741
$1,775.9
5%
94,189
291.8
1%
4,354
330.8
1%
3,832
- 24,380.5
70%
26,280.2
76%
2.0
8,294.7
•'-24%
mm mm mm
$34,665.7
100%
—
2,487
—
102,993
6,054.8
$34,443.7
$32,611.6
End of
vr. emp.
—
2,511
18%
_ _ _
-1.832.1
102,993
$ of Total
2.0
7.411
-1.911.7
$32,754.0
1974
Budget Authority
100%
—
3,479
104,011
—
104,011
Attachment A
January 23, 1973
1973
Proposed Authorized Level
End.of
$ in Mil. % of Total vr. emp.
DEPARTMENT OF THE TREASURY
OPERATING ACCOUNTS
.
1973
_____
Proposed
Auth.
Level
Average
In Mil. $ Positions
Operating Accounts:
Office of the Secretary
$L6.3
632 *
Fed. Law Enf. Trng. Center:
Salaries and Expenses
2.0
75
—
——
Construction
§ÿ .
Bureau of Accounts:
Salaries and Expenses
63.3
1,427
—
Govt. Losses in Shipment.3
Bureau of A. T & F.
75.5
3,915
Bureau of Customs
211.7
11,745
...
Bureau of E and P Fund
3.0
Bureau of the Mint:
Salaries and Expenses
24.0 . 1,513
Construction
2.0
Bureau of the Public D e b t ' w
2,478
™*°
Internal Revenue Service
1/1,147.0
72,900
*
tOffice of the Treasurer:
Salaries and Expenses
11.3
•
891
—
Check Forg. Ins. Fund
• 1.8
U.S. Secret Service
.
64.5
2,817
_________ 1974_______
Budget
Authority
In Mil. $
Average
Positions
Increase or
. Decrease
1974 over 1973
Amount
In Mil. $ Percent
$17.0
718
$ .7
2.2
6.0
83
...-
.2
6.0
1,540
71.1
.8 *
73.0
3,805
12,661
236.4
...
...
7.8
*.5
-2.5
24.7
-3.0
24.5
...
79.4
1,188.8
1,554
...
2,467
74,450
.5
-2.0
5.4
41.8
12.7
...
64.0
948
...
2,817
1.4
-1.8
-.5
4%
12%
-3%
12%
2%
7%
4%
12%
-1%
TOTAL, Operating Accounts
$ 79.2
5%
98,393
$ 1,775.9 101,043
$ 1,696.7
I/ Includes costs for the Economic Stabilization Activity in our fiscal year 1973 budget of $42.3 mil.
If .this amount were excluded the percent of increase would be 8%.
Atta
January 24, 1973
1
hi
1
2
5
4
5
LUNCHEON
6
PRINCETON
C LA S S
OF
'42
7
FOREIGN SERVICE CLUB
8
January 27, 1973
9
10
11
o
FORGE P. SHULTZ
ecratary of Treasury
w
12
13
14
15
16
17
18
19
20
21
22
23
24
25
DEv'JEY BARTLETT
Senator
State of Oklahoma
2
P ’R a C E E D X N G S
1
(The recorded proceedings begin at this point.)
2
MODERATOR:
3
4
5
includes these outstanding gentlemen:
8
Out of this, with tremendous planning and effort
and thought, came this great gathering, and I think you ought
to give these guys [Inaudible].
(Applause.)
9
I
10
11
14
Well, now from the standpoint of the Treasurer's
report, I can report he's present, he has submitted a report,
and it's in good order.
(General laughter and applause.)
15
How's that for moving?
16
(General laughter.)
17
The Secretary's report —
18
19
would like to make a few announcements, if I ma
before we gat started.
12
13
Jack Purlin, Dick
Steeple, Monty London, John Grich and Ed Eisonhardt.
6
7
— and they set up a committee that
in Florida.
I can say that he's still
He would have liked to have bean here.
An interim Sacratary to Haalth has bsen appointed — -
20
21
Ted Sill.
22
on it.
They're both doing a great job,, and you can count
23
(General laughter.)
24
All those that would like to approve the minutes
25
_ .
of the former meeting, please let it be known.
,—
3
1
2
(General laughter.)
'■■■ ■'
- • .
Thank you.
i n
- '
/
:
/ £
W e ’ve got a very nice letter from Phil Chaff, our
5
4
member on the Board of Trustees.
today.
Phil could not be here
He says, "Mary and I are very sorry we won’t be able
5
6
7
to meet with you and the other members of our class this
weekend.
I think it's a vary imaginative idea and congratulate
those who thought it up and are putting so much work into
8
it to make it a success.
My very best to the honored guests,
9
including George Dewey and Jack.
For whatever it's worth
10
VOICE:
11
Who's George Dewey?
(General laughter.)
1
__
12
MODERATORs
I'll tell you one thing.
It's not
13
the same Dewey that ran in 1948.
14
(General laughter.)
15
MODERATOR:
"For whatever it's worth, my observation
16
and experience to date as a trustee is that the university
17
has its head screwed on pretty straight.
I think Bill Boyd
18
could very well turn out to be one of the great university
19
20
21
22
23
24
25
presidents of his time.
I like the way he handles' problems,
and he has had to face a number of not only complicated ones,
but ones that were highly sensitive in terms of people's
emotions.
I also believe Bill has surrounded himself with
a very strong management team.
As most everybody knows, thing
have become quieter on campus.
Now that the Vietnam War is
4
X
over, let's hops it stays that way for a while,
2
will be thinking of you on Saturday."
3
Mary and I
Monk Morris and Dick White also were not able to
4
attend, and they both sent messages of congratulations to the
5
committee for such a great job.
6
Now, a few things in regard to the nitty gritty —
7
VOICE:
8
(General laughter.)
9
MODERATOR:
10
Who?
I didn't know this was such an intel
lectual group.
11
(General laughter.)
12
MODERATOR:
We*vs got 125 people present here, and
13
we'll probably have ten or fifteen more over at the reception,
14
which is great.
15
1942.
16
That includes about 65, 70 classmates from
Pretty great,grouping, I'll tell you.
,
Now, we're moving from here, of course, over to
If
the State Department and looking at those lovely spots over
18
there.
19
ments for this, and they're to be thanked and congratulated
20
for it.
21
And Jim Leonard and Jack Snedinson have made arrange
And when we leave here we will go over there, and
22
than at 5:00 we'll go to the Woodrow Wilson Museum, which
23
was Woodrow Wilson's former home.
24
25
.
It will be open at 4:30.
And a couple of thoughts in regard to this, wear
your name tags because if you don't have those you might have
5
to pay again, which is pretty important.
Secondly, across the street from the building thera
has been some spaces left, and it's marked "Emergency.
Parking."
No
But this has been done through the committees
who insure the classmates [Inaudible].
(General laughter and applause.)
,!
There are also a list of restaurants at the door —
all kinds of restaurants and their locations — - in case after
we gat through with the cocktail party this afternoon you
want to gat a roof and go there.
And this will be some
snacks and drink at the Woodrow Wilson Museum.
Oh, we*re in the middle of lunch..
(General laughter.)
I
trust if anybody needs a direction for the
events this afternoon, you can get another copy of this
plan.
VOICE:
Who drew this .map?
MODERATOR:
I don't know who drew this map.
It
wasn't an engineer, that's for sura.
(General laughter.)
Now I'm going to call on a distinguished member
of the Class of '42 and a very prominent, famous individual'
hire in Washington, D.C., known to all of you, who has been
working hard in conjunction with this committee, and I know
he'll want to welcome you to Washington and have a few remarks
6
1
to say.
J
j
Ü
2
Nona other than John Nevius.
3
(Applause.)
4
MR. NEVIUS:
5
Pete said that I could have about two minutes of
Thank you, Pete.
6
this 45 minute tape that h e ’s got going there, and after
7
two bourbons I decided that I would make a quick four minutes
8
out of it if you'll bear with me.
9
10
MODERATOR:
,
Thank God, you didn’t have any more,
Jack.
11
(General laughter.)
12
MR. NEVIUS:
First of all, I really want to extend
13
a very, vary cordial welcome on such a distinguished turnout
14
of classmates.—
15
VOICE:
16
(General laughter.)
17
Forget the politics.
• MR. NEVIUS:
18
memorable occasion.
19
gritty.
'
— To come to Washington on this
That includes George Dewey and nitty
(
■
" '*
-
20
(General laughter.)
21
W e ’re really very, vary pleased that you would
22
cluster in such large numbers with such enthusiasm, for an
23
occasion like this, and I hope it will be the beginning of
24
a very fine tradition.
25
You know, as I was driving over here I began to think
r
1
2
5.
4
about Washington and Princeton, and politics as Howard put it;
and it occurred to me that it's been a long time since
Princeton has been active in the politics and statesmanship
of our nation.
In the early days with fellows like Aaron Burr and
5
Woodrow Wilson, there were a lot of Princetonians visible,
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
but up until very recently that has not been the case.
And
it*s been a long time since we've had a Princetonian as a
President.
And there has been people like Peter Frelinghuyssn
in the House and an occasional fellow here and there, but
the prospect of a Princetonian in the White House has been
slim for a long time..
And it pleases me to think that in
casting about a lot of *42*s have tried to start reversing
this trend, and the. great bulk of them, I'm proud to say,
were Republicans.
And the fact of the matter, is that '42 Republicans
are the kind of guys who7like to tackle a tough job.
And
as casting about to see who might be among us a possible
ultimate new President of the United States as a 1942 Republi
can, I started off thinking about old Drinks Jones.
You know,
he tried for the Congress and couldn't get nominated.
Then
Pete himself, our president, he got nominated twice but
didn't quite make it —
the registration was running against
him pretty hard, so he didn't make it.
And just .a couple of
f
y
1
years ago I tried it, too.
2
but didn’t make it.
5
8
l
I ran for Congress and got nominat
And then there are a number of guys like Jack
4
Guthrie who really copped out by going off on a tangent some
5
where where they wouldn•t dare admit whether they were
6
Republicans or not.
7
And Jack Stevenson, he copped out by taking an
8
appointive position, you see; so. without having run for
9
election, he's not going to make President within the fore
10
seeable future.
11
And in a very real sense the same thing applies to
12
George
13
in a different way.
Shultz*
George is very close to the President, but
14
(General laughter.)
15
He's simply non-elected.
And so when you really
16
filter through all the names that you're casting about, as
17
I did, you get down to the fact that we've got one horse
18
to bet on, and that's Dewey Bartlett.
19
(General laughter and applause.)
20
And you know, that public relations is necessary
21
among other things in running for President, and so in order
22
to help Dewey on his way, shortly after his arrival in
23
Washington we've started to work on this thing.
24
25
The City Council and I sat down to noodle this
they're three Republicans out of nine in that g r o u p —
but
7 •n
f
j
<y
9
p
1
W 3 managed to work out a little something to solve that problem
2
And so we got a little resolution together which I'd like to
5
take the last of my two minutes to read to you, and it will
.4
take two minutes to read it.
5
(General laughter.)
6
If you'll bear with me, it's Resolution No. 42-1.
7
(General laughter.)
8
And it was adopted on January 26, 1973, and the
9
title "Forty-two Day in Washington Proclamation."
10
like this.
11
It reads
"Whereas, there has bean a notable deterioration
12
lately of workmanship quality demonstrated by appropriate
13
authorities in the selection of subject matter for special
14
recognition by the official designation of years, weeks, and
15
days, whether internationally, nationally, or locally? and
16
whereas, even on an international basis the Chinese have
17
failed for years to reverse this deplorable trend by decreeing
18
the Year of the Tiger; and whereas, instead inconsequential
19
things like National Mock Orange Month and Elvis Presley
20
Week in Peoria have amply demonstrated the miserable level
21
to which this ancient and respectable art has been reduced;
22
and whereas, on the other hand a unique opportunity to reverse
23
this deplorable trend in one fell swoop has suddenly presented
itself by the election of the Honorable Dewey F. Bartlett
as the new U.S. Senator from Oklahoma, and President Nixon's
/3</
i“
appointment of the Honorable Georgs P. Shultz, Secretary of
Treasury, as the new Chairman of the Council on Economic
Affairs,
"Now, therefore, in celebration of this belated
recognition of the inherent merit of the Class of 1942, and
by the residents of Oklahoma and 1600 Pennsylvania Avenue,
respectively —
(General laughter.)
t
And by virtue of the authority invested in
ms as Chairman o f •the Washington, D.C. City Council, be it
hereby resolved that Saturday, January 27,.1973, is hereby
designated *42 Day in Washington; and two, that this désigna
tion shall take effect immediately."
(Cheers and applause.)
MODERATOR:
great.
Thank you very much, Jack.
That was
It is gratefully accepted.
VOICE:
How come it has the rent seal on it?
(General laughter.)
MODERATOR:
I'm going to say to the committee righ
now we won't need the paid entertainment.
had that.
(General laughter.)
We'll save money there, Ed.
(General laughter.)
Great job, Jack.
Great job.
We've already
1
;
*
J
I want to also thank Jim Leach of the Class of *64
1
2
for his great efforts in helping the committee to put on this
5
affair; and Mrs. Harriet Alexander, who's Secretary of the
4
local Princeton Club, for all the efforts that she has made
5
in making this affair what it is today.
6
(Applause.)
7
At this time I would like to call on another
8
distinguished member of the Class of '42 for the presentation
9
of an award of sorts —
(General laughter.)
10
11
—
12
Topper, where are you?
13
MR. COOK:
14
It's a little hard to follow you, Jack, because
15
Topper Cook.
Here I am.
I thought I was just going to be sort of comic relief here.
16
(General laughter.)
17
But the media is often considered to be the enemy
18
19
of Government, and I want to put things right.
, (General laughter.)
I have some prepared remarks here, because being
20
21
from the media where wa always have a few things to say.
22
what I have here in this NBC envelope is a special media
23
tribute and grand award to the men of '42 in the nation's
24
service..
25
But
Before getting it out I have my prepared remarks.
12
( y ^
1
If sometimes it seems the press comes on too strong with you
2
public servants, please be advised our antagonism has a
5
worthy aim.
4
5
We aim at keeping you in your place.
Remember, you belong to the people and not the
other way around.
6
.(General laughter.)
7
We media guys salute you, slaves.
8
(General laughter.)
9
■ We know you are making sacrifices.
Sure you enjoy
10
the exercise of power, but you’re hurting income-wise.
11
say be patient, men.
12
back to a hundred thou per annum [Inaudible].
We
TThen your stint is done, you’ll gat
13
(General laughter.)
14
Generals, you have general dynamics to look forward
15
16
17
to.
,
(General laughter.)
•
• In return for our commiseration, gentlemen, we only
18
ask you that you permit us to raise the issue.
19
people, have an interest in that military-industrial complex
20
of yours [Inaudible].
We, the
21
(General laughter.)
22
And so, not strictly as antagonists but friendly
23
antagonists, we have an award to make today.
24
thought that we might furnish you all, or at least those of
25
It was out
you who must court the favor of the polls, with certain aids
13
1
calculated to assure you of public acceptance.
2
M
Having brought up a generation on cheap situation
5
comedies and such grungy periodical as "Playboy Magazine,"
'4
we media chaps are very knowledgeable about what the people
5
want.
6
7
Wa thought of distributing such things as hairy
hairpieces —
8.
(General laughter.)
9
—
Sideburns, that you could stick on and that
10
wouldn’t even come off when dipping in the ocean off Key
11
Biscayne.
12
(General laughter.)
13
Contact lenses; mod, flowered, print shirts .-.with; .
14
long pointed collars —
15
(General laughter.)
16
—
Bell bottom trousers; boots for shoes; facelifts.
it
You wouldn’t believe what a lot of great gifts that have coma
18
to our minds.
19
But in the face of the number of worthy candidates
20
here, and bearing in mind the well-known poverty of us in the
21
fourth estate, we have decided on a single madia award to
22
a single recipient who shall rapresent you, all.
23
24
25
George Shultz, 'we itiedia people have finally —
almost finally —
c.
well,
learned to spell the Shultz without the
'
■'■'
Slli
14
1
2
5
4
5
6
7
8
I
9
I 10
(General laughter.)
0
Maybe after soma more time in the Cabinet we*11
call you Doctor, too, which is yours as much as it is
Kissinger's; and that's a point.
We wish, however, to address ourselves to the
question of the appearance that you make on television —
(General laughter.)
—
For the betterment of which this special award —
(General laughter.)
We have observed you as Administration spokesman
with a multitude of weighty economic matters, and we've .
1
11
12
13
14
seldom seen you in a light and frolicsome mood.
(General laughter.)
.
■
Unemployment is up, and you are down.
(General laughter.)
1
15
16
17
18
19
20
21
22
There's never an economic question, Georgs, that
everybody is happy about.
Thera is always some character
who has different statistics from yours.
So we media chaps have designed a format to make
your every moment on television a shining moment of joy;
and here's the gimmick.
(General laughter.)
23
This is called a happy monkey.
24
(General laughter.)
25
You can bring along this happy little monkey to
*
16
1
2
5
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
that adds to the levity of the [Inaudible].
(General laughter.)
George, get him to do the clapping.
(General laughter.)
As Bruce Wilson said when he came through the door
today and he saw everybody inside here, he said, "This reminds
me of the Stork Club."
He said, "I haven't seen so many
old bald-headed guys with pretty girls in a long time."
(General laughter.)
Wilson always knows the right remarks to make.
. (General laughter.)
I would like now to give a partial list of those
many members of the Class of 1942 who have devoted so much
time and so much dedication and so much effort to this great
country of ours. .And I am going to read the list here, and
it won't include everybody, obviously.
We've got people in city government? we've got
people in county government.
We. have city managers, and
obviously, in .state government and Federal Government.
And the purpose of this gathering is not only to
21
renew the friendships and associations of the Class of '42,
22
but to honor those who have done such a tremendous job as
23
patriots working for our country.
24
25
And here is the list.
And hold your applause, if
you will, until we've gone through the list, and than wa
17
1
can applaud.
2
f J I
Of course we'va got George Shultz, Secretary of the
5
Treasury; Dewey Bartlett, newly elected Senator from Oklahoma?
4
Jack Nsvius, Chairman of the City Council of the District of
5
Columbia, appointed by,the President? Jack Guthrie, Major
6
General, U.S. Army? Honorable Jim Leonard, Assistant Director,
7
U.S. Arms Control Agency—
8
Ambassador? Jack Stevenson, legal adviser to the Department
9
of State —
10
notable service there to this country? Joe McFarland, Special
11
Assistant to the Auditor General of AID? Newport Coppeir,
12
Colonel, U.S. Army? Bill Price, Colonel, U.S,. Air Force?
13
Kan Condontere, Historian, Department of Defense? I-Joway•White,
14
chemist, National Bureau of Standards? Jim Baldwin, the World
15
Bank? Duncan McKay, Inner American Development Bank? Monk
16
Morris, General Counsel in the Selective Service System?
17
John Stutzman, American Consulate General in Vancouver, B.C.?
18
Bob Bender, professor of history at the U.S. Naval Academy?
19
John Bender in the State Department? and Augie Williams in
20
the State Department,.
21
Jim holds the personal rank of
Jack has recently resigned that position after
And I know ws've missed many others, but these are a
22
distinguished bunch of gentlemen who have served and are
23
serving in our nation1s service; and I think we ought to give
24
them a great [Inaudible].
25
(Applause.)
18
Thank you
1
Now, we have an award here for the individual that
2
5
4
5
6
came from the greatest distance.
subject to a change momentarily and the Chair will entertain
any motions to the contrary, that this should be awarded to
none other than Richard Pate of Denver, Colorado.
(Applause*)
7
This came from the fiftieth reunion of the Class
8
9
It has been reported to me,
of 1906, and I hope you keep it.
Not that you need it, but
it's [Inaudible].
10
(General laughter.)
11
MR. PATE:
12
(General laughter,and applause.)
13
MODERATOR:
14
15
16
17
18
the Class of *42 who are not only as much members of our
class as their husbands, but who have been so important in
all of the lives of all of the members of this class.
And I think we ought to give them a rousing hand.
(Cheers and applause.)
20
To tell you the truth it*s been a point of much
21
23
I think also at this time we should
pay particular tribute to the wives of all the members of
19
22
[Inaudible].
conjecture to me as to how some of these guys did as well as
they did.
24
(General laughter.)
25
Strike this from the record
19
1
(General laughter.)
2
Now, I am going to call on a distinguished gentleman
o
to make a few remarks, who has been president of our class
4
before.
5
everything that he's ever done and in every way; and he's now
6
a member of the Senate of the United States, and if there
7
aver was a guy who deserved.to be there to represent this
8
country and his own state, this is the man.
He's been a distinguished member of this class in
9
And I'm proud to present to you at this time the
10
member of the Class of 1942, a great guy, fine family man,
11
and a tremendous [inaudibleJ.
12
(General laughter and applause.)
13
SENATOR BARTLETT; ■* First I want to thank all of
14
you for being here and for giving Anne and ms this opportunity
15
of beginning our six years in great style by being with
16
good friends of the Class of *42.
17
way to start this out.
18
I can't think of a better
••
When Pets first mentioned Tom Dewey, I was very
19
happy in our campaign that I had no relationship to him, and
20
I'm very pleased that Jack has launched my Presidential
21
campaign.
i
22
(General laughter.)
23
George, be sure t6 tell Spiro to be a little
24
25
worried•
(General laughter.) .
20
But it reminds ma of a person from Oklahoma whose
1
2
name might be familiar.
Fred Harris had a little campaign
going for the Presidency, and he's now a resident of your
5
city, Jack, and out of politics in Oklahoma.
So it may be
4
5
just a little premature.
(General laughter.)
6
I recall what Topper said about politicians
7
8
9
10
11
12
13
14
belonging to the people, and I was thinking also of a very
kind letter I had from Jack Nevius saying that he was so
happy that I'm a member of the District Committee in theSenate.
because he said that it was so nice of you to choose being
on this committee;•and I want to tell you just how this
whole [Inaudible].
(General laughter.)
15
—
16
17
18
19
20
21
And I want to sort of make a confession to Jack
works.
I want to tell you how this statesmanship process
There were two openings for the minority party; there
were five freshman senators.
And when they mentioned the
District Committee, two of them right away said not on our
life.
So that left three of us.
The junior one felt that he was lost anyway, so
22
he said well, I volunteer.
23
from Idaho was the other one, and he said Dewey, I'll tell
24
you what I'll do.
25
That was down to two.
I'll flip you for it.
(General laughter.)
Jim McClure
21
¡ { U 7
1
voice:
2
/y v
(General laughter.)
5
4
too won?
SENATOR BARTLETT:
Wall, I said tails never fails,
and he said it just did.
5
(General laughter.)
6
But, Jack, I am very interested in learning more
7
about your city.
8
11
I'm in the District.
(Applause.)
9
10
I'm a resident.
We're looking forward to that very much.
tainly want to remember what Topper said about the importance
of the people; and of course, the people that are important
12
to me are in Oklahoma, but also they're here.
13
And I want to thank you for helping
14
15
16
campaign.
19
22
23
24
25
in the
There were many members of the class who did.
We
here ws are.
It's a real pleasure for both Anne and myself to
be here, and many of you she has not mat before, and she's
enjoying that vary much.
20
21
ms
had sort of an uphill struggle, and we were lucky, and so
17
18
We cer
Pete, I'm very pleased that you're the El Presidenta
and I'm very pleased that you decided to have the meeting
here.
I'm looking forward to hearing what George has to say.
I've already today given him a couple of little small problems
I had, so We all rely on George.
(Applause.)
MODERATOR:
Thank you very much
Senator
It might be of note and interesting to this group
that the Senator from Oklahoma —
add —
junior Senator, I might
moved into the Senate Office 3uilding at office number
4215, and it1s called S03 4215.
(General laughter.)
George Washington spoke in one of his Inaugural ad
dresses about the spirit of the party.
to partisan politics.
Ha
was referring
And the reason I mention this is
because this gathering today to honor people who are serving
our nation in our class is in honor of people who are
dedicated to the interest of this country.
And my reason for making this point is this -— it
refers to my great friend, George Shultz.
The last four
years in this country,, the last eight years, maybe the last
fifteen years in this country, has been a time of tremendous
change, revolution, the like of which w s ’ve never seen before
not only in our lifetime, but in other people1s lifetime.
Not because of the violence —
b e fore—
we'vs had that
not because of the specific changes, because of
the multitude of things that have taken place, in thsir:
country, that have changed it, and have changed the people
who think.
Well, when a guy serves, either as President of the
United States of America or when he serves in the Cabinet of
23
the United States as an advisor to the President of the
United States, and in our particular situation, a very close
advisor, this guy is subject to the wracks and pains and the
stresses and the strains that normally we in business may
5
not gat.
And it's a tougher job to support a President of
6
7
8
9
-.
whatever party he may be, when he's under severe attack by
critics, as this country does in its normal political pro
cedure.
■
So we've got a guy in our class that's been through
10
this, and ha's done an outstanding job. ,But ha's been through
11
the wracks, the strains, and the pains, and the criticism.
12
And I've talked George Shultz today to talk to us
13
14
15
16
17
18
19
20
21
22
23
a little hit about his experiences or whatever he'd like to
say insofar as he can about the things that he's doing, and
he's going to do that.
But I think we as members of this
class and as patriots in this country should give George
Shultz one of the best, rousing welcomes that a guy's ever
had.
And now here is [Inaudible].
(Applause.)
SECRETARY SHULTZ:
I appreciate that vary, very
much indeed.
Charter members of the Bartlett for President Club.
, I think it's been a very educational lunch, and Topper
24
has now displayed to us what NBC considers to be real news.
(General laughter.)
/
•
(Applause.)
Pete asked if we could have some questions of
discussion hare, and I said I'd be glad do but I wanted to say
a few words first on the subject of the next four years.
The day after the announcement of the settlement in
Vietnam, the President had a Cabinet meeting and passed out
these booklets.
And it turns out to be a four year calendar
which he has written a little bit in the front, and you turn
to 1973 and here's January 20th and it says, "One thousand
four hundred and sixty-one'days remaining."
(General laughter.)
And January 20th, 1977, "No days remaining."
(General laughter.)
And he really had two massages for us in presenting
these four year calendars for the members of the Cabinet to
use.
The first one was well, that's not really very many
days, so let's use every one.
Let's make them count because
they go by vary fast.
Somebody said in one of our meetings, the days are
long but the years are short; and they are very short, as
we work on the kinds of problems that we have.
I think the other message, which is very Nixonesqua,
really, is that you don't have to accomplish everything today.
25
14
I T
■
That a great many of our problems do not of their nature yield
to things that you do today that got them straightened out
tomorrow, but oftentimes have the characteristic that you have
to do something that is very unpleasant and difficult today
for the sake of achieving something a year from now or two
years from now*
And so, I think the message was to have a sense of
strategy? and I suppose, have a sense of the next four years
in the things that you do every day in trying to do something
significant.
So let me just say a word about the next four
years in the perspective of the last four, because I think
we can advance the thesis that at least we have the opportunit
for a great four years for America ahead of us.
When you consider the contrast between today and
four years ago, I think we see how striking our opportunities
are and how different, thinking of this as a second term
in
the Administration, how different our opportunities are in
the second term from the first. *
Undoubtedly, the most important thing which we say -I doubt that there's a person in the room who really realizes
it and can have it sink in —
I don't think it sinks in.
is that we have peace.
I say
I don't think anybody really
believes it somehow or other.
It's been such a long and
drawn out, difficult war? and of course, we still have a
26
1
ceasefire to get in Cambodia and Laos.
2
have peace.
3
But nevertheless, we
And that is just going to make all the difference
4
in the world in my opinion.
5
from the standpoint of the economic problems, it is the case
6
that we have already seen, in a .sense, the quantitative impact
7
of the winding down of the war —
8
ahead of us .—
9
there is no particular économie impact to peace.
10
in the general psychology of the country and the sense of
11
whether or -not our defense problems, budget.problems, and so
12
on may break away from us, it's a matter of overwhelming
13
significance.
U
I know that in looking at it
and that's behind us, not
so there is a sense in which you could say
,
And yet,
.
....
Second, as we look back and contrast today with
15
four years ago, granting the great problems that we have —
16
cities, and I'm sure the problems on the campuses—
17
less, wa don't have that feeling of exploding just around
18
the corner.
19
neverthe
We haven't had riots.
We don't have this feeling anymore that we are
20
subject to blackmail, that we better do this or that or
21
there's going to be a riot somewhere.
22
And we now can go on and think more constructively about the
23
problems that we have, and I think are able to think more
24
realistically about them.
25
We've gotten over that.
And if w® have something that has been.tried and
/
1
¿
7
27
1
hasn’t worked, we can have the gall, almost, to say. well, w
^
hope we can do that.
4
We're trying to do that in thé budget
the President is sending up.
I've said in looking around at Government there's
I
5
!
6
7
I
'8
9
a sort of a law about Government.
anything.
Government can't stop doing
Whatever it does, it just keeps doing it, and the
only question is whether it does more or the same amount.
Well, we're, trying to stop some things,
/md I
o
H
n
something doesn't work, it's possible to say so and get away
12
13
14
m
r~i
■HH
|
16
M
CD
w*
with that•
Third, from the standpoint of our economic problems
broadly, we have a raging inflation to contend with and to
gat turned around; and that, combined with a need to wind
dbwn war activity, met a very difficult kind of transition —
kind of a compound type of problem.
Well, we have now absorbed a reduction in defense-
1—1
I
think that the psychology has changed enough so that if
related employment of about three million over the last four
20
years, had our crunch, and have an economy that is expanding
21
strongly and a rate of inflation that has been declining.
22
So we're on the threshhold, from the standpoint of the economyr
23
once again as ws were in the middle sixties of having an
24
economy that is expanding; and if we can exercise discipline
1
25
and that's a real if —
but if we can exercise discipline and
- -
20
1
get. into a sustainable path where we have an expansion that
2
can keep going without generating anew the problem of inflatio:
5
that has been wound down at least to some considerable extent.
4
So we have a different kind of a problem, a differen
5
set of opportunities.
6
rather than being constantly preoccupied with the military
7
dimension of that, we can, with the President's .opening to
8
the Communist world, the end of the Vietnam War, think about
9
a constructive pattern of international economic relationships
10
which we know will be difficult and testy at all times,
11
particularly when it's opposed with our friends.
12
theless , that represents an opportunity that has not been
13
with us to the same extent by a longshot in the first four
14
years of the Administration.
15
And turning to the international sphere
But never
So, I think that we stand here at the beginning
16
of this new cycle, so to speak.
17.
It is a new beginning in the sense that.we find ourselves
18
about at peace for the first time in a long while.
19
20
21
22
23
24
25
It's a new political cycle.
new economic cycle that we're looking at.
It's a
And we have an
opportunity in working and trying to put something worthwhile
down in each one of these squares, and also to try to have
those things be matters that have soma sense of strategy
to them.
It's in that sense that it seems to me we hava a
great opportunity ahead of us in the next four years, and I
29
trust we'll be able to work with the United States Senate
(General laughter.)
O
.
— In bringing that to fruition.
Pete, I'd be pleased to respond to questions or .
whatever anybody would want, or maybe you want time to go
over to the State Department•
(Applause.)
MODERATOR:
The Secretary said he'll answer any
questions that you might have.
If you have some,. I suggest
you put them to him. ■
Mr. Reese over here.
MR. REESE:
Coming from a city we see every day
before us th© various Federal.programs that are being cut
back
or cut off.
I think everybody recognizes that a number
of them have failed and don't borrow with the fact of the
cutback.
I think the real problem that a lot of people in
tha cities are concerned with is is this Administration going
to continue to be sensitive to the problems in the cities
and try to develop new programs that will work, becausa let's
face it.
The problems are there, they're acute, they must
be solved if we're going to have a country.
And I think it woqld be helpful to hear your views
on that or what the views of the President are with respect
to this critical problem.
SECRETARY SHULTZ:
y
30
/ y).
Wa briefed on the President's
budget this morning, going up on Monday; and there are a whole
bunch of charts in there, but. one of them is a chart of
grants in aid to the states and, cities. And the number goes
relentlessly up, and it goes up from *72.to '73 and up from •7L
to '74, and is projected up in *75*
To some extent we don't take any particular pride in
that because we have not had the view that you solve these
problems by throwing money at them.
And as you suggest, I
think there's a lot of evidence that those things haven't
worked.
•
There are many public housing projects around in
the cities of this country that .nobody will live in and are
being torn down.
There are many efforts at helping the poor
in housing that have wound up helping land values and real
estate developers more than they have the poor.
And so we have felt it's a good idea to have a
moratorium, take a^ breath, 1st the $3 billion that's in the
pipeline be spent —
to shut off —
it's really amazing how difficult it is
but take a second look.
Now, I think the heart of the President's thinking,
however, on this subject is something different, and the
flagship of it is general revenue sharing.
That is, the
program which sends money to the states and the municipalities
the units of general government, without any particular string
31
1
Now, that program basically passed the Congress on
2
the basis of the fiscal crisis of the states and the cities.
3
4
I think to a certain extent that was a myth.
The states and
the cities fundamentally are perhaps better off than the
5
Federal Government is in their finances —
at least they are
6
now, although that is not true in all cases.
7
But that was not what the President thought was
8
important about general revenue sharing.
He has said many
9
times in public and in private, and he developed himself the
10
idea that he would sign that bill Philadelphia at Independence
11
Hall.
What it has stood for in his mind is the importance
12
of drumming on people their own responsibility to solve .
13
their own problems
and
to put into' their hands —
if general
1,4
revenue sharing stands for that to some extent —
more resourc
15
to do it with.
But to, in a sense, get away, Ilank, from
16
exactly your question —
what is the Federal Government going
17
to do by way of programs to solve these problems.
Answer:
18
what are you going to do to solve the problems in your city,
19
in your state?
20
And we have the conviction in this Administration
21
that if the problems are going to be solved really well,
22
23
24
25
they are going to be solved out of an effort, town by town,
i
city by city, state by state, to identify the problems that
you have, see what you can do about them, do that about them,
and to malts yourself count in that way.
/5G
The President's Inaugural was about that? the
general revenue sharing program was about that.
And I think
that there is a very definite thrust here to say that we
look to you to develop the right solutions for your community
And the evidence abounds that the Federal Government, with
whatever wisdom it may have, does not know as much about
your community as you do.
We can mess things up beautifully
if you give us half a chance.
(General laughter.)
I would say, for example, that the energy crisis
in this country is a monument to the Government's ability
to screw up the details.
(General laughter and applause.)
You know, have a little faith in yourself.
That's
the answer that the President is giving.
VOICE:
Just give us a little money to
work with.
(General laughter.)
SECRETARY SHULT2:
The general revenue sharing
program will put out over $30 million in a five year span,
and the grants in aids in the states and cities in the. '74
budget outlays coma to, I think, something like $42 billion?
so that's quite a piece of change.
(General laughter.)
MODERATOR:
Timé is short, and I know you have a lo
33
one
of questions, but I think there’s somebody over here. —
more question, if you will*
VOICE:
j
K
J
George, I ’d like to address a question to
your particular area area of expertise which is inflation.
I was reminded of it as I came over here when the taxi cab
driver in a conversation said he was concerned about inflation
My question is this.
The majority of the people
in this country, I think at all economic levels * felt that
Phase I and Phase.II were necessary and that they were effec
tive.
I .think that the majority of the people were sur
prised that Phase III came so abruptly, but
even
more so
that almost nothing replaced it in the minds of most people,
and that there aren't many guidelines, and I think most people
question whether they're going to work.
And my question specifically is what do you know
that we don't know that indicates to you that Phase III is
going to work?
&
(General laughter.)
SECRETARY SHULTZ:
This has got to be the last
•.
one.
I
They're getting too tough.
(General laughter.)
VOICE:
I feel like a member of a Congressional
committee.
25
„
(General laughter.)
1
2
D
SECRETARY SHULTZ:
34
y
Well, first, the history of the
free world in trying to attain prosperity without inflation
5
displays a wide variation in the African countries to use
4
wage and price controls or variations of them.
5
a direct correlation between the use of.controls and incomes
6
policies and success in controlling inflation.
And there is
7
The more countries have used control, the less
8
successful they have basin in controlling the inflation.
9
Now, there is a very easy answer to why that is so,
10
and it is that the Existence of controls of some sort allows
11
people to let themselves think that you can ignore the funda
12
mentals of basic budget policy and monetary policy and take
13
care of the problem with controls.
14
15
16
Ê
And so they do that, and their budgets go out of
hand and thsir money supply goes out of hand, and the inflation
problem goes out of hand.
So my first answer to you is ws have been conscious
18
of that problem, and we have been trying not to gat fooled
19
by the success and apparent success of Phases I and II.
20
21
22
23
24
25
And
that is why the President is so interested in discipline on
the budget, which is hard to enforce but which we think is
absolutely necessary.
I know when I was going out to announce the Phase II
business to the press, he had told me earlier, ha said now,
George, when you go out, I want you to emphasize the budget
36
the major industries has come up for bargaining, whether
whatever it is, each time those big bargains have come up,
the year before the bargaining the average hourly earnings
increase in that industry was less than the average for the
country as a whole.
So they came into that bargaining having lost groun
in real earnings and having lost ground in relative earnings
This time it ain't so.
Real earnings have been rising, and
the bargaining groups have been experiencing greater than
average gains as they come into their bargaining.
That doesn't mean w@ aren't going to have a tough
time, but the underlying situation is different
Now, as far as the controls are concerned, they
are vary extensive by any test except the test of Phase I
and Phase II.
If what we call Phase III had bean instituted
two years ago, I think everybody would have reacted and
said my God, are you trying to put a straitjacket on the
economy, because it is a very comprehensive program.
We think our biggest problem is in food prices —
I might say a very un-Galbraithian industry.
It isn't the
big labor, big industry kind of problem that is the one that
everybody has on their mind.
It's essentially a Government
problem and what kind of Government policies can we pursue
toward agriculture.
Now, there have been some extraordinarily important
steps taken and announced as Phase III was announced that
have to do with measures that increase the supply of food,
and that's the only way that we can get control of food prices
There is no way to suppress them.
All you'll get is shortages
What people want is not a low price and no food.
They want a low price and the food there. • So wa have to
increase the supply, and there have been quite a number of
things.
Some will pay off soon, but most will tcike a cycle.
I'm so tired of 1learing Secretary Buts te 11 me
that it takes 24 months to grow a two-year steer I can
hardly stand it.
(General laughter.)
But we're putting a lot of investment in this, and
we are continuing what has been an effective program on
construction, and a stepped up effort in the health area.
Now, beyond that what has happened is that there
are extensive standards in the price field and the wage field,
and people are asked to change their prices and wages in
accordance with those standards on a self-administering
.oasis
Everyone wonders is that voluntary or mandatory,
and we say well, it's self-administering and you have to do
what you think is right.
On the other hand, we're going to
be watching, and the Internal Revenue Service is going to be
1
. . y
.
/-;
38
j
watching.
2
exceeds the standards, we will take jurisdiction and impose
5
mandatory standards where violations have occurred.
4
do that.
15
6
I
And wo send them out to inspect, and if somebody
And we
We are not spoiling for a fight with anybody.
want the thing to work voluntarily.
it will work.
That is the only way
And I think the purpose of the mandatory
element, all the way through, is simply to reassure the
9
great bulk of the people who want to cooperate and who are
10
cooperating voluntarily that people who want to chisel
around the edges are going to get clipped.
■ }■
And they want
12
to be sure that it's going to be reasonably fair that way,
13
and that continues.
: 14
15
1 16
But I think it is very important to
have mads the changeover, because the controls as mandatory
controls which you had to get permission to do anything before
you could do that were becoming quite counter-productive.
17
We have an example in the heating oil field —
it*s
18
gotten a lot of controversy — .but heating, oil prices were
19
frozen as of August 1971, summer season they were at a
20
seasonal position then? and what we have generated by holding
21
22
23
24
25
!}
We
8
! ii
w i . LI
them there is unattractive refinery runs and a difficulty
in importing the fuel, even after import quotas were taken
off.
So that's an example of how —
you have seen similar ones
up messing you up.
and I*m sure many of
of how the controls can wind
'
I / O
1
2
5
'4
. /
^
39
I might say on the oil case we have dispatched the
Internal Revenue Service to the various companies that raised
thair prices, and we undoubtedly will have a hearing; and they
will, I*m sure, want to put on the public record thair justifi
cation for the price increases.
I
5
6
7
8
9
We*re not saying anything wrong was dona, but it's
a sensitive enough area so people want to see that.
But the teeth are there.
We believe that they will
■1
i
be helpful in the sense that conscience is a small voice
saying somebody may be watching, and there is a real control
1°
system there.
But behind it is attention to fundamentals,
1
11
and on our most difficult problem, namely food prices, some
1 12
13
14
pretty strong efforts to change the underlying Government
policy so that we*11 get mors food; and that is really the
way to get the prices under control.
I 15
I
16
17
18
19
20
21
22
23
24
25
So we think that we have a reasonable chance of
success in Phase III, and .w e fre determined.
And!I suppose
i
in all these efforts, the one final thing I would emphasize
is, all these efforts causa the businessmen or economists
•
or Government officials to do some arithmetic about produc
tivity and the cost of living and tell the labor world that
this is how much you can get in wage increases.
just [Inaudible].
-
They could
f
And the only way it*11 take is if you can get
people to come in and help you formulate the policy.
That is
40
example,
/ ( /
What made Phasa II succeed.
And unlike Britain,
fp fe
and many other countries, we at least at the moment have
very good-hearted labor support in our efforts to make Phase
III work.
Of course, so far what wa've had is a nice meeting
in my office, discussion, and there hasn't been any of the
tough stuff yet, and we*11 see where we come from that budget.
But I think that we have a lot of things going
for us, and with cooperation and with some determination I
think it can be successful.
(Applause.)
MODERATOR:
-
~
Thank you very much, George.
(Whereupon, the recorded proceedings ended at
this point.)
Department of
T E L E P H O N E W 04-2041
WNGTON. D C. 20220
MTIOK:
theTREASURY
FINANCIAL EDITOR
January 29, 1973
k!RELEASE 6:30 P.M.
RESULTS OF TREASURY’S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
Lis, one series to be an additional issue of the bills dated November 2, 1972
, and
e|other series to be dated February 1, 1973 , which were invited on January 23, 1973,
|e opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
jthereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of
182-day
Us. The details of the two series are as follows:
J E OF ACCEPTED
IPETITIVE BIDS:
91-day Treasury bills
maturing May 3, 1973
Approx. Equiv.
Annual Rate
Price
High
Low
Average
98.568
98.558
98.562
^
5.665$ .
5.705$
5.689$
1/
182-day Treasury bills
maturing August 2, 1973
Approx. Equiv.
Price
Annual Rate
97.038
97.030
97.032
5.8.59$
5.875$
5.871$
1/
a/ Excepting 1 tender of $200,000
94$ of the amount of 91-day bills bid for at the low price was accepted
57$ of the amount of 182-day bills bid for at the low price was accepted
| al TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
d is t r ic t
Boston
How York
Philadelphia
lleveland
Richmond
itla n ta
Ihicago
f t . Louis'
H-nneapolis
B ^ sas C it y
■alias
|an Francisco
TOTALS
A p p lie d For
A cce p te d
A p p lie d F o r
A c ce p te d
$
$
$"31,350,000
3,635,725,000
104,065,000
53,180,000
6,625,000
15,145,000
397,180,000
60,190,000
28,335,000
33,300,000
31,110,000
248,540,000
$
$4,644,745,000
$1,800,105,000
45,715,000
2,886,335,000
12,925,000
36,280,000
14,100,000
10,1.10,000
309,545,000
52,050,000
18,635,000
42,460,000
35,150,000
314,160,000
$3,777,465,000
15,720,000
1,824,835,000
12,925,000
23,710,000
14,100,000
10,110,000
193,820,000
32 ,465,000
9,455,000
19,480,000
12,250,000
232,480,000
$2,401,350,000 b/
1,300 ,.000
1,512,170,000
22,815,000
9,225,000
4,625,000
6,895,000
40,080,000
41,670,000
7,015,000
11,210,000
6,010,000
137,090,000
■deludes $195,015,000 noncompetitive tenders accepted at the average price of 98.562
Includes $ 97,900,000 noncompetitive tenders accepted at the average price of 97.032
| es® ra-tes are on a bank discount basis.
The equivalent coupon issue yields are
|.85 > for the 91-day bills, and 6.13$ for the 182-day bills.
Department of
KINGTON, D.C. 20220
u
th
e
f R
TELEPHONE W04-2041
¡
Si
a
FOR RELEASE ON DELIVERY
STATEMENT OF THE HONORABLE PAUL A. VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
BEFORE THE COMMITTEE ON WAYS AND MEANS
OF THE HOUSE OF REPRESENTATIVES
ON THE EXTENSION OF THE INTEREST EQUALIZATION TAX
ON TUESDAY, JANUARY 30, 1973, AT 10:00 A.M.
Mr. Chairman, Members of the Committee:
I am grateful for the opportunity to appear before
this Committee in support of the Administration's
proposal for a two-year extension of the Interest Equali
zation Tax Act.
As Members of the Committee are aware,
the IET was enacted in September 1964 as one means of pro
tecting our balance of payments by restraining the outflow
of portfolio capital from the United States to the
developed countries of the world.
Subsequently, on four
occasions, the law authorizing the IET has been extended,
with some small modifications.
Under present legislation,
the IET expires on March 31 of this year.
I urge you to
provide for the extension of this tax for another two
years.
S-104
2
¡H
The question of continuing the IET —
as well as
the other capital restraint programs -- must be considered
in the context of the continuing U. S. balance of payments
problems and of the current international monetary reform
negotiations.
We are in the midst of an interrelated
process in which we are seeking to build a new inter
national monetary system as well as strengthen our balance
of payments.
One of our basic objectives in that effort
is to establish a cooperative monetary order in which not
only the U. S„ but other nations, as well, feel able to
conduct their business without substantial reliance on
controls.
Yet, with a deep deficit in our payments still
evident, we cannot move immediately to that objective.
Instead, failure to extend the IET during this transitional
period would damage both the reform and balance of payments
efforts.
The IET covers transactions involving the acquisition
of foreign securities by U. S. persons.
The tax has
plainly discouraged borrowers from other industrialized
countries that would wish to raise long-term financing in
the U. So market.
It has also diminished purchases of
3
foreign stocks by Americans.
Thus, the IET provides
significant support to an important segment of our balance
of payments position.
The Interest Equalization Tax Act gives the President
authority to vary the effective rate of the tax between n;-:
zero and the equivalent of 1-1/2 percent per annum on
purchases by U. S . persons of securities issued by
foreigners.
Since April 1969, the level of the tax has <jr>
been set at 3/4 percent.
There are no plans to alter" this
rate at the present time although, of course, we keep the
situation under review and would, Within the authority
contained in thè Act, make whatever alterations in the rate
circumstances might warrant.
While the IET directly discourages foreign borrowing
in U. S. financial markets, it also serves to reinforce
programs of mandatory and voluntary restraint in tWóothéi
broad areas of capital outflows.
These companion programs'
are the Commerce Department's Foreign Direct Investment
Program, aimed at containing the balance of payments costs
°f U. S. direct investment abtoad, and the Federal Reserve
Board's Voluntary Foreign Credit Restraint Program, which
- 4 -
is designed to limit outflows of funds from banks and
other financial institutions.
These three programs --the
IET, the FDIP and the VFCR -- are complementary and
mutually reinforcing.
continued.
The FDIP and the VFCR are being
The extension of the IET is necessary so that
the support that it gives to the other two programs may
also continue.
Without the IET, the effectiveness of the
capital outflow restraint policy as a whole, and of the
FDIP and VFCR in particular, would be endangered.
As I mentioned earlier, we are engaged in grappling
with the major challenges of achieving world monetary
reform and of bringing our payments situation into a sus
tainable equilibrium position.
A necessary first step towards international monetary
reform was achieved with the currency realignment and
other steps agreed at the Smithsonian in December 1971.
In 19.72, the negotiating machinery was established in the
form of the Committee on Reform of the International
Monetary System and Related Issu e s —
the Committee of
Twenty, or C-20 as it is called -- under the aegis of the
International Monetary Fund.
7
■ i
5
The C-20 negotiations are aimed at a fundamental
reform of the system created almost 30 years ago at Bretton
Woods.
The U. So seeks an internation§Jr.j;^n^9 i§l, -system
which is more responsive to the needs of today's world and
more attuned to the changed circumstances of inter
national trade and investment.
This means a system which
to 9 orisi
imbalances by all countries -- surplus or deficit, large or
small.
The system should provide a sufficient choice of
adjustment measures so that no country is forced to adopt
undesirable controls due to a lack of effective^..alternauoo „guslis oimono09
tives.
11
U. S. proposals to achieve these goals have been
nri r
•1
'fiririff
^ J f IxdiKif V Ib j OiTOfil 3V IJ,S i 30 SIIO
placed on the table and discussions are under way.
I have
just returned from a meeting of the C-20 Deputies in Paris
last week.
We are making progress in terms of achieving a
common understanding of the issues and means of dealing with
them, although many tough problems remain to. be,-solved,.
p .:.r
* 'j T;n,;Vv:fell j"V '
Sl'B'tl , 1 *f] . Sd l ill 0lOlX9D 911.1
As you know, we are also in a period of discussion
and review with respect to international trading barriers
and practices, and exchanges pf ideas are also under way on new
understandings covering flows of capital among nations 9.
6
In all of these areas -- monetary reform, trade and
investment - - w e look forward to a new era of international
cooper a ticin and progress.
The IET and the other U.S. capi
tal restraint programs are looked upon by our major trading
partners as a sign of the earnest intention of the U.S. to
redress its balance of payments position and as a contribu
tion to international financial stability in a time of tran**pf\
.O *Q
f
*i' r
iri r + û K
'TO
p
:
sition and potential stress.
■.
■...
J fiCM Ii;
Their removal or substantial
modification now, at a time when we are engaged in complex
negotiations to establish a new framework for international
economic affairs, could endanger both those negotiations and
âVSfî
slfiOS
3-
. .
>
J
<■
3
■
-; - ■
the relative monetary stability that has existed since the
Smithsonian agreement.
We must continue to demonstrate our
willingness to cope with our balance of payments problems
while at the same time moving ahead with the broader negotid^tw SHXlssb IG
ations.
& ÎÎB B JB
r
The deficit in the U.S. balance of payments continues.
While complete data for 1972 are not yet available, all in
dications are that the deficit last year was larger than in
any year prior to 1971, when the result was affected by large
capital outflows in anticipation of exchange rate changes.
Looking at the components of the U.S. balance of payments m
1972, we find that the trade balance deteriorated by about
$4 billion from 1971, partly because of the earlier start of
business recovery here than in the other major industrialized
countries, and partly because of the initial increase of dol
lar import costs due to the exchange rate change in December of
1971.
The worsening of the trade balance was, however, to a
large extent offset by an increase in foreign purchases of
U.S. securities and, to a lesser extent, by a rise in foreign
direct investment in the U.S.
Recent data remind us that our efforts to improve our
trade position and our balance of payments require a period
of time to show large results.
There is evidence that our
relative competitive position in many markets has improved,
and continued strong efforts to control inflation -- in line
with the
ment.
President’s program -- will bring further improve
But we must face the fact that our current position
does not give us grounds for abolishing the capital restraint
programs.
Within the limitations imppsed by our balance of payments,
we have, at times, taken steps to improve the administration
8
of the capital restraint programs and to ease the compli
ance problems of business.
We do not feel, given the pre
sent state of affairs, that further significant relaxations
are justified.
For these reasons the Administration has
presented to the Congress a bill providing simply for a twoyear renewal of IET authority.
However, in addition to the
extension, if the Committee is prepared to consider related
amendments consonant with the spirit and intent of the legis
lation, the Administration has certain more or less techni
cal changes to propose.
Possible Amendments
The Administration supports
-- amending the estate tax provisions of the Internal
Revenue Code to provide an exemption from estate
tax for certain obligations issued to foreigners
which are made subject to the Interest Equaliza
tion Tax by an election of the issuer and the
interest on which is exempt from the U.S. with
holding tax under a provision enacted in 1971.
9
-- limiting the IET
, exemption for less developed
country corporations to corporations that have
significant economic contact with less developed
countries, by eliminating the special rules under
which a shipping company can qualify as a less
developed country shipping corporation by reg
istering
its ships in a less developed
country.
In addition, it has been suggested that the Interest
Equalization Tax in some cases is a deterrent to direct in
vestment in the United States by foreign corporations since,
if they should desire to raise a portion of long-term
financing for such investment in the United States, the
securities they issue would be subject to the IET.
We be
lieve that the existing legislation provides authority to
exempt new issues of foreign securities for this purpose by
Executive Order.
such an order.
Treasury would be prepared to recommend
However, to assure compliance it would be
necessary to amend the statute so that the tax would be im
posed on an issuer who did not comply with the conditions of
the Executive Order.
Attachment :
Four summary tables on the U.S.
balance of payments and trans
actions in foreign securities.
********
TABLE I:
BALANCE OF PAYMENTS SUMMARY TABLE, 1961 - THIRD QUARTER 1972
(millions of dollars)
1961-1965
Average
Merchandise: exports
imports
balance
Military transactions,
investment incomes,
Other services and
remittances, net
Balance on current account
excluding government grants
Government grants & capital, net
Private long-term capital 1/
U.S. assets abroad
Foreign assets in the U.S.
Balance
Current and long-term
capital accounts, net
Short-term non-liquid capital,
net
Errors and omissions
Net liquidity balance
(excl. SDR allocations)
Transactions in liquid funds
other than those of official
reserve agencies, net
Jan.-Sept.*
1972
1970
1971
33,576
32,964
6l2
1969
36,417
35,796
— 6TF
41,963
-39,799
2,164
42,770
-45,459
-2,'èôS
47,391
54,355
”6'$64
43
612
-12
-76
1,888
545
4,190
3,858
1,223
610
2,089
-802
-6,419
-3,042
-3,379
-4,226
-3,866
-3,570
-3,752
-4,423
-3,631
193
-3,438
-4,429
1,517
-2,912
-3,280
-4,297
5,495
1,198
-1,444
-4,855
-5,753
4,805
4,355
-50 ,
- -1,398
-3,011
-3,059
-6,348
2,268
-4,079
-828
-3,918
1,363
-2,555
-1,744
-9,304
-3,191
-5,392
4,759
-633
-10,243
-924
-848
-2,600
-104
-302
-2,151
-522
-881
-4,683
230
-399
-1,610
-640
-2,470
-6,122
-482
-1,174
-4,718
-2,386
-11,031
-22,719
-611
-2,951
-13,804
849
2,370
1,265
3,251
8,824
-5,988
-7,763
1,461
-30,482
-12,343
1967
1968
23,011
17,578
5,433
1966
29,287
25,463
3,824
30,638
26,821
3,817
218
366
5,652
Official reserve transactions
balance
1,641
2,702
-3,418
-10,706
-1,751
219
(excl. SDR allocations)
* Seasonally adjusted, annual rate.
1/ For detail see Table II.
Source: U.S. Department of Commerce, Survey of Current Business, December, 1972 and earlier issues.
January 23, 1973
TABLE
XIS
PRIVATE LONG-TERM CAPITAL,
1961 — T H I R D Q U A R T E R 1972
(millions of dollars)
[(inflows of capital to U.S .(+); outflows of U.S. capital (—)]
U.S. assets abroad, net:
U.S. Direct investments (net)
U.S. Purchases of Foreiqn securities (net)
Stocks
Bonds
1971
Jan.-Sept
1972
-4,400
-4,765
-3,331
-1,494
-467
-1,028
-942
-68
-874
-909
-20
-889
-693
292
-983
358
317
175
-565
-1,156
-220
-586
-109
-212
-4,297
-424
-4,855
-5,753
-6,348
-5,392
258
319
832
1,030
-67
332
909
-305
1,214
1,016
701
315
4,389
2,096
2,292
3,112
1,565
1,547
2,190
697
1,493
2,282
849
1,433
3,599
1,652
1,547
76
188
158
72
160
-249
281
6
180
85
715
701
23
1,112
303
547
4,805
4,355
2,269
4,759
-2,422
1,618
754
-3,370
1,248
724
-4,832
1,373
-620
-2,999
2,905
-540
-50
-1,398
-4,079
—633
1961-1965
Average
1966
1967
1968
1969
2,205
-3,661
-3,137
-3,209
-3,254
-854
17
-871
-482
207
-689
-1,266
-51
-1,216
-1,226
-153
-1,073
-438
-134
255
-281
-3,631
337
-112
-3,918
-4,429
50
86
60
-7
67
1970
Outstanding U.S. loans and
other foreign assets
Reported by U.S. banks
Reported by U.S. concerns other
than banks
Total U.S. assets abroad, net
Foreiqn assets in the U.S., net:
Foreign direct investments (net)
Foreign purchases of U.S. securities other
than Treasury issues (net)
Stocks
Bonds
Outstanding foreign loans to the U.S.
and other foreign assets in the U.S.
Reported by U.S. banks
Reported by U.S. concerns other
than banks
Total foreign assets in the U.S. (net)
Balances:
"Direct investments
Transactions in securities
Other long-term claims
Total private long-term
capital
193
1,363
1,517
5,495
-2,154
-795
-489
-3,575
427
593
-2,879
-250
217
-2,890
3,163
925
-3,438
-2,555
-2,912
1,198
Mote: Details may not add to totals and quarterly figures .may not add to annual figures due to rounding.
Source: U.S. Department of Commerce, Survey of Current Business, December, 1972 and earlier issues.
January 23, 1973
TABLE III: PURCHASES BY U.S. RESIDENTS OF FOREIGN SECURITIES
NEWLY ISSUED IN THE UNITED STATES, BY AREA, 1962 - 1972
(millions of dollars)
1962
All Areas
IET Countries, Total
West Europe incl. U.K.
Japan
Other 1/
of which:
exempt from IET 2/
subject to IET
1,076
1963
First Second
Half* Half* 1964 1965 1966 1967 1968 1969 1970 1971
1,000
250 1,063 1,206 1,210 1,619 1,712 1,668 1,456 1,506
356
343
110
35
147
195
101
60
219
107
17
53
57
—
35
—
—
95
52
_
—
722
_ _
—
656
—
19
15
4
—
14
14
—
45
42
3
—
13
130
11
—
3
130
—
—
Jan.-Sept.*
1972
1,137
17
3
§jS
3
« ...
—
17
—
_ _
14
110 3/ 20
52
10
3
130
3
42
14
15
95
9
—
—
—
141 1,027 1,058 1,191 1,605 1,667 1,655 1,326 1,503
17
1,120
790
33
304
376
616
54
176
274
Other Countries, Total (exemot)
Canada
458
608
700
709
922 1,007
957 1,270
85
775
Latin America 4/
144
36
68 • 140
32
117
119
13
23
200
Other Countries
134
61
35
33
115
121
212
176
189
193
—
—
—
241
International Institutions
84
179
80
246
390
164
* Not seasonally adjusted.
1/ Australia, New Zealand, South Africa.
2/ Related to the export, the direct investment, and the Japanese exemptions. The latter for $100 million
1965 to February 1970.
3/ Represents commitments made prior to 7/18/63, the date of inception of the IET.
T/ Includes Inter-American Development Bank issues.
Source: Department of Commerce, Bureau of Economic Analysis; Department of the Treasury, OASIA.
—
per year, ran from
January 23, 1973
sJO
TABLE IV: NET TRANSACTIONS IN OUTSTANDING FOREIGN SECURITIES
BY U.S. RESIDENTS BY AREA, 1962 - 1972
(Net U.S. Purchases (-) in Millions of Dollars)
1962
All Areas
IET Countries, Total
West Europe
Japan
Canada 3/
Other 17
Other Countries, Total
Latin America 2/
Other Countries
1963
First Second
Half* Half* 1964
194
102
-151
1965
1966
1967
1968
1969
1970
1971
Jan.-Sept.*
1972
300
-135
-60
-305
80
117
211
222
-111
_0
-284
120
145
228
90
-292
-82
0
27
31
53
9
16
-125
247
7
373
-156
10
1
-51
-53
-23
-24
-65
14
-64
11
-23
0
-18
-6
181
-52
-25
7
■»15
85
54
-4
30
5
225
234
152
—
17
12
119
6
147
-30
149
10
68
-5
-96
-5
-8
-13
-6
10
2
-8
26
-36
-33
6
36
-9
-74
-25
12
-3
-3
1
9
-13
15
-13
5
2
24
-13
-23
-72
-2
-96
15
-85
-16
-23
79
-25
-2
-3
7
30
13
51
16
-3
13
11
-98
-60
6
International Institutions
* Hot seasonally adjusted.
1/ Australia, New Zealand, South Africa.
7/ Includes Latin American Development Bank issue of $145 million in 1964.
7/ Excludes Canadian repurchases, undertaken in '66, '67 and '68 for reserve management purposes.
NOTES: These data reflect residence of seller rather than the original country of issue of the security— the basis on which
the IET applies. Also, the above data show net purchases (or sales) whereas the IET applies to gross purchases.
Detail may not add to total due to rounding.
Source: Department of Commerce, Bureau of Economic Analysis.
January 23, 1973
FOR RELEASE AT 12 NOON (EST)
MONDAY, JANUARY 29, 1973
PRESS BRIEFING ON THE BUDGET
Department of State Auditorium
Washington, D.C.
Saturday, January 27, 1973
10 a.m.
George P. Shultz
Secretary of the Treasury
jointly with
Casnar N. Weinberger
Director, Office of Management and Budget
accompanied by
Roy Ash
Director Designate, Office of Management and Budget
***
MR. LAI TIN:
If I may have your attention, pleasj
Everything said here is on the record.
Films
-
and recordings, everything said* here is for release at 12 NoJ
FST on Monday, January 29, just as the budget itself is.
There are books and charts available to the
I
accredited press, if you don’t already have them.
If you
have questions later in the day or tomorrow, we have a
professional staff standing by in my office both this
afternoon and tomorrow, starting from one o'clock.
Take these numbers down.
At my office it is
395-4854 and 395-4657.
If you have any questions on revenue estimates or
any other questions for Treasury,
Jiro Dohley. has arranged
for Tom Lusk to be available at OV 3-2631.
Secretary Shultz,
Mr • Weinberger and Roy Ash will be available for questioning
later.
In the meantime there will be opening statements
and then all three will be available to you.
Now I would like to introduce to you George p. H
the former Director of the Office of Management and Budget. |
(Laughter 6 Applause)
SECRETARY SHULTZ:
I might say in that connection!
Joe, that in the meetings of the so-called Troika there is
always the saying that the Treasury has the revenues, the 0*®
has the spending and the Council of Economic Advisors has the
deficit.
As we move from fiscal 1973 to fiscal 1974 the
revenues go up we estimate by about $31 billion, whereas the
spending goes up by $19 billion and the Council of Economic
Advisors is the big loser because the deficit declined by
around $12 billion,
I think you can see from the budget documents
that you have had that we foresee a continued rise in economic
activity and on this basis the revenues are estimated at about
$225 billion in the fiscal 73 budget.
It will rise to about
$256 billion in the fiscal 74 budget, primarily as a
reflection of the increased tempo of economic activity and
this, combined with the necessary discipline that the President
has exercised on outlays, does give us a decline in the
deficit which we think is called for at this stage of the
pace of economic activity.
I will now turn this over to the Secretary of HEW
designate.
(Laughter)
mu!
WEINBERGER: Thank your George.
When you have
been in this business as long as we all have, you tend to
think in terms of the way in which the budget always appeared
year after year.
You never think of anything singularly.
You alwavs think of it in three*s:
The nreceeding I
fiscal year, the current fiscal year and the fiscal year to
come.
A11 I look at, George, all I can see is fiscal year
1972.
When I look in the mirror, I see fiscal 1973, and when!
I look at Roy Ash I see fiscal 1974.
This is the first time we have had budget directors
for each of the three years anpearing together on the same
platform at the press briefing.
We have a few viewgranhs we thought you would like tol
see, along with a few comments on them.
Then we will take
any questions you have.
I have, first of all, two general noints that I think
should be made.
dubet —
There is a major innovation this year in the
the nresentation of very detailed figures for 1975
as well as 1974.
In some ways the 1974 budget is three budgets in
one.
First, this budget contains a major set of revisions of
the 1973 budget.
Next it is a 1974 budget.
it is a quite detailed version of 1975.
And, finally,
The nresentation f°r
1975 is necessary, I think, to show the long-term effect of
5
The President’s instructions were to bring in a
budget in which the total outlays for 1973 were no more than
$250 billion.
This is the amount necessary to stay just as
close as we possibly can to the $246 billion budget that had been
submitted in 1973 —
and as close as we can to a full-
employment balance.
A $250 billion budget would still produce a full
employment deficit in the range of $2.5 billion.
There was a
deficit of full employment in the *72 fiscal vear of nearly
$4 billion.
We felt this was on the verge of being inflation
producing, and we want to stay well within it in fiscal 1973.
If we are going to get the reductions of that kind
in 1973, we felt it was necessary to do something more than
just to look at what the effect of that would be in 1974.
was necessary, therefore, to look even farther ahead.
It
A look
at 1975 was also necessary for the purpose of insuring that
agency heads and others knew what we felt to be the outer
limits of the budget safety for 1975 as well as 1974.
This
longer view is in keening with the President’s determination
that there t*ould be no requirement of a tax increase on the
basis of Federal programs and that there would be no more
inflation production on the basis of Federal balance spending
in this year, in 1974, or in 1975.
Those were the reasons why we felt we should bring in
a quite detailed budget for 1975*
Naturally, being that far
6
out are tentative.
But there is not much doubt as to the
totals that we will have and have disnlayed for 1975.
We feel there is no way they can be substantially
exceeded without requirements of additional taxation or
the threat of more inflation or both.
For that reason, wa
have projected this budget into 1975.
The other noint that I want to make is that I thought
I should emphasize the 1975 exercise because it is, so far
as I know, the only part of the budget that has not already
leaked.
Chart 1 shows the budget totals and the portion of
the COT taken by the Federal Government.
is just about the sane over the years.
The Federal share
It is still roughly
in the 20 percent area, going down a little bit from '72 to
•74.
The important noint that is not shown on that chart
is when State and local government expenditures are added,
the total government share is about 34 nercent.
Therefore,
about a third of the Gross National Product goes to govern
ment.
This is another reason why the President felt we should
be very concerned about the Federal outlays —
to hold
down the Federal Government's nortion.
Chart 4 in Budget Highlights shows what would have
haooened if we had not had this restraining exercise.
turned in a budget a year ago of $246 billion.
Wc
By June, it
had climbed to $250 billion.
When we made calculations in
June covering the bills likely to nass in the Congress and
possible increases in uncontrollable snending, we could see
a total near $260 billion.
Actually, a later review, conducted
after the Congress adjourned on October 27th, concluded that the
effect of Congressional actions and other factors had produced
an unconstrained total of $261 billion.
The effect, then, of
the President's directions to get us back to $250 billion are
seen as having brought us back to where we were in June, but
still over the budget that was submitted a year ago this week.
Chart 5 shows the real importance of making that kind
of restraining exercise in 1973*s outlay.
$11 billion stay —
If we had let that
the difference between the $250 billion
and the $261 billion that would have been spent if we had not
tried to restrain 1973 outlays —
it would have grown to
$19 billion in 1974 and to $24 billion in 1975.
without the addition of new programs.
This is
It is simnly the
built-in effects of programs of Presidential nronosals now
before us.
They would have grown that far without the
restraining exercise that we have nut in for 1973*s budget.
So there was a real importance in doing this.
8
There was also an importance of trying to calculate,
in the detail we have, what would happen in 1975 had this not
occurred.
With the savings included in the $250 billion outlaysl
for 1973, the roughly $269 billion on an actual basis for 1974|
and the $288 billion figure that we are recommending for
1975, we will be in a full employment balance in 1974.
As we get much closer to full employment, we will be
very close to an actual balance in 1975.
There is not a calculation of actual revenues in
1975, but the growth in receipts that goes with the kind of
year we think it is reasonable to anticipate, will bring us
out to the point where we believe the 1975 budget can be very
close to, if not actual balance, certainly it demonstrates
that we will not need new taxes in 1973, 1974, or 1975, and
we will not have any inflation-driving forces as a result
of Federal spending.
Chart 7 is a comparison of the various full e m p lo y
ment budgets, starting back in 1064.
As you see, we have
had in 1972 and 1973 some comparatively small full e m p lo y m e n t
deficits.
We have felt it necessary to take this restraining
action to get back into the situation you see in 1974 and 1975j
Chart 8 gives another indication, another method
by which the economy was stimulated, was the reduction of
/ 1f
individual income taxes.
9
These taxes have been actually
reduced, under the assumptions that we make, by just about
$25 billion below what left the 1969 rates would have
required.
Had the 1969 rates remained, there would be
taxation of about $25 billion more on the individual income
tax than at present.
We understand there are difficulties with some of
these assumptions.
Perhaps the CNP would not have been
cruite the same if the 1969 tax structure had not been
changed.
But as closely as it can be figured, that is what
we believe is the reduction in the individual income tax
that has taken place as a result of tax changes made from
the 1969 rates and structure.
Chart 9 shows that this is not a net saving because
payroll taxes have gone un approximately $20 billion.
So,
by the end of fiscal *74, there will be a net tax reduction
of about $5 billion.
Benefits have also gone un very
substantially, about $21 billion.
That again will be the
structure that is in place at the end of 1974.
fls hm X
10
Chart 10 shows the changing? priorities —
dollars on the left and percentages on the right.
outlay
The outlay^
for defense were just about level since 1968.
Human resources climbed sharply.
In 1974, we 1&1j
have spent in excess of $125 billion and in 1975, nearly $135
billion.
«
I 31
• '
Human resources will be approximately 47 percent
in 1975 and defense under 30 percent of the budget.
You can
see the exact reversal of priorities and that the gap is
actually widening.
Chart 12 shows the level nature of the Defense
Department outlays.
The increase from *73 to *74 is accounted
for almost entirely by pay and price increases, with no
increased level of activity.
As a matter of fact, there are about 200,000 fewer
men involved in the *74 defense budget than the *73 budget.
We can see most dramatically in Charts 13 and 15 that there
has been a very substantial decline in activity.
Chart 13 shows the amount of absorption into the
economy that has taken place in the numbers of people who were
involved in defense and defense-related activities since
1968.
It has been a very substantial amount, about three million Pe°i|
Those have pretty much been reabsorbed back
a peacetime economy.
Chart 15 shows why the increase in dollars
into
in the defense budget brings no increase in the level of
activity.
The actual pay and allowances were about $5,500
for the 3.5 million personnel in 1968.
Now they are $10,000
each even though we have 2.2 million instead of 3.5 million
persons.
Chart 16 shows another way of phrasing it: for a
billion dollars you get 100,000 men instead of 219,000 men
which you get ten years ago.
Turning to the other side of the increase, you
will note there is an increase of about $19 billion in the
'74 budget over 1973.
That $19 billion is allocated almost
entirely on the human resources —
natural resources side; the
$4 billion on the defense side which we have seen is related
to nay and price increases and actually funds 200,000 fewer
peonle.
On the human resources side, we see an increase in all
fields.
elderly.
—
Chart 18 shows the continuing increase in aid to the
The large increase —
over 80 percent in recent years
in social security benefits was a major factor in this
increase.
Chart 19 shows very sharo increases in outlays for
food assistance in *71, *72, *73 years, levelling off a bit
In 1974. Still, there has been a very large increase, well over
$4 billion in 1974 as opposed to well under $1 billion in 1964.
And the principal portion of that jump has taken place since 1970
12
On the health care side, you car^ see in Chart 20 that
the federal contribution to health is increasing very substan
tially, tnat the private sector is diminishing, and that state
and locals are remaining about the same*
Chart 23 indicates that the numbers of patients
treated in veterans hospitals and out-patient visits increase
sharply.
As with most of the programs in the 1974 budget,
this program is levelling off somewhat from the rate of
increase before.
Nevertheless, there is still a substantial level of
activity, particularly in the case of out-patient visits.
13
College student Aid (Chart 25) demonstrates the
changing emphasis that the Administration placed on aiding
students who are substantially in need of assistance, as opposed
to institutional aid.
This indicates there has been a marked
increase in that form of assistance in both grants and work
study programs.
The awards jumped very substantially, both in
number and amount.
Chart 26 shows veterans education benefits still
going up.
They are leveling off a bit but still rising as they
have steadily since 1969.
Chart 27 presents civil rights activities.
The
minority assistance and enforcement programs both show major
increases, pretty much continuing the steady progressions
since 1970 ?—
from $1 billion then to over $3 billion now.
No leveling off is occurring here.
Chart 29 displays outlays for the reduction of
crime, both from the point of view of aid to state and local
governments and as federal direct outlays.
You see now these
are almost evenly distributed? in 1969 the federal share was
a great deal smaller.
Again, along with general revenue sharing, there
has been a very substantial increase in this special form
of assistance.
14
Chart 31 is on lav/ enforcement), showing the
treatment, rehabilitation, education, training and research
aspect of the drug problem.
Again, outlays are getting well
into the three-quarters of a billion dollar range.
Chart 33, on environmental quality programs, shows
the effect of the support the Administration has given to this
series of programs has grown from well under a billion dollars
in 1969 to well over $3 billion.
I think it is important to point out that there
has been some discussion about whether the President is using
all the authority possible under the so-called Clean Water Act
and Pollution Control Act.
if he were, that line which has
such a very sharp increase would run all the v/ay up to and get
just about at the top of the curtain.
We didn’t have a screen
large enough for that purpose. (Laughter)
Chart 38 has two panels.
The left side shows a
sharp increase in farmers cash receipts.
The right side
demonstrates our far greater ability to rely now on private
market mechanisms, the ability to take down price support very
substantially and also to take down the storage and storage
costs in the commodity credit owned industry.
These are both major savings that we are able
to make in 1973, as well as in 1974.
Urban transportation (Chart 40) is another of the
areas that continues to show steady growth, with mass transit,
particularly, maintaining the very large increase that was
first put in in 1972.
Airport funding remains about the
same with highways showing a little increase.
Most of the
highway increase is continued payout from prior commitments•
Chart 41 shows why it seems feasible now to
call a halt in so many of the Federally subsidized Federal
housing programs.
has gone
u p
The number of units of standard housing
very substantially.
The number of people forced
to live in substandard housing has gone down dramatically.
The rapid increase in Federal subsidized liousing and the
continued concern about the nature and effectiveness of those
programs has led to the conclusion that this was an
appropriate or right time to call a temporary halt to some
of the things we are doing while we take stock to sec whether
there is not some better method of attacking the remaining
portion of this program.
We should bear in mind we will still be spending
well over $3 billion.
This is a bit more than last
year, just because of the length and clogged nature of
the Federal pipeline.
10
Chart 42, on R&D, shows an increase in two categories
and a decrease in one.
Civilian R&D goes
defense, somewhat more gradually.
!'■
u p
very sharply
Soace, with the comnletion
of the Apollo Program, continues the decline of the previous
year.
There is still a major increase in civilian R&D.
The next chart (Chart 43) shows one of the principal reasons
for this.
That is the attempt to improve the energy situation
lr
both through the breeder reactor as well as programs designed
for clean coal burning and matters of that kind which will
be so vital in the next few years.
As Chart 46 shows, Federal civilian employment
continues to decline as directed by the President.
We are
now down from about 2.6 million in I960 to an estimated 2.4
million in 1974.
Therefore, we are having the very substantial
reduction in Federal civilian employment.
It will actually
be about a 4-1/2 percent reduction by June 1974.
Federal grants to State and local governments
(Chart 50) are continuing the pace with a new added starter,
general revenue sharing in the last year.
You will see that
there is still a very substantial amount in all fields,
particularly human resources, going out to State and local
governments.
This is on top of general revenue sharing,
so wo are somewhere in the neighborhood of $45 billion for
grants.
Those were the charts that we thought might be of
interest.
We can now, I think, take more general questions
or questions on the charts.
QUESTION: M r . Weinberger, how long are you
postponing that second quarter of general revenue sharing,
the $1.5 billion?
MR. WEINBERGER:
I think that is just a matter of
a comparatively short time, a few days. Because of the nature
of it, the last quarter moves over into the next fiscal year.
SECRETARY SHULTZ:
By law I think we must make
that payment in the first five days in the quarter following
and it would normally come in that space of time.
QUESTION:
Mr. Shultz, you have given us the GNP
forecast for next year.
Could you give us the unemployment
and inflation figures that are associated with that?
SECRETARY SHULTZ:
We expect that with CITP
growth, which is about $115 billion, unomnloynent vjould
continue the gradual pace of decline that it has had, and
reach the neighborhood of about four and a half percent by
the end of the year.
QUESTION:
We couldn’t hear that back here.
SECRETARY SHULTZ:
We expect that with the rise
of the GNP of about $115 billion, comparing 1972-1973, that
unemployment will continue its gradual decline and we expect
that it will reach the neighborhood of 4.5 percent by the
10
end of the calendar year.
As you know, the Presidents objective on the
price side is to reach a figure of about 2.5 percent or below
by the end of the year.
Uc recognize that that is an
ambitious objective, but we think it is attainable and we are
working hard to attain that.
The average for the year would probably be
somewhat above that.
QUESTION:
Mr. Weinberger, the message said in
several places that the increase in military outlays is
essentially pay.
MR. WEINBERGER:
QUESTION:
Pay and price.
On page 73 there is a table that seems
to indicate that it is half manpower and only half.
I wonder
if you can explain that discrepancy.
MR. WEINBERGER:
QUESTION:
Yes.
MR. WEINBERGER:
crepancy.
On page 73?
I don't think there is any dis
Two billion dollars is military and civilian pay
comprability•
About $500 million relates directly to the
all volunteer armed forces and proposed retirement increases.
Five hundred million dollars is wage board and
retired pay increases that are included in the defense base,
and $1.1 billion is the normal price growth that we figure
on defense purchases, about 3 percent per annum, or a little less
so that you have in that general total about $4.1 billion.
QUESTION:
Excuse me, if I may follow un. This
table shows, differently from the v/ay you
stated it, that investment, procurement, basically, and con
struction will be up 1.8.
Are you saying that 1.1 of that 1.8 is price
increase?
MR. WEINBERGER:
One point one is the normal price
20
growth in investment and other procurement, and the balance
is in the other wage increases that we believe will be
associated with that.
30
JL
p§:
JL V
Secretary Shultz, you promised Congress
to p r o v i d e
a tax reform p r o p o s a l
There does
not
s e e m to b e a n y
about
this
t i m e of
in t he b u d g e t .
t he year,
C a n y o u explain
that?
SECRETARY SHULTZ:
budget
that repeats
is
included
pensions.
the P r e s ident's
& Means
to the W a y s
a:te n o t p r e p a r e d
legislation
tax questions
to a n n o u n c e
QUESTIONI
aid
to p r i v a t e
Mr.
SECRETARY
is
e n a c t e d , but
one
tax
for pr i v a t e
for revised
are under
item
t ax
in the
of
last year
schools.
A3 sc
treatment
of
c o n s i d e r a t i o n and we
t h e m now.
Shultz,
schools will
is
recommendation
C o m m i t t e e on aid
proposed
Other
There
cost
SHULTZ:
how m u c h do you
that
the Trea s u r y ?
It d e p e n d s
1 believe we have
think
an
on
estimate
the w a y
of
in
which i
something like
$300 million in the budget for fiscal s74 and another $300
million for the pension revision.
QUESTION:
Mr. Shultz, could you tell us if there
are any plans for post-war aid to Vietnam?
MR. WEINBERGER;
QUESTION :
It was regarding post-war
SECRETARY SHULTZ:
figures
to do
for post-war
t hat,
it w i l l
a id
be
I did not hear the question.
an
aid
to Vietnani*|
The budget d o es not include ar|
in Southeast Asia.
If it is deteminCfl|
additional amount, but the P resid ent 5
lines, I think, are quite clear.
Proposed additions are to be measured and their
priority determined by the question as to what should be
reduced in order to accommodate them.
When a proposed addi
tion comes along, the question will not just be the amount
or the importance of the proposed addition, it will also be
what are we going to give up in order to accommodate it.
As you note, the President has asked for a spending
ceiling for 1974 in the exact amount of the budget total
that is submitted.
He feels, I think quite correctly, that
the budget is something that has to be adhered to.
QUESTION:
Is that to say, to put it another way,
that any aid to Vietnam will be at the expense of domestic
programs?
SECRETARY SHULTZ:
I don’t know what it will be at
the expense of.
I think if it is an addition to the budget, it will be
at the expense of something because the only other alternative,
I think, would be to concede we were going to have an infla
tionary budget or to concede that we would have to have a
tax increase.
Both alternatives have been rejected completely.
QUESTION:
In that connection, where do you have the
greatest opportunity to cut?
SECRETARY SHULTZ:
We have already exercised a
considerable opportunity to cut, and we haven't given any
thought to any additions •
We ordinarily like to let the ink
get dry on this budget before we think of supplements.
It is
22
not quite dry yet.
QUESTION:
The President very seriously said the
other day there would be American aid to help in the recon
struction of Vietnam.
SECRETARY SHULTZ:
will not be.
We are not saying that there
We are simply saying it will require budget
revisions, and those revisions undoubtedly will be proposed
if that is considered to be a high enough priority to add to
it.
QUESTION:
Pretend the ink is dry,
SECRETARY SHULTZ;
I think first of all it is clear
from Henry Kissinger's briefing to the Congress yesterday
that there has been no commitment on that and that there will
be consultation with the Congress on that point.
Second, as anyone who has followed the process of
aid of that kind as it is unfolding in terms of outlays, it
is not the kind of thing that results in a quick build-up of
outlays like most other programs of that kind.
It has to get itself organized, programmed, con
tracted and so forth.
Whatever is finally done is not
necessarily going to be a very big item in terms of outlays
for fiscal 1973 or 1974.
QUESTION.
Mr. Shultz, does the lack of any money
for family assistance in 1974 or 1975 mean you put that off
for at least three years?
À
23
SECRETARY SHULTZ:
X think I will turn that over
to the Secretary Designate of HEW*
i '■
c lp n ; t .' # h
that kind can be drawn-
There is no completed action on
the proposed legislative orogram for the Department or for
the welfare area at: this point,
When there is, that program
will be presented.
te
r1
D\ ■
If it renuires additional outlays/ they
Will be recfuested on the basis that they should be of
high enough priority to take the place of something
else.
OUESTIOri:
In view of the Present emphasis on
strengthening State and local government, what is the
rationale for eliminating Title V of ESEA, which would
strengthen State educational departments?
iR. wniIiBERnnTl:
I think the rationale is that it
does not strengthen state education departments.
I had a little exnerience with the way that pfograt
worked in one of our larger States.
well.
It did not strengthen the State Department
of Education really at alJ.
that
It did not work very
It was utilised for purposes
we had previously removed from the budget of the
State Department of Education, and we had
a basic feeling that it was siraolv a Federal grant which
really did not carrv out the nurooses for which it was interim
OUESTI02J:
Secretary Shults, can you visualise any
circumstances in which an increase in the budget totalities
25
or a tax proposal in 1973-1974 would be acceptable to the
Administration?
SECRETARY SHULTZ :
I think the situation we have is
one in which the economy, is rising rapidly toward full
employment.
know from our experience in the late lOKO’s
!
that for the outlays to rise aboverand in that case
V ic
dramatically above, full employment revenues was a very
heavy contributing factor tc the start of inflation, and
unwise.
So, we feel we should learn from that experience
and make a determined effort to hold the outlays to full
employment revenues, particularly as we get toward full
employment.
The only way to hold it is to set a line and
hold it.
OUESTIOH:
Mr. Shultz, I think the question
was
could you manage — QUESTION * What was the response to the cruestion?
SECRETARY SIÎULTS : The response to the question is
that we feel there is a matter of substance here, a matter
of great importance, and the best way to dramatize it and
to hold fast to it is to set yourself a number and to
hold to that position.
OUESTIOH:
Suppose the economy were to turn down?
Is that a circumstance that would change the course or is
that the only one?
SECRETARY SIIULT?.:
In nrojecting the budget to
fiscal 1975, we clid that deliberately in order to test out
for ourselves and to disnlay for others the fact that the
indications of the current pattern of outlays and their
rise did not include a tax increase, that it was possible
to manage snending in such a way that we would not need a
tax increase in 1973, 1974 and 1975.
How, we have deliberately not, as Director
Hembergcr nomted out, tried to nrcject actual revenues
in fiscal 1975, although it is always temoting to do some
thing like
that.
He
have
learned from experience,
1 will say I have learned from experience^ that it is
hard enough to project the economy and revenues by one
year, let alone two years.
He have demonstrated the point in fiscal *75 and
we want to maintain our ability to exercise -judgment and
reasonable fiscal nolicy as we see things unfold.
27
MR. WEINBERGER;
Let me add a word to that,
Those projections of what would happen if the
outlays in 1973 were unrestrained, I think, emphasize the
importance, as I understand it, that the President attaches
to staying within the limits of 73 and 74.
Those
projections that show us going up to $312 billion on an
unconstrained basis in 1975 do not take into account any
new initiatives, any kind of Congressional additions to
any of these programs, any kind of veto overridesror anything
of that sort.
They are quite conservative.
Knowing the past
track record in that general area, it would seem perfectly
clear that if we do not make the restraining exercise that
the President has directed for 1973 and channel funds into
areas more likely to produce results , wc will
not only have a massive tax increase, but we will
have a strongly inflationary fiscal policy.
So there is a real need to stay within these
basic totals.
The need is that the President feels so
strongly that there should not be a tax increase this year,
next year, or the year thereafter.
QUESTION;
Secretary Shultz, you pointed out that
aid to Vietnam would be a slow moving thing and that it would
not have any substantial effect on 73 or 74.
28
C a n you say that aid to V i e t n a m
S E C R E T A R Y SHULTZ:
it will he.
---
I d o n ’t k n o w h o w s low moving
My p o i n t was that this is some t h i n g t hat has to
be d i s c u s s e d b e t w e e n the A d m i n i s t r a t i o n and the p a r t i e s in
S o u t h e a s t A sia and the Congress,
and g e t it w o r k e d out»
If a n y t h i n g is w o r k e d out-
it takes a w h i l e to
uxiroXua
H o w f a s t p e o p l e w i l l be able to m o v e o n that, I
d o n ’t know,
I a m n o t involved in the d e t a i l s of that
projection,
QUESTION:
the basis of that is:
T he q u e s t i o n I was g o i n g to as}', on
Do you feel that aid to V i e t n a m might
m e a n a tax increase in 1975?
S E C R E T A R Y SHULTZ:
QUESTION:
I w o u l d n 51 think so, no.
S e c r e t a r y Shultz,
the b u d g e t lays
g r e a t stress on the need to p e r f o r m and improve the
C o n g r e s s i o n a l a p p r o p r i a t i n g process.
Would you or any of the other two have—beens
with you identify a specific improvement
that
the
Administration would be for?
S E C R E T A R Y SHULTZ:
MR. WEINBE R G E R :
the question.
The b u d g e t i d e n t i f i e s some
We have b e e n asked to repeat
The q u e s t i o n was to i d e n t i f y some of the
s p ecific C o n g r e s s i o n a l r e f o r m s or c hanges
pro c e s s
in the budget
tnat w o u l d re m o v e some of the d i f f i c u l t i e s we have
29
already identified such as very late passage of the bills and,
particularly, a failure to take anything in the nature of an
overall look at the whole expenditure problem.
For example, we know that in order to stay within
the range where we can avoid a tax increase , or more
inflation, it was necessary to stay roughly in the range of
about a $18 to $19 billion increase between 73 and 74.
Knowing that, we would be a little surprised, I
think, if you had deliberately set out to use something in
the neighborhood of about $12 billion of that $18 or $19
billion for one particular program, namely a sharp increase
in income security.
nevertheless, that is what the Congress did. They also
did several other things. As a result of Congressional actions
and increases in uncontrollable outlays, the totals went way up,
tar above that $18 or $19 billion increase, in fact, about $11
billion more was added to it.
Yet, no one really felt that anyone in the
Congress wanted a tax increase, at least no one ran on a
program calling for that that we are aware of.
What we really need is a Congressional procedure
that enables the Congress to look at the whole budget and
have that total in mind when they act on the individual
pieces.
We are very hopeful that this joint committee
that has just been established will address itself to that
30
problem.
There aremany ways
this c o u l d be done.
Y o u c o u l d have a si n g l e b u d g e t bill.
h ave a r e q u i r e m e n t
for j oint h e a r i n g s
Y o u c ould
so as to eliminate some
of the f r a g m e n t e d a p p r o a c h e s to it.
Y o u c o u l d have a n r o v i s i o n that is s u c c e s s f u l l y
u s e d in m a n y St a t e s under w h i c h the L e g i s l a t i v e B r a n c h does
not c o n s i d e r any o t h e r s p e n d i n g m e a s u r e s un t i l the b u d g e t
is enacted.
Y o u c o u l d also have
a w h o l e s eries of
p r e l i m i n a r y c o n s i d e r a t i o n s b e f o r e t he b u d g e t a c t u a l l y is
submitted.
So there are a n u m b e r o f d i f f e r e n t b i n d s o f
arrangements.
T-7e d o n ' t in an^ sense i n t e n d to t o l l the
C o n g r e s s w h a t t hey should do o r Itow t h e v s h o u l d do it.
I thin]; t h a t no one is satisfied,
However,
p a r t i c u l a r l y no o n e in
C o ngress, w h o is s a t i s f i e d w i t h the e x i s t i n g 'procedures
w i t h the i n a b i l i t y of the C o n g r e s s
to h ave
and
an o p p o r t u n i t y to
look at the o v e r a l l picture.
X d o u b t t h a t t here w e r e
five p e o p l e
in the Congre s s
w h o r e a l l y k n e w on O c t o b e r 27th t hat the p o t e n t i a l
o u t l a y total w a s a b o u t
$261 b i l l i o n as o p p o s e d
and that t heir a c t i o n s on i n d i v i d u a l b i l l s
increase.
to
1973
$230 billion i
c a u s e d m o s t of the
T h e r e a s o n X say t h a t is that b o t h H o u s e s
d i d pass a
.»pending c e i l i n g e v e n t h o u g h t h e y w e r e u n a b l e to a g r e e on the
procedures
for s t a v i n g w i t h i n it.
**ho a m o u n t o f $250 bi ll i o n .
T h e y b o t h p a s s e d the ceiling
S o r e of this
is s et f orth in d e t a il
around page 9 of the budget.
QUESTION:
Mr. Secretary, what will happen to
previously impounded funds?
Will they be released sometimes
and how will they affect the outlays?
32
MR. WEINBERGER:
The so-called fund impoundment or
the withhol difig of appropriations , has been a practice, of
course, that has been followed by every President, since
Thomas Jefferson., X am sure it will continue to be
followed by every President in the future.
The amount that is actually withheld now is
substantially under, on a percentage basis, the amounts that
have been withheld on the average in previous years.
It
is a flowing process.
There are funds withheld for a time, when there is
no recipient identified, when there is literally no one to
nay the money to.
Some funds, such as for the Clean Water
Act, are held because to sncnd them x^ouid produce a high
level
of inflation and particularly on ton of the $5 billion
that has been released by the President.
Some may be
released
in subsequent months as the conditions arise under which they
can be properly and efficiently snent.
Remember, the President is operating under several
different statutes which reauire him to spend money as
efficiently as possible: the Anti-Deficiency Act, the debt
ceiling of $4f!5 billion, and so on.
There can be a whole ranqe
of different Congressional intents that are expressed,
and, thus far, every President has interpreted his duty
his responsibility as not spending some of the total
and
authorized appronriation.
Usually it varies between six and seven percent.
Now it is well under that.
QUESTION:
What overall could the President do to
try to keep Congress within bounds on spending?
MR. WEINBERGER: He is doing quite a lot right now.
His 1974 budget proposes that everyone keep in bounds —
executive branch and legislative branch *—
the
at the $250 billion
figure for 1973 at the $269 billion he has recommended for 1974.
He has asked again for a spending ceiling.
We have been
very nleased at some of the support that has developed
for that recommendation.
QUESTION:
I am not sure I understand your answer
to the next to the last question, when you say some of
the so-called impounded funds will be released.
MR. WEINBERGER:
Some would be released and some are
being held out because there is no one to pay them to.
QUESTION:
My question is in the *73 and '74 estimates,
you must be making some estimate of how much of the currently
I
’mnounded funds will be released.
So to make those figures, you must have made
that estimate and know where they are.
MR. WEINBERGER?
are.
I am sure we do know where they
I don't quite get the question.
QUESTION:
It seems you ought to be able to give
34
a more specific answer to which| if any, of3 the impounded
funds will be released, because you had to know that to make
the estimate.
MR. WEINBERGER:
We will have in great detail,
prior to February 10th, a complete list of the funds impounded,
the plans for the release of them, whether they will be
reached at the last quarter of the fiscal year or the
next auartcr of the next fiscal year, and so on.
It is
quite a large job.
We sent one of these un to Congress in Septemberf I
think, and we will have another list that will go up actually
next week.
You can tell from the products of the reduction
and termination programs where some of the items arc.
There are others added because they are in a somewhat different category.
You can also see the usual so-called road man on
page 32 of the budget that indicates some of the releases
to be made in the form of budqet authority and unexpended
authority from previous years.
On top of that, we will have
a very detailed, very specific list prior to February 10th,
which is the time Congress asked us to send it up.
QUESTION:
Hr. Weinberger, you cite over again that
the projections do not take into account any new initiative
or any new program.
HR. WEINBERGER: New Congressional initiatives.
The nrograms take into effect the Presidential programs now
in place and the nrograms nronosed in this budget and the
out-year reauirements of those programs.
OUESTION:
In short, there is no room for any
addition to this budget.
At the same time, you arc leading
us to believe that there is some concentual idea of possible
aid to Vietnam.
Now, would it be in the fiscal resources or human
resources or defense spending or some of both and you
must have some concent of where you would get this
additional money.
HR. WEINBERGER:
The question is again —
I think
this is the third time we have had it this morning —
if we
have a Vietnam reconstruction what will we take out.
I think the simple fact of the matter is and the
simnle answer is that we do not have a proposal*
We are not at this point able to see the
dimensions of it, or the amount of outlays that will be
✓
required # Nor do we have at this point an indication of when
a proposal would come in or whether a proposal would come in.
There has been discussion of it.
If it comes in
36
then I would think that an hannens with many other situations,
and I have in mind Particularly the flood emergency of
last year, that there will be no hesitancy to try to fit it in
If it comes along and there is a desire that it be fitted
in, then we would certainly review the entire budget to
see what,at that particular time, is a lower priority
than that.
I am unable to state whether it will be defense,
human resources or the treasury department.
OUESTIOU:
(Laughter)
Mr. Weinberger, how much did the
December bombing of North Vietnam increase Federal spending
and correspondinglv, by how much does today *s peace
agreement lower Federal spending for FY 73 and '74?
MR. WEINBERGER: The question is how much did the
December bombing increase the Defense budget and how much
will the peace reduce the budget.
Generally speaking, not generally speaking, but
specifically, we have not received from the Defense Department
any indications or requests that additional amounts would
be required for the activity that has now fortunately
ended.
I7e do have a general idea of the most general
nature, not in any way specific, of the kind of range of
dollars that the Vietnam war was costing a year ago.
Secretary Laird, I think about a year ago, a year
and a half ago, nade an estimate of about $8 billion as the
incremental cost of the War.
now.
I am quite sure that is lower
It is very difficult to figure, because you have
certain divisions and certain ships and certain numbers of
men, all of whose cost
requirements and pay and so on go
on regardless of where they are in place.
I am certain that figure is a lot lower than the
$8 billion rough estimate that Secretary
Laird
gave a year
or so ago.
On the other hand, I don't believe it is below the
$4.2 billion increase that we mentioned a moment ago that
is recruired — ■ because of the size of pay and price increases
to maintain a smaller defense establishment.
So, I don't see any new so-called peace dividend
arising as a result of the end of the war.
I hope there
will be some resources freed, I very much hope that.
We
certainly will be free from the necessity of constant and
major increases,or inability to modernize, that
has been the case in the past few years..
But I don't see any new amount because of the enormously
increased requirements for nay and allowances.
When you move pay allowances up from $5,500 per
V
man to $10,000 per man, you have done two things:
You
have, I thin\ reduced a tremendous amount of the frictions
that the draft produced throughout the country
But you
38
also have to have a more expensive defense establishment,
even though it is smaller,
we have to bear in mind, too,
that others in the world are not afflicted with chis nroblon,
that their manpower requirements
are very much less and
they, therefore, have a lot mb re that they can nut into
hardware and weapon systems.
QUESTION: Was your budget Premised on the war
continuing or not, regardless of the -MR* WEINBERGER:
The 1974 budget was premised on
the assumption that the war would be over*
QUESTION: Has anybody figured the cost of the
reimbursement to the Treasury of the sale of surplus
goods from the war?
Maybe this will be a bookkeeping
problem, maybe it \\rill save us from future procurement or
will we get any cash credit for what we leave in Vietnam?
MR* WEINBERGER:
The question is whether or not there
will be any gain to the Treasury from the sale of surplus
equipment or equipment no longer needed, equipment not
left in place and presumably sold abroad or returned home for
sale.
There is some of that going on.
There have been
projects which have returned quite a bit of equipment.
A lot
of it has been allocated out to minority business groups,
small business,and things of that kind.
I don't really know;
if there is a firm estimate of net dollars to
39
the Treasury as a result of some of this.
Maybe Assistant
Director Dam can give you an estimate.
MR. DAM:
I simply point out there has been a
substantial reduction in the size of the armed forces
already.
Whatever receipts we would be having from sales
of surplus war goods we have already had.
So, I doubt that there will be an increase.
40
QUESTION:
Mr. Weinberger, on the $17 billion in
savings from program terminations and reductions, is the $6.9
billion in special revenue sharing a direct offset against
those savings?
MR. WEINBERGER:
y>ur figures.
I am not really able to identify
Did you say $17 billion?
QUESTION:
In the budget they list $17 billion.
MR. WEINBERGER:
In 1974, $16,8.
What is your
question?
QUESTION:
You are requesting special revenue
sharing of $6.9 billion.
MR. WEINBERGER:
There isn't any specific offset.
We would gain from the program reductions and terminations
that are proposed for 1973 a total of $6.5 billion.
They go up
to just about $17 billion in 1974.
That is the savings that we would make because
we would be no longer funding or no longer funding at the same
level those programs proposed for reductions and terminations
in *73 and *74.
We are also proposing special revenue sharing
programs for 1974.
There isn't any direct correspondence
between the two, but we do eliminate from a total outlay
requirement about $17 billion that would otherwise have
to be made if we didn't start on the reductions and terminations
proposed in the budget.
QUESTION;
But some would have to be restored,
would they not?
MR. WEINBERGER:
No, these programs that are
listed for reductions and terminations proposals are not
temporary,
They are made with the rdea they would remain
in place and that is why we figured the three-year cost
effect of them.
QUESTION:
On page 40, on the national defense
line, the budget authority increase is indicated as rising
from $81.7 billion in fiscal 1973 to $91.9 billion in fiscal
1975, a $10 billion rise,
I have two questions.
The first is:
Is that
whole $10 billion rise in budget authority for Defense
attributable to pay and price increases and also why are pay
and price increases not indicated then for the rest of the
budget?
MR, WEINBERGER:
Pay and price increases are
indicated for the rest of the budget.
increases are.
Certainly, pay
As far as the first part of your question —
to whether the budget authority increase for national
defense between'73 and *75 is entirely associated with pay
and price increases —
the increase, I think, is.
The problem that we have is that we do have
prior-year commitments that will require pay-outs in the
42
succeeding years quite a long ways down the road.
That 1975 estimate of authority would include
the out-year effects or the continuing effects of pay and
price increases required by the maintenance of the kind of
program we are talking about in 1971,,
It also necessarily
includes the authority required to pay off the government's
commitments that will be coming due in those years.
But the increase generally is associated .
— -.both
the outlay figure as well as the increase 1—
in the required
figure for those years.
On the next page you will see the outlays
climbing from $76 billion to $81 billion to $35 billion.
That,
of course, includes not only the military activities of the
Department of Defense but the other items associated with that
functional classification.
QUESTION:
If Congress declines to pass any or all
of your special revenue sharing proposals, will you continue
to spend equivalent amounts under the categorical programs
that the special revenue sharing programs will replace?
MR«. WEINBERGER:
The question was if the Congress refuses
to pass the special revenue sharing proposals, will we continue
to fund the programs designed to be replaced.
Where these programs are listed as reductions
and terminations, the intention is to have those be permanently
replaced and not contingent and not temporary.
The continuing
funding level for those programs will be proposed for reduction
or termination, and that proposal would have nothing to do
with whether or not the special revenue sharing were actually
enacted *
We are pushing the special revenue sharing proposals
very hard.
important
We think it1 is a far better way to go.
fact
Also, an
is that the programs that make up
some of those that we are talking about replacing
are programs
that we feel do not have programatic values sufficient to
warrant a continuation.
QUESTION:
I don’t think my question was answered.
Over and above the fiscal '74 yoii have this $17 billion in
savings, but over and above that or beyond that you are
folding in additional funds from these categorical programs
44
into special revenue sharing.
My question is, if those proposals are not passed,
will you continue to fund the categorical programs at the
same level as called for under the revenue sharing?
MR. WEINBERGER:
QUESTION:
I think not.
Mr. Weinberger, how much of the price
increases of the Defense Department are attributable to cost
overruns?
MR. WEINBERGER:
will be.
We are hopeful that none of them
We have new procedures in the Defense Department
that are designed to try to overcome and prevent that.
A
lot of the ones that are appearing In the papers are as a
result of contracts that were let several
yeeirs
ago when
those new procedures were not in effect.
QUESTION:
That is right.
How much would you say of
that is attributable to bad management in the past to the
Defense Department?
MR. WEINBERGER:
We are not prepared to quantify
the management of previous Administrations at this time,
but we hope -QUESTION:
I am not talking about previous
Adminis trations• (Laughter)
MR. WEINBERGER:
We hope that the new procedures,
regardless of the precise time at which they were entered
into, will prevent cost overruns in the future.
45
QUESTION:
Mr. Weinberger, to follow the question
before last, if the Congress does not approve special revenue
sharing, is it the Administration's intention to discontinue
funding of aid to elementary and secondary education, for
\
example?
MR. WEINBERGER:
The proposal of the Administration
is that there should be instituted
a revenue sharing
bill that will enable the states and local governments and
school districts to make their own decisions as to the best
way to handle educational matters, rather than being forced
into decisions required by the Federal Government.
I know of no weakening on the part of the Adminis
tration with respect to its support of that special revenue
sharing proposal.
I would certainly think that it will
be pushed as hard as possible because there is a feeling that
it
is a much better way to get better education in the
difficult and disadvantaged areas.
My feeling is that what we would do would be to push
as hard as we could with that special revenue sharing
proposal, and base it on the assumption that is stated that
it is a substitute for those programs.
I certainly don't have any way of speculating what
the Administration's position will be if the Congress should
not wish to pass it.
46
of no feeling at this time that there is any lack of resolve
to push for that program.
I think there is general
acceptance of the idea that the offering of a comparatively
easy alternative to the passage of a bill is not only no way
to get a bill
massed
but is also an indication of a feeling
that the existing programs can perfectly well continue.
We feel, as we have indicated by the proposal, that
they should be sufcstitucd
for by a special revenue sharing
proposal.
QUESTIONi
Mr. Weinberger, does the Administration
intend to strive for annual reductions in the total civilian
employment in the Executive Branch, and do you have a target
figure for fiscal *78 or '79?
MR. WEINBERGER?
figure in mind.
No, we don*t have any target
I think that the continuation of that effort
would certainly be one that we would want to make if it were
determined that the tasks, the necessary tasks of the Federal
Government could be conducted with fewer people.
So far we have not had too much trouble making that
determination on the basis of the past few fiscal years.
The
reduction has been gradual, but it has been steady as indicated
on the chart we showed a moment ago Chart4Q and I would think that
there would be a continue^desire to try to identify areas where
the necessary tasks could be done with fewer people.
Roy would like to say something about plans for that.
Maybe
48
than doing them with Federal Government employees themselves.
QUESTION:
Secretary Shultz, can we draw any
implications from the absence of any reference to the
President's plan for property tax relief?
SECRETARY SHULTZ:
I don't think you can draw any
implication about the tax program from the absence of a descrip
tion in here.
The President has not made his decisions on that
Until he does, I really do not have an ability to comment,
beyond saying this: We did have an extensive discussion
of the property tax question in the Advisory Committee on
Intergovernmental Relations.
At that meeting, on behalf of
the President, I did put forward the notion of a Federal
circuit breaker having to do with the property taxes of the
elderly.
We also expressed a willingness to support grants
to the States who were developing their own circuit
breaker plan.
It was a startling meeting in many ways in that the
Mayors and Governors who spoke at the meeting and the vote
at the meeting was along the line of the property tax has been
something State and local governments have Worried about
sind thank you very much, we would just as soon leave it
that way.
The President asked the Advisory Committee
for
advice on that among a range of subjects and the advice was
47
HR, ASH:
One of the efforts that, as you can see,
has been given special attention in recent years, is that
of personnel
levels.
levels
and
opportunities to reduce those
One of the efforts that we will continue,and give
even more attention to,is employment requirements throughout
the Federal Government.
Two or three different aspects of
that were, for the first time, discussed to some extent
yesterday.
It is not just the matter of levels, it is what
those people are doing and where they are doing them in the
government.
In addition
to
reducing numbers,
there
is
a
substantial
activity under way to decentralize out of the White House,
the President’s office, the President’s staff, those kinds
of functions, those kinds of jobs that can better be
performed in the agencies.
The purpose, therefore, is not to reduce just
the numbers of people, but at the same time, to make the total
of the government more effective by the placement of those peonl
This would be done, particularly, by the placement of those
people farther and farther away from the central core
of government , first farther out in the operating agencies
of the Federal Government, but, secondly,
through revenue sharing, to place many of the governmental
functions in the hands of the States and the cities rather
QUESTION:
that question and ask:
Mr. Secretary, I would like to follow
In charts 4 and 5 you have the effect
of the restraining of outlays forecast for 1975.
Do you have
any forecasts on what the inflationary levels would be without
this restraint?
SECRETARY SHULTZ:
that.
We do not have a forecast of
We think that those levels are inconceivable and we
must hold the budget at or close to the levels that the
President has put forward.
I must say in all of the discussion yesterday with
the Congressional leadership nobody challenged that, the
desirability of that.
QUESTION:
The proposal is that if the special
revenue sharing is not passed we do not fund the programs.
I wonder if that implies the condition you do not fund the
program even if Congress continues to fund them, and passes
funds to do so,
MR. WEINBERGER:
There are all kinds of problems
involved in the Presidents use of the Presidential prerogative
of withholding expenditures, withholding appropriated funds.
I would assume that he would certainly face those
problems if that unpleasant situation ever arose.
At the
moment we are making a serious proposal based on programmatic
grounds and not only budgetary grounds.
We are staying wit*’* it because it is a solid proposal.
52
There is no suggestion whatever that we would
retreat from it.
Nor is there any suggestion at this point
about what the Congress might do.
There was a lot
of feeling in the Congress against general revenue sharing and
general revenue sharing passed.
There is a lot of feeling in Washington that
categorical programs in which the
federal imperative is
exercised are the best way to go.
The feeling is not shared by a large part of the
country.
I don’t think there is any reason whatever to
predict at this time that the Congress is going to reject out
of hand these special revenue sharing proposals which are
meant as a
substitute for a lot of existing programs.
QUESTION:
On page 13, again relating to revenue
sharing, the President cites 70 outmoded programs to be
replaced.
Is their annual cost roughly in line of that
$6.9 million and the other question I want to get in is why
were the revenue sharing plans for rural development and
transportation dropped?
MR. WEINBERGER:
Well, the first question is:
Is
the $6.9 billion for the special revenue sharing generally
in line with the 70 outmoded programs.
I think the answer is yes.
There is one area
where a program is proposed for dropping and not to be folded
negative.
Now the President has not made any final decision,
but certainly that is an important piece of information.
QUESTION:
If the Congress does not pass special
revenue sharing programs and wants to continue to do some
of these activities by the categorical programs, are you
saying that it is possible that the Administration in that
case simply does not fund those programs?
MR. WEINBEROER:
QUESTION:
That is the proposal, yes.
There would be nothing in those areas?
MR. WEINBEROBR:
That is the proposal.
Yes.
QUESTION: Mr. Secretary, when you were asked
before about the price-inflation assumptions underlying the
budget, you answered by pointing to the President’s goal
for Phase 3 and not really the price assumption under the
budget.
First, could you tell us what the nrice assumption
is and secondly, is there a goal on unemployment as
ambitious as the price goal, as you have described?
SECRETARY SHULTZ:
As I said, the cruestion was about
price and unemployment goals as set forward or assumed
in the budget.
,
The answer is that
we
have a goal of 2.5 percent
or b61ow on inflation by the end of the year.
We recognize
that is ambitious and we recognize we are not there now.
50
P®
£re probably a little above the President's
two or three nercent goalr although by some statistics
you could say we are well within the range,
So, the orice assumntions are that we will average
somewhere in the neighborhood of three percent, perhaps a
little less f and be at a 2—1/2 percent level by the end
of the year, t
On the unemoloyment side, we exnect to see employment
to continue to grow and unemnloyment to continue to decline
and to reach the neighborhood of 4,5 nercent by the
end of the year.
into this.
That is the expectation that ir built
51
QUESTION:
that question and ask:
Mr. Secretary, I would like to follow
In charts 4 and 5 you have the effect
of the restraining of outlays forecast for 1975.
Do you have
any forecasts on what the inflationary levels would be without
this restraint?
SECRETARY SHULTZ:
that.
We do not have a forecast of
We think that those levels are inconceivable and we
must hold the budget at or close to the levels that the
President has put forward.
I must say in all of the discussion yesterday with
the Congressional leadership nobody challenged that, the
desirability of that.
QUESTION:
The proposal is that if the special
revenue sharing is not passed we do not fund the programs.
I wonder if that implies the condition you do not fund the
program even if Congress continues to fund them, and passes
funds to do so,
MR. WEINBERGER:
There are all kinds of problems
involved in the Presidents use of the Presidential prerogative
of withholding expenditures, withholding appropriated funds.
I would assume that he would certainly face those
problems if that unpleasant situation ever arose.
At the
*
moment we are making a serious proposal based on programmatic
grounds and not only budgetary grounds.
We are staying wit*' it because it is a solid proposal.
52
There is no suggestion whatever that we would
retreat from it.
Nor is there any suggestion at this point
about what the Congress might do.
There was a lot
of feeling in the Congress against general revenue sharing and
general revenue sharing passed.
There is a lot of feeling in Washington that
categorical programs in which the
federal imperative is
exercised are the best way to go.
The feeling is not shared by a large part of the
country.
I don’t think there is any reason whatever to
predict at this time that the Congress is going to reject out
of hand these special revenue sharing proposals which are
meant as a
substitute for a lot of existing programs.
QUESTION:
On page 13, again relating to revenue
sharing, the President cites 70 outmoded programs to be
replaced.
Is their annual cost roughly in line of that
$6.9 million and the other question I want to get in is why
were the revenue sharing plans for rural development and
transportation dropped?
MR. WEINBERGER:
Well, the first question is:
Is
the $6.9 billion for the special revenue sharing generally
in line with the 70 outmoded programs.
I think the answer is yes.
There is one area
where a program is proposed for dropping and not to be folded
V
c
into the special revenue sharing.
That is
53
termination of
the
the emergency employment program.
Accordingly, the manpower special revenue sharing»come
out a little less than the total of the existing programs.
I
don’t have any very specific reason as to why the other special
revenue sharing programs that you mentioned were dropped.
I think there is a basic feeling that the proposals
as set forth in the budget are a good way to go now and there
undoubtedly were a number of different factors considered by
the operating agencies in those areas.
These are the current proposals and I think that
the Administration plans to stay with these.
I don’t at this
point have any very specific bases for identifying any of
the reasons for discontinuing those two.
If any of my colleagues do behind me, I would be
delighted to have them mentioned at this point.
MR. MORRELL:
I might add that I think you will
find in the budget a statement that the Rural Development Act,
which was enacted by the Congress last year, will be
implemented in a fashion consistent with special revenue
sharing.
In addition, the transportation matter was debated at
length in the Congress in connection with the highway bill and
the Administration has indicated that it docs exoect
54
to renew its request for legislation that permits flexibility
for urban areas in the choice of the use of funds for the
mode of transportation.
QUESTION:
TO follow this very excellent question,
would you say it is fair to characterize the 70 cuts of those
programs absolutely junked as being a folding of the Great
Society into federal revenue sharing?
MR. WEINBERGER:
No.
I wouldn't.
I would say the
70 programs we feel have been disappointing or achieved less
than anticipated programmatic results.
better
than
to
We feel that it is
have the federal government insist on
the application form and the apparatus necessary to review
the grants
and
force the states frequently—
the myth of free federal money —
because of
to raise matching
funds for projects that may be of lower priority to
them.
With 70 different programs there is not any one
reason that can fit all of them.
In some cases they were demonstration programs.
There is a time occasionally when a demonstration program must
conclude that it has demonstrated one way or the other and
we should stop it.
There is a different rationale for almost all of
these.
We don’t have any such broad generalization as that.
55
QUESTION:
Mr. Weinberger, would vou compare. the
1974 figures with 1973 with respect to the non-eldorly poor.
MR. WEINBERGER:
Yes, I think wo have some data on
that.
OUESTION:
What was the question?
ME. WEINBERGER:
The question was would we compare
the provisions in 1974 for the non-elderly poor with
those in 1973, is that correct?
QUESTION: Yes.
HR. WEINBERGER:
In most situations, there has been
either a level continuation of these programs or an increase.
In actual totals —
and I have a little difficulty sorting
out the elderly and non-elderly because we don’t compute
it that v?ay — Federal outlays to, the noor in
1974 yill exceed $30 billion.
This is
$2
billion
above the 1972 level.
There is an increase or a level funding or
based on increased numbers of participants
in almost every program.
I think that vou would find if
you went through the whole list that there were none
that declined.
Some
increased more spectacularly than
others, but in general, with figures of that kind, you
would have a very substantial continuation.
56
mmm
But we don’t have a precise breakdown between
elderly and non-elderly —
maybe we do.
Sam Cohen calls our attention to page 166 of the special
analysis.
It has figures on benefits to annuitants, other
aged, disabled, mothers and children, temporarily unemployed
and other transitional low-income persons.
OUESTIOW:
I don|t understand how you can see there
has been no decreasing when we see a moratorium on housing.
MR. WEINBERGER: The simnliest thing in the world.
The moratorium on housing will not be reflected in budget outlays|
for 2-1/2 years. The whole problem with some of these Federally
subsidized housing programs is that they do not deliver benefits
to the intended groups. Let me add one personal note, if I
might.
Let me say it this way: The most nauseating cartoon I
saw this year was of some very obvious poor people sitting out
in the snow.
A label under the cartoon indicated that this was
the result of the termination of the Federally subsidized housing
program.
If anyone would take the trouble to look through
the facts of these matters, he would see that one of the
reasons we decided to terminate them temporarily until we can
come up with a new method is that they don't benefit the poor.
They are targeted toward upper and middle income people
and developers, and they have done very we31 in those
categories.
The other tiling is you do not have any outlay
effect in these programs,sadly,for about two, 2-1/2 years,
so we will be spending the same old $3.2 billion for these
programs for about two years.
So there is no downward effect
on the poor, aged or otherwise as a result of that
decision.
QUESTION: Mr Weinberger, given the length of the
pipeline, still on housing, given the length of the
clogged pipeline that you mentioned earlier and given what
you just said that the freeze, the moratorium, will not be
expected for about 2-1/2 years, what will be the income
in 2-1/2 years when current commitments are exhausted?
MR. WEINBERGER:
We don't plan to wait 2-1/2
years to do something about this.
There is a very
*'finite plan to try to develop some tiling far better than
the system which has produced the great yawning, empty
barracks in the great narts of the cities that have
increased the crime rate so substantially and have not
satisfied the basic needs.
Secretary-Designate Lynn in
his confirmation testimony made it clear that
there is
a strong desire to develop a better and more significantly
set of programs,targeted to the neonle who most need
them,than what we have now.
The fact that there is a decision to stop something
p ,0
Jy
we are doing now seems to me to be entirely commendable
because it is not a
program that is working very well.
Where there are results, we have
identified those results, and we hone to include
any portions of the programs that heln to nroduce those results
in future orograms .
The
termination of nrograras that
clearly are not working, for a long enough
to try to develop something that would work better, certainly
should not be considered or interoreted as any loss of
commitment or any lack of commitment to the neonle who are
most in need of good housing.
This again is another 4ilustration of the point
that I made, I am sure, at reneated length to many
you individually.
that
i f
^
There is still this basic assumption
there is anything wrong with the country you
hy more money, and if you propose less money one
year, you demonstrate a callousness.
a Tree with this assumption.
X do not
59
QUESTION:
Did I understand you a moment ago to say
that if special revenue sharing does not pass' that such programs
as Federal aid to education will be terminated?
MR. WEINBERGER:
misunderstood.
try it.
I don't see how you could have
We will try it for the fourth time.
You
(Laughter.)
SECRETARY SHULTZ:
This is the kind of question on
which the Director of the Budget has to weave and boby and we have
obviously done that.
That is all we will do*
(Laughter and
applause.)
MR. WEINBERGER:
are very good programs.
Special revenue sharing programs
We are strongly committed to them.
We have no reason to suppose that Congress will be so unwilling
to recognize the value of thesr progransthat they will not pass
them.
QUESTION:
Is there any limit now in latflin your
Hew,as to the extent to which Congress can impound or not
end?
Suppose the categorical programs are passed by
Congress again over the veto.
Is there still nothing, or
is the anti-deficiency law enough?
MR. WEINBERGER:
Did I understand you correctly
to say is there any limit to which Congress can impound?
,-a JT
QUESTION:
.
_
m
Jjk
,
. ^.*v
.
r.
ggj s 7.
tig v ffe |
?
.
\
,
I am sorry, the Administration.
MR. WEINBERGER:
There are several lawsuits pending
involving this matter, involving Missouri and Hawaii funds
60
that were withheld by the previous President,
I think that
it is always a little difficult, at least the Department of
Justice thinks
various
legal
it
is, for us to comment too blithely on
theories while
litigation
is noncling.
Speaking personally, I take great comfort in the
fact that the Presidency as an institution has exercised
this prerogative for close to 200 years and that it has been
complained about.
There have been grumblings.
There have been
complaints by some of the people who later had to exercise
that power.
I never thought that it was possible for the
Government to operate under the system we have without the
exercise of this kind of authority.
The details of it, how it is done, to what extent
it is done, under what circumstances it is done, are matters
that are under litigation.
Certainly, this President has
not exercised this power in any greater amount or any greater
degree than any of his prececessors.
Frequently, it depends on where you strike
fclijTj b a l a n c e ,
It is
a orocouf? o f
flow
and
it is a matter of £ m d s coming from Congress and not having
recipientsfsometimes for a number of reasons.
The
P r e s id e n t
has been well under the total percentage of withholdings
and
impoundments
that w o u l d be
made in previous times•
required
to b e m a d e
o r h a v e been
THE PRESS:
Thank you.
(Whereupon* at 11:45 a.itiQ? the briefing was
concluded »)
department of th e fR E A S U R Y
NGTON, D C. 20220
T E L E P H O N E W 04-2041
I
for i m m e d i a t e r e l e a s e
January 30, 1973
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 $4,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing
8,
February
1973,
in the amount
of $ 4,201,545,000, as follows:
9 1 -day bills (to maturity date) to be issued February
8,
1973,
in the amount
of $ 2,400,000,000, or thereabouts, representing an additional amount of bills
dated November 9, 1972,
and to mature
May 10, 1973
originally issued in the amount of $1,901,370,000,
(CUSIP No. 912793QT6 )
the additional and original
bills to be freely interchangeable.
182 -day bills, for $ 1,800,000,000, or thereabouts, to be dated February
and to mature August 9, 1973
8,
1973
(CUSIP No. 912793 RP3 ).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern
Standard time, Monday, February 5, 1973.'
Tenders will not be received at the Treasury Department, Washington.
must be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied by Federal,Reserve Banks
or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers
provided the names of the customers are set forth in such tenders.
Others than
banking institutions will not be permitted to submit tenders except for their own
account.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only thosj
submitting competitive 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 any one bidder will be accept
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
February
8, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing
treatment.
February
8,
1973.
Cash and exchange tenders will receive equal
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.
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 considered to accruj
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price pat*
for the 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.
Treasury Department Circular No. 418 (current revision) and this notice,
prescribe the terms of the Treasury bills and govern the conditions of their issuer
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
MGTON, D .C. 20220
FOR I M M E D I A T E
T E L E P H O N E W04-2041
RELEASE
January
30,
TENTATIVE DISCONTINUANCE ON ELECTRONIC CERAMIC
A N D PARTS T H E REOF F R O M J A P A N U N D E R THE
ANTIDUMPING ACT
1973
PACKAGES
T h e T r e a s u r y D e p a r t m e n t a n n o u n c e d t o d a y t h a t it w i l l
publish a n o t i c e a n n o u n c i n g a t e n t a t i v e d i s c o n t i n u a n c e of the
antidumping i n v e s t i g a t i o n w i t h r e s p e c t to e l e c t r o n i c ceramic
packages and pa r t s t h e r e o f from Japan.
These packages provide
a sealed h o u s i n g for
i n t e g r a t e d c i r c u i t c h i p s a n d an e l e c t r i c a l
connection b e t w e e n these chips and the as s o c i a t e d c i r c u i t r y of
various e l e c t r o n i c p r o d u c t s i n c l u d i n g c a l c u l a t o r s and co m p u t e r s .
The n o t i c e w i l l a p p e a r i n t h e F e d e r a l R e g i s t e r o f J a n u a r y 31, 1 9 7 3
The i n v e s t i g a t i o n reve a l e d some instances w h e r e exporter's
sales p r i c e w a s l o w e r t h a n t h e a d j u s t e d h o m e m a r k e t p r i c e o f
such o r s i m i l a r m e r c h a n d i s e .
However, these w e r e dete r m i n e d
to b e m i n i m a l in t e r m s o f t h e v o l u m e o f e x p o r t s a l e s i n v o l v e d .
Formal a s s u r a n c e s w e r e r e c e i v e d f r o m t h e s o l e m a n u f a c t u r e r
investigated t h a t it w o u l d m a k e no f u t u r e sales o f e l e c t r o n i c
c eramic p a c k a g e s a n d p a r t s t h e r e o f f o r e x p o r t a t i o n t o t h e
United Stat e s at less tha n fair value.
The notice of tentative
d i s c o n t i n u a n c e o f t h e i n v e s t i g a t i o n is b a s e d o n t h e s e a s s u r a n c e s
and t h e
facts
just described.
D u r i n g c a l e n d a r y e a r 1972, i m p o r t s o f e l e c t r o n i c c e r a m .c
p a c k a g e s a n d p a r t s t h e r e o f f r o m J a p a n w e r e v a l u e d at a p p r o x i m a t e l y
$4 m i l l i o n .
FOR
IMMEDIATE
RELEASE
January
31,
1973
TENTATIVE NEGATIVE DECISION ON
SLIDE FASTENERS A ND PARTS THEREOF
_______________ F R O M J A P A N
The Treasury Department announced today the issuance
of a t e n t a t i v e d e t e r m i n a t i o n o f no sales at less than fair
v a l u e i n c o n n e c t i o n w i t h its a n t i d u m p i n g i n v e s t i g a t i o n o f
slide fasteners and parts thereof from Japan.
Slide fasteners
a n d p a r t s t h e r e o f a r e c o m m o n l y k n o w n as z i p p e r s a n d a r e
p r i m a r i l y u s e d in w e a r i n g apparel.
The notice will b e published
o f F e b r u a r y 1, 1 9 7 3 .
in the F e d e r a l
Register
I n f o r m a t i o n g a t h e r e d in t h i s i n v e s t i g a t i o n s h o w e d t h a t
the p r i c e to b u y e r s in the h o m e m a r k e t w a s l o w e r t h a n the
p r i c e t o b u y e r s in t h e U n i t e d S t a t e s .
Appraisement of
this m e r c h a n d i s e ha s
not been withheld.
D u r i n g t h e p e r i o d o f J a n u a r y t h r o u g h J u n e 1972, i m p o r t s
of slide fasteners and parts thereof from Japan w e r e v a lued
at a p p r o x i m a t e l y $10 m i l l i o n .
# # #
January 31, 1973
MEMORANDUM FOR CORRESPONDENTS :
T h e a t t a c h e d n o t i c e , t o b e p u b l i s h e d in t h e F e d e r a l
Register, d e s c r i b e s the p r o p e r
p r o c edures for financial
i n s t i t u t i o n s to f o l l o w in o b t a i n i n g t a x p a y e r i d e n t i f i c a t i o n
n u m b e r s in a c c o r d a n c e w i t h t h e r e g u l a t i o n s i m p l e m e n t i n g
P u b l i c L a w 91-508, t h e F i n a n c i a l R e c o r d k e e p i n g a n d C u r r e n c y
a n d F o r e i g n T r a n s a c t i o n s R e p o r t i n g A c t o f 1970.
S-105
NOTICE
DEPARTMENT OF THE TREASURY
MONETARY OFFICES
FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY
AND FOREIGN TRANSACTIONS
INSTRUCTIONS RELATING TO TAXPAYER IDENTIFICATION
NUMBERS UNDER 31 CFR, PART 103
On June 30, 1972, instructions were issued on this subject
published in the Federal Register (37 F.R. 13279 (1972)).
and
procedures have been revised in accordance with
These
amendments
to the regulations issued on December 8, 1972,
published in the Federal Register (37 F.R. 26517 (1972)).
and
With respect to each deposit or share account opened after
June
30, 1972, by a person residing or doing business in the
United
savings
credit
States or a çitizen of the United States, each bank,
and loan association, building and loan association,
union, or broker or dealer in securities must, within
forty-five
days from the date the account is opened, secure
and
maintain a record of the taxpayer identification number of
the
person maintaining the account.
For individuals, the taxpayer identification number is his
social security number.
For corporations, partnerships, and
other entities it is the 1RS employer identification number.
an account is opened in more than one individual's name,
the financial institution is required to secure and maintain
2
the social
a
security
financial
In
interest in that
determining
obtained
institution
rulings
issued by
6109
the
of
have been
F O R THIS
the
Internal
issued by
TYPE
An
individual's
2.
Husband and Wife
account)
and minor
account)
or more
(joint
least
follow
Internal
Revenue
IRS
7.
than
the
one name,
the
regulations
and
Revenue Service
Code.
under that
account
(joint
(joint
individuals
account)
5. A c c o u n t ’i n t h e n a m e o f
guar d i a n or committee
fcr a d e s i gnated ward,
minor, o r i n c o m p e t e n t
person
6.
individual having
i d e n tification number to be
opened in more
should
one
account.
OF ACCOUNT:
1.
3. A d u l t
at
the p r o p e r
for accounts
financial
4. T w o
number of
The
under Section
following
guidelines
section:
OBTAIN SOCIAL SECURITY
N U M B E R OF:
The
individual
The husband
The
adult
Any
one
of the
The ward,
competent
C u stodian account of a m i n o r
(Uniform Gifts to
M i n o r Acts)
The minor
S o - c a l l e d t r u s t a c c o u n t t h a t is
not a legal or valid trust under
S t a t e law
The
real
individuals
m i n o r or in
person
owner
3
FOR THIS TYPE OF ACCOUNT
OBTAIN EMPLOYERS IDENTIFICATION
NUMBER OF:
8. A valid trust, estate, or
pension trust
Legal entity. Do not furnish
the identifying number of
the administrator, executor,
or trustee unless the legal
entity itself is not desig
nated in the account title.
9. Corporate account
The corporation
10. Religious, charitable, or
educational organizational
account
The organization
11. Proprietorship account held
in the trade name of the
business
The proprietorship
12. Partnership account held
in the name of the business
The partnership
13. Association, club, or other
tax-exempt organization
14. A broker or registered
nominee
*
The organization
The broker or nominee
With respect to accounts opened for trusts, charitable
organizations, clubs and similar entities the financial
institution should secure the employer identification number
of the entity.
An employer identification number should be
obtained for this purpose even though an organization might
not otherwise require one.
A taxpayer identification number need not be secured in
the following instances:
(i) accounts for public funds
o p e n e d by
local
(a)
or
agencies
foreign governments,
ambassadors,
officers,
foreign
their
or
(b)
immediate
entitled
to
exceed
business
which
opened
the
Club,
any
(v)
of
any
of the
units
of
a group
a school
club
does
a tax
exemption
and similar
(iv)
aliens
a trade
not
or
a recognized
program supervised
Government,
exempt
central
letter,
a person
under
savings
exceed
o f such
(formerly
a period
in
$10,
(vi)
(vii)
18
installment
or
unincor
organization
interest
years
program,
and
an
288),
Sec.
[a l i s t
attending
Federal
thrift
not
are
training
m a intained by
interest
vacation
or
for
as
Organiza
U.S.C.
148.87
engaged
are
immunities
families
United States
of
organizations
Regulations],
not
of
aliens w h o
and
Section
are
consular
International
immediate
aliens
or
29, 1945 (22
of F e d e r a l
agency
covered by
accounts
annual
the
19,
aliens w h o
attaches
for
exemptions
in Title
State,
for the members
accounts
December
in the
university
as p a r t
and
United States w h o
subordinate
are
bearing
days,
in t h e
c o n d u c t e d by
porated
Code
diplomatic
or other
under
of t h e i r
residing
180
or
of
appears
10.30a),
temporarily
college
Act
for
to international
privileges,
the members
Section
(iii)
of Federal,
accounts
career
legations,
organization
Immunities
for
and
(ii)
military
families,
enjoy
organizations
to
naval,
representatives
international
and
ministers,
embassies
accredited
tions
and i n s t r umentalities
(viii)
savings
of
age
provided
Christmas
programs
5
provided the annual interest does not exceed $10.
In instances
(vii) and (viii) , the bank shall, within fifteen days following
the end of any calendar year in which the interest accrued in
that year exceeds $10, use its best efforts to secure and
maintain the appropriate taxpayer identification number or
application form therefor.
If the customer does not have a social security number
or is unaware of his number, he can authorize the Social
Security Administration to furnish his identification number ,
to the financial institution.
This authorization may be
printed or stamped on the back of Form SS-5 (Application,
for Social Security Number), in the space immediately above
imoU lo
J ojagias «JfccttJNiD < H
the legend, "For Bureau of Data Processing and Accounts Use".
The authorization must contain the following language:
Please furnish my SSN to:
NAME____________________________
ADDRESS
,
__________
' ;
_____________________________________________________
SIGNATURE
The customer should complete Form SS-5 and sign the
statement on the back of the form.
The financial institution
should mail the completed form to the Social Security
Administration in the pre-addressed envelope provided and
retain a copy (duplicate or photocopy) of the application
until the number is received.
6
The Social Security Administration does not require the
Form SS-5 or the authorization statement to be signed by a
parent or guardian even though the customer is under eighteen
years of age.
A similar procedure may be used to obtain employer
identification numbers.
Upon proper authorization by the
applicant on the back of Part 2 on the first page of Form SS-4
(Application for Employer Identification Number) , the IRS will
furnish the employer identification number to both the applicant!
and the financial institution.
Financial institutions may obtain supplies of Form SS-5
and pre-addressed envelopes
from their nearest
S o c i a l Security
<
Office, and supplies of Form SS-4 and pre-addressed envelopes
from any Internal Revenue Service Center or District Office.
In the event that a financial institution has been unable
to secure the identification required herein with respect to
an account within the forty-five day period specified, it
shall nevertheless not be deemed to be in violation of this
requirement if (i) it has made a reasonable effort to secure
such identification, and (ii) it maintains a list containing
the names, addresses, and account numbers of those persons
from whom it has been unable to secure such identification,
and makes the names, addresses, and account numbers of those
persons available to the Secretary as directed by him.
7
A reasonable effort to obtain a taxpayer identification
number should include the mailing of a written request.
The
request should inform the customer that the bank is required
to maintain, for the use of the Department of the Treasury,
a list of customers who have failed to supply the bank with
a TIN within the forty-five day period.
The forty-five day period provided for shall be extended
where the customer has applied for an employer identification
number or social security number on Form SS-4 or SS-5 until
such time as the customer has had a reasonable opportunity
to secure the number and furnish it to the institution.
Operations
Department of Ih e fR E A S lIR Y
ASHINGTON. D .C : 20220
TELEPHONE W 0 4 2041
<f
January 31, 1973
FOR IMMEDIATE RELEASE
JOHN C. RICHARDSON RESIGNS AS
TAX LEGISLATIVE COUNSEL
Treasury Secretary George P. Shultz has accepted, "with
deepest regret," the resignation of John C. Richardson, Tax
Legislative Counsel. Mr. Richardson will join the New York
law firm of Brown, Wood, Fuller, Caldwell & Ivey, effective
in February, 1973.
Mr. Richardson has been with the Treasury Department
since December, 1970, when he accepted appointment as Deputy
Tax Legislative Counsel, and succeeded John E. Chapoton as
Tax Legislative Counsel in August, 1972. Mr. Richardson has
been responsible for the development of many of the regulations
under the Tax Reform Act of 1969, and played an important role
in shaping the Revenue Act of 1971.
A native of New Orleans, Louisiana, and a graduate of
Tulane University in 1954, Mr. Richardson also graduated
cum laude from Harvard Law School in 1960. Before coming
to Treasury, he was tax counsel for AVCO Corporation of
Greenwich, Connecticut. 1-Ie previously was General Counsel
of Continental Investment Corporation, Boston, Massachusetts;
Vice President (Legal) of Hoover Worldwide Corporation, New
York, New York; and with Holland & Hart, attorneys, Denver
Colorado.
S-106
oOo
Removal Notice
The item identified below has been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Transcript
Number of Pages Removed: 5
Author(s):
Title:
"The Today Show" Interview with Treasury Secretary Shultz
Date:
1973-01-30
Journal:
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Department of t h e T R E A S f f l f Y
ASHINGTON, D C120220
I’OR
T f L E P H O N E W04-2041
January 31, 1973
immediate r e l e a s e
TREASURY ANNOUNCES FEBRUARY FINANCING PLANS
The Treasury is offering holders of the $ 6.8 billion of Treasury notes maturing
February 15, 1973, the right to exchange their holdings for 3-l/2-year 6-1/2$ Treasury
notes. The public holds about $4.8 billion and Government accounts and Federal Reserve
Banks hold about $2.0 billion of the notes eligible for exchange.
The Treasury also announced that it will auction $1.0 billion, or thereabouts, of
6-3/4-year:6-5/8$ Treasury notes. An additional amount of these notes may be allotted
to Government accounts and Federal Reserve Banks in exchange for maturing notes held
by them. .
A
EXCHANGE OFFERING
The notes being offered in exchange are 6-l/2$ Treasury Notes of Series G-1976,
dated February 15, 1973, due August 15, 1976 (CUSIP NO, 912827 CWO), at a price of
99.70 (to yield about 6.60$).
Interest will be payable on August 15, 1973, and there
after on February 15 and August 15.
Subscribers will receive a cash payment for the difference between the par value
of the maturing notes and the offering price of the new notes.
Subscription books will be open until 5:00 p.m., local time, Wednesday, February 7, j|
1973. To be timely subscriptions MUST BE RECEIVED by a Federal Reserve Bank or Branch
or by the Office of the Treasurer of the United States, Securities Division, by such
time, except that subscriptions addressed to a Federal Reserve Bank or Branch or to the
Office of the Treasurer of the United States postmarked before midnight, Tuesday,
February 6, 1973, will be deemed to be timely.
Cash subscriptions will not be accepted.
Ihe payment and delivery date for the notes will be February 15.
AUCTION1
:| f1|% I
1
-t
M
Hitv
;lu 'lrrl
m .t'*0t1ftj
The notes to be auctioned will be 6-5/8$ Treasury Notes of Series B-1979, dated
February 15j 1973, due November 15, 1979 (CUSIP NO. 912827 CX 8), with interest payable
on May 15 and November 15, 1973, and thereafter on May 15 and November 15.
Tenders will be received up to 1:30 p.m.. Eastern Standard time, Wednesday,
February 7, 1973.
Tenders will be received at any Federal Reserve Bank or Branch and
at the Office of the Treasurer of the United States, Securities Division, Washington,
C. 20220. Noncompetitive tenders will be considered timely received if they are
mailed to any such agency under a postmark no later than February 6.
Each tender must be in the amount of $ 1,000 or a multiple thereof, and must state
the price offered, if it is a competitive tender, or the term "noncompetitive", if it
is a noncompetitive tender.
The price on competitive tenders must be expressed on the
basis of 100, with two decimals, e.g., 100.00.
Tenders at a price less than 98.51 will
flot be accepted. Fractions may not be used.
The notation "TENDER FOR TREASURY NOTES"
should be printed at the bottom of envelopes in which tenders are submitted.
Public announcement will be made of the amount and price range of accepted tenders. |
ihose 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.
Sub
ject to these reservations noncompetitive tenders for $400,000 or less will be accepted
111 full at the average price (in two decimals) of accepted competitive tenders. The
price may be 100.00, or more or less than 100.00.
(OVER)
-
2-
Commercial banks, which for this purpose are defined as banks accepting demand j Limpt
deposits, may submit tenders for account of customers provided the names of the custom f
are set forth in such tenders.
Others than commercial banks will not be permitted to]
submit tenders except for their own account.
Tenders will be received without deposit from commercial and other banks for thei
own account, Federally-insured savings and loan associations, States, political sub
divisions or instrumentalities thereof, public pension and retirement and other public
funds, international organizations in which the United States holds membership, foreig
central banks and foreign States, dealers who make primary markets in Government secur
ties and report daily to the Federal Reserve Bank of New York their positions with
respect to Government securities and borrowings thereon, Federal Reserve Banks, and
Government accounts.
Tenders from others must be accompanied by payment of 5 percents
the face amount of securities applied for.
j
Payment for accepted tenders must be completed on or before Thursday, February 15
1973, at the Federal Reserve Bank or Branch or at the Office of the Treasurer of the
United States in cash, 6-l/2$ Treasury Notes of Series C-1973 or 4-7/8$ Treasury Rotes
Series D-1973, which will be accepted at par, or other funds immediately available toi
Treasury by that date. Where full payment is not completed in funds available by the j
ment date, the allotment will be canceled and the deposit with the tender up to 5 perc
of the amount of notes allotted will be subject to forfeiture to the United States.
The Treasury will construe as timely payment any check drawn to the order of the
Federal Reserve Bank or the Treasurer of the United States that is received at such bd
or office by Tuesday, February 13, 1973, provided the check is drawn on a bank in the
Federal Reserve District of the bank or office to which the tender is submitted. Othej
checks will constitute payment only if they are fully and finally collected by th e pay
ment date Thursday, February 15, 1973.
Checks not so collected will subject the inves
tor's deposit to forfeiture as set forth in the preceding paragraph. A check payable
other than at a Federal Reserve Bank received on the payment date will not c o n s titu te
immediately available funds on that date.
_
I
I
I
I
I
I
I
I
I
Commercial banks are prohibited from making unsecured loans, or loans collateral]. I
in whole or in part by the notes bid for, to cover the deposits required to be paid m I
tenders are entered, and they will be required to make the usual certification to that
effect.
Other lenders are requested to refrain from making such loans.
All bidders are required to agree not to purchase or to sell, or to make any agre I
ments with respect to the purchase or sale or other disposition of the notes bid for I
under this offering at a specific rate or price, until after 1:30 p.m., Eastern
Standard time, Wednesday, February 7, 1973.
EXCHANGE AND AUCTION
The notes will be made available in registered as well as bearer form in denomi-l I
nations of $1,000, $5,000, $10,000, $100,000 and $1,000,000. All subscribers request! I
registered notes will be required to furnish appropriate identifying numbers as requir I
on tax returns and other documents submitted to the Internal Revenue Service.
Coupons dated February 15, 1973, on notes tendered in exchange or payment should I
detached and cashed when due.
The February 15, 1973, interest due on registered notes
will be paid by issue of interest checks in regular course to holders of record on
January 15, 1973, the date the transfer books closed.
Department ofthe TREASURY
¡HINGTQN. D.C. 20220
I
' ‘
TELEPHONE W 0 4 -2 0 4 fJ
...
FOR IMMEDIATE RELEASE
FEBRUARY 1, 1973
TREASURY ANNOUNCES SIMULTANEOUS
WITHHOLDING OF APPRAISEMENT AND SALES AT LESS THAN FAIR VALUE
ON STAINLESS STEEL PLATE FROM SWEDEN
__________________ UNDER THE ANTIDUMPING ACT
Assistant Secretary of the Treasury Edward L. Morgan
announced today Treasury's actions with respect to stain
less steel plate from Sweden under the Antidumping Act of
1921, as amended. This plate is used in the manufacture
of a variety of scientific and industrial equipment.
These decisions will be published in the Federal Register
of February 2, 1973.
Assistant Secretary Morgan announced that stainless
steel plate from Sweden is being, or is likely to be, sold
at less than fair value. The case will now be referred to
the Tariff Commission for a determination as to whether an
American industry is being, or is likely to be, injured.
Simultaneously with the determination of sales at less
than fair value, the Treasury Department issued a three-month
withholding of appraisement order covering imports of this
merchandise from Sweden. The significance of the three—month
withholding of appraisement is that imports of the merchandise
will not be appraised for the three months pending the
Tariff Commission's determination. If the Tariff Commission
issues an affirmative injury determination, dumping duties
will be assessable effective as of the date of the withholding
action. If the Tariff Commission issues a negative injury
determination, the case will be closed, and no dumping duties
will be assessed.
During the period of January through June 1972, imports
of stainless steel plate from Sweden were valued at approxi
mately $3.6 million.
# # #
DipartmentofthefREASURY
IINGTON, D C. 20220
3
T ELEP H O N E W04-2041
FOR IMMEDIATE RELEASE
2,
February
1973
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 $4,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing February 15, 1973, in the amount
of $4,202,575,000
as follows:
91 -day bills (to maturity date) to be issued February 15, 1973, in the amount
of $2,400,000,000, or thereabouts, representing an additional amount of bills
dated November 16, 1972, and to mature
May 17, 1973
originally issued in the amount of $1,901,200,000,
(CUSIP No. 912793 QU3)
the additional and original
bills to be freely interchangeable.
182-day bills, for $1,800,000,000, or thereabouts, to be dated February 15, 1973
and to mature
August 16, 1973
(CUSIP No. 912793
RQ1).
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 $10 ,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern Standard time, Friday, February
9,
Tenders will not be received at the Treasury Department, Washington.
rcust be for a minimum of $ 10 ,000.
$5,000.
1973.
Each tender
Tenders over $10,000 must be in multiples of
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.
maY not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied by Federal Reserve Banks
on Branches on application therefor.
/..
^
Banking institutions generally may submit tenders for account of customers
Provided the names of the customers are set forth in such tenders.
Others than
banking institutions will not be permitted to submit tenders except for their own
account.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only those
submitting competitive 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 any one 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 February 15, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing February 15, 1973.
treatment.
Cash and exchange tenders will receive equal
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.
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 considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
for the 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.
Treasury Department Circular Wo. 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.
Department of th e fR E A S U R Y
kSHINGTON, D.C. 20220
FOR
T ELEP H O N E W04-2041
IMMEDIATE
February
RELEASE
SIDNEY
S.
SOKOL RETIRES
2, 1973
FROM TREASURY
Sidney S. Sokol, Deputy Fiscal Assistant Secretary of
the Treasury, is retiring on February 3, 1973, after more
than thirty-seven years of public service.
In a Special Citation formally recognizing Mr. Sokol's
"extraordinary performance as a practitioner of the art of
good government," Secretary of the Treasury George P. Shultz
described him as an "administrator par excellence, gifted
technician, inspiration to his associates, pragmatic activist,
and dedicated idealist" who "has devoted his great energies
and his superior abilities for more than thirty-seven years
to the achievement of a single goal - the highest quality ^
service to the public at the lowest cost to the taxpayers."
Mr. Sokol began his distinguished career at a Treasury
accounting office in New York City in 1935. With the excep
tion of four years with the War Department, he continued in
Treasury's Fiscal Service, ultimately being appointed Deputy
in 1971. He was Commissioner of the Bureau of Accounts from
1965 to 1971, Deputy Commissioner from 1961 to 1965, and
served in numerous management roles during the preceding
years. He is the recipient of the Department of the Army's
Meritorious Civilian Service Award and Treasury's Meritorious
Service and Exceptional Service Awards.
Born in New York City, Mr. Sokol received his BS and
MBA degrees from the College of the City of New York and did
graduate work at Columbia University. He is a Certified
Public Accountant in New York State. Mr. Sokol is married
to the former Evelyn Gold, also a native of New York City.
The Sokols reside at 623 Warfield Drive, Rockville, Maryland.
###
S-108
SECRETARY GEORGE P. SHULTZ
SAVINGS BONDS COMITTEE ANNUAL MEETING
U . S . TREASURY DEPARTMENT
HAN:
»officer Louis Helles.
Thank you very much.
As you can well Imagine, Secretary Shultza$ schedule
1s perhaps one of the busiest 1n the United States. About an
hour or so ago, he was In Washington attending some very Importa
meetings. And those meetings are scheduled to restsme promptly
on his return. However* because of his great Interest 1n the
Savings Bond program* he flew here by special plane to be with
us today. Therefore we are going to revise our agenda so that
the Secretary can speak to u$ before lunch, In order to -- for
him to get back to Washington for his very Important meetings.
Secretary Shultz 1s a man who the New York Times recsn
described as “
commander of fiscal policy.*3 As assistant to
the President and chief economic spokesman he has been asked
to wear many hats, and i t Is clear to all that he wears all
of these hats with distinction.
Ladles and gentlemen, It 1s my great privilege and
mnor to present the Secretary of the Treasury, the Honorable
«sorge P. Shultz.
[Applause
SECRETARY GEORGE P. SHULTZ:
Secretary Fowler, Secretary Anderson.
Thank you, Hr. Chairman,
First let me reassure you there 1s going to be an
* However, i t will come just before you eat, and
to listen t® me. Now, I Questioned the chairman
an s a i d s the b a sic reason f o r coming
t a l k with jo y about the importance
and t© express my ap preciation on
the Treasury Department fo r the
th a t I know you w i l l do. This program
to the
»
%
in the Cabinet Room the f i r s t Cabinet meeting th a t the President
held follow in g his Inauguration, And we found at our places
around the Cabinet ta b le t h i s handsomely bound le a t h e r b o o k le t.
And I thought» “ $y gosh» what a strong agenda we have today.
It looks p re tty t h i c k . We're going to be here a l l day." But
on opening 1t up I found 1t was a very In t e r e s t i n g document.
I t ' s a four-ye a r calendar» and a rather unusual document. And
you s t a r t 1n 1973 on January 20» 1973» and what 1t says on the
calendar i s , "There are 1 »461 days remaining in the second term
of the Mixon a d m i n i s t r a t i o n . “ And you come to the l a s t page»
of course» and he re 's January 20» 1977 — "No days remaining."
v And the President had a message f o r us which I think
Is appropriate f o r t h i s to p ic and appropriate f o r many t o p i c s .
And the message was r e a l l y two-fold and i t w i l l form sort o f
the theme of what I want to say to you on Phase I I I . The f i r s t
part of the message was» " N e l l , there r e a l l y a r e n ' t so many
days. And we need to make each day count and use t h i s calendar
and see i f you c a n ' t write down In each one o f those spaces
something worthwhile th a t you did on each one o f those days.
So make each day count. Do something worthwhile for your government
1n the span o f time t h a t ' s been given to us to work fo r the
national I n t e r e s t . "
And the second message that he had» a very Nixonescfue
message» as I have worked with the President» was» "Well» i t
1s a lim ite d span of time a l l r ig h t» but w@ a l l know that you
have to in ve st something today in order to get something, tomorrow.
So l e t us have a sense o f s t r a t e g y about what we do. l e t us
try to have the s i t u a t i o n unfold so th a t I t may be we w i l l have
to do some tough things today In order to get a pay-out a year
from now or two years from now." T h a t's a f a m i l i a r concept
to those o f you In the world o f Investment. And 1t 1s a concept
that the President has put before us — to work» o f course»
to do everything you can today» but a lso to have an eye to the
future» to the two-year span» to the four-year span» to see
1f we c a n 't put some things in place th a t w i l l r e a l l y work fo r
us in the long run.
what have
t h a t and askln
n 1973 and in
9
r
tour years and in 1972 that bears on the outlook fo r Phase I I I
In i t s broadest sense? — well» I think» f i r s t o f a l l » and most
Importantly» w@ have peace. I t 1s so f r u s t r a t i n g to bring t h i s
ft@g©t1&ti©n to an end» 1t 1s so f r u s t r a t i n g » I know» for y§
to see how d i f f i c u l t 1t 1s f o r t h i s truce to s e t t l e down; n e v e r t h e l e
we have peace. And that Is going to sink In and 1 t ' s going
to make a tremendous d i f f e r e n c e , I know people have a hard
time b e lie v in g 1t . And probably people won't r e a l l y b e lie v e
H until they see the f i r s t POMs come home. And maybe they
won't r e a l l y b e lie v e I t u n t il they see the l a s t POUs come home.
But we have peace. And gradually that f a c t Is going to sink
1n and 118s going to make a tremendous amount o f d i f f e r e n c e
to a l l of us.
Second# we do have an economy th a t 1s r i s i n g , with
all of the im p lic a tio n s o f a r i s i n g economy# the p r o d u c t iv it y
gains generated by that th a t are so important 1n de a lin g with
our long-run competitive s i t u a t i o n as well as our Immediate
In fla tio n a ry problem. And we have a s i t u a t i o n 1n which the
rate of i n f l a t i o n has been reduced# whereas four years ago the
rate o f i n f l a t i o n was on the r i s e . So our environment 1s d i f f e r e n t
and that 1s something very Important going f o r u s . Änd I think
kind o f 1n l i n e with that we have l e s s o f a f e e l i n g 1n the country
todayB and j u s t i f i a b l y s o , t h a t somehow or other everything
1s out of c o n t r o l . We don't have the r i o t s 1n the c i t i e s ; we
don*t have the turbulence on the campus th a t we d id . There
seems to be a H t t l e b i t more o f a s i t u a t i o n where s o c i e t y 1s
at l e a s t moderately under c o n t r o l . And that 1s e x h ib ite d In
the economic scene, and 1t has i t s Impact on the economic scene.
So a g a in st that general background, the n, l e t ‘ s look
at some o f the more p a r t i c u l a r In gredients o f Phase I I I . flow,
let me c a l l to your mind, f i r s t of a l l , th a t 1n the h is t o r y
of e f f o r t s 1n the fre e world to use s o - c a l l e d “ incomes p o l i c i e s “
or wag@/pr1ce p o l i c i e s o f one kind or another we see a d e f i n i t e
correlation between the extent to which countries have used
these p o l i c i e s and t h e i r experience with I n f l a t i o n . And I n t e r e s t
ingly enough, the more they have used these p o l i c i e s the l e s s
successful they have been 1n c o n t r o l l i n g I n f l a t i o n , flow, t h e r e 9$
a very simple reason fo r t h a t , I b e l i e v e ; and that Is that the
existence of a wage/pr1ce control scheme ©f some kind allows
people to say to themselves; “ I don8t have to worry so much
about the fundamentals. I don't have to worry so much about
the budget p o l i c y and the monetary p o l i c y , because t h i s wage/pr1e@
system Is somehow going to take care o f the problem." And o f
course 1s the fundamentals are not under c o n t r o l , the wage/price
system c a n 't do I t s j o b , c a n ' t c on trib u te what I t can c o n t r ib u t e .
flow, the President has not f a l l e n f o r t h a t . He has
maintained a l l the way through Phase I , Phase I I , Phase I I !
h1s sense of the fundamental Importance of the fundamentals.
And so I think the most Important part o f Phase I I I 1s the budget
picture. And I might j u s t r e c a l l something th a t happened to
*ne on the day that Phase I I I was announced.
I had met with
the President fo r many times on 1 t , and a t the l a s t meeting
had on 1t he s a i d , “H e l l , now, when you go and announce t h i s ,
Seorge9 be sure that you emphasize the Importance of the fundamen
tals. "
f
So, p a r t i c u l a r l y sin ce I 8® agreed, I s a i d , “ Yes, s i r - be glad t o . " And then as I was waiting around to - - to conduct
the b r ie f in g I got a message via Ron Z i e g l e r ; “The President
5
wants to be sure you remember - - emphasize the fundam entals."
And about 15 minutes before I was supposed to b r ie f » I got asked
to come Into the Oval O f f i c e and the President said» "flow» George»
remember: the fundamentals are very Important, and you la y that
right out on the l i n e . "
So I went out and I d id . And 1 r e a l l y f e l t t h a t I
hit 1t very s tro n g ly with the p re s s. And o f course there wasn’ t
a word In the papers about 1t * not one s i n g l e word. But that
doesn’ t mean the fundamentals a r e n ' t Important. The press missed
the p oin t. And they a r e . And the budget that the President
has l a id down 1s o f tremendous s i g n i f i c a n c e 1n t h i s sense.
You remember s i x or e ig h t months ago the President
called f o r a c e l l i n g on spending and we sta rte d t a l k i n g about
we c a n 't spend more than $250 b i l l i o n . And a l l o f the people
who know everything r e g is t e r e d t h e i r view» from the research
In s titu tio n s on both the L e f t and the Right and the Center and
the business economists and the academic economists. And everybody
said» "Look, the budget's out o f c o n t r o l .
I t ' s Impossible to
bring 1t down to $250 b i l l i o n . " And when the President said
he wasn't going to be f o r a tax Increase» they a l l said» "0hB
you're l y i n g . I t ' s j u s t an e l e c t i o n statement. And I t - - 1t
can't be done."
That was the atmosphere. You a l l remember t h a t .
Probably you a l l thought that y o u r s e lv e s . But here we are»
and In f i s c a l *73 the President 1s going to d e l i v e r a - - has
delivered a $250 b i l l i o n ou tlay budget; and I t 1s do-able and
1t 1s going to be done. And we have a f i s c a l '74 budget t h a t
maintains the ou tlay le v e l within the revenues th a t w i l l be
generated as we approach f u l l employment. And furthermore»
1n an unprecedented move, the President has projected 1n d e t a i l
a f i s c a l '75 plan on outlays p rim a rily In order to demonstrate
that th is p ictu r e i s not out o f control and I f we can e x e r c is e
d is c ip lin e we can have r i s i n g p ro sp e rity with reasonably s t a b le
prices based on a responsible budget and without a tax In c r e a s e .
It can be done. And the whole p ro je c tio n 1s by way o f supporting
p oint. Änd I observe by t h i s time people have g e n e r a lly
come around to the P r e s id e n t 's point o f view and they now be lie v e
i t , because he has put the f a c t s 1n p la c e .
donf t lay th a t prospective spending 1n fo r *74 or *75. And
it comes to $19 b i l l i o n 1n f i s c a l *74 and $24 b i l l i o n in f i s c a l
*75# And t h a t Is the d i f f e r e n c e between what everybody thought
was the case and what the President has brought Into place by
the strong a ction s t h a t he has taken.
So we have a big turnaround there and a determination
to pursue the fundamentals» to use wage and p rice c o n tro ls and
Incomes p o l i c i e s 1n the most e f f e c t i v e way we can f o r *73 - but based on adherence to the fundamentals 1n terms o f budget
policy» so th a t we can r e a l l y get some mileage out of Phase
III.
Having said that» now l e t me turn to Phase I I I and
suggest to you the p r in c ip a l d i f f e r e n c e s 9 as I see i t » between
what we had l a s t year and what we are looking forward to t h i s
year and why i t i s th a t the President f e l t * and we a l l f e l t »
1n designing Phase I I I th a t i t was the most e f f e c t i v e use o f
the incomes p o lic y t o o l s th a t we have 1r* our hands t h a t we could
devise» more e f f e c t i v e than a return to Phase I or a c o n tln u a tio
of Phase II#
F i r s t o f a l l » I b e lie v e i f you look at the s t a t i s t i c s
1t 1s c l e a r th a t the b ig g e s t problem th a t we have had In 1972
has been with food p r i c e s . Me have had a skyrocketing p ic t u r e
there at the raw a g r i c u l t u r a l price l e v e l * and f o r the housewife
she 1s a l l too f a m i l i a r with what has happened on th a t s core .
I f you took the food p r ic e p ictu r e away* the o v e ra ll performance
has been quite good. But the food p rice p ictu re has brought
the average up and in i t s e l f 1s a tremendous problem f o r u s.
How* what happened 1n *72f Mall* what h a pp e n e d is
that the supply o f a g r i c u l t u r a l produce rose a l l r igh t» but
we had a tremendous increase 1n demand th a t was the consequence
of world-wide conditions as well as the prosperity in the United
States. So the demand increased a l o t f a s t e r than the supply
did* and we had r i s i n g p r i c e s .
How* what have we done about th a t In Phase I I I ? Me
have taken some very strong action» some o f which» in the s p i r i t
of the President®^ calendar» w i l l be paying o f f f a i r l y c lo s e
«it hand* many o f which» however» are Investments 1n what w i ll
be happening to p r ic e s s i x months from now, e ig h t months from
now* 12 months from now. Me have released from the set«as1de
very s u b sta n tia l amounts o f acreage» on the order o f 45 m i ll io n
&cre$ as compared with l a s t y e a r . T h at8s a tremendous boost
to supply Inherent In t h a t . Me are s e l l i n g the stocks that
have on hand and emptying the bins» not only the major bins
that are commercially and governmentally c o n t r o lle d but storage
on the farm which government loans support.
That loan program
will be ended on May 31st. So th a t the storage 1s what Is on
7
hand 1s being loosened up and th a t material w i l l flow to the
market. We have opened up on meat our borders to Imports.
There are no q u a n t i t a t i v e r e s t r i c t i o n s l e f t . The President
did that In the middle o f l a s t y e a r . I t did bring about a r e s u lt *
not a huge r e s u l t but a meaningful and s i g n i f i c a n t one; and
that 1s being c a rrie d forward t h i s y e a r . We have changed, the
regulations so th a t set-a$1de acres th a t are l e f t can be grazed
upon; and that a lso 1s an Important move th a t w i l l stim u late
supply. Then we have provided a d m in is t r a t iv e l y so th a t a l l
of the marketing orders and things of th a t kind th a t flow out
of the department w i l l pass through the procedures of the Cost
of Living Council so th a t we have a ■
— a look from the consumer's
standpoint at the things th a t are going on as f a r as government
agricultural p o l i c i e s are concerned.
Mow» we think what a l l t h i s adds up to 1s a very s i g n l f i cant Increase 1n supply» so that we feel we can say with consider
able confidence th a t the p ric e s of raw a g r i c u l t u r a l products
will be no higher a t the end of t h i s year than they are at the
beginning - - no higher at the end of the year than they are
at the beginning. Me expect to see a sort o f a bow-shaped p ictu r e
here. So f i r s t » and I think o f great s i g n i f i c a n c e » 1n Phase
III are strong a c tio n s th a t w i l l a f f e c t food p r i c e s .
Mow» second - - and I think 1f you study Incomes p o l i c i e s
around the world y o u ' l l see how our people have struggled to
bring t h i s about — second» we have the cooperation o f management
and labor» and we have an outstanding 1abor/management advisory
committee that w i l l help us on the wage side o f t h i s picture»
as 1t did In Phase I I . You remember th a t we did have labor
p articipation in the s e t t i n g o f the basic wage policy. And
I myself be lie v e th a t t h a t had a great deal to d© with the w i l l i n g
ness that was e x h ib ite d to conform to those p o l i c i e s . Me were
fortunate that frank Fitzsimmons o f the Teamsters stayed on
that board and helped to administer the r e g u la t io n s th a t were
put forward. And I think now 1t Is a very Important marker
as w@ look to 1973 that in the development o f our p o lic y on
wages for 1973 we have the cooperation o f organized labor and
an outstanding group o f management people working with them.
I might note In t h i s connection th a t the outstanding
^©rk done by the constru ction Industry sta b ll1 za t1 o n board w ill
continue.
Mow» third» in terms, ©f the environment 1t 1s markedly
Improved. I 9v@ mentioned the p rice p i c t u r e . On the wage side
of things t h e r e 's a very I n t e r e s t i n g c o n tra s t to be made between
the s it u a t i o n at the s t a r t o f t h i s three-year c y c le o f c o l l e c t i v e
bargaining and the s i t u a t i o n at the s t a r t o f the l a s t two c y c l e s .
go back and look a t the c o l l e c t i v e bargaining that was going
to take place In 1967 and ask ourselves In the in d u s t r ie s that
I
1
I
8
we’ re going to bargain what was happening the year before to
the average hourly earnings in th a t Industry as compared with
what was happening in the economy as a whole. And the p ictu re
just jumps out a t you. And what was happening 1s th a t In the
Industries th a t were coming Into the big bargainings the workers
1n those In d u s trie s had an Increase In t h e i r average hourly
earnings of a l e s s e r amount than the average of a l l workers;
s© they were l o s i n g in real earnings» and they were a lso lo s in g
1n r e l a t i v e wage p o s i t i o n . And when you trace th a t through
that Is true o f 1967» 1968» 1969» 1978» Industry a f t e r Industry»
without exception.. Änd that» o f course» 1s a fundamental Ingredient
for an e x p lo siv e s i t u a t i o n 1n c o l l e c t i v e bargaining and very
big f i r s t year s e ttle m e n ts .
That s i t u a t i o n does not p re va il today. The in d u s t r ie s
that w ill be bargain ing t h i s coming year have had t h e i r - - the
workers In those In d u s tries have had the experience» f o r the
f i r s t time since 1965» o f two years o f r i s i n g real e a rn in gs .
And t h e ir average hourly earnings have been going up in the
last year or two a t a pace a t l e a s t as rapid» and more rapid
1n most cases» than the average. So the s i t u a t i o n 1s j u s t turned
around. The environment» the thing th a t we’ re going in with»
is much b e t t e r .
How» f i n a l l y - • and t h i s 1s the element o f Phase I I I
that has gotten the most note - - w@ have the same rules o f the
road» you might say» as f a r as p rice r e g u la t io n s are concerned
as we did In Phase I I . They have been adjusted» we think In
an I n t e l l i g e n t manner» but b a s i c a l l y they are o f the same nature.
But we are p utting more emphasis In Phase I I I ©n s e l f - a d m i n i s t r a t i o n ,
as compared with bureacrat'ic adm inistration» of those r u l e s .
I see my fr ie n d over hare shaking h1$ head. Why
is I t th a t the f i n a n c i a l community has such f a i t h in bureaucracy
and so l i t t l e f a i t h In the s e n s i t iv e n e s s and the s e n s i b i l i t y
and the common sense ©f the average guy running h is company»
running his union» running f*1s l i f e » to do something th a t 1s
In conformity with the r u le s ? I f you study Phase I I and what
was beginning to happen - - and we were advised by a great many
people ors t h i s — you saw a developing s e r ie s o f anomalies»
Ine fficie ncy» I n e f f e c t i v e n e s s coming into the American economy
as a r e s u l t o f the way the r u le s were Impacting. And with a l l
0f the good w i l l and good e f f o r t s in the world» the bureaucracy
j p t cannot keep up with the magic o f a fre e market system and
what I t does t© ad ju s t things out.
9
and we w i ll take a c t i o n ; we w i l l Impose mandatory c o n t r o l s .
Now» we are sort o f being dared to do t h a t .
I t ' s - - 1t's a - it*s an odd kind of t h i n g . I t I s n ' t d i f f i c u l t to clobber somebody
from Washington. T h a t's the e a s i e s t thing 1n the world to do9
to bring 1n* p referably* some head o f big business and clobber
him; Washington loves 1 t . So 1 t ‘ s r e l a t i v e l y easy to do. But
the t r i c k here 1s* c e r t a i n l y to be ready to clobber people when
they need 1t - - and we w i l l — but to Induce people to do v o l u n t a r i l y *
like you pay your Income tax v o l u n t a r i l y somebody sa1d9 to do
voluntarily what the ru le s prescribe and to be s e n s ib le about
it.
I think I t Is so rt o f l i k e as I f we had a s i t u a t i o n
In which people were d r iv in g t h e i r cars according to a s p e c i f i e d
speed and before you could change the speed o f y o u r car you
had to go to Washington and get permission. And that was Phase
I I . In Phase I I I we say* “ The rules are the same* the t r a f f i c
laws are the same* and you s o rt o f a d ju s t to the conditions
as you see them on a s@lf-admin1ster1ng b a s i s . But I f you speed*
you're going to get picked up; and I f you're a drunken driver*
you're going to lose your l i c e n s e . " And we can do t h a t ; and
we will"do t h a t . But we think on the basis o f the communications
to us that people b a s i c a l l y v/ant to have t h i s program succeed
and are b a s i c a l l y cooperative and w i ll be cooperative with us.
To the extent they don't f e e l that way* t h e y ' l l hear from us.
So I think on the whole Phase I I I 1s a considerable
strengthening o f Phase I I and w i l l bring us success 1n our endeavors.
We know th a t the program i s am bitious. We know th a t to a t t a i n
a 2.5 percent rate of I n f l a t i o n by the end o f the year i s an
ambitious g o a l . But we b e lie v e that 1t Is a t t a i n a b l e - - f i r s t *
because we're not th a t f a r away from 1t now In the economy*
the private nonfarm economy g e n e r a lly * so 1f w@ can j u s t keep
behaving reasonably* the way we have* th a t part 1s. In the b ln ;
second* because we f e e l we have taken steps and w i l l continue
to take steps on the food p ric e side of t h i s equation* which
has been the most d i f f i c u l t side* th a t w i ll change the s i t u a t i o n
in '73 as compared with 872 and In a manner p e r f e c t l y c o n s i s t e n t
with strong and r i s i n g farm Income based on more product at
the same p rices rather than l e s s product at higher p r i c e s ; t h a t ' s
that's going to do the t r i c k f o r us. So 1 t ' s a t t a i n a b l e - next because 1 t ' s based on fundamentals.
haven't l o s t s ig h t
of the fundamentals. We're s t i c k i n g with them. And the President
has put forward a strong budget p o l i c y ; he 1s going to f i g h t
for 1 t 9 and we b e lie v e he 1s gPlng to win* because we have the
people on our s id e .
How* I have f e l t 1t was p a r t i c u l a r l y appropriate to
come here to a group o f people who are gathered to help the
9ov@rnment by helping with our program to s e l l Savings Bonds*
because In that program you obviously have a great I n t e r e s t
•n the control of I n f l a t i o n . And second* because you're doing
11
1
flj
|J
||
10
this you obviously are w i l l i n g to give some of y o u r s e l f 1n a
cooperative vein fo r the good o f the country. And so I t seems
to me appropriate to make a kind o f a twin thank-you fo r your
help and cooperation 1n the Savings Bond program and also for
your help and cooperation, as you have given 1n the past and
I know you w i l l give 1n the f u t u r e , to making the broad economic
policy that we're embarked upon and the p a r t i c u l a r s o f Phase
III a great s u c c e s s , so th a t we can look back on 1973, as the
President s a y s , as an outstanding year fo r the American economy - not j u s t another very good y e a r , but an outstanding year for
the American economy, We can do i t 1f we work to g e th e r. The
government 1s d r iv in g hard f o r t h i s o b j e c t i v e .
I know w e 'll
have your cooperation. And we're going to make 1t.
Thank you a l l very much.
[Applause]
MAN: Mr. S e c r e t a r y , on b e h a lf o f a l l here p re s e n t,
I want to thank you f o r being with us and p a r t i c u l a r l y f o r the —
your w i l l i n g to take the time to speak about Phase I I I .
I want to be very c a r e fu l what I say now. I would
like -« ask Father Farley to come forward, not to say a prayer,
but to give us the in v o c a t io n .
Department o f t h e J / f U S U R Y
ASHINGTON, D.C. 20220
T E L E P H O N E W 04-2041
FOR RELEASE AT 10:00 A.M.
STATEMENT BY THE HONORABLE GEORGE P. SHULTZ
SECRETARY OF THE TREASURY
BEFORE
THE HOUSE APPROPRIATIONS COMMITTEE
MONDAY, FEBRUARY 5, 1973, 10:00 A. M.
Mr.
Chairman
I am p l e a s e d
to
and M e m b e r s
of
appear before
this d i s t i n g u i s h e d
you
today
to d i s c u s s
Committee,
the Federal
budget.
The
tables
projections
appended
of the budget,
lights.
Our
receipts
f or t h e
revenues
to
current
is d u e
$8 b i l l i o n
security
in
then,
As you
increase
for
the
a re
know,
current
employment basis,
Most
stem
at
expenditures
year.
from
for
this v e r y
economy,
but
increased
revenue
the
gain
boost
1974
l a s t ye a r .
high
in
total
indicate
large
some
social
Next year's
$ 256 b i l l i o n .
to
recommended
a total
This will
almost
however,
of
the
the P r e s i d e n t has
fiscal
which will
projections
legislated
estimated
stantial budget deficit:
S-107
Our
year,
s t rength of
that w e r e
in F e d e r a l
in b a l a n c e .
fiscal
the
touch on
show a $16.3 b i l l i o n
in r e v e n u e s .
to t h e
summarize
so I w i l l m e r e l y
added receipts
taxes
receipts,
current
gain
statement
estimates
$225 billion.
a $31 b i l l i o n
increase
to m y
of
an
$250 b i l l i o n
produce
$25 b i l l i o n .
the b u d g e t wil l
$18 b i l l i o n
On
a very
sub
a full-
again be r o u ghly
i?
-
For
the
that
outlays,
bringing
rise
in
calls
budget
increases
defense
American
people.
and
Furthermore,
year,
employment
economic
growth
percent
p e r c e n t by
consumer
of
by
to ab o u t
year
the
prices
end
to
for
$269
billion.
rise
in
in h a l f ,
outlays
to
1973
and
to
a nd
economic
two
for
needs
fiscal
rapid
be
We
advance:
2-1/2 percent
for
or
the
years
are
Last
2.3 m i l l i o n
The
real
approximately
look
of
This year we
rate will drop
The
an adequate
objectives.
6-1/2 percent.
3 percent.
its
1974 will
important objectives.
an e x t r a o r d i n a r y
of t h e y e a r .
slow
for
these
1973 w i l l
the u n e m p l o y m e n t
t h e ye a r .
almost
the g r o wing
advanced
to c o n t i n u e
calendar
and
rapid
outlays provide
of
our basic
output
slowed
activity
for
in F e d e r a l
increased
economic
inflation
achieve many
the b u d g e t s
consistent with
of
deficit
requested
in F e d e r a l
to a b o u t
the m o r e
requests
for m a n y
fully
total
1974 b u d g e t
States
military
and
spending
has
in b a l a n c e .
the U nited
substantial
increase
a f ull-employment basis,
The President's
help
Federal
coupled with
the
On
the P r e s i d e n t
a $19 b i l l i o n
total
cut
$12.7 billion.
a re
for
spending
receipts will
receipts
-
coining f i s c a l y e a r ,
a budget
This
2
less
expect
economic
6-3/4
to a r o u n d
the
rate
4-1/2
increase
by
the
in
end
X v*
- 3 -
Our
improving
this year,
sector,
economic
is t r a c e a b l e
although
the
primarily
stimulus
has m a d e
a contribution
however,
is b e i n g
its
the
1973
and
a revival
of
generated by
was
in f i s c a l
In o r d e r
also
an
between
needs
of
and
Only
if F e d e r a l
we
of
to
continue
spending
it c a n n o t h e l p b u t
that were
Committee
can
Only
If w e
to m o r e
and
budget
policy.
to p r e v e n t
cooperation
Branch.
the
these budgets
this way
can be reduced
slow.
fiscal
close
to p r e s e r v e
soars beyond
lead
on a full-
to p r e v e n t
This
inflation,
the E x ecutive
people.
to
sound
again need
is v i t a l
of u n e m p l o y e d
inflation.
to b a l a n c e
1966-68.
e c o n o m i c - e n v i r o n m e n t in w h i c h
can
approaches
the b i p a r t i s a n F e d e r a l
a return
this w a y
the A m e r i c a n
the n u m b e r
or b o t h .
taxes,
cooperation
a healthy
flation
in
against
is n e c e s s a r y
of
a resurgence
the Congress
fiscal policy.
stimulus,
economy
close
that
in d e v e l o p i n g
to p r e v e n t
Such
This
inflationary pressures
that marked
increase
as t h e
are
the runaway budgets
1969
the p r i v a t e
by our budget deficits
is o n g u a r d
a condition
the m a s s i v e
instrumental
of
and
output.
1974 b u d g e t s
employment basis,
last year
the vi g o r
provided
sharply
In t h i s w a y t h e b u d g e t
Both
to
both
to t h e e x p a n s i o n .
reduced
full potential
performance,
integrity
serve
the
can we maintain
the
economy
a nd
the r ate of
fail
of
in t h i s
can grow,
in
endeavor,
full-employment revenues,
inflation
or m o r e
taxation
4
Budget
Under
Legislation Proposed
(Billions
Receipts
in F i s c a l
of
1974
Budget
Document
Dollars)
1972
actual
1973
estimate
1974
estimate
. 94.7
. 32.2
99.4
33.5
111.6
37.0
. 46.1
.
4.4
55.6
5.3
67.9
6.3
.
3.4
. 15.5
.
5.4
.
3.3
.
3.6
3.7
16.0
4.6
3.0
4.0
4.0
16.8
5.0
3.3
4.1
................... . 208.6
225.0
256.0
Deduct :
T r u s t f u n d r e c e i p t s ........................ . 73.0
I n t r a g o v e r n m e n t a l t r a n s a c t i o n s .......... .“■13.2
92.0
-21.2
105.5
-20.8
154.2
171.3
I n d i v i d u a l i n c o m e t a x e s .....................
C o r p o r a t i o n i n c o m e t a x e s ....................
Social i n s u r a n c e taxes and contributions:
E m p l o y m e n t t a x e s a n d c o n t r i b u t i o n s .....
U n e m p l o y m e n t i n s u r a n c e ....................
C o n t r i b u t i o n s for o t h e r i n s u r a n c e and
r e t i r e m e n t ........... .....................
E x c i s e t a x e s ....................................
E s t a t e a n d g i f t t a x e s ........................
C u s t o m s d u t i e s ..................................
M i s c e l l a n e o u s r e c e i p t s .......................
Unified budget
Federal
funds
receipts
receipts
.................... . 148.8
Underlying
(Calendar years.
Economic Assumptions
In b i l l i o n s
G r o s s n a t i o n a l p r o d u c t ...... ...............
P e r s o n a l i n c o m e ............ . . . . . . . . . . . ______
C o r p o r a t e p r o f i t s b e f o r e t a x . . ______......
of d o l l a r s)
1972
1971
actual
estimate
1,050
861
83
1,152
936
94
1973
estimate
1,267
1,018
108
Projected Changes in Budget Receipts
Fiscal Years 1973 and 1974
Fiscal 1973
from
Fiscal 1972
Fiscal 1974
from
Fiscal 1973
(billions of dollars)
Revenue changes
traceable to:
Economic growth
+ 22.0
+ 23.8
Tax Reform Act of 1969
-
2.7
-
1.6
Revenue Act of 1971
-
7.7
+
1.6
Changes in depreciation
regulations
-
0.2
-
0.6
Social security changes
+
6.6
+
8.1
Other changes
-
1.6
-
0.3
Total
+ 16.3
+ 31.0
¡Department of t h e T R E A S U R Y
ilNGTON, D C. 20220
T E LE P H O N E W 04-2041
>
ItTENTION:
?
é
FINANCIAL EDITOR
February 5, 1973
RELEASE 6:30 P.M.
RESULTS OF TREASURY’S WEEKLY
BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
dlls, one series to he an additional issue of the hills dated
November 9, 1972 , and
|he other series to he dated
February 8, 1973 , which were invited on January 30, 1973,
fere opened at the Federal Reserve Banks today. Tenders were invited for $2,400,000,000,
[r thereabouts, of 9 1 -day bills and for $1,800,000,000, or thereabouts, of
182 -day
ills. The details of the two series are as follows:
182-day Treasury bills
maturing
August 9, 1975
Approx. Equiv.
Annual Rate
Price
91 -day Treasury bills
maturing
May 10, 1973
Approx. Equiv.
Annual Rate
Price
tfGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
5.625$
5.693$
5.665$
98.578
98.561
98.568
. $
5 819
97.058
97.030
97.043
1/
5.875$
5.849$
1/
84$ of the amount of 9 1 -day bills bid for at the low price was accepted
29$ of the amount of 182 -day bills bid for at the low price was accepted
IrOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
D is t r ic t
Boston
New York
P h ila d e lp h ia
Cleveland
Richmond
A tlan ta
Chicago
S t. Louis
M inneapolis
Kansas C it y
D allas
San F r a n c is c o
TOTALS
A p p lie d For
A c c e p te d
A p p lie d F or
A cce p te d
$
$
$
$
48,655,000
3,125,370,000
17,680,000
26,510,000
16,830,000
14,790,000
289,315*000
63,650,000
28,975,000
'34,190,000
38,080,000
117,025,000
$3,821,070,000
13,255,000
1,995,790,000
17,680,000
26,510,000
8,830,000
13,265,000
137,975,000
43,650,000
28,975,000
27,310,000
19,760,000
67,075,000
$2,400,075,000 a/
49,090,000
2,859,605,000
25,055,000
34,375,000
22,650,000
9,445,000
257,785,000
45,235,000
31,775,000
21,325,000
30,765,000
129,035,000
$3,516,140,000
4,090,000
1,582,105,000
5,055,000
9,375,000
4,220,000
9,065,000
32,525,000
16,735,000
23,775,000
16,570,000
8,765,000
88,035,000
$1,800,315,000 b /
p Includes $197,125,000 noncompetitive tenders accepted at the average price'of 98.568
g/ Includes $ 87,335,000 noncompetitive tenders accepted at the average price of 97.043
f/ These rates are on a bank discount basis.
The equivalent coupon issue yields are
5.83 $ for the 9 1 -day bills, and 6.11$ for the 1 8 2 -day bills.
f
Tth REASUR
Department of
WASHINGTON, D.Q. 20220
FOR IMMEDIATE
3
T iL E P H O N E fV 0 ^ |0 4 t
RELEASE
F e b r u a r y 6,
1973
ANTIDUMPING INVESTIGATION INITIATED ON
ACRYLONITRILE-BUTADIENE-STYRENE TYPE OF PLASTIC
___________ R E S I N I N P E L L E T F O R M F R O M J A P A N
A s s i s t a n t S e c r e t a r y o f t h e T r e a s u r y E d w a r d L. M o r g a n
a n n o u n c e d t o d a y t h e i n i t i a t i o n o f an a n t i d u m p i n g i n v e s t i g a t i o n
on i m ports o f a c r y l o n i t r i l e - b u t a d i e n e - s t y r e n e t y p e o f p l a s t i c
resin in p e l l e t fo r m f r o m Japan.
Thi s resin, c o m m o n l y r e f e r r e d
to as A B S p l a s t i c , is u s e d in a n u m b e r o f e n g i n e e r i n g t y p e
a p p l i c a t i o n s s u c h as t e l e p h o n e a n d a p p l i a n c e h o u s i n g s a n d
drain, w a s t e a n d v e n t p i p e .
Notice of this action will be p u blished
R e g i s t e r o f F e b r u a r y 7, 1 9 7 3 .
in the Federal
Mr. M o r g a n ' s a n n o u n c e m e n t f o l l o w e d a s u m m a r y i n v e s t i
gation c o n d u c t e d b y the B u r e a u of C u s t o m s after r e c e i p t of
a c o m p l a i n t a l l e g i n g t h a t d u m p i n g w a s t a k i n g p l a c e in t h e
United States.
The total value of acrylonitrile-butadiene-sty rene type
of p l a s t i c r e s i n i n p e l l e t f o r m i m p o r t e d f r o m J a p a n d u r i n g
the p e r i o d o f J a n u a r y t h r o u g h S e p t e m b e r 1 9 7 2 a m o u n t e d to
approximately $5.6 million.
Department of
HINGTON, D.C. 20220
theTREASURY
T E L E P H O N E W 04-2041
FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE GEORGE P. SHULTZ
SECRETARY OF THE TREASURY
BEFORE
THE JOINT ECONOMIC COMMITTEE
WEDNESDAY, FEBRUARY 7, 1973, 10:00 A. M.
Mr. Chairman and Members of this Committee, I am
pleased to be here today to discuss the economy.
The Nation’s basic economic goal is to achieve
prosperity for all our citizens, without war and without
inflation. We made considerable progress toward that goal
in 1972: employment and output advanced sharply,
unemployment and inflation declined, and we saw the start of
a major change in our international economic relationships.
I expect that we will make further progress in all of these
areas in 1973.
Economic growth is now under a full head of steam that
will carry forward through the year ahead. This momentum
is coming primarily from the private sector of the economy,
but the Federal Budget is also contributing to the expansion.
As is appropriate, this fiscal stimulus will be reduced as
the economy continues to expand and enters the zone of full
resource utilization.
As we approach 1974, we must be on guard against either
a burst of economic growth that would carry us through the
upper bounds of the full employment zone, as occurred in
1967, or a marked slowdown in growth that would leave us
short of full employment, as in 1959-60. Our present course
will, I believe, put us on the path of steady growth at
full employment and minimize the risk of straying off
the path to one side or the other.
-
2
-
At the same time and on the assumption that fiscal and
monetary discipline will be maintained, we will make further
progress in the fight against inflation. The stabilization
program contributed to the slowing of price and wage increases
in 1972, and we expect it to make a contribution again in 1973.
The program has been modified so that in much of the economy
the rules are now self-administered, nevertheless; a
cojmprehensive system of restraints over prices and wages remains
in force.
In some ways, the economy and Federal spending now stand
at roughly the same place they did in 1964 or 1965. At that
time, the economic recovery was well underway, inflation was
still near a minimum, and the unemployment rate was dropping
rapidly. Fiscal policy was stimulative, supported by the
1964-1965 tax cuts, but the Federal Budget was in approximate
balance on a full employment basis. However,as domestic
spending continued to increase, and as military spending for
our growing involvement in Southeast Asia soared, our fiscal
and monetary policies became irresponsibly stimulative and
pushed the nation into an inflationary boom from which we are
still recovering.
This committee became increasingly vocal during the
mid-1960's in expressing grave concern about that course of
events. In 1968, the Congress and the Executive Branch
together achieved a major reversal of fiscal policy, by
regaining control over the Federal Budget. This effort was
carried out by two Presidents and by members of the Congress
on both sides of the aisle.
Since 1968, the Federal Budget has generally remained
under control. Severe restraint on military spending has
provided room for an enormous expansion of spending for human
resources and for large tax cuts. At present, however, all of
the demands for increased Federal spending cannot be met. While
there is room in the 1973 and 1974 budgets for an increase of
$37 billion in total outlays -- mostly for human resources and
general revenue sharing -- it is vital that we cut back
decisively those programs that are not worth the expenditure.
Thus, it is again critical that we have close
cooperation between the Congress and the Executive Branch.
Failing such cooperation, Federal spending will again rise
at a pace that would generate an unacceptable rate of
inflation in future years.
INTERNATIONAL DEVELOPMENTS
The focus of the Administration's efforts with respect
£o the international economy is clear© First, we must
continue our efforts to bring our external trade and
payments position into a sustainable position© Second, we
must press ahead with the urgent work of international
monetary and trade reform to build an international
economic order within which all nations are treated fairly
and can grow and prosper©
These goals are interrelated© Without a stronger
dollar and trade position, the prospects for monetary
stability and an open trading order will dim© Without
an agreed framework for the monetary and trading systems,
unilateral defensive actions by one country or another can
frustrate the restoration of an acceptable balance in our
payment s ©
Last year, the overall U.S© balance of payments
position showed a reduced, but still very substantial,
deficit© However, the improvement can be traced entirely
to some lessening of speculative pressures and smaller
capital out-flows© Meanwhile, our trade deficit was
larger in 1972 than in 1971, although the deteriorating
trend was arrested in the second half of the year©
The larger trade deficit last year is explicable
in terms of cyclical factors and the initial, inevitably
perverse effects of the exchange rate realignment©
Looking ahead, we can foresee some improvement©
Nevertheless, I must emphasize the hard fact that
we have a long way to go to achieve the trade surplus we
need to bring our overall payments into sustainable
equilibrium© We have learned that process will take
time© I believe the exchange rate realignment is
beginning to help© So is our relatively good performance
toward restoring price stability at home© Yet, there can
be no room for complacency© The stark fact of our large
deficit is plain for all to see© Sporadic speculative
disturbances in exchange markets reflect the underlying
uncertainties© We must do what we can to speed the
process of adjustment©
In particular, we need to recognize the favorable
effects of exchange rate realignment will be undermined
if we fail to manage our domestic economy effectively«
Our domestic and international objectives coincide in
demanding that we resist inflationary increases in costs
and priceso Over the past two years, U 0S0 price1
performance has compared favorably with that of our
competitors. We are resolved to do still better0 The
President1s budget, the Wage-Price Program, and the
full range of our economic policies reflect our
determination to do so0
For the longer term, we seek a major strengthening
of the international economy through further elimination
of trade barriers and through thorough reform of the
international economic system,.
Negotiations on reform of the international monetary
and trading system are already in full progress, mainly
under the auspices of the Committee of Twenty created last
year*. The United States played a leading role in
establishing that forum representative of world-wide
interests, and has advanced a series of specific reform
proposals to stimulate the discussions0
These discussions are dealing with fundamental issues
of deep concern to individual nations,, It is understandable indeed it may be essential — that conclusions be deferred in
one area of discussions until the pattern of the whole can
be more clearly foreseen« Moreover, seeming agreement on
such broad generalities as an improved adjustment process
or convertibility can hardly be meaningful until those
generalities are fleshed out more with concrete approaches,
incentives and obligations« I believe the negotiation
process has achieved a better understanding of these issues,
and more specifically the proposals which we and others
have submitted« In short, the committee is laying the
intellectual basis for ultimate decision making«
We all recognize there are deep-seated and fundamental
differences on many aspects of reform, and I have no
illusions about an easy solution« But I am encouraged
that there is at least a common view of the broad
objectives, and a general willingness to try to resolve
our differences«
5
I continue to hope that the main outlines of a new
system can be agreed by the next IMF meeting in Nairobi,
and I assure you the United States will do its best to
help meet that target0
0O0
Department of th e JR E A S U R Y
ftSHINGTON, D.G, 20220
M C
T ftS P H O N E W 04 2041
FOR IMMEDIATE RELEASE
FEBRUARY 7, 1973
William E. Simon, Deputy Secretary of the Treasury,
issued the following statement today:
Several questions have been asked about the role the
President has assigned me as Chairman of the Oil Policy
Committee.
First, let me emphasize that the nation's energy
problem is of such importance that I will be directly
and emphatically involved in policy-making and implementation.
Our energy demands are outpacing our national energy
supply, so the decisions of this Committee will become
increasingly important to the nation's well being.
New solutions must be found through new or improved
approaches to the problems that face us. Some of these new
proposals will come from the Oil Policy Committee.
The President has directed that, under the new Executive
Order, the Oil Policy Committee be an advisory group to the
Chairman, who will report to the President through the
Assistant to the President, Secretary of the Treasury George
P. Shultz. The Deputy Secretary of the Treasury has the
responsibility for policy direction of the oil import control
program, for coordination of the various agencies' efforts in
this area, and for evaluation of the results.
I am already convinced there is a need for a fresh,
objective approach to ensure that we provide:
-- ■ An improved distribution system for import licenses.
--- A long range approach which is stable and predictable.
--- A program to- stimulate adequate domestic exploration
and refinery construction.
OVER
2
I know that many of the above ideas are not new. What I
hope to provide is the prod and the push to get action going
in these fields.
For the past five days I have been conferring with Treas
ury aides and experts from the Interior Department and other
government agencies on the shape of the new organization that
results from the Presidents Executive Order. We hope to
finalize within the next few weeks the plan by which this
Committee will integrate and coordinate policy on oil imports.
The policy and implementation functions will be merged to
facilitate government operations in this area.
I plan to use as a staff aide in this project Duke R.
Ligon, Director of the Treasuryfs Office of Natural Resources
and a man who has been, and is, an adviser to the Secretary
on oil and gas matters. Because of his expertise in this
field, I shall also consult with Jack Bennett, Deputy Under
Secretary of the Treasury, However, in view of his other
responsibilities in the Treasury, he will not have a con
tinuous direct role in policy matters.
The first meeting of the Oil Policy Committee will be
held at the Treasury next week to discuss organization,
Immediate problems, and matters involving long range planning.
The Secretaries of State, Defense, Interior and Commerce,
the Attorney General, fc'he Chairman of the Council of Economic
Advisers and the Deputy Secretary of the Treasury are members
of this Committee. Observers at the Oil Policy Committee
meetings regularly include officials of the Office of Management
and Budget, the Environmental Protection Agency and an
observer from the Etfergy Subcommittee of tfie White House
Domestic Council.
0O0
OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20220
TELEP H O N E W04-8711
February 8, 1973
FOR IMMEDIATE RELEASE
REVENUE SHARING CHECKS BEING MAILED
TO INDIAN TRIBES AND ALASKAN NATIVE VILLAGES
The Treasury Department announced that Revenue Sharing
checks for Calendar Year 1972 will be mailed Friday (Feb. 9)
to eligible Indian Tribes and Alaskan native villages by
the Office of Revenue Sharing.
Graham Watt, newly appointed Director of the Office of
Revenue Sharing, said that 331 ckecks are being mailed out,
totaling approximately $6.2 million.
Payment to the tribes and villages had been delayed
because of insufficient data. Henceforth, the tribes and
villages will receive their Revenue Sharing payments on a
quarterly basis, along with other state and local governments.
The data used to determine the checks is based on April
1970 population estimates prepared by the Bureau of Census in
cooperation with the Bureau of Indian Affairs, which also
supplied the addresses of the tribal governments.
The State and Local Fiscal Assistance Act of 1972 specifies
that Revenue Sharing funds will be allocated to Indian tibes
or Alaskan native villages "having a recognized governing body
which performs substantial governmental functions."
A tribe or native village receives its payments from
funds allocated to a county area, on the basis of the proportion
which tribal population represents of the total county area.
Such payments must be spent for the benefit of members of the
tribe or village residing in the county area from which the
original allocation was made.
"Each tribe and village is being notified of the population
data used in computing its allocation, and will have until March
15,1973, to challenge the data," Mr. Watt said. If errors are
discovered, changes in allocations will be made.
OVER
-
2-
As with all recipient governments, the Alaskan native
villages and Indian tribes will have to account for expenditure
of their funds to the Secretary of the Treasury.
0O0
d
S
February 7, 1973
ATTENTION: FINANCIAL EDITOR
FOR RELEASE AT 8:00 P.M., EST
RESULTS OF TREASURY NOTE AUCTION
The Treasury announced that it has accepted $1.0 billion of the $1.7
billion of tenders received for its new 6-3/4-year 6-5/8$ notes auctioned
today. The range of accepted competitive bids was as follows:
High
Low
Average
Price
Approximate Yield
. 99.88 1/
99.21
99.40
6.65$
6.77$
6.74$
^Excepting 3 tenders totaling $372,000
The $1.0 billion of accepted tenders includes 58$ of the amount of notes
bid for at the low price, and $0.1 billion of noncompetitive tenders accepted
at the average price.
In addition $0.6 billion of the notes were allotted to Federal Reserve
Banks and Government accounts at the average price, in exchange for notes
maturing February 15.
u
THE SECRETARY OF THE TREASURY
W A S H IN G T O N
.*
FEB r
Dear
Mr.
1973
Speaker:
T h e r e is t r a n s m i t t e d h e r e w i t h a p r o p o s e d b i l l
” To e s t a b l i s h a F e d e r a l F i n a n c i n g B a n k , to p r o v i d e
f o r c o o r d i n a t e d a n d m o r e e f f i c i e n t f i n a n c i n g of
F e d e r a l and F e d e r a l l y a s s i s t e d b o r r o w i n g s f r o m t h e
p u b l i c , a n d for o t h e r p u r p o s e s . ”
S u c h l e g i s l a t i o n is u r g e n t l y n e e d e d b e c a u s e
t h e t r e m e n d o u s i n c r e a s e in F e d e r a l c r e d i t p r o g r a m
a c t i v i t y in r e c e n t y e a r s h a s g r e a t l y e x p a n d e d t h e
t o t a l F e d e r a l i m p a c t on t h e c r e d i t m a r k e t s .
T h e w i d e s p r e a d s u p p o r t for t h i s l e g i s l a t i o n
w a s e v i d e n t f r o m i ts p r o m p t p a s s a g e l a s t y e a r by
t h e S e n a t e a n d b y its a p p r o v a l by t h e W a y s a n d M e a n s
C o m m i t t e e of t h e H o u s e .
I h o p e that the C o n g r e s s
w i l l a c t p r o m p t l y on t h i s m e a s u r e so t h a t w e c a n
b e g i n to r e a l i z e t h e s a v i n g s in i n t e r e s t c o s t s a n d
o ther b e n e f i t s that the F e d e r a l F i n a n c i n g Bank w o u l d
assure.
M a n y exi s t i n g F e d e r a l a g e n c i e s a r e n o w r e q u i r e d
to f i n a n c e th eir p r o g r a m s d i r e c t l y in t h e s e c u r i t i e s
markets.
Sim ilar f i n a n c i n g a r r a n g e m e n t s have also
b e e n p r o p o s e d f o r a n u m b e r of n e w a g e n c i e s .
These
a g e n c i e s must develop their own finan c i n g staffs, and
t h e i r a b i l i t i es to c o p e w i t h t h e i r p r i n c i p a l p r o g r a m
f u n c t i o n s a r e l e s s e n e d by t h e n e e d a l s o to d e a l w i t h
t h e c o m p l e x d ebt m a n a g e m e n t o p e r a t i o n s e s s e n t i a l to
m i n i m i z i n g th eir b o r r o w i n g c o s t s a n d a v o i d i n g c a s h
flow problems w h i c h could d isrupt their basic lending
programs.
2
I n t e r e s t c o s t s of t h e v a r i o u s F e d e r a l a g e n c y
financing methods normally exceed Treasury borrowing
c o s t s by s u b s t a n t i a l a m o u n t s , d e s p i t e the fa c t that
these issues ar e b a c k e d by the F e d e r a l G o v e r n m e n t ,
B o r r o w i n g c o s t s a r e i n c r e a s e d b e c a u s e of t h e s h e e r
p r o l i f e r a t i o n of c o m p e t i n g i s s u e s c r o w d i n g e a c h o t h e r
in t h e f i n a n c i n g c a l e n d a r , t h e c u m b e r s o m e n a t u r e
of m a n y o f t h e s e c u r i t i e s , a n d t h e l i m i t e d m a r k e t s
in w h i c h t h e y a r e s o l d .
Underwriting costs are often
a s i g n i f i c a n t a d d i t i o n a l c o s t f a c t o r d u e to t h e m e t h o d
of m a r k e t i n g .
Under the proposed legislation these essentially
debt m a n a g e m e n t p r o b l e m s could be shifted f r o m the
p r o g r a m a g e n c i e s to t h e F e d e r a l F i n a n c i n g B a n k .
M a n y of the o b l i g a t i o n s w h i c h a r e n o w p l a c e d d i r e c t l y
in t h e p r i v a t e m a r k e t u n d e r n u m e r o u s F e d e r a l p r o g r a m s
w o u l d i n s t e a d b e f i n a n c e d by t h e B a n k .
T h e B a n k in
t u r n w o u l d i s s u e its o w n s e c u r i t i e s .
The Bank would
h a v e the n e c e s s a r y e x p e r t i s e , f l e x i b i l i t y , v o l u m e , and
m a r k e t i n g p o w e r to m i n i m i z e f i n a n c i n g c o s t s a n d to
a s s u r e a n e f f e c t i v e f l o w of c r e d i t f o r p r o g r a m s
e s t a b l i s h e d by t h e C o n g r e s s .
W h i l e m a n y of t h e m a r k e t f i n a n c i n g a c t i v i t i e s of
F e d e r a l a g e n c i e s a r e s u b j e c t to c o o r d i n a t i o n w i t h
Treasury's financial management advisers, a large
a n d g r o w i n g n u m b e r of t h e s e a r e n o t .
S o m e of t he
c o o r d i n a t i o n r e q u i r e m e n t s a re v a g u e or incomplete,
a n d n o n e r e q u i r e a d v a n c e s u b m i s s i o n of f i n a n c i n g
p l a n s as w o u l d b e r e q u i r e d in t h e p r o p o s e d l e g i s l a t i o n .
T h e F e d e r a l F i n a n c i n g B a n k bill will not solve
a l l of t h e p r o b l e m s in t h e f i n a n c i n g of F e d e r a l a n d
F e d e r a l l y a s s i s t e d b o r r o w i n g s , b u t it w i l l go a l o n g
way toward relieving them within a rational framework.
T h e d i s c i p l i n e of i m p r o v e d m a n a g e m e n t of F e d e r a l
f i n a n c i a l o p e r a t i o n s is u r g e n t n o w b u t w i l l b e c o m e
e v e n m o r e c r i t i c a l for t h e y e a r s a h e a d .
O
6/
3
It w o u l d b e a p p r e c i a t e d if y o u w o u l d la y t h e
p r o p o s e d b i l l b e f o r e t h e H o u se of R e p r e s e n ta t i v e s .
A n i d e n t i c a l b ill h a s b e e n t r a n s m i t t e d to th e P r e s i d e n
of t h e S e n a t e .
/
T h e D e p a r t m e n t h a s b e e n a d v i s e d b y th e 0 f f i c e of
M a n a g e m e n t a n d B u d g e t t h a t t h e r e is n o o b j ec t i o n to
t h e s u b m i s s i o n of t h i s l e g i s l a t i o n to t h e Co n gr ess
a n d t h a t its e n a c t m e n t w o u l d b e in a c c o r d w i th t h e
p r o g r a m o f t h e Pr e s i d e n t •
Sincerely
yours,
»-C- Z 7
George
The Honorable
C a r l B. A l b e r t
S p e a k e r of t h e H o u s e of
Representatives
W a s h i n g t o n , D.C.
20515
Enclo sure
✓
P,
Shultz
A BILL
To establish a Federal Financing Bank, to provide
for coordinated and more efficient financing
of Federal and federally assisted borrowings
from the public, and for other purposes.
•
/
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled, That
this Act may be cited as the "Federal Financing Bank Act of
1973".
FINDINGS AND DECLARATION OF PURPOSE
SEC. 2.
The Congress finds that demands for funds
through Federal and federally assisted borrowing programs
are increasing faster than the total supply of credit and
that such borrowings are not adequately coordinated with
overall Federal fiscal and debt management *policies.
The
purpose of this Act is to assure coordination of these
programs with the overall economic and fiscal policies of
the Government, to reduce the costs of Federal and federally
assisted borrowings from the public, and to assure that
such borrowings are financed in a manner least disruptive
of private financial markets and institutions.
DEFINITIONS
SEC. 3.
(1)
For the purposes of this Act—
The term "Federal agency" means an
executive
department, an independent Federal establishment, or a
corporation or other entity established by the Congress
which is owned in whole or in part by the United States.
(2)
The term "obligation" means any note, bond,
debenture, or other evidence of indebtedness, but does
not include Federal Reserve notes or stock evidencing an
ownership interest in the issuing Federal agency.
(3)
The term "guarantee" means any guarantee, insur
ance, or other pledge with respect to the payment of all
or part of the principal or interest on any obligation,
but does not include the insurance of deposits, shares,
or other withdrawable accounts in financial institutions,
or any guarantee or pledge arising out of a statutory
obligation to insure such deposits, shares or other
withdrawable accounts.
(A)
The term "Bank" means the Federal Financing
Bank established by section 4 of this Act.
CREATION OF BANK
SEC. 4.
There is hereby created a body corporate to
be known as the Federal Financing Bank, which shall have
succession until dissolved by an Act of Congress.
The
Bank shall be subject to the general supervision and
direction of the Secretary of the Treasury.
The Bank
shall be an instrumentality of the United States Government
3
and shall maintain such offices as may be necessary or
appropriate in the conduct of i'ts business.
BOARD OF DIRECTORS
SEC. 5. (a)
/
The Bank shall have a Board of Directors
consisting of five persons, one of whom shall be the
Secretary of the Treasury as Chairman of the Board, and
four of whom shall be appointed by the President from
among the officers or employees of the Bank or of any
Federal agency.
The Chairman and each other member of
the Board may designate some other officer or employee of
the Government to serve in his place.
(b)
The Board of Directors shall meet at the call
of its Chairman.
The Board shall determine the general
policies which shall govern the operations of the Bank.
The Chairman of the Board shall select and effect the
appointment of qualified persons to fill such offices as
may be provided for in the bylaws, and such persons shall
be the executive officers of the Bank and shall discharge
such executive functions, powers, and duties as may be
provided for in the bylaws or by the Board of Directors.
The members of the Board and their designees shall not
receive compensation for their services on the Board.
FUNCTIONS
SEC. 6. (a)
The Bank is authorized to make commit
ments to purchase and sell, and to purchase and sell on
f
terms and conditions determined by the Bank, any obliga
tion which is issued, s0ld, or guaranteed by a Federal
agency.
Any Federal agency which is authorized to issue,
sell, or guarantee any obligation is authorized to issue
or sell such obligations directly to the Bank.
(b)
Any purchase by the Bank shall be upon such terms
and conditions as to yield a return at a rate not less than
a rate determined by the Secretary of the Treasury taking
into consideration (l) the current average yield on out
standing marketable obligations of the United States of
comparable maturity, or (2) whenever the Bankfs own
obligations outstanding are sufficient, the current
average yield on outstanding obligations of the Bank of
comparable maturity.
(c)
The Bank is authorized to charge fees for its
commitments and other services adequate to cover all
expenses and to provide for the accumulation of reasonable
contingency reserves.
”
TREASURY APPROVAL
SEC. 7. (a)
To ensure the orderly and coordinated
marketing of Treasury and Federal agency obligations and
appropriate
financing
to f a c i l i t a t e
by l a w
the
subject
the p r i o r
effective
to
t he
approval
be r e q u i r e d
with
planning
with
financing
applicable
of
the
respect
of
Secretary
of
of
financing,
(2)
t he
source
of
financing,
(3)
the
timing
of
financing
conditions
(4)
the
of
and
authorized
such
law ,
Treasury
shall
r e s p e c t *t o
the m e t h o d
agencies,
programs
provisions
il)
market
thereto,
and
financing
f
in
by
relation
other
to
Federal
and
the financing terms and conditions,
including rates of interest and maturities,
of o b l i g a t i o n s
issued,
agency,
that
except
sold,
the
or
guaranteed
approval
of
the
by
any
Federal
Secretary
of
the
-.-r-
Treasury
tions
shall
issued
expressly
the U n i t e d
local
s im i la r
and
sold
States
required
pursuant
any
or
involving
types
of
in
the
to
an
respect
Act
of
the
that
same
investment
and
markets
(1)
Congress
of
are
as
securities.
obliga
which
obligations
large
originated
that
to
guaranteed
guarantee
are
of
such
obligations
institutions
sold
with
guarantee
(2)
obligations
lending
bo ug ht
or
be
prohibits
w it h p r o g r a m s
individual
not
and
not
bonds
in
by
connection
numbers
serviced
o rd in a r i l y and
other
of
by
r
( b )
’
•V
Upon receipt of a request from a Federal agency
for his approval under subsection (a) of this section,
the Secretary of the Treasury shall act promptly either
to grant his approval or to advise the agency of the
reasons for withholding his approval.
In no case shall
\
the Secretary of the Treasury withhold such approval for
a period longer than one hundred and twenty days unless,
prior to the end of such period, he submits to the Congress
a detailed explanation of his reasons for so doing.
Expedited treatment shall be accorded in any case in
which the Federal agency advises the Secretary of the
Treasury that unusual circumstances require such treatment.
(c)
Federal agencies subject to this section shall
submit financing plans to the Secretary of the Treasury
at such times and in such forms as he shall prescribe.
INITIAL CAPITAL
SEC. 8.
The Secretary of the Treasury is authorized
to advance the funds necessary to provide initial capital
to the Bank.
Each such advance shall be upon such terms
and conditions as to yield a return at a rate not less than
a rate determined by the Secretary of the Treasury, taking
into consideration the current average yield on outstanding
marketable obligations Of the United States of comparable
.<
maturity.
Interest
deferred,
such
at
the
deferred
payments
discretion
payments
on
of
shall
such
t he
advances
may
be
Secretary,
but
any
themselves
bear
interest
at
f
the r a t e
to b e
specified
appropriated
be a v a i l a b l e
f or
in
this
not
to
the
section.
exceed
purposes
There
is
$100,000,000,
of
this
section
authorized
which
shall
without
)
fiscal
year
SEC.
of t h e
have
limitation.
9.
(a)
OBLIGATIONS
OF
The
authorized,
is
Secretary
of
the
Treasury,
outstanding
at
any
one
$ 1 5 , 0 0 0 , 0 0 0 , 0 0 0 , or
authorized
in
as m a y
be
at
such m a n n e r
t io ns
the
to
bearing
be
the
is
such
of
excess
of
as m a y
be
having
or
interest
rates
of
obligations
before
therein.
the
and
obligations
Such
Bank
approval
Bank
may
maturity
So
shall
f ar
be
as
be
in
is
commen
structure.
also
Secretary
any
of
the
publicly
amounts
th.e B a n k .
of
in
rate
stipulated
asset
Bank
such
with
issue
not
Acts,
structure
Treasury may
to p u r c h a s e
by
BANK
to
additional
option
debt
its
The
the
the
as m a y
t he
surate w i t h
(b)
and
determined
redeemable
feasible,
such
time
appropriations
such m a t u r i t i e s
of
Bank
THE
in
of
his
authorized
the
Treasury
discretion
obligations,
and
to
issue.its
and
the
obliga
Secretary
purchase
or
for
purpose
such
agree
the
8
Secretary
debt
of
t he
transaction
hereafter
issued
purposes
Liberty
for
Act
Each p u r c h a s e
of
under
and c o n d i t i o n s
a rate
into
the
the
are
this
determined
by
the
the
maturity.
The
Secretary
such
and
conditions
Secretary
any
subsection.
of
subsection
the
shall
of
of
the United States.
(c)
The
Bank may
obligations
section
in
by t h e
such
Secretary
purchases
to
of
exceed
upon
the
of
not
on
of
may
price
and
debt
Second
terms
less
than
taking
outstanding
comparable
sell,
or
upon
prices
acquired
sales
obligations
the
the
such
yield
obligations
public
and
Treasury,
States
such
Act,
purchases.
a rate
the
public
securities
under
such
Treasury
such
as
Bond
a
by
as
by
him
the
under
this
transactions
of
v
to p u r c h a s e
(b)
of
purchases
of
treated
at
average
at
t he
All
be
as
any
Secretary
United
and
of
Treasury
be
the
the
of
include
a return
the
use
issued
shall
current
obligations
this
by
sale
be
Secretary
marketable
determine,
to
to
Liberty
may
subsection
yield
the
Second
obligations
to
he s h a l l
of
extended
as
terms
authorized
securities
consideration
under
is
proceeds
under
which
Bond
Treasury
Treasury
require
of
amounts
the
the
t he
Bank
as w i l l
Treasury
Secretary
issued
not
$5,000,000,000
at
any
the
pursuant
cause
resulting
of
the
from
one
Treasury
to
sub
holding
such
t i me .
required
This
9
subsection
of
the
excess
shall
not
Secretary
of
such
(d)
to
be
construed
purchase
as
limiting
the
obligations
of
t he
Bank
pursuant
authority
Bank
amount.
Obligations
in
/
of
the
issued
to
this
\
section
as
shall
security
be
f or
lawful
all
fiduciary,
investment
or
deposit
or c o n t r o l
of
the
the C o m m o n w e a l t h
possession
mentality
of
of
the
any
investments,
of
United
of
the
trust,
shall
States,
Puerto
United
of
which
and
and
be
the
may
be
accepted
public
under
District
the
of
funds,
the
authority
Columbia,
Rico,
or
any
territory
or
States,
or
any
agency
instru
foregoing,
or
any
or
officer
or
officers
thereof.
GENERAL
SEC. 10.
POWERS
The Bank shall have power —
(1) to sue and be sued, complain and defend,
in its corporate name;
(2) to adopt, alter, and use a corporate seal,
which shall be judicially noticed;
(3) to adopt, amend, and repeal bylaws, rules
and regulations as may be necessary for the conduct
of its business;
(4) to conduct its business, carry on its operations,
and have offices and exercise the powers granted by
10
this
Act
in
any
qualification
(5)
to
State
or
without
similar
lease,
regard
statute
purchase,
or
in
to
any
any
State;
otherwise
acquire,
/
own,
hold,
with
any
any
improve,
(6)
therein,
to a c c e p t
or
of
or
intangible,
property,
otherwise
wherever
gifts
real,
in
aid
or
in a n d
or m i x e d
•
or
situated;
donations
personal,
or
of
the
any
deal
of
of
services,
mixed,
tangible
purposes
of
Bank;
(7)
to
exchange,
and
or
p r o p e r t y ,'r e a l , p e r s o n a l ,
interest
the
use,
sell,
and
convey,
otherwise
m o r t g a g e ,p l e d g e , l e a s e ,
dispose
of
its
property
assets;
(8>
to
employees,
define
and
their
pensation
subject
laws;
appoint
to
agents
duties,
for
to
such
the
their
as m a y
to
fix
be
for
to
pay
as m a y
service
bonds
attorneys,
required,
and
services
civil
require
officers,
and
them
to
such
be
com
determined,
classification
and
pay
the
premium
thereof;
(9)
ments
are
of
to
to
incur
necessary
its
affairs
enter
into
contracts,
liabilities,
or
incidental
and
the
and
to
proper
to
the
do
to
execute
all
proper
conduct
of
things
instru
as
management
its
business
11
*
(10)
agency
to
to
or
and
authorized
Bank;
through
any
the
services
any
such
to
provi'de
corporate
of
the
thereof
agency
>*#
or
or
United
on
other
States,
a reimbursable
/
instrumentality
services
as
and
requested
is
by
the
and
(11)
to
necessity
. and
,
instrumentality
utilize
basis,
act
;Ij.
the
determine
for
its
manner
allowed,
and
character
obligations
in w h i c h
paid,
specifically
t he
they
subject
applicable
and
to
and
the
expenditures,
shall
to
of
be
incurred,
provisions
Government
of
law
corporations.
EXEMPTIONS
SEC.
capital,
11.
(a)
reserves,
funds,
and
now or
hereafter
State
or
i ts
local
shall
subject
any
the s a m e
extent
property
is
by the
Bank
interest
to
imposed
shall
and
Federal,
to
(2)
subject
State,
its
both
and
that
property
and
local
value, as
and
all
as
local
franchise,
^nd
all
States
except
State
any
from
United
personal
its
holdings,
exempt
the
Federal,
be
property,
authority;
according
taxed,
be
by
tangible
to
i ts
security
shall
taxing
and
Bank,
surplus,
income
property
be
The
taxation
or
by
(1)
of
any
any
the
other
to
such
principal
taxation
real
Bank
taxation
obligations
to
other
to
issued
and
the
12
same
are
extent
as
All
this A c t
(15
1939
of
of
Exchange
their
private
of
corporations
herein
of
1934
this
the
and
shall
imposed
statute
the
be
on
or
The
t o t a l s of
Government
approve,
such
such
U.S.C.
to
within
Act
of
of
the
78c(a)(12)),
Trust
Indenture
Act
affect
thebudget
status
receipts
of
its
exempt
In
the
from
expenditures
United
to
of
of
the
Bank
budget
of
under
accounting
and. d i s b u r s e m e n t s
functions
the b u d g e t
of
the
any
and
shall
United
général
net
not
of
be
States
limitation
lending
(budget
States.
PREPARATION
prepare
3(a)(12)
the m e t h o d
the
Bank,
Securities
Act,
in
by t h e
(15
pursuant
securities
obligations
included
12.
Bank
selling
t.he d i s c h a r g e
SEC.
the
section
shall
in
of
the
7 7 d d d ( a ) (4)).
the B a n k
outlays)
of
of
of
by
exempted
i
transactions.
by
be
3.(a) (2)
Act
agencies
6(a)
to
304(a)(4)
Nothing
the F e d e r a l
issued
77c(a)(2)),
(15 U . S . C .
section
deemed
section
section
(c)
for
be
U.S.C.
Securities
of
obligations
shall
the m e a n i n g
and
obligations
taxed.
(b)
1933
the
order
to
obligations
OBLIGATIONS
furnish
Secretary
obligations
OF
of
in
t he
such
when
obligations
Treasury
form
as
prepared
is
the
to
be
for
delivery
authorized
Bank
held
may
in
the
to
-
13 -
delivery
upon
Treasury
subject
to
engraved
plates,
dies,
cuted
connection
of
in
the
the
Secretary
Secretary
pieces,
therewith
of
of
bed
the
the
order
and
shall
Treasury.
Treasury
the
other
remain
The
for
by
any
The
material,
in
Bank
Bank.
the
exe
custody
shall
reimburse
expenditures
made
in
ì
preparation,
custody,
and
delivery
ANNUAL
S EC.
13.
the
end
of
the
Congress
The
each.fiscal
an
annual
OBLIGATIONS
SEC.
Bank
14.
The
FOR
sixth
as
soon
transmit
report
ELIGIBLE
such
obligations.
REPORT
shall,
year,
of
of
its
to
practicable
the
of
BY
and
NATIONAL
t he
after
President
operations
PURCHASE
sentence
as
seventh
and
activities
BANKS
paragraph
\
of
section
U .S .C .
5136
2 4) ,
Federal
is
of
amended
Financing
participations,
Federal
Revised
by
Bank"
or
National
National
the
other
ment
15.
The
Corporation
be a p p l i c a b l e
to
" or
as
of
Association
(12
obligations
after
instruments
amended
"or
or
or
the
obligations,
issued
the
of
by
the
Government
Association,".
GOVERNMENT
SEC.
inserting
immediately
Mortgage
Mortgage
Statutes,
CORPORATION
budget
Control
t he
and
Act
Federal
audit
(31
CONTROL
ACT
provisions
U.S.C.
Financing
of
t he
841
et
seq.)
Bank
in
the
Govern
shall
same
14
•
manner
as
they
corporations
are
named
in
PAYMENTS
ON
16.
(a)
this A c t ,
t he
purchase
any l o c a l
public
necessary
l o ca l
to
the B a n k
of
body
upon
body
i ts
such
Secretary
t he
costs
that
agency
if
(b)
would
such
an
or
agency
which
to the
Bank
of
Treasury,
be
shall
be
terms
than
be m ade
and a p p r o p r i a t i o n s
as
in
for
authorized.
and
the
of
of
estimate
not
local
sold
U.S.C.
United
costs
t he
the
with
public
of
local
conditions
as
prescribed
payments
under
the
pur
costs
public
6.
appropriations
or
payments
obligations
making
agency
Bank.
obligations
section
by
the
body
offset
of
such
borrowing
to
advance
of
be
to
sufficient
by
of
purchase
to m a k e p e r i o d i c
prescribed
•
Federal
the
846)
States
as m a y
t o ‘the
guaranteeing
/
provision
consultation
the
contract
(31
obligations
borrowing
in
were
agency
the
head
Government
BODIES
conditions
The
by
Act
other
a result
shall
incurred
any
within
in
obligations,
purchasing
upon
PUBLIC
and
as
owned
such
Bank, of
increase
Bank may
rather
the
terms
the
Bank
of
OF
agency
Federal
to t he
are h e r e b y
or
The
by
t r a ct s m a y
by
obligations
ch as e d
section
BEHALF
i ts
or a g e n c i e s
101
obligations.
guaranteeing
of
the w h o l l y
Notwithstanding
avoid
public
to
section
SEC.
s ha l l b e m a d e
>•
applied
in
Such
bodies
this
con
therefor,
such
contracts
15
NO IMPAIRMENT
i
SEC.
17.
Nothing
impairing
any
authority
or t h e
Secretary
of law,
nor
shall
any p r o v i s i o n
of
agency
to
or t he
authority
Treasury
sell
to
of
in
this
or
the
Treasury
in
to
under
this
concerning
obligations
or
shall
the
the
such
construed
of
any
Act
President
other
provision
affect
right
of
the
as
the
of
Secretary
responsibility
purchase
be
responsibility
anything
law
Act
in
any manner
any
of
Federal
the
Treasury
Secretary
of
the
obligations.
SEPARABILITY
SEC.
tion
18.
If
any
provision
thereof
to
any
person
the v a l i d i t y
of
the
remainder
of s u c h
not be
provisions
to
other
or
of
this
Act,
circumstance,
of
the
persons
Act,
or
or
the
applica
is h e l d
invalid,
and
the
application
circumstances,
shall
affected.
EFFECTIVE
SEC.
19.
This
Act
its *e n a c t m e n t , e x c e p t
the e x p i r a t i o n
of
becomes
that
thirty
DATE
effective
section
days
after
upon
7 becomes
the
date
effective
siich d a t e .
of
upon
DepartmnloltheTREASURY
INGTON, D.C. 20220
T E L E P H O N E W 04-2041
FOR IMMEDIATE RELEASE
February 9, 1973
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 $4,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing
of $4,202,090,000
February 22, 1973, in the amount
as follows:
91-day bills (to maturity date) to be issued February 22, 1973,
in the amount
of $2,400,000,000, or thereabouts, representing an additional amount of bills
dated November 24, 1972,
and to mature
May 24, 1973
originally issued in the amount of $1,900,550,000,
(CUSIP No. 912793 QVl)
the additional and original
bills to be freely interchangeable.
182-day bills, for $1,800,000,000, or thereabouts, to be dated February 22, 1973,
and to mature
August 23, 1973
(CUSIP No. 912793
RR9).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty.p.m., Eastern Standard time, Friday, February 16, 1973.
Tenders will not be received at the Treasury Department, Washington.
must be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied by Federal Reserve Banks
or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers
provided the names of the customers are set forth in such tenders.
Others than
banking institutions will not be permitted to submit tenders except for their own
account.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only thosl
submitting competitive 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 any one bidder will be accepte
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 February 22, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing February 22, 1973.
treatment.
Cash and exchange tenders will receive equal
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.
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 considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid
for the 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.
Treasury Department Circular Wo. 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.
Dtparim entoftheTREASURY
hlNGTON. D C 20220
TELEPHONE W 04-2041
FOR IMMEDIATE RELEASE
February 9, 1973
RESULTS OF TREASURY EXCHANGE OFFERING
The Treasury announced today that $2.5 billion of the $4.7 billion of notes
held by the general public maturing February 15, 1973, have been exchanged for
the new 6-1/2$ notes leaving $2.2 billion o r 4 7.4$ unexchanged.
Federal Reserve
Banks and Government accounts exchanged $1.4 billion of notes held by them for
the new 6-1/2$ notes.
Details of the exchange are as follows
(amounts in millions):
ELIGIBLE FOR EXCHANGE
Security
6-1/2$ notes
4-7/8$ notes
GRAND TOTAL
F R B ’s and
Govt. Accts.
$
EXCHANGED
General
Public
158
$2,356
1,281
$1,439
•
F R B ’s and
Govt. Accts.
$
General
Public
Total
122
$1,309
$1,431
2,391
1,270
1,189
2,459
$4,747
$1,392
$2,498
$3,890
FOR IMMEDIATE RELEASE
J A M E S W.
February
DONLEY
TO
LEAVE
TREASURY
12,
1973
POST
S e c r e t a r y of the T r e a s u r y G e o r g e P. S h u l t z t o d a y
a c c e p t e d '’w i t h d e e p p e r s o n a l r e g r e t " t h e r e s i g n a t i o n of
J a m e s W. D o n l e y as S p e c i a l A s s i s t a n t to the S e c r e t a r y f o r
Public Affairs.
T h e r e s i g n a t i o n is e f f e c t i v e M a r c h 1.
O n t h a t d a t e Mr. D o n l e y w i l l b e c o m e P r e s i d e n t of
F r e d R o s e n A s s o c i a t e s , Inc., of N e w Y o r k City, a c o r p o r a t e
and f i n a n c i a l p u b l i c rela t i o n s fir m w h i c h serves m a j o r
b a n k i n g a n d c o r p o r a t e c l i e n t s in the U.S. a n d a b r o a d .
"We. h a v e b e e n t h r o u g h an e x c i t i n g e r a o f e c o n o m i c
h i s tory together and during these i m portant times I
h a v e v a l u e d y o u r h e l p in c o m m u n i c a t i n g a d m i n i s t r a t i o n
p o l i c y to the p u b l i c .
Your friendly, but professional,
r e l a t i o n s h i p w i t h the f i n a n c i a l a n d e c o n o m i c p r e s s has
h e l p e d i m p r o v e the a c c u r a c y a n d u n d e r s t a n d i n g o f
national and international economic news," Secretary
S h u l t z s a i d in a l e t t e r to Mr. D o n l e y .
F o r m e r T r e a s u r y S e c r e t a r y J o h n B. C o n n a l l y b r o u g h t
D o n l e y to W a s h i n g t o n in M a r c h 1972.
A t t h a t t i m e he
was v i c e p r e s i d e n t of a N e w Y o r k p u b l i c r e l a t i o n s a g e n c y
r e p r e s e n t i n g m a j o r c o r p o r a t i o n s and banks.
D o n l e y , 38,
p r e v i o u s l y h a d b e e n a s s i s t a n t to the p u b l i s h e r of T i m e
magazine.
H e h as a m a s t e r s d e g r e e in i n t e r n a t i o n a l
b u s i n e s s f r o m the W h a r t o n S c h o o l of F i n a n c e a n d C o m m e r c e ,
a n d a B A in e c o n o m i c s f r o m D e n i s o n U n i v e r s i t y in his
h o m e s t a t e of O h i o .
D o n l e y returns w i t h his w i f e and
two c h i l d r e n to t h e i r h o m e in G r e e n w i c h , C o n n e c t i c u t .
oOo
S-lll
THE S E C R E T A R Y O F THE T R E A S U R Y
WASHINGTON
2 0 2 2 0
February 9, 1973
Dear Jim:
I accept, with deep personal regret, your
resignation as my Special Assistant for Public
Affairs, effective March 1.
We have been through an exciting era of
economic history together and during these
important times I have valued your help in com
municating administration policy to the public.
Your friendly, but professional, relationship
with the financial and economic press has helped
improve the accuracy and understanding of national
and international economic news.
Although you have been with us only one
year, you have made your mark and I hope you
will continue to help us as a member of the
distinguished Treasury alumni.
Sincerely yours,
George P. Shultz
Mr. James W. Donley
Special Assistant to the Secretary
for Public Affairs
U. S. Treasury Department
Washington, D.C. 20220
Department
ofthefREASURY
IaSHINGTON, D.C. 20220
TELEP H O N E W04-2041
cM
I tTENTION:
m
FINANCIAL EDITOR
February 9, 1973
RELEASE 6:30 P.M.
RESULTS OF TREASURY’S WEEKLY
BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
Ulls, one series to be an additional issue of the bills dated November 16, 1972
, and
[he other series to be dated February 15, 1973 , which were invited on February 2, 1973,
ere opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
pr thereabouts, of
91-day bills and for $1,800,000,000, or thereabouts, of
182-day
pills. The details of the two series are as follows:
182 -day Treasury bills
maturing August 16, 1975
Approx. Equiv,
Annual Rate
Price
9 1 -day Treasury bills
maturing May 17, 1973
Approx. Equiv.
Annual Rate
Price
1GE OF ACCEPTED
COMPETITIVE BIDS:
5.353$
5.471$
5.424$
98.647
98.617
98.629
High
Low
Average
97.182 a/
97.140
97.157
±J
5.5.74$
5.657$
5.624$
1/
a/ Excepting one tender of $500,000
54$ of the amount of 9 1 -day bills bid for at the low price was accepted
76$ of the amount of 182 -day bills bid for at the low price was accepted
COTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Balias
San Francisco
TOTALS
Applied For
Accepted
Applied For
Accepted
$
$
$
$
43,425,000
2,834,820,000
14,140,000
20,500,000
6,195,000
23,995,000
283,070,000
37,215 ,‘000
35,275,000
26,485,000
37,850,000
147,670,000
$3,510,640,000
8,425,000
1,885,920,000
14,140,000
20,500,000
6,195,000
23,995,000
208,870,000
34,215,000
35,275,000
16,485,000
24,850,000
121,210,000
$2,400,080,000 b/
47,615,000
2,578,920,000
4,195,000
9,320,000
2,355,000
14,245,000
228,085,000
24,005,000
33,140,000
19,695,000
38,430,000
164,360,000
$3,164,365,000
12,615,000
1,488,640,000
4,195,000
9,320,000
2,355,000
9,245,000
96,845,000
14,265,000
33,140,000
9,695,000
10,430,000
109,360,000
$1,800,105,000 c/
Includes $164,000,000 noncompetitive tenders accepted at the average price of 98.629
t/ Includes $ 70,485,000 noncompetitive tenders accepted at the average price of 97.157
*•' These rates are on a bank discount basis.
The equivalent coupon issue yields are
5.58 $ for the 91-day bills, and 5.87$ for the 182-day bills.
FOR IMMEDIATE RELEASE
Feb. 10, 1973
A spokesman for the U.S. Treasury today issued the
following statement:
Under instructions from the President and in constant
communication with the Secretary of the Treasury, Mr. Paul A.
Volcker, Under Secretary for Monetary Affairs for the U.S.
Treasury is conferring with authorities of other nations on
«Ü
recent developments in the foreign exchange markets.
Mr. Volcker left Washington on the afternoon of Wednesday,
February 7th.
Thus far he has held conversations
Bonn and London.
He will soon be enroute to Paris.
oOo ■
in Tokyo,
/
'2
FOR IMMEDIATE RELEASE
Feb. 12, 1973
A Treasury Department spokesman said today
that Paul A. Volcker, Under Secretary for Monetary
Affairs,' flew today to Bonn, West Germany, from Paris.
He is holding discusssions with Takashi Hosomi, Special
Adviser to the Minister of Finance of Japan.
-
0-
Mr. Volcker remains in constant contact with
the Secretary of the Treasury.
(Despite published reports, he is not reporting
directly to the President.)
He left Washington Wednesday, Feb. 7. ^o far he
has visited Tokyo, Bonn,London, Rome and Paris
for conversations on recent foreign excha ge market
developments.
We have no further comment.
oOo
Department of th e J R [A $ U R Y
INGTON. D C. 20220
T E LE P H O N E W 04-2041
FOR IMMEDIATE RELEASE
FEBRUARY 12, 1973
JOSEPH LOFTUS JOINS TREASURY DEPARTMENT
Secretary of the Treasury George P. Shultz
announced today the appointment of Joseph A 0 Loftus
as Special Consultant to the Secretary«
Mro Loftus will work on special assignments from
Secretary Shultz and in co-operation with the Special
Assistant to the Secretary for Public Affairs,
James Wo Donley, and with M r 0 Donley's successor, who
will be designated soon0 M r 0 Donley announced his
resignation today, effective March 1 0
Mrc Loftus, a member of the NEW YORK TIMES
Washington Bureau for 25 years, joined the Labor
Department four years ago as Special Assistant to the
Secretary for Communications0
at that time was M r 0 Shultz0
oOo
S-112
The Secretary of Labor
UNITED S TA T ES SAVINGS BONDS ISSUED AND R E D E E M E D THRO U G H
( D o l l a r a m o u n t s in m i l l i o n s D E S C R IP T IO N
¡T U R
ED
le ñ e s
A -1935 thru D -1 9 4 1
¡Series
F and G -1 9 4 1 th ru 1952
S e rie s
J and K -1 9 5 2 th ru 1957
Ja n u a ry 31 , 1973
rou nd ed and w ill not n e c e s s a rily a dd to to ta ls )
A M O U N T IS S U E D ^ /
AMOUNT
r e d e e m e d
AMOUNT
! /
o u t s t a n d in g
! /
% O U T S T A N D IN G
O F A M O U N T IS S U E D
5,003
29,521
3 , 754-
4,998
29,497
3,745
5
23
8
.10
.08
.21
1,920
8 , 4-70
13,609
15,888
12,509
5,701
5 , 4-33
5,632
5,587
4-, 901
4-, 239
4-, 4-4-45,085
5 , 1845 , 4-03
5 , 2244,928
A , 821
4-, 524
4- , 55Q
4,637
4-, 509
5,064
4,936
4-, 816
5,183
5,129
4-, 870
4-, 579
4,789
5,506
5 , 4-79
4-08
1,730
7,625
12,283
14,265
11,085
4,895
•' 4,532
4,620
4,506
3,901
3,374
3,513
3,941
3,965
4,091
3,922
3,651
3,476
3,223
3,148
3,084
2,911
3,067
2,995
2,887
2,991
2,924
2,734
2,431
2,229
2,055
1,147
405
189
845
1,326
1,623
1,424
806
901
1,011
1,081
1,000
866
931
1y
1,220
1,312
1,302
1,277
1,346
1,301
1,40 2
1,553
1,598
1,997
1,940
1,929
2,192
2,205
2,137
2,148
2,560
3,451
4,332
3
9.84
9.98
9.74
10.22
11.38
14.14
16.58
17.95
19.35
20.40
20.43
20.95
22.50
23.53
24.28
24.92
25.91
27.92
28.76
30.81
33.49
35.44
39.44
39.30
40.05
42.29
42.99
43.88
46.91
53.46
62.68
79.07
.74
187,957
137,605
50,352
26.79
5,485
8,830
3,933
2,894
1,551
5,897
28.28
66.78
14-, 315
6,827
7 ,4 88
52.31
202,272
144,432
57,840
28.60
38,278
202,272
24-0,550
38,240
144,432
182,672
36
57,840
57,876
.09
28.60
24.06
■m a t u r e d
S e rie s E - ^
:
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
19587
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
U n c la s s ifie d
T o ta l S e r ie s E
Series
H (1952 thru M a y , 1 9 5 9 )-^
H ( J u n e , 1959 thru 1972)
T o ta l S e r ie s H
T o ta l S e r ie s E an d H
( T o t a l m atu red
AH S e rie s
l
T o ta l
unmatnreH
( G ra n d T o t a l
["eludes a c c ru e d d is c o u n t.
r ren< red em p tio n v a lu e .
W P on of o w n er b o n d s m a y b e h e l d a n d w i l l e a rn i n t e r e s t fo r a d d it io n a l p e r io d s a f t e r o r i g in a l m a t u r it y d a t e s .
Form PD 3812 (Rev. Feb. 1972) —Dept, of the Treasury —Bureau of the Public Debt
Department o f t h e J R [ A $ U R Y
INGTON, D C 20220
T ELEP H O N E W04-2041
February 12, 1973
FOR IMMEDIATE RELEASE
DAVID MOSSO NAMED
DEPUTY FISCAL ASSISTANT SECRETARY
Secretary of the Treasury George P. Shultz today
announced the appointment of David Mosso, a Treasury
career official, as Deputy Fiscal Assistant Secretary
of the Treasury. He succeeds Sidney S. Sokol, who retired
on February 3, 1973.
Mr. Mosso began his Federal career in 1955 in
Treasury*s Bureau of Accounts as a staff assistant in
thfc former Division of Central Reports. He was appointed
head of that office in 1964 and became Deputy Commissioner
of the Bureau in 1965. Since February 1971 he has served
as Commissioner of Accounts, and he will continue those
duties along with his new assignment.
Mr. Mosso, 46, was born in Pasadena, California, and
spent his early years in Kansas. He holds a Bachelor's
degree, magna cum laude, in business administration from
Washburn University, Topeka, Kansas, and a Master's degree
in economics from the University of Minnesota. Prior to
joining the Treasury he was an instructor in accounting
and economics at Washburn. He is also a Certified Public
Accountant in the State of Virginia.
Mr. Mosso has been honored with the Department's
awards for Meritorious Service and Exceptional Service,
the American Institute of Certified Public Accountants'
Elijah Watts Sells Award, and election to Phi Kappa Phi
honor society.
He is married to the former Lee Pierce of Richmond,
Virginia. They have three children, Jan, Andrew and Jocelyn,
and reside in Springfield, Virginia.
oOo
S -113
15
Dtpartment of
KINGTON, D.C. 20220
iheTREASURY
T E L E P H O N E W Q4-2041
FOR IMMEDIATE RELEASE
February 12, 1973
STATEMENT ON FOREIGN ECONOMIC POLICY
BY
SECRETARY OF THE TREASURY GEORGE P. SHULTZ
The United States, as do other nations, recognizes the
need to reform and strengthen the framework for international
trade and investment. That framework must support our basic
objective of enhancing the living standards of all nations.
It must encourage the peaceful competition that underlies
economic progress and efficiency. It must provide scope'
for each nation -- while sharing in the mutual benefits of
trade -- to respect its own institutions and its own particular
needs. It must incorporate the fundamental truth that
prosperity of one nation should not be sought at the expense
of'another.
This great task of reform is not for one country alone,
nor can it be achieved in a single step. We can take
satisfaction in what has been accomplished on a. cooperative
basis since the actions announced on August 15, 1971 clearly
signaled our recognition of the need for.decisive change.
•'- Intense negotiations established an important
fact in December 1971: mutual agreement can be
reached on changes in the. pattern of world exchange
rates, including the parity of the United States
dollar, in order to promote the agreed goal of a
better balance in international trade and payments.
-- Monetary negotiations have been started by the
"Committee of Twenty” on the premise that better
ways must be found to prevent large payments
imbalances which distort national economies,
disturb financial markets, and threaten the free
flow of trade. The United States has made
practical and specific proposals for international
monetary reform.
-- The groundwork is being laid for comprehensive
trade negotiations. Those negotiations should look
beyond industrial tariffs to encompass also other
S -11 4
*
-
2
-
barriers to the free flow of goods. They should
assure fair competitive treatment of the products
of all countries. They should also seek agreed
ways of avoiding abrupt dislocations of workers
and businesses.
In September 1972 the President told the financial
leaders of the world that "The time has come for action
across the entire front of international economic problems.
Recurring monetary crises, such as we have experienced all
too often in the past decade; unfair currency alignments
and trading arrangements, which put the workers of one
nation at a disadvantage with workers of another nation;
great disparities in development that breed resentment; a
monetary system that makes no provision for the realities
of the present and the needs of the future -- all these not
only injure our economies, they also create political tensions
that subvert the- cause of peace.”
At the same meeting, I outlined the principles of a
monetary system that would enable all nations, including
the United States, to achieve and maintain overall balance
in their international payments. Those principles would
promote prompt adjustment and would provide equitable treat
ment for all nations — large and small, rich and poor.
Yet, in recent months we have seen disquieting signs.
Our own trade has continued in serious deficit, weakening
our external financial position. Other nations have been
slow in eliminating their excessive surpluses, thereby
contributing to uncertainty and instability.
In recent days,
currency disturbances have rocked world exchange markets.
Under the pressure of events, some countries have responded
with added restrictions, dangerously moving away from the
basic objectives we seek.
Progress in the work of the Committee of Twenty has
been too slow and should move with a greater sense of
urgency. The time has come to give renewed impetus to our
efforts in behalf of a stronger international economic
order.
To that end, in consultation with our trading partners
and in keeping with the basic principles of our proposals
for monetary reform, we are taking a series of actions
designed to achieve three interrelated purposes:
-3(a) to speed improvement of our trade and payments
position in a manner that will support our effort
to achieve constructive reform of the monetary
system;
(b) to lay the legislative groundwork for broad and
outward-looking trade negotiations, paralleling*
our efforts to strengthen the monetary system;
and
(c) to assure that American workers and American
businessmen are treated equitably in our trading
relationships.
•
For these purposes:
First, the President is requesting that the Congress
authorize a further realignment of exchange rates. This
objective will be sought by a formal 10 percent reduction
in the par value of the dollar from 0.92106 SDR to the
dollar to 0.82895 SDR to the dollar.
Although this action will, under the existing Articles
of Agreement of the International Monetary Fund, result in
a change in the official relationship of the dollar to gold,
I should like to stress that this technical change has no
practical significance. The market price of gold in recent
years has diverged widely from the official price, and
under these conditions gold has not been transferred to any
significant degree among international monetary authorities.
We remain strongly of the opinion that orderly arrangements
must be negotiated to facilitate the continuing reduction
of the role of gold in international monetary affairs.
Consultations with our leading trading partners in
Europe assure me that the proposed change in the par value
of the dollar is acceptable to them, and-will therefore be
effective immediately in exchange rates for the dollar in
international markets. The dollar will dec line in value by
about 10 percent in terms of those currencies for which there
is an effective par value, for example the Deutsche mark
and the French franc.
-
Japanese authorities have indicated that the yen will
be permitted to float. Our firm expectation is that the yen
will float into a relationship vis-a-vis other currencies consistent
with achieving a balance of payments equilibrium not dependent upon
significant government intervention.
■JL
- 4 These changes are intended to supplement and Work in
the same direction as the changes accomplished in the
Smithsonian Agreement of December 1971. They take into
account recent developments and are designed to speed
improvement in our trade and payments position.' In
particular, they are designed, together with appropriate
trade liberalization, to correct the major payments
imbalance between Japan and the United States which has
persisted in the past year.
*
Other countries may also propose changes in their par
values or central rates to the International Monetary Fund.
We will support all changes that seem warranted on the basis
of current and prospective payments imbalances, but plan to
vote against any changes that are inappropriate.
We have learned that time must pass before new exchange
relationships modify established patterns of trade and
capital flows. However, there can be no doubt we have
*
achieved a major improvement in the competitive position
of American workers and American business.
The new exchange rates being established at this time
represent a reasonable estimate of the relationships which -taken together with appropriate measures for the removal of
existing trade and investment restraints -- will in time
move international economic relationships into sustainable
equilibrium. We have, however, undertaken no obligations
for the U.S. Government to intervene in foreign exchange
markets.
Second, the President has decided to send shortly to
the Congress proposals for comprehensive trade legislation.
Prior to submitting that legislation, intensive consultations
will be held with Members of Congress, labor, agriculture,
and business to assure that, the legislation reflects our
needs as fully as possible.
,
This legislation, among other things, should furnish
the tools we need, to:
(i) provide for lowering tariff and non-tariff
barriers to trade, assuming our trading partners
are willing to participate fully with us in that
process;
(ii) provide for raising tariffs when such action
would contribute to arrangements assuring that
American exports have fair access to foreign
markets;
(iii) provide safeguards against the disruption of
particular markets and production from rapid
changes in foreign trade; and
(iv) protect our external position from large and
persistent deficits.
i
In preparing this legislation, the President is
particularly concerned that, however efficient our workers
and businesses, and however exchange rates might be altered,
American producers be treated fairly and that they have
equitable access to foreign markets. Too often, we have
been shut out by a web of administrative barriers and
controls. Moreover, the rules governing trading relation
ships have, in many instances, become obsolete and, like
our international monetary rules, need extensive reform. <
We cannot be faced with insuperable barriers to our
exports and yet simultaneously be expected to end our
deficit.
At the same time, we must recognize that in some areas
the United States, too, can be cited for its barriers to
trade. The best way to deal with these barriers on both
sides is to remove them. We shall bargain hard to that end.
I am convinced the American workers and the American
consumer will be the beneficiaries.
In proposing this legislation, the President recognizes
that the choice we face will not lie between greater freedom
and the status quo. Our trade position must be improved.
If we cannot accomplish that objective in a framework of
freer and fairer trade, the pressures to retreat inward
will be intense.
We must avoid that risk, for it is the road to
international recrimination, isolation, and autarky.
Third, in coordination with the Secretary of Commerce,
we shall phase out the Interest Equalization Tax and the
controls of the Office of Foreign Direct Investment. Both
controls will be terminated at the latest by December 31,
1974.
I am advised that the Federal Reserve Board will
consider comparable steps for their Voluntary Foreign Credit
Restraint Program.
-
6
-
The phasing out of these restraints is appropriate in
view of the improvement which will be brought tto our
underlying payments position by the cumulative* effect of
the exchange rate changes, by continued success in curbing
inflationary tendencies, and by the attractiveness of the
U.S. economy for investors from abroad. The termination
of the restraints on capital flows is appropriate in the
light of our broad objective of reducing governmental
controls on private transactions.
The measures I have announced today -- the realignment
of currency values, the proposed new trade legislation, and
the termination of U.S. controls on capital movements -will serve to move our economy and the world economy closer
to conditions of international equilibrium in a context of
competitive freedom. They will accelerate the pace of
successful monetary and trade reform.
They are not intended to, and cannot, substitute for
effective management of our domestic economy. The discipline
of budgetary and. monetary restraint and effective wage-price
stabilization must and will be pursued with full vigor.
We have proposed a budget which will avoid a revival of
inflationary pressure in the United States. We again call
upon the Congress, because of our international financial
requirement as well as for the sake of economic stability
at home, to assist in keeping Federal expenditures within
the limits of the Presidents budget. We are continuing a
strong system of price and wage controls. Recent inter
national economic developments reemphasize the need to
administer these controls in a way that will further reduce
the rate of inflation. We are determined to do that.
The cooperation of our. principal trading and financial
partners in developing a joint solution to the acute
difficulties of the last few days has been heartening. We
now call upon them to join with us in moving more rapidly
to a more efficient international monetary system and to a
more equitable and freer world trading system so that we can
make adjustments in the future without crises and so that
our people can enjoy the maximum benefits of exchange
among us.
0O0
DEPARTMENT OF THE TREASURY
STATEMENT OF
THE HONORABLE GEORGE P. SHULTZ
SECRETARY OF THE TREASURY
l
ACCOMPANIED BY:
William P. Rogers
Secretary of State
/
«
Arthur Burns
Chairman, Federal Reserve System
Herbert Stein
Council of Economic Advisors
Peter Flanigan
Executive Office of the President
William E. Simon
Deputy Secretary of the Treasury
Jack Bennett
Deputy Under-Secretary of Monetary Affairs
Room 4121
Department of the Treasur
Washington, D. C.
Monday, February 12, 1973
10:50 o ‘clock, p.m.
2
SECRETARY
of m a j o r
SHULTZ:
steps,
which
to th e A m e r i c a n
the A m e r i c a n
so
here
say,
in
have
will
this
be
the A m e r i c a n
to
say
a word
the n e g o t i a t i o n s
understand
had
consisting
and back
believe
workingman,
first,
that people
We
we
announcing
evening
a series
of definite
benefit
businessman,
and
consumer.
I want,
volved
I'm
a small,
of m y s e l f
here.
We
it's
about
the
that we
a
have
little
a policy
and
gentlemen
have met
quite
been
from most.
group,
here
frequently
in
through
different
sort of
the
procedure
you might
on my
over
an
left
extended
/
period
o f .time,
to o t h e r w i s e
We
times
on
Burns
and
this
We
Mr.
have
in a n
from one
And he
by
o ut.
of
He
is
come
had
to
with
the
and
of
State
cared
He'll
as y o u
a great big
be
out
here
and
been
to
of
Dr.
on
it,
and
so.
had
our
picture
soon will
of
get
tomorrow morning.
traveling
kept
President
taken
the
a number
here where we
have
from the
then
done
and pretty
with
has.
the P r e s i d e n t
negotiator
another
groups
President
Troika have
in Bonn,
home.
our
group,
in v a r y i n g
should have
instructions
this
and
the
have
so.
a procedure
really
and
have
and
than we might
Secretary
had meetings
here.
had
The
Flanigan
capital
has
developed
worked
we
or
met myself with
had kind
airplane
But,
individually
and we
Volcker
frequently
last week
subject.
I have
negotiator,
Paul
the
I have
Stein,
*
in
have met
President.
Mr.
and more
the
around
advised.
that were
President
and
3
Then, as he has proceeded and as we have gathered
information from the governments we were talking with, we
have sifted those in our group and discussed them hack and
forth with the President, and he has made additional deci
sions as we have gone along.
I would say the basic decision on what we would go
v
forward with, in terms of our own plans, the President made
along about last Tuesday; and then the final decision on
what we would finally go forward with in the light of all
the things' that other people had to say, the President made this
morning after a discussion I had with him on the telephone.
So that is our procedure.
Now, I think our approach here has been, in this crisis,
to see how we might use the crisis as an opportunity, and I
believe.that we haye.
It is an opportunity to do something
that will be of benefit to the worker, to our businesses?
an opportunity to do something that will move us toward
*
equilibrium in international accounts, and an opportunity
to do something that is fundamentally consistent with the
principles that we laid out at the IMF last September.
So we have had all of these things in mind in trying
to get something constructive out of the sense of crisis
that has taken place here.
Now, as you know becuase you have seen this statement,
there are in a sense three things being announced:
first,
a set of exchange rate changes that start with a ten percent
change, that derives from a ten percent reduction or devalua
tion of the dollar.
We have additionally a float by the Japanese, and we
believe that market forces will carry the dollar-yen rela
tionship into a larger change than the change our devaluation
action will achieve with respect to major European currencies
So o^er all, we have a major exchange rate realignment
that, we think will benefit our international accounts and
our position in world trade.
I might note, also, it is in the statement, that the
U.S. has undertaken no obligation for intervention in foreign
exchange markets.
Second, as you remember in the IMF proposals, we put
forward the notion that you cannot expect the exchange rate
system to carry the full load of adjustment.
We think we
need to be better equipped as a country in terms of our
ability to deal with trade matters.
And so, the President is announcing today his inten
tion to seek additional trade authority from the Congress,
and the categories, some of the categories in which we will
be working are laid out in the statement that you have.
But we want to have a greater ability to negotiate
flexibly and effectively on trade matters.
And the President
5
will make a final decision on what he will ask for after we
have had a wide process of consultation in the Congress, and
with business and with labor and agriculture, and other
groups.
Finally, also consistent with our approach in the IMF
speech in which we said it is desirable to reduce as much
\
i
as possible the impact of controls, we will phase out our
capital controls, which are controls on the export of capital
by the end of December, 1974, by then or before.
So, these are three inter-related sets of actions and
proposals 'that the President has decided on which, as I say,
I think will yield a better deal for the American working
man and businessman in world markets.
Wèll, I will be glad to take questions.
Secretary Rogers, do you have anything additional to
say?
Peter, Arthur, Herb, Bill or Jack?
(No response)
QUESTION:
Mr. Secretary, always in devaluations there
are two percentages.
Last year it was 7.89 and 8.57.
What is the other percentage in this case?
SECRETARY SHULTZ:
You mean depending upon how you com
pute it and how it’s worked?
QUESTION:
or the inside.
Yes, whether you look at it from the outside
;
7
QUESTION:
Do you know how much it will add to living
costs, Mr. Secretary?
SECRETARY SHULTZ:
Oh, it is very difficult to make
an estimate of that sort, and of course it depends a lot on
how successful we are in achieving the budget results that
)
the President has laid out, and how successful we are in
making Phase III work as well as we believe it can work.
So, I think it’s a very difficult kind of estimate.
QUESTION:
Mr. Secretary, would you repeat what you
said about: the yen before?
I didn't understand.
Is the yen
to go down ten percent before a float starts?
What was the 277 figure?
SECRETARY SHULTZ:
Well, we start with a devaluation
of ten percent.
QUESTION:
Of the yen?
SECRETARY SHULTZ:
f
QUESTION:
Of the dollar.
Of the dollar.
(General laughter)
QUESTION:
But are you anticipating, at a minimum, an
equal revaluation of the yen to the ten percent?
That's
what I'm trying to get to.
SECRETARY SHULTZ:
We anticipate that market forces will
carry the dollar-yen relationship into a larger change, net
change, than our action will achieve with respect to major
European currencies.
*
QUESTION:
Mr. Secretary, do you anticipate --
SECRETARY SHULTZ:
But since it is a float, we don't
know precisely what that will amount to, but we expect it to
be larger than the impact of the ten percent devaluation with
respect to the Deutsche mark.
QUESTION:
What is your understanding or expectation
\
on the three major floating currencies: the Canadian dollar,
the British pound, and the Swiss franc?
And also, what is your understanding or expectation
on the two'-tiered markets in Europe?
SECRETARY SHULTZ:
Well, we expect, as we understand it,
and of course other countries will announce what they do -we do not announce what they do -- but I think it is probable
that those who are floating will continue to float.
QUESTION:
Mr. Secretary, how long do you expect that
Japan will float the yen?
SECRETARY SHULTZ:
QUESTION:
Pardon me?
How long to you anticipate that Japan will
float the yen?
SECRETARY SHULTZ:
Well, that is a question you will
Have to ask the Japanese.
What we know is that they will float the yen.
How long
that will take place remains to be seen.
QUESTION:
Mr. Secretary, did you try to get an up
valuation of the mark as part of this exercise?
9
SECRETARY SHULTZ:
Well, we worked around a lot of
ideas, and we have come out with a result that we think is a
good one under all of the circumstances.
And we feel that
this is a good result, and I don't think it particularly
serves any purpose in going over what might or might not have
happened.
QUESTION:
What will happen when Congress comes back,
and you get legislative approval of this, Mr. Secretary?
SECRETARY SHULTZ:
I think it's very likely exchange
markets will reflect this announcement quickly and, at the
same time, we will go up for legislation as soon as Congress
returns.
QUESTION:
When will the exchange markets open?
SECRETARY SHULTZ:
Well,
ours
will open tomorrow.
And others -- what will happen in other countries, I am
not certain.
Some of those have been closed, and some may be
closed tomorrow.
<*
I'm not sure about that.
(More)
(
QUESTION:
What do you expect from the phasing!out of
the controls in terms of the balance of payments?
SECRETARY SHULTZ:
Well, that again is hard to estimate
I think one can question what sort of the stable state
impact of those controls is at this stage.
There is a problem Lof loans abroad, that might be
brought here in large quantities that one has to think
about as a phase-out type of problem.
And at the same
time, I think we may very well have an impact on the flow
of funds into the United States, once we establish the fact
that money that’s here is not going to be restricted and
going out again.
So, this is again a complicated thing to
estimate, but we think the net benefits will be good for
us in the long run.
QUESTION:
Hr. Secretary, do you anticipate any changes
in central rates ov par values of any European currencies?
^SECRETARY SHULTZ:
We have no basis for anticipating
that, but again, other countries will have to speak for
themselves.
QUESTION:
But you did say that the three that are
floating, which includes Canada, you will anticipate floatin
SECRETARY SHULTZ:
That would be my expectation, that
they will continue floating, but they will have to speak for
themselves -- I don't intend to try to speak for them.
11
QUESTION:
Europe?
What, about the two-tier systems) of
Are those going to be phased out, or are they
going to remain in force?
—\ •:
SECRETARY SHULTZ:
Again, these countries will
have to speak for themselves and make their own statements
about various controls -on the capital movements, and on the
two-tier system.
QUESTION:
Mr. Secretary, you indicate in your
statement that you’d like gold to be phased out of the
international monetary system.
Isn’t increasing or
devaluing the dollar against gold counterproductive in that
sense?
SECRETARY SHULTZ:
Not particularly.
This is
really a kind of a mechanical adjustment as we see it, and
we have stated our view
on this matter many times.
We state it here again just so that people who might
get> the impression that you stated will be disabused of it
and we wanted to put it right in there.
QUESTION:
Mr. Secretary, can we expect some kind
of international conference, which might make an
(More)
adjustment,
12
readjustment, something like a Smithsonian Conference?
SECRETARY SHULTZ:
J
We have, I think basically]
got an agreement on this particular set of exchange ratc|
changes, and we don’t need a conference in order to do
it.
It’s been done with the cooperation of various
i
people, and at considerable loss of sleep by many,
particularly Mr. Volcker.
But that has been done.
Now, I think that one of the things that comes
o ix t
of this, and is dramatized by this, and it has been
interesting to me in the conversations and messages and
so forth that have gone back and forth, is how this has
come out.
The realization is that it is important to
g et
on with the task of basic reform of the international
monetary system.
And I think that again in the spirit
of trying to make an opportunity out of a crisis, that
others have realized this.
We have pointed it up and brought it up, and I
think we will get a little more rapid movement on this
as a result of this crisis.
People are aware that all
i
not well, and that we need to do things to repair this
system.
So there will be meetings of that kind, but
we
don’t need a meeting in the Smithsonion in order to con:
these changes.
They have essentially been worked out.
QUESTION:
Mr. Secretary, will we be here a
year from now to hear the same kind of announcement of
ten percent, five percent?
SECRETARY SHULTZ:
Is the dollar just plunging?
I think the basic fact abou
the dollar is that we have a large, diverse, strong
economy that is expanding.
It is healthy.
I
We have our problems with inflation.
We seem
to be doing better with them than most of our other
*
trading partners. And so I think the outlook is
fundamentally strong.
On the other hand, we have a great disequilibr
in trade and balance of payments accounts, and we feel
this is a step and a strong step in curing them.
We feel that the negotiations for change in th
basic, system will be -- are very important and helpful.
And so, we are moving in the right direction.
And where we will be a year from now, I would
guess we will have to wait a while to see.
QUESTION:
Mr. Secretary, in relation to --
specifically in relation to Canada, there is no mention
in here of Canada, and it is floating its currency.
Do you have any particular objectives in mind
with trade relationships with Canada that you would like
to pursue?
SECRETARY SHULTZ:
Well, I have talked with th
Minister of Finance, Mr. John Turner, at. least twice
during these discussions.
And again, Canada will anno'un
14
its own course of action with respect to the exchange
rates.
But I believe he did say, in Parliament today,
that they expected to continue to float.
But just what
on that they may add is up to them.
We have felt that there are a number of things
in the trade picture with Canada that should be
straightened out and changed and improved, and we will
continue to work at that.
But that is essentially --
those are things that we have been talking about for
some time.
There is nothing particularly new there.
VOICE:
Thank you, Mr. Secretary.
department
INGTQN, D C 20220
oftheTREASURY
T ÉLÉP H O N É W04-2041
FOR RELEASE ON DELIVERY
REMARKS OF DR. H. I. LIEBLING
DEPUTY DIRECTOR, OFFICE OF FINANCIAL ANALYSIS,
OFFICE OF THE SECRETARY, THE DEPARTMENT OF THE TREASURY,
AT THE ECONOMIC OUTLOOK LUNCHEON SPONSORED BY
SECURITY ANALYSTS OF SAN FRANCISCO
AND THE NATIONAL ASSOCIATION OF BUSINESS ECONOMISTS
THURSDAY, FEBRUARY 15, 1973, 12:15 P.M.
¡¡#
THE RE-ENTRY PROBLEM
The country now is enjoying the benefits and
disquietudes of a new prospect: re-entry into the zone
of its potential of economic growth and employment. It
has its pleasures and its pains.
That may not be news -- and, indeed, to some it
remains not even an acceptable evaluation because it is
considered too buoyant a view of 1973 prospects. There
are some die-hard pessimists, and there are also some
who are restrained in their expectations -- those who
cluster at the 6% real growth rate for 1973. By and large,
however, the challenge of the problem of re-entry is wide
ly accepted by policy formulators, in and out of power.
Except for a small minority, proposals for meeting the
re-entry problem now only differ with respect to the
proper mix of pleasure and pain.
That is a happy circumstance
because at least the
problem has been defined and. it arises from a consensus
that the economy in 1973 will be vigorous. Now, Govern
ment forecasts of the economy’s prospects have not always
been accepted nor have they been generally validated. As
a career forecaster at the Treasury in several adminis
trations, I have watched the birth of many forecasts,
frequently waving a paper containing a minority view
because I did not wish to be known as the suspected parent.
2
In former years, the slant in these projections
appeared to be nearly always toward underestimating the
strength of the economy -- presumably registering the
ultimate consequences of the learning experience of ex
graduate students in economics»
who since have evolved
into public officials, but who remain influenced by the
stagnationist theories taught by professors in the
late 1930s and 1940s. Thus, we find that in the official
GNP forecasts appearing in the Economic Report of the
President for the years 1962-69, the forecast error
nearly always was below the "actual.*1 On the average, the
forecast underestimate of GNP was close to 1%. This
translates into a magnitude of error of nearly $12 billion
at current levels of GNP. That is not a good performance -although it is not absolutely abysmal.
Since that time, the official GNP forecasts have
tended to be too high -- averaging 1% above so-called
"actuals'’ for 1970 and 1971. That, too, may have been
part of some systematic malady of economic theory, but the
facts show that it was quickly cured. In August 1971,
policies for robust growth of the economy were set in place.
They succeeded. And while the forecast for 1972 was quite
optimistic, it also was very much on target -- whether
judged in terms of nominal GNP growth, real growth or
unemployment rates. And I might say, as one who partici
pated in its preparation, that the forecast was developed
substantially free of the usual biases that
I have sometimes encountered over the years.
It is against that background that the official
economic outlook for 1973 merits more than the usual stand
ard of acceptance. Its recognition of the re-entry prob
lem provides the framework underlying the decisions made
in the Budget. as well as the general policy stance pro
vided in the Economic Report.
That economic outlook for 1973 contains the following
highlights with which you might be familiar by now:
•
A 10% rise in current dollar GNP.
•
A 6“3/4% real growth rate.
3
(7
• A drop in the unemployment rate to 4-1/2% by the
end of the year.
• An inflation rate f- as measured by the GNP
deflator -- of 3% (which has caused some head-wagging and
on which I will comment subsequently).
These projections already include the hard decisions
now in the Budget. But, I would emphasize that they were
made in recognition that the economy was proceeding at a
full head of steam which was developing in the private
sector of the economy and that this energy would provide
momentum throughout 1973. Those private sector forces
would be:
• A capital goods boom. It was not generally recog
nized until recently that such a boom was in progress.
With each succeeding quarter in 1972, outlays appeared to
fall below survey expectations and this led to some less
than buoyant forecasts. But, the shortfall of outlays
from anticipations should be viewed as laying the basis for
greater expansion in 1973 -- and perhaps beyond. The short
fall was reflecting not so much deficiencies from the demand
side but supply problems. The expectation for 1973 is that
business fixed investment will advance some $17 billion or
so
a rise of 14%
and it could be more. Even a 14%
gain would be comparable to that in 1972 -- and would
represent the largest advance back to 1966, when it also
was 14%.
® Strong housing activity. Even if starts begin to
tail down in 1973, a large gap has developed between rates
of starts and completions. In terms of dollars and employ
ment requirements, construction activity will sustain
economic activity in 1973 -- and perhaps more than the
slight rise that is implicit in the official projection.
That is supported by the financial aspects. Even
if interest rates rise and saving flows to mortgage granting
institutions taper from now heavy rates, the volume of
outstanding mortgage commitments is very large -at S&Ls, $11 billion at the end of 1972, or $4 billion more
than a year earlier. This will more than offset any decline
from Federal subsidized housing -- and even that will not
be developing very soon.
- 4 • Rising state and local government outlays -- up 12%,
compared with 10% in 1972.
• Buoyant consumer spending. The surveys of consumer
intentions -- including last week’s Commerce report -i:
indicate considerable confidence on the outlook. Beyond
these opinion surveys, it is the hard, nearly certain,
prospect that disposable incomes will be rising 10%, much
more than the 7% rise in 1972. Of course, much of the 1973
acceleration will be due to refunds of overwithheld taxes,
but not all. Incidentally, the consumer spending projec
tion would have been larger, if the greater part of the
refunds had not been assumed as being saved. So, here
again, the forecast might be on the conservative side.
• Rising inventory investment -- first to keep pace
with the advance in final sales, as well as to restore
what appears to have been a lower-than-usual relationship
to sales.
All this adds up to a very strong pressure on the
resources in the economy -- even before taking into account
the balance of expenditures and receipts in the Budget.
The strength of these forces, aided by a stimulative
budget in 1972, already had narrowed the gap below potential
economic growth. Recognizing the difficulty of this con
cept, it still may be useful to say that the gap was cut in
half between mid-1971 through the last quarter of 1972 -reducing it to 3% below potential.
If the official projection for 1973 is realized,
the gap would narrow to 1-1/2% below potential bv
year-end.
This is the essence of the re-entry problem. The
pleasure of it is that it promises to stimulate growth and
reduce unemployment substantially; the pain of it is the
fiscal and monetary discipline that is required to prevent
an unacceptable rate of inflation which, in its absence
during 1966-68, provided us with a legacy
from which we have not yet completely recovered.
5
It is to seek some balance of pleasure and pain toward
which the 1973 and 1974 Budgets were directed. They were
intended to provide restraint -- but not to the degree that
they would become deterrents for continued expansion. The
rough outlines of the Budget are known to you -- in summary,
they involve spending advances of $18 billion and $19 bil
lion for fiscal years 1973 and 1974 and deficits of $25 bil
lion and $13 billion, respectively, on the unified basis.
Now, some will say that, if we are approaching the
re-entry zone, spending advances might have been curtailed
more. In fact, big cuts have been made, despite the huge
volume of so-called uncontrollables, to the point where
much of the public believes that the budget total has
declined rather than increased.
The basic posture of the Budget is one of restraint -whether it is evaluated on the basis of the unified budget
basis, where the deficit is halved, or the basis of the
NIA budget, where the evidence appears even more compelling.
Impact on financial markets
The present turbulence on the international exchanges
is not a very propitious time to draw conclusions on the
impact of a given level of economic activity on financial
markets. While it is hazardous to do so against that
perspective, the following points might be made:
• With so buoyant a view of the economic outlook in
1973, it is clear that a huge volume of credit will be
required to finance economic activity. I do not under
estimate its impact. Indeed, if some of the uncertainties
of the forecast regarding business and consumer spending
are resolved on the higher side -- a possibility I did not
exclude -- credit requirements would be even larger.
• Financial markets already have reacted. Treasury
bill rates are slightly above 5-1/2% and now are close to
the highest levels in more than two years. But this was
surely to have been expected in a strongly expanding
economy.
6
On the other hand, long rates have been remarkably
stable since late 1970, except for a temporary flurry in
mid-1971. That stability has reflected the continued
wringing out of the inflationary premium which had been
going into these rates. Accordingly, the future course of
these rates again will depend on how diligent our efforts
are in making a success of the fight against inflation.
• With the budget in its present posture, there is
much more room for appropriate monetary policy. Anyway,
since the forecast of GNP growth for fourth-quarter 1972 to
fourth-quarter 1973 is 9%, there would appear to be some
room for a slowing in money supply growth without signi
ficant repercussions.
• The next few months might witness some pressures
in money markets, but this will be a temporary phase, as
far as Treasury financing goes. The Treasury will need to
raise about $8 billion by mid-April. After that, the
Treasury will be in a roughly balanced position or better
in the rest of fiscal 1973. Cash needs will then arise,
but, of course, FY 1974 deficit has been halved.
• Rates remain well below the levels reached in the
so-called money crunch of 1969 and 1970. It would be a
mistake to base a forecast of money markets on the
influence of temporary and transient events, such as the
current international turbulence.
I leave you with the thought that the pleasures and
pains of the re-entry problem have their interface in
financial markets.
A favorable outcome for Phase III and fiscal
discipline would appear to be the keys to success for
re-entry.
ooOoo
Department
INGTON, 0.C. 20220
oftheTREASURY
T E L E P H O N E W 04-2041
FOR RELEASE AT 7:30 P 0M Q. CST
Remarks by the Honorable William E. Simon,
Deputy Secretary of the Treasury
Before the Opportunities Industrialization
Centers Industries Day Banquet
Dallas, Texas, February 20, 1973
7:30 P.M. CST
George Shultz, the Secretary of the Treasury, is
deeply honored to be the recipient of the First Annual
George Champion Award. And I am equally honored to
accept it tonight on his behalf. He asked me to convey
to you his sincere thanks -- and his regret that his
heavy schedule did not permit him to be here to thank
you in person.
You who have created, and implemented, Opportunities
Industrialization Centers of America have reason to be
proud. Proud, because you have focused new light
on a basic American principle in more than 100 cities.
Proud, because you have extended the understanding of
advancement through self-help, an ethic which has
contributed so much to our becoming a free and
independent nation.
The OIC’s deserve high commendation for having
made training available to 100,000 citizens who might
^otherwise have been deprived. The fact is, more than
- 70 ner^cent of .those you trained have found and Jkeot. eood
jobs.
These people al*e a living tribute to the success
of your efforts, a tribute which I am sure you find
rewarding.
Since it is your purpose to present the George
Champion Award to one who exemplifies support of the
self-help principles inherent in our free enterprise
system, may I say that I believe your choice of George
Shultz was a great one?
2
/
He has always been sensitive to the need for jobs,
and the need for trained workers to man those jobs.
When he was an educator, he kept his finger on the
American pulse through his work in labor-management
affairs, in economic development, in industrial relations.
He was willing to put aside his personal concerns
when the opportunity came to serve his government -as an economist, as Secretary of Labor, as Director
of the Office of Management and Budget, and now as
Secretary of the Treasury and Assistant to the
President.
He is, I believe, an excellent example of why
we, as a people, have reason to feel particularly
favored. We have had men like this throughout history.
He is one of those dedicated men who are willing
to devote their most productive years to the service
of their government and all their fellow Americans.
Obviously, his objectives are closely allied to
yours.
As Secretary of the Treasury, he must be concerned
with the level of employment, with an economy healthy
enough to support a large labor force, and with an
educational and training system which prepares people
to handle the jobs when and where they exist.
One of his duties is to act as head of the Cost
of Living Council.
In this role, he has the responsi
bility of preserving the buying power of the paycheck,
of trying to hold the price line so that wages will be
adequate to supply the needs of those who earned them.
At any point in history there have been -- and
there always will.be - - a great many different opinions
of what should be done, what policy should be established.
And all of those opinions must be considered objectively,
on their merits. They must be weighed in determining
the course to be followed, or they must be set aside
at the risk of opposition from those who hold them.
Once the decision is made, the responsible
executive must bear the further burden of implementing
it, enforcing it. I don’t mean by this that he
must be inflexible, or, that a policy once adopted must
remain in force forever, just because it was adopted.
But, as long as he is convinced that it is the right
thing to do, he must make every effort towards its
success. When circumstances change, he frequently
has to take another direction.
-■
3
A good case in point is the recent move into
Phase III of our Iconomic Stabilization program.
The system of controls in effect since 1971
has helped considerably to improve our economic
health.
In 1969, the first year President Nixon
was in office, the annual rate of inflation was
about six per-cent. That rate has been cut nearly
in half. Today the United States has the lowest
rate of inflation of any industrial country in
the free world. We intend to improve on that record.
For instance, let me tell you what some of our
goals are for this year; We will move further
towards our unemployment goals; we want to reduce
inflation to 2 1/2 per cent or less; and most
important, we will get control of federal spending -to keep this fiscal year’s budget to one quarter of
a trillion dollars. Surely, we ought to be able
to get along on this amount.
Phase III is an essential element in our effort
to reach these goals.
It is designed to succeed
through the voluntary cooperation of every element
in the private sector of the economy, as well as
that of the government itself. This means that
businesses, and workers too, will largely be able
to determine what their own conduct should be,
what they themselves should be doing within the
anti -inflation standards that have been established.
The Federal Government has the power -- and
indeed the responsibility -- to step in when any
action is in conflict with the national objective
of holding down inflation. But much of the federal
machinery necessary during the first two phases
of the program can be eliminated. We are counting
on the basic cooperative spirit of workers and
businessmen, and the response from both groups
has been good.
What we have here is akin to our income tax
system.
It’s a voluntary tax system. But you’d
better fill out that return. And we have a
voluntary Phase III - But we do have a club in
the closet -- and we know how to use it.
What we are trying to do, in essence, is to
restore the basic American free enterprise system
under which prices and wages find their own fair
level through the competitive pressures of the
market place. We are preparing for the day when
we can all enjoy the security of reasonable price
stability without any government controls at all.
And we can speed up the coming of that day through
the conscientious application of self-help principles -on both a personal and a national basis.
These are the things President Nixon himself
called for in his Inaugural Address -- voluntary
action, self-help. And these are the words which
Secretary Shultz uses to describe Phase III on the
many occasions when he is asked to explain its
philosophy.
Voluntary Action. Self-Help. Successful
principles for the OIC’s and for the United States
of America.
It has been a pleasure to be with you
tonight and, again, I thank you.
0O0
Department
IHINGTON, D C. 20220
oftheTREASURY
T E L E P H O N E W Q4-2041
¥
FOR IMMEDIATE RELEASE
February 13, 1973
WITHHOLDING OF APPRAISEMENT OF
CERAMIC GLAZED WALL TILE FROM THE PHILIPPINES
Assistant Secretary of the Treasury Edward L, Morgan
announced today a withholding of appraisement of ceramic
glazed wall tile from the Philippines pending a determination
as to whether it is being sold at less than fair value within
the meaning of the Antidumping Act, 1921, as amended.
The decision will appear in the Federal Register of
February 14, 1973.
Under the Antidumping Act, the Secretary of the Treasury
is required to withhold appraisement whenever he has
reasonable cause to believe or suspect that sales at less
than fair value may be taking place.
A final Treasury decision in this investigation will be
made within three months. Appraisement will be withheld for
a period not to exceed six months from the date of publica
tion of the "Withholding of Appraisement Notice” in the
Federal Register.
Under the Antidumping Act, a determination of sales in
the United States at less than fair value requires that the
case be referred to the Tariff Commission, which would consi
der whether an American industry was being injured. Both
sales at less than fair value and injury must be shown to
justify a finding of dumping under the law. Upon a finding
of dumping, a special duty is assessed.
During the period of January through October 1972 imports
of ceramic glazed wall tile from the Philippines totaled
approximately $780,000,
# # #
FOR IMMEDIATE RELEASE
February 14, 1973
DRUG TRAFFICKERS RECEIVE MAXIMUM SENTENCES ON TAX
CHARGES IN TREASURY/IRS NARCOTICS TRAFFICKERS PROGRAM
Assistant Treasury Secretary Edward L. Morgan announced
today that during January, four identified major drug traf
fickers received the maximum sentences which could be imposed
upon conviction of evading their income taxes or failing to
file an income tax return. Those convicted were major targets
identified by the Internal Revenue Service in its drive to
take the profit out of the illegal traffic in narcotics
through use of the tax laws.
In Ft. Wayne, Indiana, Richard L. Barksdale, 33, re
ceived a prison term of fifteen years upon his conviction
for evading his Federal income taxes for a three-year period
(1969-1971). A fine of $30,000 was also imposed.
At Baltimore, Maryland, Gordon R. King, 50, alleged to
be one of the top dealers in the Nation's Capitol, was sen
tenced to serve six years on charges of evading his income
tax for one year and not filing for another year. This
sentence runs consecutively with an eight-year sentence
imposed for possession of an unregistered firearm brought
by Treasury's Bureau of Alcohol, Tobacco and Firearms.
In Detroit two men received maximum sentences; one,
Lester Ramsey, 46, ten years for evading his income taxes
for a two-year period, and the other, Morris L. Williams,
30, received a three-year sentence upon his plea of guilty
for filing a false and fraudulent income tax return for
one year.
The 19 months results of the narcotics trafficker pro
gram are as follows:
$102 million in taxes and penalties have been assessed
under the program, of which more than $17.9 have already
been collected (see Tables II and III).
S-115
J< 4
-
2
-
Twenty-five persons have been convicted on criminal
tax charges; 48 other criminal tax cases are pending in
Federal District Courts; and another 76 investigations
have been completed with prosecution recommendations (see
attached Tables II and III).
In 46 states, 82 metropolitan areas and the District of
Columbia, 1,235 targets have been selected by Treasury's
Target Selection Committee and referred to IRS for intensive
tax investigation (see attached Table I).
In addition, 1,582 other traffickers are under tax
action by IRS.
Mr. Morgan stated, "We believe this program is making
a strong contribution to the President's drive to halt the
illicit flow of narcotics by seizing the trafficker's work
ing capital.
"As funds become less available and profit becomes an
invitation for tax investigations, it is anticipated that
many financiers and traffickers will get out of the business
or go to prison with maximum sentences."
The program's objectives--to take the profit out of
the illegal traffic in narcotics and thereby further dis
rupt the traffic--are accomplished in two ways:
1. Major targets: by conducting systematic tax
investigations of middle and upper echelon narcotics
traffickers, smugglers, and financiers. These are the
people who frequently are insulated from the daily opera
tions of the drug traffic through intermediaries.
2. Minor targets: by the systematic drive underway
to seize— to be applied to taxes and penalties owing— the
substantial amounts of cash that are frequently found in
the hands of minor narcotics traffickers, those below the
middle and upper echelon level.
Treasury has coordinated this tax program with State
and local police, whose more than 350,000 officers consti
tute the first line of defense against the internal traffic
in narcotics, as well as with the anti-smuggling drive of
its Bureau of Customs, the drive against narcotics distribu
tion of the Bureau of Narcotics and Dangerous Drugs and the
Office of Drug Abuse Law Enforcement, as well as the prosecu
tion efforts of the Tax and Criminal Divisions of the
Department of Justice.
DEPARTMENT
TREASURY/INTERNAL
REVENUE
OF
THE
SERVICE
TREASURY
NARCOTICS
TABLE
TRAFFICKER
PROGRAM
TARGETS
COMPLETED
INVESTIGATIONS
13
2
1
1
63
11
STATE
METROPOLITAN AREAS
klabama
Mobile
klaska
Anchorage
Arizona
Phoenix-Tucson-Yuma
Arkansas
Little
C a lifo rn ia
Los A n g e l e s - S a n D i e g o
San F r a n c i s c o - O a k l a n d
46
44
23
7
Colorado
Denver
12
2
Connecticut
Hartford-Bridgeport
16
2
Delaware
Wilmington
1
Washington
23
5
Florida
Miami-Jacksonville
Tampa-Orlando
99
27
Hawaii
Honolulu
10
1
Georgia
A t l a n t a - A u g u s ta
31
14
[Illin o is
Chicago-Springfield
Peoria
69
9
Indiana
I n d i a n a p o l i s - Gary
13
5
Iowa
Des
Kansas
Lawrence
1
Kentucky
Louisville-Covington
Newport
6
Louisiana
New
Maine
Bangor
Maryland
Baltimore-Annapolis
15
4
Massachusetts
Boston
24
5
Michigan
Detroit
77
Minnesota
St.
D is tric t
of C o l u m b i a
Rock
Moines
Orleans
Paul
3
4
4
17
1
- Minneapolis
I
5
m
15
1
COMPLETED
STATE
METROPOLITAN AREAS
Mississippi
Gulfport
Missouri
St.
Nebraska
Omaha
3
Nevada
Las
5
New Hampshire
Portsmouth
New Jersey
New
Louis-Kansas
TARGETS
City
Vegas-Reno
investigation!
3
8
22
2
4
0
Newark-Camden-Trenton
70
10
Albuquerque
11
5
Albany
Buffalo-Rochester
New Y ork City
14
0
20
156
3
47
Greensboro-Charlotte
19
3
Ohio
Cincinnati-Dayton-Columbus
Cleveland-Toledo
17
30
Oklahoma
Oklahoma
Oregon
Portland
18
4
Pennsylvania
Philadelphia
Pittsburgh
62
39
6
Mexico
New York
North
Carolina
City
3
Rhode
Island
Providence
6
South
Carolina
Columbia
5
South
Dakota
Aberdeen
1
Tennessee
Nashville-Memphis-Chattanooga
8
T exas
A u s tin-Houston-El
Dallas-Ft. Worth
Paso
3
2
51
13
8
2
Utah
Salt
Virginia
Richmond-Norfolk
Arlington-Alexandria
28
4
Washington
Seattle
25
5
West
Parkersburg
1
Milwaukee
6
Virginia
W i s c o n s in
Lake
City
6
1 235
O f f i c e of Law E n f o r c e m e n t
Treasury Department
1
254
TABLE II
Regular Assessments
Jeopardy Assessments 1/
Tax Year Termination 2 /
Total
Minor Target Assessments:
Amounts
Number
Major Target Assessments:
2 53
53
50
$13,559,222
20,761,714
16,434,781
356
$50,755,717
105
1477
$ 3,771,705
47,542,245
3/
Jeopardy Assessments
Tax Year Termination
1582
Total
$51,313,950
Total Assessments involving Narcotic Traffickers
$102,069,667
Seizures involving Narcotic Trafficker:
Currerlcy
Property
Major Targets
Minor Targets
$2,089,362
376,329
$11,761,174
2,460,849
Total Dollars Seized
$17,928,754
5 Collected
Cases Recommended for Prosecution
76
Criminal Tax Cases in U. S. Courts
awaiting Trial
48
Criminal Tax Conviction
25
Total Criminal Cases
•
,
-^9
1/ Jeopardy assessments are assessments of taxes made where a return
has been filed or should have been filed, but where circumstances
exist under which delay might jeopardize the collection of the revenue.
2 / Termination of tax year is a computetion of the tax due and assess
ment made where the time for filing the return has not become due where
circumstances exist under'which delay might jeopardize the revenue,
3/ These are assessments made as a result of seizures by other law
enforcement agencies of cash’or other assets against current income
of narcotic traffickers ¿-.’here delay might jeopardize collection of
the revenue.
Treasury Department
Office of Law Enforcement
February 1, 1973
^
U . S . Treasury Department
Office of Law Enforcement
TABLB III
Minor Target Program
Major Target Program
Metropolitan Areas
Number
Atlanta, Ga.
Austin-Houston-Sl Paso, Tex0
Baltimore,-Md. - .Washington, D.C.
Boston, Mass.
Euffalo, N.Y.
Cleveland, Ohio
Chicagc-Springfield, 111.
Detroit, Mich.
Charlotte-Greensboro, N.C.
Miami-Jacksonville-Tampa, Fla.
Los Angeles-San Deigo, Calif.
Newark-Camden-Trentcn, N.J.
New York City
Philadelphia, Penna.
Phoenix-Tucscn, Ariz0
Pittsburgh, Penna.
San Francisco-Oakland, Calif.
Seattle-Tacoma, Wash.
Sto Louis, Mo.
Richr.ond-Korfolk-A.ri ington, Va0
Other Areas
20
20
12
5
3
0
1$
2h
3
hi
25
la
69
5
16
6
22
6
11
5
3h
Totals
356
Assessments . Dollars Seized ,P.R.
$
h6l,866
1,899,7hl
1,362,862
5,561,815
16,383
-03h9,hh5
l,523,5h8
163,933
ll,062,hl0
915,hhl
3,721,619
8 ,675,688
206,195
85h,076
378,6lh
1,180,313
191,260
l,09h,705
169,h80
10,966,323
$
$50,755,717
$
28,511
5h,220
-0 22,183.
-0 -01 6 , 85o
13,555
I5,2h9
208,000
59,238
1,656
1,691,093
16,000
36,235
2,8h3
79,68h
35,000
7,133
ll,27h
166,967
2,h65,691
5
2
1
1
1
0
6
6
2
2
h
0
11
0
5
7
5
1
2
3
12
76
i.
3
2 .
2 .
1
0
0
3
2 t
0
11
1
2
C.
.Number
Assessments ,Dollars Seized 1 Collections
63
120
2
75
26
16
92
8h
hO
80
2h2
33
123
50
87
15
82
13
16
7
316
$ 1,102,017
2,025,h07
238,83h
2,185,2hl
232,89h
731,752
2,726,39h
3,011,125
361,310
1,8 0 2,5 22
11,333,16h
1,5 5 8,2 22
8,559,8hl
79h,162
3,168,1hl
501,899
2 , 757,068
22h,932
656,993
26h , 880
7,077,152
$
3
2
1
3
1
0
6
1
0
0
0
2
1
h
2
0
1
0
1
1
0
0
2
0
2
h8
25
1582
$51,313,950
$
h
2
1
1
h
Dollars Seized includes both property and currency
P.R. - Cases Recommended for Prosecution
I.
- Criminal Cases in U. S. Courts awaiting Trial
C.
- Criminal Convictions
18h,09h
952,012
hh,879
558,667
113,972
123,807
220,223
h72,75h
65,179
976,85h
1,627,795
902,h73
3,965,5h2
3h3,39h
h67,9h8
159,9h3
623,869
122,20h
10h,376
15,836
2 ,176.202
lh,222,023
$
67,877
28h,78h
692,000
I8,h63
lh2,877
8,lhh
26,895
$ 1,2hl,OhO
February 1, 1973
Department of (he T R E A S U R Y
INGTON, D X . 20220
T ELEP H O N E WQ4-2041
FOR IMMEDIATE RELEASE
February 14,1973
TREASURY ANNOUNCES ACTIONS ON TWO
INVESTIGATIONS UNDER THE ANTIDUMPING ACT
Assistant Secretary of the Treasury Edward L. Morgan
announced today Treasury's actions with respect to two
investigations under the Antidumping Act of 1921, as amended.
In one case there is a final determination of sales at
less than fair value, and in the other case there is a final
determination of sales at less than fair value with a
simultaneous withholding of appraisement.
These decisions will be published in the Federal Register
of February 15, 1973.
In the first case, Mr. Morgan announced that impression
fabric of man-made fiber from Japan is being, or is likely to be,
sold at less than fair value within the meaning of the Antidumping
Act. These impression fabrics are used for typewriter ribbons
and computer tapes. The case will now be referred to the
Tariff Commission for a determination as to whether an American
industry is being, or is likely to be, injured. In the event
of a determination of injury, dumping duties will be assessed
on all entries of these impression fabrics which have not been
appraised and on which dumping margins exist. A notice of
"Withholding of Appraisement" was issued on November 15, 1972,
which stated that there was reasonable cause to believe or
suspect that there were sales at less than fair value. During
the period of calendar year 1972, imports of impression fabrics
of man-made fiber from Japan were valued at approximately $750,000
In the second case, the Treasury Department announced that
synthetic methionine from Japan is being, or is likely to be,
sold at less than fair value. Synthetic methionine is used as
a feed additive to promote weight response and vigor in poultry.
The case will now be referred to the Tariff Commission for a
determination as to whether an American industry is being, or is
likely to be, injured. Simultaneously with the determination of
sales at less than fair value, the Treasury Department issued
a three-month withholding of appraisement order covering imports
of this merchandise from Japan. The significance of the threemonth withholding of appraisement is that imports of the
(OVER)
-
2
-
merchandise will not be appraised for the three months pending
the Tariff Commission's determination. If the Tariff Commission
issues an affirmative injury determination, dumping duties will
be assessable effective as of the date of the withholding
action. If the Tariff Commission issues a negative injury
determination, the case is closed, and no dumping duties will
be assessed. During the period of January through July 1972,
imports of synthetic methionine from Japan were valued at
approximately $2 million.
# # #
February 14, 1973
FOR IMMEDIATE RELEASE
OIL POLICY COMMITTEE MEETS
A Treasury Department spokesman today issued the following
statement:
The first meeting of the Oil Policy Committee was held
yesterday at the Treasury. The meeting was chaired by William E.
Simon, Deputy Secretary of the Treasury.
The purpose of this meeting was to explain the re-organization
of the staff support to the Oil Policy Committee. The re
organization is designed to facilitate immediate implementation
of policy decisions and also to outline major areas for immediate
action. The emphasis is to take a new look at each of these
areas.
It was stressed that a more efficient method of allocating
crude oil resources was needed. Alternative methods, which
would be more economically sound than the present system, were
discussed. These methods will be evaluated within the next
two weeks and the best approach will be implemented.
It was agreed that the Oil Import Appeals Board would be
reconstituted so as to function as a barometer for supplydemand problems to be brought to the attention of the Oil
Policy Committee. The Oil Policy Committee will present
guidelines to the Oil Import Appeals Board so that the Board
may function as a more effective "safety valve" for immediate
relief of critical scarcity problems.
Further, the problem of supplying crude oil for small
inland refiners was outlined, and it was agreed to immediately
explore alternative solutions to alleviate this situation.
It was also agreed that long-range planning was necessary
for an adequate gasoline supply this summer and for next
winter's fuel oil requirements. Such planning is now under way.
Mr. Simon told the Committee that as a result of reported
shortages of kerosene, he had ordered an immediate study of the
kerosene supply situation in the United States. This study
revealed that there was a problem of distribution of kerosene
in certain areas and not one of total supply. The Chairman has
the authority to provide immediate relief in the event of actual
hardship cases and Mr. Simon expressed a strong desire to use
this authority when appropriate.
o 0 o
FOR RELEASE ON DELIVERY
WEDNESDAY. FEBRUARY 14, 1973
REMARKS BY THE HONORABLE SAMUEL R. PIERCE, JR.
GENERAL COUNSEL OF THE TREASURY
AT THE
KANSAS CITY COST OF LIVING COUNCIL REGIONAL CONFERENCE
ON PHASE III
Wednesday, February 14, 1973
Kansas City, Missouri
(At 9:00 A.M. CST)
PHASE III OF THE ECONOMIC STABLIZATION PROGRAM
As William Shakespeare once said:
"What’s past is prologue".
Phase III of the Economic Stabilization Program is built on what has
gone before. Many of the standards, objectives and goals of
Phase III are based on what occurred and what was learned during the
operations of Phases I and II. To best understand Phase III, it is
necessary to be generally familiar with what happened during
Phases I and II, and the facts and circumstances that led to the
adoption of those programs by the Nixon Administration.
Background
When President Nixon assumed office in January of 1969, he
inherited one of the most intractable economic problems in modern
times.
Inflation and inflationary expectations had truly captured
the American economy.
The Nation had experienced an annual rate of
inflation of 5 percent during the last three months of 1968 and it
accelerated to 6.4 percent in the first three months of 1969. This
was an intolerable rate of inflation. To combat this situation, the
Administration immediately instituted a program of fiscal and
monetary restraint aimed at cooling off the economy by winding down
1.
The Tempest, Act II, Scene 1.
-116
-
2
-
inflation.
Significant progress was made toward that objective.
The Administration1s fiscal and monetary policies squeezed out much
of the excess demand that had placed too much pressure on available
resources. However, substantial inflation continued — not primarily
as the result of excess demand, but as the consequence of the
momentum generated by past inflation and the expectations of continued
inflation.
The problem of continued inflation led the President and his top
economic advisers to engage in a comprehensive analysis of the economy,
and on August 15, 1971, the President announced his New Economic Policy.
The Policy was designed:
1.
To restrain inflationary behavior and expectations by
a system of wage-price controls.
2.
To assure acceleration of economic growth and employ
ment by the more rapid expansion of demand for goods
and services.
3.
To achieve a realignment in the external value of the
dollar which would reflect more realistically the.
relative position of international prices and costs.
The Economic Stabilization Program was organized to help achieve
those objectives. Phase I of that program provided for a 90 day wage
and price freeze. The goals of the freeze were to put an immediate
halt to wage and price increases for 90 days; to restore confidence
in the economy by changing the expectations of the American people
about inflation; and to provide the necessary time to develop a plan
for the following phase.
o
The Cost of Living Council was created to provide policy guidance,
and the program was administered by the Office of Emergency Preparedness.
2. At the same time that the Economic Stabilization Program was
initiated, the President proposed a tax revision package, including
the Job Development Credit and repeal of the automobile excise tax,
a 10 percent surcharge on imports, and negotiations leading to
revaluation of world currencies.
3. The Council consisted of the Secretary of the Treasury, as Chairman;
the Chairman of the Council of Economic Advisers as Vice Chairman; the
Director of the Council who is Counsellor to the President; the
Secretaries of Agriculture, Commerce, Labor, Housing and Urban Development; the Director of the Office of Management and Budget; the Director
of the Office of Emergency Preparedness; the Special Assistant to the
President for Consumer Affairs; and the Chairman of the Federal Reserve
Board as an Adviser.
- 3 -
The freeze was for a definite period because an indefinite freeze
would be unworkable in a dynamic economy like ours, where technology,
new products, and changing demand patterns exert a continuing strong
influence on prices. Movements of prices and wages serve the
essential purposes of organizing and guiding the allocation of
resources, and to suppress them for long would seriously distort
resource allocation. Consequently, a sequel to Phase I was necessary.
It was realized that the success of Phase II would depend in
large measure on it being well understood and widely supported by the
public. Consequently, the President and his Cost of Living Council
consulted with numerous representatives of each major interest in
the control program: labor and business, farmers and consumers,
State and local governments, and the Congress. From these discussions,
a consensus was ultimately obtained on the belief that Phase II
required:
(1) a clear cut, publicly supportable goal for the disin
flationary effort; (2) machinery allowing the public and major elements
of the economy to participate in setting policy and administering the
program; (3) an essentially self-administered system embodying strong
incentives to encourage anti-inflationary behavior; and (4) provision
in the system for maximum continued operation of competitive pricing
and free collective bargaining.
The formulators of the plan for Phase II decided that in the
interest of equity and effectiveness, the controls should be mandatory,
and initially as comprehensive in their direct coverage as was adminis
tratively feasible. The decision for almost universal coverage at the
outset did not preclude the relaxation of the controls by stages, as
the effectiveness of the system was demonstrated, confidence in the
control of inflation was strengthened, and sectors of the economy no
longer requiring control were identified.
It was against this background that the Cost of Living Council
developed the plan for Phase II which was approved by the President,
and ultimately became effective on November 14, 1971. The Executive
Order establishing the administrative machinery for Phase II provided
for the continuation of the Cost of Living Council. The COLC was
assigned responsibility for establishing broad goals, determining the
coverage of the control program, overseeing enforcement, and coordinating
the anti-inflationary effort in line with the overall goals.
In a
sense, it was the umbrella policy organization under which the groups
implementing Phase II operated.
The primary bodies created to develop standards and make decisions
on changes in all prices (including rents) and compensation (wages,
salaries and fringe benefits) were the Price Commission, composed of
- 4 -
seven public members, and the tripartite Pay Board which originally
consisted of 15 members divided equally among business, labor, and
public representatives, but which was eventually reduced to seven
members (five public and one each for business and labor).
The Pay Board has the responsibility for promulgating regula
tions and making rulings which were designed to keep compensation at
levels consistent with the goals to reduce inflation set by the Cost
of Living Council. The Price Commission had the same responsibility
with respect to prices and rent. Although the COLC had the responsi
bility for setting goals in the Phase II program, it had no super
visory authority over any regulation issued or rulings made by either
the Pay Board or Price Commission.
Advisory committees were also established to promote a voluntary
program to restrain interest rates and dividends, to solicit State
and local government cooperation, and to suggest means to curtail price
increases in the health services industry. A rent advisory board was
created to counsel the Price Commission, while the pre-existing
tripartite Construction Industry Stabilization Committee was placed
under the authority of the Pay Board. The National Commission on
Productivity which existed prior to Phase I, was expanded and assigned
the advisory role of insuring that the entire stabilization' program
encouraged productivity growth.
For the purposes of administrative efficiency, the COLC decided
that small economic units should not be required to give advance notice
or to report price and wage increases which were consistent with the
basic guidelines established by the Price Commission and the Pay Board.
This group included the vast majority of businesses in the United States.
The largest firms and employee groups were required to obtain advanced
approval from the Commission and the Board for any change, and an
intermediate group was required to report after wages or prices were
increased in accordance with stabilization regulations.
The Cost of Living Council recognized that prices of some
products and services were either insignificant in the overall inflation
problem relative to the administrative difficulty of controlling them,
or were impractical to control, or were subject to direct controls
outside of the Phase II program. Consequently, the Council exempted
these products and services from the program. These exemptions
included such items as raw agricultural products, life insurance,
exports, securities, and damaged or used products.
The organization basically responsible for seeing to it that the
public complied with the rules and regulations issued under the Phase II
program was the Internal Revenue Service. The IRS assigned approximately
3,000 agents in 58 offices scattered throughout the Country to work on
the stabilization program. The Office of Emergency Preparedness, which
had administered Phase I, no longer had any responsibility for the program.
/
- 5 -
The power of the President to freeze and control wages and
prices is based on the Economic Stabilization Act of 1970.
In
reviewing that Act and considering the various legal aspects of the
Phase II program, several of us, having an official interest in the
program, concluded that it would operate much more smoothly and
have a greater chance of success if the Economic Stabilization Act
was substantially amended. Consequently, the Act was amended in a
number of respects. For example, the President’s power to stabilize
the economy was extended to include interest rates and dividends;
Phase II agencies were generally excluded from the operations of the
Administrative Procedure Act; stabilization agencies were authorized
to issue subpoenas; and a system for the Federal Courts to handle
more efficiently cases arising under the Economic Stabilization
Program was written into the Act.
During Phase II, as compared to the pre-freeze period, the rate
of inflation decreased, total employment rose, the rate of unemploy
ment dropped, and real spendable earnings rose.
In general, the
program received wide public acceptance and voluntary cooperation.
The effectiveness of Phases I and II is clearly shown by the
leading economic indicators. At the time Phase I became effective
the annual rate of inflation as measured by the Cost of Living Index
was 4.8 percent. By the end of Phase II, it had dipped to 3.3 percent.
Real GNP was 1.4 percent at the beginning of Phase I, and by the end
of Phase II, it had risen to 7.5 percent. During the same period
real spendable earnings rose from 1.2 percent to 3.8 percent, and
the level of unemployment had fallen from 6.1 percent to 5 percent.
One may appropriately ask, "If Phase II was operating so well,
why did the Government shift to Phase III?"
Development of the Rationale for Phase III
While Phase II was generally successful, it did have problems
that would eventually require a change in the system. This became
very clear to the Cost of Living Council and others responsible for
the Economic Stabilization Program after Phase II was carefully
analyzed during December, 1972 and early January, 1973. Consultation
meetings were held with labor, management, consumers, members- of
Congress, and the members of the various boards and organizations
serving the Economic Stabilization Program. After reviewing the
results of this consultation process and the experience gained from
operating the present system, it was clear that the burdens of the
Phase II control system would mount in the coming year.
It was found that red tape and administrative burdens, both for
the Government and the public, would expand. Delays and interferences
with the normal conduct of business would become more serious.
6
Inequities in the treatment of different individuals and businesses
would multiply.
Incentives to efficiency and investment would be
weakened.
It was believed that if the present system continued for long
unchanged, these difficulties would become so overwhelming that the
system would become ineffective.
Therefore, the system had to be
modified to achieve its continuing contribution to the anti-inflation
effort with less danger of injury to the economy, and with greater
equity in the treatment of the individuals and businesses covered by
the system.
During this battle against inflation — both in the pre-freeze
and post-freeze periods — the Administration learned a number of
lessons. Those of us involved with economic stabilization were
greatly impressed with the power of competition. Ia Industries where
there were lots of firms and excess capacity, so that firms were really
fighting for business, competition was probably more effective than
our control system in holding down prices. There were many instances
during the operation of Phase II when firms met all of the necessary
requirements and received price increase approvals, but were not able
to implement those approvals because of the competition in their
industries.
We also learned that with public cooperation, a voluntary, selfadministered controlled system can, in general, operate effectively
in reducing inflation. There are, however, certain areas of the
economy where, for a variety of reasons, mandatory controls become
necessary. At the present time, with rapidly rising food prices,
food processing and retailing industries must be subject to mandatory
controls. The health care and construction industries also present
problems which — for the present time at least — can be better
handled with the aid of mandatory controls.
We also realize that our economy is extremely dynamic and other
situations may develop in the future where voluntary restraints are
not achieved and mandatory controls will become necessary.
Therefore,
in any control system, it is necessary to retain the power to impose
mandatory controls whenever it is considered imperative to attain the
goals of the program.
Finally, we know that no wage-price system, regardless of how
ingeniously devised, can be successful and produce substantial results
unless certain fundamental economic principals are adhered to. Most
fundamental among these is sound fiscal policy. Without strong fiscal
discipline, Federal spending may be so pumped up that the same forces
are released that caused the earlier inflation. The Administration will
vigorously resist this danger.
That is why it intends to hold Federal
7
spending for fiscal year 1973 within $250 billion. The Administration
submitted a budget for fiscal year 1974 in which expenditures are not
to exceed $268.7 billion, and which will not exceed the tax revenues
that would be generated by a fully employed economy.
It is imperative
that Federal spending be kept within these bounds if two very important
goals to the American people are to be achieved, namely, further re
duction of inflation, and no increase in Federal income taxes.
It was against this background that the Phase III program was
formulated.
The Phase III Program
The Cost of Living Council is continued under Phase III. The
Price.Commission and Pay Board and all advisory committees that existed
under Phase II will be terminated, and the authority of the Commission
and Board as well as their staffs will be transferred to the COLC.
Rental units are excluded from the program, but landlords are
expected to exercise restraint. Regulated industries will be guided
by the general criteria listed in present Price Commission regulations,
and restraint is expected to be reflected in their actions and the
actions of regulatory agencies.
Generally speaking, except for the food, health, and construction
industries, Phase III will be a voluntary, self—administered program.
As a general guide for prices, increases in prices above presently
authorized levels should not exceed increases in costs. Even where
costs have increased prices should not be increased if the firm s
profit margin exceeds the firm’s base—profit margin. Alternatively,
a firm may increase prices to reflect increased cost without regard
to its profit margin if the firm’s average price increases would not
exceed 1.5 percent in a year. Moreover, the base period for calculation
of the profit margin guide has been revised to permit inclusion of any
fiscal year that has been concluded since August 15, 1971.
the
and
has
the
The existing general standards of the Pay Board can be taken for
present as a guide to appropriate maximum wage increases unless
until they are modified. A Labor-Management Advisory Committee
been established to advise the Cost of Living Council on whether
standards should be modified and, if so, how.
In general, with the exception of firms in the food, health,
and construction industries, all firms with sales of more than $50
million (approximately 3,500 firms) are required to keep records of
profit margin changes as well as price changes which will permit the
computation of weighted average price increases. Firms will have the
s
- 8 obligation of producing these upon request. All firms with sales of
$250 million or more (approximately 800 firms) are required to file
quarterly reports concerning any weighted average price change and
their profit margin.
Generally speaking, with the exception of employee units in the
food, health and construction industries, all employee units of 1,000
or more will be required to keep records of wage rate changes, and all
employee units of 5,000 or more will be required to file reports with
the Cost of Living Council indicating wage rate changes.
The Cost of Living Council staff and the Internal Revenue Service,
under the direction of the COLC, will monitor performance through
reviewing reports received from firms and employee units; spot checking
and auditing the records of firms; and using various government and
trade data. There will be a reduction in the number of Internal Revenue
Service agents working on Economic Stabilization from the 3,000 used
in Phase II to approximately 1,500.
The Cost of Living Council has the authority to establish mandatory
standards where it is necessary to assure that future action in a
particular industry is consistent with the national goal pf further
reducing inflation. Also, if it learns that an action has been or is
about to be taken that is not consistent with the
standards or goals of the program, the Cost of Living Council can
issue a temporary order setting interim price and wage levels.
In
short, as has often been stated by officials connected with the
Economic Stabilization Program, the COLC has a "big stick in the closet"
which it can use if there is any breakdown in the system of voluntary
restraint.
Incidentally, the Economic Stabilization Act of 1970, as
amended, is sufficient to give the Council the authority to invoke
mandatory controls and punitive sanctions when necessary.
That is why
the Act did not have to be further amended, except to provide for a
one year extension.
The food, health, and construction industries will be under
mandatory controls.
Special rules have been or will be devised for
each of these industries.
Food processers will be required mandatorily to comply with
present regulations, somewhat modified, including pre-notification
and approval of cost-justified price increases.
Food retailers will
be held to present margin markups. Pay units in the food processing
and retailing industries will continue to be covered by present
regulations. A committee drawn from the Cost of Living Council has
been established to review and recommend appropriate changes in Govern
ment policies having an adverse effect on food prices. There will
also be established a Food Industry Advisory Committee which will be
composed of people from the private sector appointed by the President
to advise the Council on the operation of the Economic Stabilization Pro
gram in the food industry and other matters related to food costs and
prices.
The Federal Government has also taken certain steps to increase
the supply of food with the expectation that these actions Will help
reduce the cost of food. For example, the Administration has suspended
all quotas on meat imports for 1973; and the Department of Agriculture
has temporàrily suspended quotas on imported, non-fat dry milk, has
eliminated the mandatory set-aside requirement under the 1973 wheat
program, and has terminated the direct export subsidies for lard,
broilers, and flour.
The present controls applicable to the health care industry will
continue until appropriate modifications are made by the Cost of Living
Council.. A committee drawn from the Cost of Living Council will be
established to review and make recommendations concerning changes in
Government programs that could lessen the rise of health costs. Also,
an Advisory Committee composed of knowledgeable individuals outside
the Federal Government will be established to advise the Cost of Living
Council generally on the problem of health costs. This Committee will
also work to mobilize insurance companies and other third-party payers
to use their influence to curb the rise in health costs.
The Construction Industry Stabilization Committee, which existed
under Phase II, will continue its work with the twin goals of improving
the bargaining structure in the industry and achieving additional pro
gress in bringing the rate of wage growth in this sector into line with
the general wage growth in the economy. Rules are provided to insure
that modifications in the wage growth rate can be reflected by adjust
ments in construction prices.
The Committee on Interest and Dividends, which was established
under Phase II, and chaired by the Chairman of the Board of Governors
of the Federal Reserve System, will be continued. This Committee,
subject to review by the COLC, is charged with formulating and executing
a program for obtaining voluntary restraints on interest rates and
dividends.
Will Phase III Be Successful?
By the end of 1972 the rate of inflation had been reduced to 3.3
percent. When he announced Phase III, the President stated that a
goal of the program was to further reduce the rate of inflation to 2-1/2
percent by the end of 1973.
Can this goal be attained along with a
further substantial reduction in unemployment, a considerable increase
in GNP for 1973, and an increase in real spendable earnings?
- 10
If this question is eventually answered in the affirmative, then
Phase 111 will have been a success.
In my opinion, the success of Phase III will depend on three
factors;
1.
Whether Federal spending is held within the budgetary
limits recommended by the Administration;
2.
Whether food costs are brought under control; and
3.
Whether the public will voluntarily comply with the standards
for wage and price increases set by the COLC during Phase III.
To the extent these things are done, Phase III will be a success.
To the extent they are not, Phase III will be a failure.
Thank you so much for your attention.
ill
I
I
Department
ofthefREASURY
February 15, 1973
tOR IMMEDIATE RELEASE
TREASURY’S MONTHLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for
j$l,800,000,000, or thereabouts, of 349-day Treasury bills for cash and in exchange
for Treasury bills maturing February 28, 1973
The bills of this series will be dated
February 12, 1974
, in the amount of $1,700,665,000.
February 28, 1973
, and will mature
(CUSIP No. 912793 SM9).
The bills will be issued on a discount basis under competitive and noncom
petitive 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 $10,000, $15,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing
hour, one-thirty p.m., Eastern Standard time, Thursday, February 22, 1973.
Tenders will not be received at the Treasury Department, Washington.
must be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
not be used.
Fractions may
It is urged that tenders be made on the printed forms and forwarded in
the special envelopes which will be supplied by Federal Reserve Banks or Branches
on application therefor.
Banking institutions generally may submit tenders for account of customers
provided the names of the customers are set forth in such tenders.
Others than
banking institutions will not be permitted to submit tenders except for their own
account.
Tenders will be received without deposit from incorporated banks and trust
companies and from responsible and recognized dealers in investment securities.
Tenders from others must be accompanied by payment of 2 percent of the face amount
°f Treasury bills applied for, unless the tenders are accompanied by an express
guaranty of payment by an incorporated bank or trust company.
(OVER)
-2Immediately after the closing hour, tenders 11/111 he opened at the Federal
Banks and Branches, following which public announcement will be made by the
Department of the amount and price range of accepted bids.
Reserve
Treasury
Only those submitting
competitive tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $200,000 or less without
stated price from any one bidder will be accepted in full at the average price (in
three decimals) of accepted competitive bids.
Settlement for accepted tenders in
accordance with the bids must be made or completed at the Federal Reserve Bank on
February 28, 1973
, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing February 28, 1973
tenders will receive equal treatment.
.
Cash and exchange
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.
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 considered to accrue when the
bills are sold, redeemed or otherwise disposed of, and the bills are excluded from
consideration as capital assets.
Accordingly, the owner of Treasury bills (other than|
life insurance companies) issued hereunder must include in his income tax return, as
ordinary gain or loss, the difference between the price paid for the 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.
Treasury Department Circular No, 418 (current revision) and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
FOR
IMMEDIATE
today
RELEASE
February
D i r e c t o r of the Secret Service, James
i s s u e d the f o l l o w i n g s t a t e m e n t :
J.
16,
1973
Rowley,
A s a r e s u l t o f r e c e n t n u m e r o u s n e w s r e p o r t s o f an
a l l e g e d rift b e t w e e n a m e m b e r of the Secret Service and
a m e m b e r o f t h e W h i t e H o u s e S t a f f , I w i s h to m a k e the
f o l l o w i n g s t a t e m e n t in t he i n t e r e s t o f e s t a b l i s h i n g an
accurate record.
R o b e r t H. T a y l o r , f o r m e r l y S p e c i a l A g e n t in C h a r g e
o f t h e P r e s i d e n t i a l P r o t e c t i v e D i v i s i o n h a s n o t b e e n dis
charged nor^was such action ever considered.
Mr. T a y l o r
h a s b e e n t r a n s f e r r e d to b e c o m e the S p e c i a l A g e n t in
c h a r g e of the F o r e i g n D i g n i t a r y P r o t e c t i v e D i v i s i o n - - a
D i v i s i o n t h a t is c h a r g e d w i t h t h e r e s p o n s b i l i t y o f p r o t e
t h e n u m e r o u s f o r e i g n h e a d s of s t a t e a n d o t h e r d i g n i t a r i e
that v i s i t the U n i t e d States.
Mr. T a y l o r ’s t r a n s f e r w a s
i n i t i a t e d b y m e in k e e p i n g w i t h o u r p o l i c y o f r o t a t i n g
supervisory personnel.
At no time has any m e m b e r of the Wh i t e Ho u s e
e i t h e r r e q u e s t e d or i m p l i e d to t he S e c r e t S e r v i c e
Mr. T a y l o r s h o u l d b e r e m o v e d or t r a n s f e r r e d .
Staff
that
DepartmentofthefREASlIRY
SHINGTON, D.C. 20220
i
T E L E P H O N E W04-2041
2
FOR
IMMEDIATE
RELEASE
February
16,
1973
S A M Y. C R O S S
APPOINTED DEPUTY ASSISTANT SECRETARY FOR
INTERNATIONAL MONETARY AND INVESTMENT AFFAIRS
T r e a s u r y S e c r e t a r y G e o r g e P. S h u l t z t o d a y a n n o u n c e d
the a p p o i n t m e n t o f S a m Y. C r o s s o f F a l l s C h u r c h , V i r g i n i a ,
as D e p u t y A s s i s t a n t S e c r e t a r y f o r I n t e r n a t i o n a l M o n e t a r y
a n d I n v e s t m e n t A f f a i r s in the O f f i c e o f the A s s i s t a n t
S e c r e t a r y for I n t e r n a t i o n a l Affairs.
Mr. Cross, 45, is a c a r e e r T r e a s u r y e m p l o y e e .
He
h a s b e e n s e r v i n g as D i r e c t o r o f the I n t e r n a t i o n a l
Monetary System Office.
H e s u c c e e d s Mr. W i l l i a m C a t e s
w h o r e c e n t l y r e s i g n e d to r e t u r n to p r i v a t e b u s i n e s s .
Mr. C r o s s b e g a n his c a r e e r at T r e a s u r y in 1 9 5 1 as
an e c o n o m i s t .
H e s e r v e d as T r e a s u r y R e p r e s e n t a t i v e in
the U.S. E m b a s s y , L o n d o n , f r o m 1952 to 1956 a n d as a
N a t i o n a l S e c u r i t y A f f a i r s A d v i s e r in the T r e a s u r y
D e p a r t m e n t in W a s h i n g t o n f r o m 1 956 to 1963.
He w a s
a g a i n s t a t i o n e d in L o n d o n f r o m J u l y 1 963 to M a y 1967,
as U.S. T r e a s u r y R e p r e s e n t a t i v e .
U p o n r e t u r n i n g to
the U n i t e d S t a t e s he w a s a p p o i n t e d D i r e c t o r of the
O f f i c e of D e v e l o p i n g N a t i o n s .
In S e p t e m b e r 1 9 7 0 he
b e c a m e D i r e c t o r of the I n t e r n a t i o n a l M o n e t a r y S y s t e m
Office.
Mr. C r o s s is a n a t i v e o f F l o r i d a .
He rec e i v e d
B A a n d M A d e g r e e s f r o m the U n i v e r s i t y of T e n n e s s e e
in 1 949 a n d 1950.
Mr. C r o s s is m a r r i e d to the f o r m e r
N o r m a S i g l e r of Los A n g e l e s , C a l i f o r n i a .
T he C r o s s ’
have four children.
oOo
S - 118
SPEECH OF
THE
HONORABLE
GEORGE
SECRETARY OF
P.
TREASURY
to the
BUSINESS
SCHULTZ
COUNCIL
2
1
(Applause)
2
5
VOICE:
Dent, the Secretary of Commerce.
4
(Applause)
5
6
Good friends, the Honorable Frederick B.
VOICE:
Mr. James Donnelly, the Special Assistant to
the Secretary of the Treasury.
7
(Applause)
8
VOICE:
9
10
And another good friend of mine, the Honorabl
Peter M. Flannigan, Director of the Counsel of International
Economic Policy.
11
(Applause)
12
VOICE:
13
Mr. William L. Giffard, Assistant to the
Secretary of the Treasury for Legislative Affairs.
14
(Applause)
15
VOICE:
And another man who's been known to us for
16
some time, the Honorable Kermit Gordon, who's now the President
17
of the Brookings Institute.
18
(Applause)
19
20
VOICE:
Honorable Richard M. Elms, who's now the United States Ambas
21
sador —
22
Dick?
23
24
25
And another old friend of all us, the
this says designate, but I thought you were confirmed,
Aren't you confirmed, now?
(Applause)
VOICE:
The Honorable James
Kiao, Director
3
G
1
the United States Information Agency —
2
(Applause)
5
4
VOICE:
The Honorable William E. Simmons, the Deputy
Secretary of the Treasury.
5
(Applause)
6
7
Information Agency.
VOICE:
And the Honorable Herbert Stein, Chairman
of the President 's Council of Economic Advisors.
8
(Applause)
9
VOICE:
And another very good friend of mine, and a
10
good friend of all of us the Honorable Casper W. Weinberger,
11
the Secretary of Health, Education and Welfare.
12
(Applause)
13
VOICE:
Now, it's a great privilege and an honor for
1.4
me to be able to introduce our distinguished speaker this
15
evening, and I don't propose to take much time in introducing
16
him.
17
As you all know, he came
to Washington as President
18
Nixon's first Secretary of Labor, and that was in the spring
19
of 1969.
20
21
22
23
24
25
Then he took over as the first Director of the Office
of Management and Budget when that agency was created in July
of 1970.
And then last May, he was appointed to his present
position as the Secretary of the Treasury.
Recently, when
the President announced some rather major changes in his White
House staff, he named Secretary Shultz as one of the five
1
O D V
•
major assistants to the President, who'll be charged with
2
overseeing some of the very important activities for which the
5
President is directly responsible.
4
5
And Secretary Shultz's responsibility, of course,
in this area will be in the field of economic affairs.
6
It was a great privilege and an honor for me to have
7
had the opportunity to work with George during my years in the
8
Pentagon, and I learned to respect him very highly, and to
9
admire him, as I'm sure all of you have done.
10
He's a true professional in his field, and I think we
11
are very, very fortunate indeed, that he has been willing to
12
take the time from his very busy schedule, particularly his
13
busy schedule of these last several, weeks, to be with us here
14
tonight.
15
j
t -
So it is a real personal pleasure for ms to present
16
to you the Honorable George P . Shultz, the Secretary of the
17
Treasury.
18
(Applause)
19
SECRETARY SCHULTZ:
First of all, I have a couple of
20
introductions of my own to make, and you lost a Chairman of
21
the Business Council, but I've gained a Chairman of our Saving
22
Bond Drive in the Treasury, and Bill Batton's doing a great
23
job for us.
24
(General laughter and appluse)
25
And your loss is my gain.
And I think it's just
5
1
a rather —
2
(Applause)
5
And second, I didn't realize Arthur Burns had so
4
much influence in this organization, but you didn't introduce
5
Arthur Burns, David.
6
(General laughter)
7
My goodness, Arthur Burns, come on.
8
(General laughter and applause)
9
You know where you stand, Arthur, to all us people.
10
And I would first like to record my thanks to the
11
Business Council for the help that you have given us in the
12
Administration.
13
Dave Packard, called me and told me that he thought he might
1,4
very likely get elected as Chairman.
15
thought that the reason he was Chairman tantamount, and he
16
came around and we talked about a little bit.
17
I recall particularly in the —
most recently,
He'd been nominated, and
I said well, David, you could bring some of your
18
Business Council members around.
19
afternoon, or some afternoon like that, right after we announce
20
the Phase III.
21
We'd have something to talk about, and he did.
He brought a group from the Business Council to my
22
office.
23
very impressive lecture.
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25
I think it was on Tuesday
We discussed the Phase III changes.
And Dave gave a
I wrote it down right after you left the office,
Dayid.
I thought it was a pretty good way of putting the
1
2
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problem, and asked for cooperation and support.
And as far as I have been able to figure out and
looking around and what has been happening, the companys re-
4
presented here have been giving Phase III genuine support, and
5
we appreciate that very much.
6
And I might say that in the Productivity Commission,
7
the President's Productivity Commission, which was formed a
8
few years ago, and has become a very important vehicle for
9
discussing a wide range problems that have to do with produc-
10
tivity, but also with wage and price matters; we have drawn
1 11
from the Productivity Commission as a group to consult with
1 12
about the wage and price system.
13
And the Labor Management Advisory Committee, that
1 14
will make a statement about what is responsible wage behavior
I 15
in the United States for 1973, the management side of that is
16
17
drawn from the Productivity.Commission as is the labor side.
And at least in my judgment, it's an outstanding
18
group of people, and I might say four of the five management
19
people are members of the Business Council.
20
So there is a great contribution here.
There is a
21
sense of service, and I would say, from my own standpoint, I
22
don't feel the slightest hesitation in calling anyone of you
23
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25
and saying, here's something that we would like to get you to
do on behalf of the Government, and I have a total confidence
that you would respond and do your best at it, and give us
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ri]
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t|
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your help.
So I thank the Business Council for the help that
you are, and I'm sure will give us.
Like to start by relating an incident that happened
to me and a number of other people here in the room a few
mornings ago., The President had a breakfast for members of
the Cabinet, and White House advisors.
And we talked about
the budget, and we talked about this and that.
Various people gave reports.
And Bill Rogers gave
a report, and Ryan Ash gave a report, and John Roadsman, and
they were all right-on and so —
and then the President gave
a little report at the end.
..... .
i,
And it was one of the most moving and dramatic move
ments that I.have experienced in my lifetime, and certainly
in the Administration.
And I think there is, in addition to
the drama of it, there are some lessons from it.
The President has felt, of course, that as he has
pursued the Vietnam War and problems, that he has had a sense
of strategy, and a sense of what it was necessary to do, and
a sense of the toughness that had to be exhibited in order to
get a reasonable result, and I'm sure a certain sense of fulr
fillment when we have finally had |peace.
And he talked a .
little bit about that.
And then, he related an incident having to do with
the person, the last man killed in Vietnam, who had been buried
8
1
2
5
4
in Arlington Cemetery a few days earlier, and had written his
family before he had been killed saying that he wanted to bring
them to Washington to see to the Capitol, and sea the White
House and so forth.
5
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And the President said in here, they were.
came into the Oval Office.
and —
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There's a wife, five children,
I forget exactly what —
three brothers and two sisters,
And he remarked on how Lady Bird Johnson had behaved
with such dignity as a First Lady.
And he said and here came
this woman, and not accustomed to the glare of publicity that
a First Lady become accustomed to, who came to Washington undei
these difficult circumstances, and he said behaved like a
queen.
15
16
They
the grandfather, sort of a big American family.
9
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r
No, he said no, behaved like a First Lady.
And then he talked about the family, and then they
came through the sort of a little receiving line to shake his
hand.
■-.i
And first of all,
Bert went through as the boy who had
sideburns and a mustache, and a beard and long hair.
The press were eyeing him for juicy statements.
As
he got up toward the President, lo and behold, on his lapel
was an American flag.
He spoke to the President about how
proud he was of his father.
The next person through, he said, was a girl of about
16, very pretty, who came through the line,
him and said Mr. President, may I kiss you?
and looked up at
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The President stood and I was sitting about two
1
2
5
chairs away.
sort of emotion coming from his toes right up through.
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And we all sat there for a good minute or two without
anybody
having anything to say.
So finally, he did say well, so that's what it's
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t s*
us, for him? and I think dramatizes in a kind of perverse way
the most important fact about our economy and our society
right now, which we have not absorbed at all, and is that we
have peace.
We've had war for eight years.
It's been terrible,
difficult, and now we have peace, and we don't even know it.
And I suppose that most people don't accept the fact that we
do.
The POW's coming home, and we begin to, and all come home
wa will.
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H
And it was a very dramatic kind of moment for all of
14
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«Mmk WimMi
all about.
9
10
And the President couldn't
say anything.
7
8
I could see him, and I think you could see the
I was put in my place a little bit, given a better
sense of prospective about what's really important, last Monday
night when I had been working on our international monetary
problems for days and nights, weekends and so on, meeting with
everybody.
. '.
And Monday night, finally, we got it all settled,
and we had a little press thing.
And I went home.
io
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2
And my wife was there.
said —
3
My wife was there, and^she
[Recorded proceedings interrupted at this point].
5
(General laughter)
4
My wife was there and she said that —
5
watching television today?
6
I*ve been at the office all day.
7
And I said no.
have you been
I*ve been busy.
She said well, I've been watching television.all
8
day, and she gives me the most emotional thing, or traumatic
9
thing that I have seen for a long, long while.
10
it.
11
day.
She said my tears were running down my cheeks most of the
12
13
She described
And then she said by the way, what's going on with
your monetary thing?
14
(General laughter)
15
Well, it really put things in place
16
(General laughter)
17
What is important?
Which is important is human
18
beings, what is happening to them, and that's what it's all
19
about.
20
21
And that is what this economics business is all
about.
22
23
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25
That's what the moentary business is all about.
So, that unless we. have that prospective, we're
nowhere.
So, all of these things I think add up to a prospec
tive that seems to me very important as we try to assess what
lies in front of us in the economy, which I know is principally
11
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your concern here, which I will talk about.
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&
&
But the big thing is we have peace, we have a new
outlook now.
right.
We need to take advantage of it, and do things
We have a new situation in this country, that we haven*t
had before.
And we just —
it*s going to sink in.
we don’t even appreciate it yet.
And
It's going to gradually dawn on people,
that it’s different, and I think it*s going to make a tremendous
difference to us, make a big difference to everybody but the
stock market, which of course will go down.
Now, just in trying to give a sense of outlook, as
I have tried to think of it, in thinking about the President
and how he operates, and how when I first had that meeting aftei
the inauguration, we found these books.
We went to the meeting.
It turned out they were
four-year calendars, and they had a message that,first of all,
make each day count; and second of all, have a sense of pros
pective, have a sense of strategy, and try to think in terms
of being willing to do something, felt it rather unpleasant
and difficult today, if you think that six months from now, a
year from now, two years from now, maybe it will wind up stra
tegically having been a good thing.
So, what is a sense of strategy for the economy?
Well, I would say that it has to proceed from a sense of the —
all of the interconnections there are between the different
12
y
You certainly see them in the Treasury, among
1
things going on.
2
other places, as you see the different kinds of things we work
5
on, you get a sense of the complexity of the system.
4
You can*t-help but get a sense of the need for res
5
pecting what the free market can do.
6
reactions to efforts to get a little bit more of the free mar
7
ket in the system, you recognize how deeply imbedded in business;
8
community and in our financial community is the sense of need
9
for regulations.
10
11
And as you sense the
And this case, this deep case of regulatory hiatus,
that we have, and that I think we all must recognize.
12
Nevertheless, as the President approaches the prob
13
lem and thinks about the sense of strategy, I think very impor
14
tant in his idea
15
what —
16
get back to that.
17
of the right sense of strategy is a sense of
of letting the free market do its job, and trying to
Now, we have made a number of major moves in that
18
direction recently.
19
received with some applause and a reasonable amount of hostil
20
And they have been quite, -I would say,
ity, which I think only shows.how important it is to think about
21
the concept of freedom, and what it means, and how important
22
it is.
23
24
25
We have Phase III, which is a shift from bureacratic
administration to self-administration with stiff rules.
It's
a very strong programs of controls from any standpoint.
Herb
13
1
2
5
3
mandatory as it has to be, and I think that's a very good char
acterization.
4
5
6
7
And I'm afraid, I have to tell you, that it will be
mandatory, and all of it —
as we find —
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and if any of you want to proffer yourself up as
And I think that's going to happen one of these fine
days.
It's already happened.
Harry Bridges didn't get his
wages raised, and various other people feel aggrieved.
11
12
and we will clobber somebody as soon
that juicy target, to get your heads knocked off, we're delights
8
9
f a
characterized it as being as voluntary as it can be, ana as
So it's a strong program, and it's going to be ad
ministered that way.
And there is a great sense of determina
tion in the Administration to deal with the problem of infla
tion , and to get as much out of political controls as we can wit]
indulging ourselves in the further corruption of our committment
to freedom in this country, that we have gone so far down the
road of.
Now, a second step that we have made, as of Monday,
is a step toward more flexibility in the monetary system.
In
the devaluation of the dollar, we have two more of our six major
trading partners floating; Japan and Italy, add them to Canada
and Britain, you have a big proportion of our trade in a situa
tion of flexible exchange rates.
We have reasserted the fact that we have no obliga
tion, we have undertaken no obligation to intervene in -
14
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exchange markets.
2
3
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5
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7
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we think that this move that conveyed is a positive one.
Ther
I
don11 know that it has been perceived particularly as a move
which has brought a greater element of flexibility in the sys
tem.
But I think that is at least a reasonable new impact of
it.
*-t
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V. 3 ; •
And, of course, we have also stated that we intend
for our capital controls program phased out by the end of 1974.
10
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/
Now, we look for stability in exchange markets.
8
9
-
Now, these are steps, I think, in the direction of
the President's strategy for economic policy, and I think we car
implement that strategy successfully, and we can have expansion
and we can have prosperity, and we can attain more stable
prices.
m]
15
: it
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We can do that if we manage to maintain to our
16
attention on fundamentals.
17
get out of these controls as we ween ourselves away from them.
Yeh, there is mileage that we can
is
18
I 19
I
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j 21
22
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24
25
But at the time time, we have to maintain ourselves
with other countries.
We have to rely on the good sense of our
friend Arthur Burns, his colleagues in the Federal Reserve to
conduct our monetary policy in accordance with these broad goals
as l fm sure he will.
We have to take particular problems like the problem
of food prices, and treat it in terms of the fundamentals;
that is, we have to see that the basic problem involved is not
9
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what kind of additional controls we can impose, but what we
can do that will increase the supply of food.
going to get the prices of food in line.
4
And I must say as I think about the problems that we
5
have in comparison with others.
6
discussions with the British recently.
7
8
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system while you*re going into the Common Market, and thereby
raising your tariffs on food prices in effect, and running them
up.
It*s wild.
We at least have a sense of what we can do if we
have any luck at it in getting food prices down by increasing
supply.
14
15
And I had a little round of
Consider trying to implement a wage and price control
11
12
That is what is
In that case, going at it in terms of the fundamentals.
And finally, I would say, that we have put forward
a budget, that while it has been characterized in a great many
16. way, on the whole it has not been characterized as outkeeping
17
with the economic needs, that we have right now.
18
19
20
21
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23
It is a tough budget by political standards.
certainly as much as we ought to spend by economic standards,
and it represents a determination by the President to hold
spending under control, and keep taxes under control, and put
out a budget policy that's consistent with expansion of the
economy, and reasonably stable prices.
24
25
It is
Now, I think this battle, which you're in the midst
of —
and there is big battle here going on —
is nevertheless
16
a battle which the President is winning —
interrupted at this point],—
[Recorded proceedings
that 250 billion is enough.
That it really isn't a good idea to raise taxes more
in order to spend more Federal money.
And it is not a proven
case that the Federal Government knows how to spend your money,
better than we do on the market, at the levels that we're now
at.
And that for fiscal '74, another $19 billion is quits
a good-sized additional boost.
And we have put into play, as a
relative innovation, a fairly detailed fiscal *75 budget.
That
is by way that I can demonstrate that if we have some discipline
the job can be done.
Now,’.I want to call this to your attention as an
example of what Presidential determination can do.
You may re
member six months or eight months ago, that everybody said that
.
j
the Budget was totally out of control.
Kermit Gordon's institution, the Brookings Institu
tion, published a study showing extrapolations, and saying ob
viously spending was way up, and we're going to have to have a
tax increase.
•
The American Enterprise Institution basically publish2 d
a similar sort of thing.
I'm certain that all of your economist
told you that that was the kind of situation.
It was a universal view.
And I remember talking to
small groups in the Treasury about it.
And I would have to say,
4
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5
6
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However, I think today people think well, it's going
to happen.
We are going to have an ability to hold out some-
place near 250 billion.
It is possible to manage this thing,
so that we don't have to have a tax increase.
And it is purely, and simply, and only for one reason because the President was determined to do it. And they have
all the smart money, all the people who know everything about
everything thought he was wrong.
ft
When he said there wasn't going to be a tax increase
12
during the campaign, he was called a liar.
13
it's going to be,
14
can do.
15
#
tened, but they were waiting with a very skeptic attitude.
7
8
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there were people that came in that'were very polite, -and lis
5
4
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But that is the way
And it is an example of what the President
And I think it expresses again his committment to fund•* ■
amentáis.
H
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16
And it is this committment to fundaments with an over
’"
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17
lay of controls, which we will use with determination? make
18
no mistake about it.
19
20
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22
23
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25
And we have an outstanding labor-manage-
ment advisory committee.
And they will make a good statement.
But it is all to no avail unless the fundamentals
are in place, and they are going to be in place.
So, I think to go back to this, whatever, theme I
have for this talk, that the thing that counts is the sense of
strategy that you have.
is going to work.
That we have a sense of strategy.
It is going to work fundamentally because
It
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2 , I5
K
z 57
%
18
it is based on the things
that are fundamenta1/Ly
important.
2
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6
[Recorded proceedings interrupted at this point.]
I would be glad to try to field your questions, or listen to
your statements.
chairmen of the Business Council.
(General laughter)
8
10
11
12
The first time I appeared before the Business Counci] ,
Mr. Nickerson, you were the Chairman.
And I have always found this a very stimulating and
14
you've made that known to me.
And you haven't always agreed with me, and
18
Yes, sir?
21
22
23
24
25
i
i
É
•
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your comments on whatever.
(Applause)
20
And that is fine.
And I would be pleased to have your questions or
17
19
Packard's
auspicies.
interesting group.
16
And I appeared under Free
Divorce's auspicies, and to go back some, under Dave
13
15
H -
commenting to Dave Vander, that I am now among my important
7
9
But I have found over the years, I was
QUESTION:
?. ,
jc
If"
[Inaudible]
SECRETARY SCHULTZ:
Well, I'll be willing to respond.
Whether I'll answer or not, remains to be seen.
(General laughter)
QUESTION;
[Inaudible]
SECRETARY SCHULTZ: Well, as far as exchange rates
are concerned, we tried to have the monetary system in
19
conjuction with the trade arrangements, Which we don't think
are satisfactory at all or are not as satisfactory as they
should be —
all —
I suppose I shouldn't
say that satisfactory at
in conjunction with the flow of inventsments, and mili
tary spending, all together looked at, we seek to have the ex
change rate system play its part in making adjustments for the
flows of international trade.
So that we can have some reasonable equilibrium.
And we think that —
and this underlies the Smithsonian Agree
ment and the devaluation basically —
that over a period of
time in the post-World War II period, the dollar was not valued
correctly, and other people undervalued, systematically.
And that we had to make some changes that would help
to correct that.
We are under no allusion in the Administra
tion that changes in exchanges rates can carry the full load of
international economic adjustment.
They're important, but other things have to be done,
too.
And we have said that, and said that and said that.
The
speech that the President gave, and the one that he instructed
me to give subsequently at the IMF meetings, emphasized this
point.
And we repeat it, and repeat it.
And we seek a system that will allow an encourage
a strong flow of trade, and will have this take place with equi
ibrium in our balance of payments.
Now, let me come to your word discipline, because I
20
agree with you.
I think that we must h^vé discipline.
You referred to Arthur Burns.
I meet with Arthur
Burns a great deal, particularly lately.
(Laughter)
And every other word he utters is discipline, and
he has preached it at us, and preached it at us, and so have
many others.
i
And the budget that the President has put forward
is a disciplined budget.
Now, many have said why didn't you have a disciplined
budget in fiscal year 1971, say, or '72?
to balance the budget?
Why didn't you try
That would have been discipline.
In our view, that would have been false discipline.
That there wás an importance from the standpoint of expanding
the economy to letting the budget of the Federal Government be
out of balance, and that that would provide a stimulation to
the economy, as long as you did have some sense of how far you
could go with that.
-
And we put.forward for that reason the concept of
the full employment budget? that is of measuring your outlays
against —
[Inaudible] —
you would get at full employment.
And we're trying to keep them more or less within that limit,
so that as you got toward full employment, you could discipline
yourself.
You could obtain those outlays, and you wouldn't have
had the situation run away with you.
- r ---I f
* ^ > . / < 7
21
<1 b
And we think that that is where we are if we can get
1
2
the discipline.
5
Now, the President has put forward a disciplined bud
4
get.
5
it, all around Washington anyway.
6
He has gotten practically nothing but criticism for doing
X have the feeling out around the country, he's
7
gotten a lot of praise for it, but in Washington, it's a big
8
Constitutional issue, and we're fighting away about that.
9
10
1 11
And sir, I would say if you're interested in disci
pline, help us, help us keep this budget in line? not by the
use of any improper procedures, we don't think we have used any
12
improper procedures, but by supporting the idea that programs
13
that don't work, that President Eisenhower has tried to get
14
rid of, that President Kennedy tried to get rid of, that Presi
15
dent Johnson tried to get rid of, that President Nixon tried to
'
ii
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16
17
get rid; that we should try to get rid of them, and just do it.
And that's discipline.
And that, I think, is very
18
fundamental in this whole , and comes back to exactly what I was
19
trying to emphasize about what it takes, right now, to have
20
prosperity without inflation, and some reasonable stability in
21
our international accounts is a sense of discipline particularly
22
on our budget.
23
. 24
25
And in the statement that we drew up that — - I
i.
issued it, but on behalf of the President, and the people who
worked on it, about the devaluation.
We wound up with two
(i
Li
1
points.
.. . - V 7
22
That we all felt were the fundamental points: one of
them was the need for international monetary reform on a long
term basis; and the other was the importance of how you conduct
yourself in the domestic economy, discipline, particularly on
the budget.
Thank you.
(Applause)
QUESTION:
[Inaudible]
(General laughter and applause)
VOICE:
very important —
Well, thank you very much, George, for this
[Recorded proceedings interrupted at this
point].
-MR. BURNS: [inaudible] —
when we look back to the
good old days when we had discipline, one of the disciplines was;
furnished by the gold standard.
Under the gold standard, gentlemen and ladies, we
had a declining price level from 1879 to 1896.
We had a rising
trend in the price level from 1896 to 1913.
Between 1914 and 1920, the price level rose in
wholesale markets by something like 140 or 150 percent.
The —
we had a collapse in prices from 1929 to 1933.
*
We had severe depression from 1882 to 1885.
severe depression from 1893 to 1896.
We had
We had a crisis from
1907 to 1908.
We had a rather severe depression just before World
____ _
1
War I.
2
*21,and we had a great collapse of our economy from 1929 to
5
1933; all happened under the discipline of gold standard.
23
We had another one right after WorldJtWr I fi*om 1920 to
4
Let's not be romantic, gentlemen.
5
(General laughter and applause)
6
VOICE:
7
And let me just —
8
(Laughter)
9
Let me just say, ladies and gentlemen, it seems to
10
me that what the President has done with the guidance and the
11
wisdom of these distinguished guests here tonight
12
that the business community has really asked for for a long
13
time.
14
Well, thank you very much, Arthur.
is something
It seems to me that it's up to us to set up now,
15
and help enforce and support this discipline.
And I think we
16
have a real responsibility nov; to back up the President, and
17
thèse wonderful people who are really doing a great job in
18
finally reaching where a great many of us hoped we would reach
19
a long, long time ago.
20
Thank you all very much for being with us.
21
Thank you, guests, for being with us tonight.
22
The meetings adjourned, and Counsel will —
23
24
25
[Recorded proceedings end at this point.]
OFFICE OF THE SECRETARY OF THE TREASURY
W A S H I N G T O N , D .C . 20220
Draft/Schiff/2/15
Graham W. Watt, Director of the Office of
Revenue Sharing, announced today a supplemental
mailing of entitlement checks to various units
of local government.
On February 9, every eligible Indian tribe
and Alaskan native village was mailed a revenue
sharing check for CY 1972 based on the proportion
of the tribal population to the total county area
population.
In order to avoid an overpayment to
other governmental units within the affected
counties, the Office of Revenue Sharing withheld
a percentage of the county area allocations based
on roughly estimated population figures.
The supplemental checks represent an adjust
ment to governments in county areas where over
estimates of tribal or village population had
occurred.
|^
M
r
Rev* Sharing Masthead
Feburary 16, 1973
SUPPLEMENTAL REVENUE SHARING CHECKS
MAILED TO INDIAN AND A U S KAN AREAS
The Office of Revenue Sharing today is mailing out
nine supplemental checks to Indian tribes and Alaskan native villages,
reflecting revised data on their entitlements for 1972.
The nine checks, totalling $307,521, go to cities
and counties in four states: A-laska, New Mexico, North Dakota and
.South Dakota.
The Greater Anchorage Area borough will receive
its
almost $100,000, in thee supplemental entitlement check, which is
the largest of the checks being dispatched today.
and
The nine communities* the amounts to be received,
>
follow under the states involved:
Al a s k a :
Greater Anchorage area, $99,907; Nome,
$33,715; Barrow, $35,893; Katzebue, $17,386.
New Mexico: McKinley County,
$25,8?9;
Gallup,
$27,188.
North Dakota:
Rolette County, $13,198.
South Dakota:
Todd County, $33,826; Washabaugh County,
$20,529.
m
The supplemental checks bring up to date entitlents
areas
mailed last week(Feb. 9) to 331 Bammxxxtixsxin which Indian tribes
or Alaskan native villageswere originally computed in the geographic
or population data
February 16, 1973
RESULTS OF TREASURY'S
WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
ills, one series to be an additional issue of the bills dated November 24, 1972 , and
e other series to be dated February 22, 1973 , which were invited on February 9, 1973,
re opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
rthereabouts , of 91-day bills and for $1,800,000,000, or thereabouts, of
182-day
l l s . The details of the two series are as follows:
OF ACCEPTED
IMPETITIYE BIDS:
High
Low
Average
91-day Treasury bills
maturing May 24, 1973
Approx. Equiv.
Annual Rate
Price
98.640
98.597
98.621
5.380$
5.550$
5.455$
1/
182-day Treasury bills
maturing August 25, 1975
Approx. Equiv.
Annual Rate
Price
97.170
97.098
97.142
5.1
5.740$
5.653$
1/
72$ of the amount of 91-day bills bid for at the low price was accepted
45$ of the amount of 182-day bills bid for at the low price was accepted
ITAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Pistrict
Boston
|@W; York
Philadelphia
Cleveland
Richmond
Atlanta
fhicago
[a . Louis'
Minneapolis
Kansas City
Dallas
3an Francisco
TOTALS
r!Includes
Applied For
$
26,050,000
2,685,430,000
15,675,000
21,130,000
7,655,000
11,025,000
200,385,000.
38,795,000
28,535,000
32,820,000
34,200,000
166,240,000
Accepted
$
23,250,000
1,885,630,000
15,675,000
21,130,000
7,655,000
11,025,000
186,385,000
37,795,000
28,535,000
26,540,000
25,200,000
131,240,000
Applied For
$
18,550,000
2,342,975,000
4,600,000
14,130,000
3,015,000
6,870,000
175,125,000
25,270,000
29,400,000
17,305,000
46,420,000
114,660,000
Accepted
$
6,550,000
1,465,475,000
4,600,000
14,130,000
3,015,000
6,870,000
125,125,000
22,270,000
29,400,000
9,755,000
36,420,000
76,660,000
$3,267,940,000
$2,400,060,000 a/
$2,798,320,000
$1,800,270,000 b /
$171,540,000 noncompetitive tenders accepted at the average p r i c e 1of 98.621
Includes $ 66,555,000 noncompetitive tenders accepted at the average price of 97.142
Ihese rates are on a bank discount basis.
The equivalent coupon issue yields are
h:l| 1° for the 91-day bills, and 5.90$ for the 182-day bills.
Department of theJ U [ / I S I I U Y
i
T T T -
February 19, 1973
Note to Correspondents:
Attached is a copy of the letter of transmittal
from the Secretary of the Treasury to the Speaker of
the House proposing legislation to devalue the dollar
by 10 percent by amending the Par Value Modification
Act of 1972.
A copy of the bill and background
material are also attached.
A similar letter was
transmitted to the President of the Senate.
Attachments
S-120
Proposed Modification of Par Value of Dollar
Table of Contents
(1) Letter of Transmittal from the Secretary of the Treasury
to the Speaker of the House
(2) Draft Bill
(3) Comparative Print Showing Changes Made by Bill in
Existing Law
(4) Secretary Shultz’s Statement on February 12, 1973
(5) Tables and Explanatory Notes on Financial Effects of
U.S. Devaluation.
(6) Background Material on Proposed Modification of Par
Value of the Dollar
THE SE CR E T A R Y OF THE T R E A SU R Y
WASHINGTON
2 0 2 2 0
February 19, 1973
Dear Mr,. Speaker :
'7 There is transmitted herewith a draft bill, "To amend the Par
Value1 Modification Act.”
Iri a‘ Statement on behalf of the President on February 12, 1973,
I announced our intention to propose legislation to implement a de
valuation of the dollar by 10 percent. This step was proposed in
'combination with other actions taken in Europe and Japan to amend
the':Structure of exchange rates agreed at the Smithsonian Institution
ih:December 1971.
' ^ statement, which is enclosed, explains the reasons for these
exéhângè'raté changes and other steps being taken to strengthen the
competitive position of our factories and farms in world markets.
Also enclosed is a background paper which reviews the events leading
up to the February currency crisis, the exchange rates resulting from
the agreed realignment, and the relationship of the realignment to
broader reform of the international monetary and trading system.
The legislation I am submitting, today would give Congressional
approval to the change in the dollar exchange rate. It amends the
Par Value Modification Act, P.L. 92-268, approved on March 31> 1972,
by providing for establishment of a new par value of $1 equals
0.8289*J-8 tSpecial Drawing Right or, in terms of gold, of $1 equals
0.02368^+ of a fine troy ounce of gold. The Bretton Woods Agreements
Act prohibits a change in the par value of the dollar in the Inter
national Monetary Fund without prior Congressional approval and the
proposed législation would grant this approval.
In the past, our par value has been expressed only in terms of
gold. The proposed bill expresses our par value in terms of both
Special Drawing Rights and gold in order to emphasize the importance
we attach to the enhanced role of Special Drawing Rights in the
future development of the international monetary system.
The change in the par value of the dollar will increase the
value of the United States gold reserves, Special Drawing Rights and
gold tranche automatic drawing rights in the International Monetary
Fund. There will also be increases in the dollar value of subscrip
tions to the international financial institutions.
2
The par value change will also have the consequence of requiring
the United States to add to its dollar subscriptions to the inter
national financial and lending institutions in order to maintain the
value of these subscriptions in terms of gold. The maintenance of
value provision is applicable to all members and is designed to assure
that contributions from all countries maintain their relative value
when relationships among currencies change. It also assures that we
do not lose out through devaluation in our share of the assets and
voting power of these institutions. Authority to maintain the value
of our international financial institution subscriptions and an
authorization of appropriations for this purpose are contained in
the Par Value Modification Act.
In addition, certain costs reflecting foreign exchange obligations
will result from the change in par value. The enclosed tables and
explanatory notes contain full details on all aspects of the increases
in assets and liabilities resulting from the change in par value as
well as an estimate of the maximum amount of appropriations to be
requested to maintain the value of international financial institution
subscriptions.
I urge early and favorable consideration of this important
legislation.
It would be appreciated if you would lay the draft bill before
the House of Representatives. A similar draft bill has been trans
mitted to the President of the Senate.
The Department has been advised by the Office of Management and
Budget that enactment of this proposed legislation would be in accord
with the program of the President.
Sincerely yours
George P. Shultz
The Honorable
Carl Albert
Speaker of the House of
Representatives
Washington, D. C. 20515
Enclosures
A BILL
To amend the Far Value Modification Act
Be it enacted bv the Senate and House of Representatives of the
United States of America in Congress assembled« That the first sentence
of section 2 of the Par Value Modification Act (Public Law 92-268) is
amended by striking the words "one thirty-eighth of a fine troy ounce
of gold" and inserting in lieu thereof the following:
"0.828948
Special Drawing Right or, the equivalent in terms of gold, of $1 equals
0.023684 of a fine troy ounce of gold".
COMPARATIVE TYPE SHOWING CHANGES IN EXISTING LAW
MADE BY PROPOSED BILL
Changes in existing law proposed to be made by the bill are shown
as follows (existing law proposed to be omitted is enclosed in
brackets, new matter is underscored):
Public Law 92*268
Section 1. This Act may be cited as the "Par Value
Modification Act".
Sec. 2. The Secretary of the Treasury is hereby authorized
and directed to take the steps necessary to establish a new par
value of the dollar of $1 equals [one thirty-eighth of a fine
troy ounce of gold.] 0.828948 Special Drawing Right or, the
equivalent in terms of gold, of $1 equals 0.023684 of a fine
troy ounce of gold. When established such par value shall be
the legal standard for defining the relationship of the dollar
to gold for the purpose of issuing gold certificates pursuant
to section 14(c) of the Gold Reserve Act of 1934 (31 U.S.C. 405b).
Sec. 3. The Secretary of the Treasury is authorized and
directed to maintain the value in terms of gold of the holdings
of United States dollars of the International Monetary Fund,
the International Bank for Reconstruction and Development, the
Inter*American Development Bank, the International Development
Association, and the Asian Development Bank to the extent pro*
vided in the articles of agreement of such institutions.
There
-
2
-
is hereby authorized to be appropriated, to remain available
until expended, such amounts as may be necessary to provide
for such maintenance of value.
Sec. 4. The increase in the value of the gold held by
the United States (including the gold held as security for gold
certificates) resulting from the change in the par value of
the dollar authorized by section 2 of this Act shall be covered
into the Treasury as a miscellaneous receipt.
FOR IMMEDIATE RELEASE
February 12, 1973
STATEMENT ON FOREIGN ECONOMIC POLICY
BY
SECRETARY OF THE TREASURY GEORGE P. SHULTZ
The United States, as do other nations, recognizes the
need to reform and strengthen the framework for international
trade and investment. That framework must support our basic
objective of enhancing the living standards of all nations.
It must encourage the peaceful competition that underlies
economic progress and efficiency. It must provide scope
for each nation -- while sharing in the mutual benefits of
trade -- to respect its own institutions and its own particular
needs. It must incorporate the fundamental truth that
prosperity of one nation should not be sought at the expense
of-another.
This great task of reform is not for one country alone,
nor can it be achieved in a single step. We can take
satisfaction in what has been accomplished on a cooperative
basis since the actions announced on August 15, 1971 clearly
signaled our recognition of the need for.decisive change.
-- Intense negotiations established an important
fact in December 1971: mutual agreement can be
reached on changes in the pattern of world exchange
rates, including the parity of the United States
dollar, in order to promote the agreed goal of a
better balance in international trade and payments.
-- Monetary negotiations have been started by the
’’Committee of Twenty” on the premise that better
ways must be found to prevent large payments
imbalances which distort national economies,
disturb financial markets, and threaten the free
flow of trade. The United States has made
practical and specific proposals for international
monetary reform.
-- The groundwork is being laid for comprehensive
trade negotiations. Those negotiations should look
beyond industrial tariffs to encompass also other
S-1 1 4
-
2
-
b a r r i e r s to t h e f r e e f l o w o f g o o d s . T h e y s h o u l d
assure fair competitive treatment of the products
o f all countries.
T h e y s h o u l d also s eek a g r e e d
w a y s of avo i d i n g abrupt d i s l o c a t i o n s of w o r k e r s
and businesses.
In S e p t e m b e r 1 972 t h e P r e s i d e n t t o l d t h e f i n a n c i a l
l e a d e r s o f the w o r l d t h a t ’’T h e t i m e h a s c o m e f o r a c t i o n
across the entire front of inte r n a t i o n a l e c o n o m i c p r oblems.
R e c u r r i n g m o n e t a r y c r i s e s , s u c h as w e h a v e e x p e r i e n c e d a l l
t o o o f t e n in t he p a s t d e c a d e ; u n f a i r c u r r e n c y a l i g n m e n t s
a n d t r a d i n g a r r a n g e m e n t s , w h i c h p u t t h e w o r k e r s o f one
n a t i o n at a d i s a d v a n t a g e w i t h w o r k e r s o f a n o t h e r n a t i o n ;
g r e a t d i s p a r i t i e s in d e v e l o p m e n t t h a t b r e e d r e s e n t m e n t ; a
m o n e t a r y s y s t e m t h a t m a k e s n o p r o v i s i o n f or t h e r e a l i t i e s
o f the p r e s e n t a n d t h e n e e d s o f the f u t u r e -- a l l t h e s e n o t
onl y injure our eco n o m i e s , they also create p o l i t i c a l tensions
that s u b v e r t the cause o f p e a c e . ”
At the same m e e t i n g , I o u t l i n e d the p r i n c i p l e s of a
m o n e t a r y s y s t e m t h a t w o u l d e n a b l e all n a t i o n s , i n c l u d i n g
t h e U n i t e d S t a t e s , to a c h i e v e a n d m a i n t a i n o v e r a l l b a l a n c e
in t h e i r i n t e r n a t i o n a l p a y m e n t s .
Those principles would
promote prompt adjustment and would provide equitable t r e a t
m e n t f o r all n a t i o n s -- l a r g e a n d s m a l l , r i c h a n d p o o r .
Y e t , in r e c e n t m o n t h s w e h a v e s e e n d i s q u i e t i n g s i g n s .
O u r o w n t r a d e h a s c o n t i n u e d in s e r i o u s d e f i c i t , w e a k e n i n g
our external financial position.
Other nations have been
s l o w in e l i m i n a t i n g t h e i r e x c e s s i v e s u r p l u s e s , t h e r e b y
c o n t r i b u t i n g to u n c e r t a i n t y a n d i n s t a b i l i t y .
In r e c e n t d ays,
currency disturbances have rocked world exchange markets.
U n d e r the p r e s s u r e of e v e n t s , some c o u n t r i e s h a v e r e s p o n d e d
w i t h a d d e d r e s t r i c t i o n s , d a n g e r o u s l y m o v i n g a w a y f r o m the
b a s i c o b j e c t i v e s w e seek.
P r o g r e s s in t h e w o r k o f the C o m m i t t e e o f T w e n t y h as
b e e n too s l o w and s h o u l d m o v e w i t h a g r e a t e r s e n s e of
urgency.
T h e t i m e h a s c o m e to g i v e r e n e w e d i m p e t u s to o u r
e f f o r t s in b e h a l f o f a s t r o n g e r i n t e r n a t i o n a l e c o n o m i c
order.
T o t h a t e n d , in c o n s u l t a t i o n w i t h o u r t r a d i n g p a r t n e r s
a n d in k e e p i n g w i t h the b a s i c p r i n c i p l e s o f o u r p r o p o s a l s
f o r m o n e t a r y r e f o r m , we a r e t a k i n g a s e r i e s o f a c t i o n s
d e s i g n e d to a c h i e v e t h r e e i n t e r r e l a t e d p u r p o s e s :
-3-
32
(a) to speed improvement of our trade and payments
position in a manner that will support our effort
to achieve constructive reform of the monetary
system;
(b) to lay the legislative groundwork for broad and
outward-looking trade negotiations, paralleling*
our efforts to strengthen the monetary system;
and
(c) to assure that American workers and American
businessmen are treated equitably in our trading
relationships.
For these purposes:
First, the President is requesting that the Congress
authorize a further realignment of exchange rates. This
objective will be sought by a formal 10 percent reduction
in the par value of the dollar from 0.92106 SDR to the
dollar to 0.82895 SDR to the dollar.
Although this action will, under the existing Articles
of Agreement of the International Monetary Fund, result in
a change in the official relationship of the dollar to gold,
I should like to stress that this technical change has no
practical significance. The market price of gold in recent
years has diverged widely from the official price, and
under these conditions gold has not been transferred to any
significant degree among international monetary authorities.
We remain strongly of the opinion that orderly arrangements
must be negotiated to facilitate the continuing reduction
of the role of gold in international monetary affairs.
Consultations with our leading trading partners in
Europe assure me that the proposed change in the par value
of the dollar is acceptable to them, and-will therefore be
effective immediately in exchange rates for the dollar in
international markets. The dollar will dec Ine in value by
about 10 percent in terms of those currencies for which there
is an effective par value, for example the Deutsche mark
and the French franc.
Japanese authorities have indicated that the yen will
be permitted to float. Our firm expectation is that the yen
will float into a relationship vis-a-vis other currencies consistent
with achieving a balance of payments equilibrium not dependent upon
significant government intervention.
4
T h e s e c h a n g e s a r e i n t e n d e d to s u p p l e m e n t a n d w o r k in
t h e s a m e d i r e c t i o n as t h e c h a n g e s a c c o m p l i s h e d i n t h e
S m i t h s o n i a n A g r e e m e n t o f D e c e m b e r 1 971.
T h e y t a k e into
a c c o u n t r e c e n t d e v e l o p m e n t s a n d a r e d e s i g n e d to s p e e d
i m p r o v e m e n t in o ur t r a d e a n d p a y m e n t s position.'
In
p a r t icular, they are designed, t o g e t h e r w i t h a p p r o p r i a t e
t r a d e l i b e r a l i z a t i o n , to c o r r e c t t h e m a j o r p a y m e n t s
imbalance between J a p a n and the U n ited States w h i c h has
p e r s i s t e d in t h e p a s t y ear.
t
Other c o untries m a y also p r o p o s e c h a nges in their par
v a l u e s or c e n t r a l r a t e s to t h e I n t e r n a t i o n a l M o n e t a r y F u n d .
We w i l l s u p p o r t all c h a n g e s t h a t s e e m w a r r a n t e d o n t h e b a s i s
o f c u r r e n t a n d p r o s p e c t i v e p a y m e n t s i m b a l a n c e s , b u t p l a n to
v ote agai n s t any changes that are inappropriate.
We have learned that time m u s t pass b e f o r e n e w e x c h a n g e
r e l a t i o n s h i p s m o d i f y e s t a b l i s h e d p a t t e r n s of t r a d e and
c a p i t a l flows.
H o w e v e r , t h e r e c a n be n o d o u b t w e h a v e
a c h i e v e d a m a j o r i m p r o v e m e n t in t h e c o m p e t i t i v e p o s i t i o n
of A m e r i c a n w o r k e r s a n d A m e r i c a n b u s i n e s s .
The n e w exchange rates bei n g e s t a b l i s h e d at this time
r e p r e s e n t a r e a s o n a b l e e s t i m a t e o f t h e r e l a t i o n s h i p s w h i c h -taken t ogether w i t h a p p r o p r i a t e m e a s u r e s for the r e m o v a l of
e x i s t i n g t r a d e a n d i n v e s t m e n t r e s t r a i n t s -- w i l l i n t i m e
m o v e i n t e r n a t i o n a l e c o n o m i c r e l a t i o n s h i p s into s u s t a i n a b l e
equilibrium.
W e h a v e , h o w e v e r , u n d e r t a k e n no o b l i g a t i o n s
f o r t h e U.S. G o v e r n m e n t to i n t e r v e n e in f o r e i g n e x c h a n g e
markets.
S e c o n d , t h e P r e s i d e n t h a s d e c i d e d t o s e n d s h o r t l y to
t h e C o n g r e s s p r o p o s a l s f or c o m p r e h e n s i v e t r a d e l e g i s l a t i o n .
P r i o r to s u b m i t t i n g t h a t l e g i s l a t i o n , i n t e n s i v e c o n s u l t a t i o n s
w i l l be h e l d w i t h M e m b e r s of C o n g r e s s , l a b o r , a g r i c u l t u r e ,
a n d b u s i n e s s to a s s u r e that, t h e l e g i s l a t i o n r e f l e c t s o u r
n e e d s as f u l l y as p o s s i b l e .
the
This
tools
(i)
(ii)
legislation,
w e need, to:
p r o v i d e for
b a r r i e r s to
are willing
process;
among
other
things,
should
furnish
lowering tariff and n o n-tariff
trade, a s s u m i n g our t r a d i n g p a r t n e r s
to p a r t i c i p a t e f u l l y w i t h u s i n t h a t
p r o v i d e f or r a i s i n g t a r i f f s w h e n s u c h a c t i o n
w o u l d c o n t r i b u t e to a r r a n g e m e n t s a s s u r i n g t h a t
A m e r i c a n e x p o r t s h a v e f a i r a c c e s s to f o r e i g n
markets;
Pd.IJ
UAXi: J MU l B Y s a
a¿O'.v rM i b x •:.i;
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aaollIIM
t
Summary Table
Financial Effects of U .S .,Devaluation
frmPi
.Lerteitei)
. . * { H'lci }
,tMX
noiIssXXIlst 3 osiis/ioxil
I,
hUO'ix^-j'h
ol
XV"'V\I X??: 1Oi'iOyl
^ 7 . $ Millions
On U.S. Financial Statements
A. Increase in Assets
B, Increase in Liabilities
iui«4! XaierrsO C&rxl^-XIncrease inQAssets ..
II.
IM6 IE rti/1
On Records of Contingent Liabilities
on
.crr.o', l^exseO
rTfC:„r<..
I t
rie l
jr.-r<o
992
,. frJy22!l
x^--3^ioast Budgetary Expenditures .. ..¿95 m o y x v 'j
bTS
to ifiomyaI»H hi O0i
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1 onoi 4.0 *r, i.0 j
.
,s ghiwJBdil v:.oooxyj’l? 12
IA fill '100'! '
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no iXq j.-i.300 do 1&itQliir-bA
,. a m : o/i-j 0.'
FY 19T3
■so 0 no iifQx^p'tqj^A
ito lftp 1 :1 1 o.b a 3 e & h s rio x ii
FY 1975-1985
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rtoil^i 3OT<fS OhrMa^imum Appropriation Required .
iO
b o o
Increase in Obligation to Make Additional
Subscription to the International
pending Institutions, if called
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X
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1 *u •.
v- ft.. ..X so it f
^ ^ e. f f
'
?bVi-v
Financial Effects of U»S. Devaluation
(Explanatory Notes Attached)
On U.S. Financial Statements
A.
Increase in Assets
1.
2.
3.
B.
Accruing to:
$ Millions
Increase in Value of Reserves
G o l d ...................... .....
Special Drawing Rights (SDR)....
Gold. Tranche Automatic IMF
Drawing Rights...............
Increase in Value of U.S.
Currency Subscriptions in
the International Monetary
Fund (IMF)......................
Increase in Value of U.S.
Participation in Capital of
International Lending
Institutions.................. .>
Total Assets
1,165
218
Treasury General Fund
Exchange Stabilization Fun
52
Treasury General Fund
606
Treasury General Fund
i m
2,518
Financed from:
Increase in Liabilities
1.
2.
3.
1.
5.
Treasury Debt in Foreign
Currencies.............. .... .i.... I
Federal Reserve Obligations in
Foreign Currencies..... r... ji|,. •*■;
Increase in Repayment of
Obligations to IMF
For Currency Drawings..... ..
For SDR Allocations...... .
Required Additional Subscription
to the IMF............... ......
Obligation for Additional Capital
Subscription to International
Lending Institutions............
Total Liabilities
Net Increase in Assets
.193
Exchange Stabilization Funl
196
Federal Reserve Resources 1
150
Appropriations or
Exchange of Assets
Exchange Stabilization Fun|
278
606
Appropriations or
Exchange of Assets
lt77
Appropriations
1,900
6I8
On Records of Contingent Obligations
Increase in Obligation to make
Additional Capital Subscription
to the International Lending
Institutions, if called........ .
On Maximum Appropriation required
Treasury General Fund
Financed frosu
992
Appropriations
2,225
On Forecast Cash Expenditures
FY 1973....
FY 197^....
FY 1975-1985
0
12
IfO per annum
Notes to Table:
I.
?>3
u
"Financial Effects of U.S. Devaluation"
On U.S. Financial Statement
A.
Increase in Assets -- Devaluation will result in increases in
the dollar value of three types of assets:
(l) reserve assets,
(2) currency subscriptions in the International Monetary Fund,
and (3) paid-in capital subscription to the international develop
ment, lending institutions. The total increase in all three classes
is $2,518 million.
1.
Reserve Assets
Gold — United States holdings now total $10,U87 million. After
devaluation the value of these holdings in current dollars will
increase by 11.11$ or $ 1,165 million. The increment in value of
gold will result in a direct cash inflow into the Treasury of
$1,165 million as gold certificates equivalent to the increase
in gold value are issued to Federal Reserve banks. However,
under unified budgetary accounting concepts, this increment in
value will not be considered a budgetary receipt.
Special Drawing Rights (SDR) — S D R ’s are an international reserve
asset that are created by the IMF and allocated among members.
These assets have a gold value and United States holdings now
totalling $1,958 million will increase by 11.11$ or $218 million.
Gold Tranche — The gold tranche is the amount of our automatic
regular drawing rights on the International Monetary Fund. These
rights can be used by the United States to purchase or draw for
eign currencies from the Fund to meet a balance of payments need.
These rights, which are included in U.S. reserves, now total
$^69 million. They represent gold paid to the Fund in partial
fulfillment of U.S. subscription obligations and will increase
in value by 11.11$ or $52 million.
2.
Increase in value of our currency subscriptions in the Interna
tional Monetary Fund
Seventy-five percent of our subscription to the IMF was
paid in United States dollars but this subscription of $5,^56
million was denominated on the books of the Fund in dollars of
a fixed weight and fineness of gold. Thus, the value of this
subscription will increase in terms of current dollars after
devaluation to a total of $6,062 million —— an increase of
$606 million. This increase in value allows us to increase
our drawing rights, maintain our share of voting rights and
allocations of Special Drawing Rights.
-
3.
2
-
Increase in Value of U.S. participation in Capital of
Development Lending Institutions
Paid-in investments in the World Bank, the International
Development Association, the Inter-American Development Bank
and the Asian Development Bank are also denominated in dollars
of a fixed weight and fineness of gold. United States invest
ments in these institutions will increase in value by $¿177
million. The increase for the Inter-American Development Bank
will be $233 million, for the World Bank — $71 million, for
the International Development Association -- $l6l million,
and for the Asian Development Bank — $12 million.
Increase
1.
in Liabilities
Treasury Debt in Foreign Currencies
The Treasury has outstanding $1,71^ million in foreign
currency borrowings — $306 million in German marks and $1.U
billion in Swiss francs. Repayment of these obligations at.
maturity under the new rates of exchange are estimated to
result in approximately $193 million additional expenditure
of dollars. The actual amount of loss will vary depending
upon the market rates at which the currencies are obtained
for repayment. The liability for meeting this additional
cost is borne by the Exchange Stabilization Fund. Thus, no
appropriation or budgetary expenditures are involved.
2.
Federal Reserve Obligations under Swaps
The Federal Reserve has outstanding mutual deposit arrange
ments or so-called ’’swaps" with foreign central banks totalling
$1,639 million. The cost of buying foreign currencies to repay
these swap obligations is estimated to increase by about $196
million over what it would have been prior to devaluation. The
actual amount of loss will vary depending upon the market rates
at which the currencies are obtained for repayment. The
Federal Reserve will bear this additional cost and no appro
priation or budgetary expenditures are required.
3.
Increase in Repayment Obligation to the IMF
—
For Currency Drawings
The United States now has a drawing outstanding, representing
U.S. purchases of foreign exchange from the International Monetary
Fund in the amount of $1.U billion. The International Monetary
Fund Articles of Agreement require the United States to maintain
the value of these dollars held by the Fund in terms of gold.
The payments required, in the form of a letter of credit, will
amount to $150 million.
- 3 -
—
For, SDR Allocations
Special Drawing R ig h t s a l l o c a t e d to th e U n ite d S t a t e s are
also denominated in term s o f g o ld .
The U n ite d S t a t e s h a s been
allocated a total o f $2,¿+91 m i l l i o n i n S p e c i a l Draw ing R ig h t s
and should the SDR scheme e v e r be l i q u i d a t e d , th e U n ite d S t a t e s
would in c u r an in c r e a s e d l i a b i l i t y o f $278 m i l l i o n .
R e q u ire d A d d i t i o n a l S u b s c r ip t io n s to th e IMF
I n a d d it io n to . th e c u r r e n c y draw ing m ain ten an ce o f v a lu e
d e s c r ib e d under ite m 3 a b o v e , th e U n ite d S t a t e s h a s a m ain ten an ce
o f v a lu e o b l i g a t i o n on i t s c u r r e n c y s u b s c r ip t io n i n th e Fund o f
$5,1+55 m i l l i o n . Under Fund r u l e s , t h i s c u rr e n c y s u b s c r ip t io n
m ust be m a in ta in e d i n g o ld v a lu e r e q u ir in g a payment o f $606
m i l l i o n i n th e form o f a l e t t e r o f c r e d i t .
Obligations for Additional Capital Subscriptions to Inter
national Financial Institutions
The U n ite d S t a t e s w i l l i n c u r an in c r e a s e d p a i d - i n c a p i t a l
o b l i g a t i o n t o th e i n t e r n a t i o n a l developm ent i n s t i t u t i o n s
t o t a l l i n g $¿+77 m i l l i o n . The amounts a r e : W orld Bank $71
m i l l i o n , -In te r -A m e r ic a n Bank $233 m i l l i o n , A s ia n D evelopm ent
Bank $12 m i l l i o n , and th e I n t e r n a t i o n a l D evelopm ent A s s o c ia t io n
$ l 6 l m i l l i o n . These am ounts w i l l be fin a n c e d from an a p p ro
p r i a t i o n r e q u e s te d o f C o n g r e s s .
T h is m a in ten a n ce o f v a lu e o b l i g a t i o n stem s from s i m i l a r ,
b u t n o t i d e n t i c a l , p r o v is io n s i n th e agreem en ts g o v e rn in g each
o f th e i n t e r n a t i o n a l le n d in g i n s t i t u t i o n s p r o v id in g t h a t e ach
member c o u n tr y t h a t , d e v a lu e s i t s c u r r e n c y must m a in ta in
th e v a lu e o f i t s c o n t r ib u t io n s a s m easured b y a common
y a r d s t i c k , i n t h i s c a s e .g o l d . The p u rp ose o f t h i s r e q u ir e
ment i s to a s s u r e t h a t th e c o n t r ib u t io n s o f a l l members a re
m a in ta in e d i n v a lu e i n r e l a t i o n to e ach o th e r d e s p it e ch an ges i n
exch an ge r a t e s . T h is - p r o v is io n h a s worked i n fa v o r o f th e U n ite d
S t a t e s b y a s s u r in g t h a t o th e r c o u n t r ie s t h a t d e v a lu e t h e i r c u r
r e n c ie s do n o t d im in is h th e v a lu e o f t h e i r c o n t r i b u t io n s . T h u s,
th e b u r d e n -s h a r in g p r i n c i p l e i s n o t a d v e r s e ly a f f e c t e d by c u rr e n c y
d e v a lu a t io n s . The m ain ten a n ce o f v a lu e p r o v is io n a ls o a s s u r e s
t h a t ou r sh are i n th e a s s e t s and v o t in g r i g h t s i n th e s e i n s t i t u
t io n s i s n o t im p a ire d by our d e v a lu a t io n .
- k -
A l l o th e r c o u n t r ie s have f u l f i l l e d t h e i r m a in te n a n ce o f
v a lu e o b l i g a t i o n s .
I n t o t a l , th e r e have been o v er 200 p a r v a lu e
m o d if ic a t io n s i n th e I n t e r n a t i o n a l M on etary Fund and i n e a ch
c a se th e c o u n tr y co n ce rn e d h a s f u l f i l l e d i t s m a in te n a n ce o f
v a lu e o b l i g a t i o n s i n th e i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n s .
M o re o v e r, m ost c o u n t r i e s , e s p e c i a l l y th e l a r g e i n d u s t r i a l
c o u n t r i e s , have f u l f i l l e d th e s e o b l i g a t i o n s p r o m p tly . F o r
e x a m p le , F ra n ce d e v a lu e d i n 1957? 1958 and 19 6 9 . I n th e f i r s t
i n s t a n c e , m ain ten a n ce o f v a lu e was made on th e d a te o f d e v a lu a
t i o n , in th e s e c o n d , two days a f t e r , and i n th e t h i r d , t h r e e days a f t e r .
I n th e c a se o f th e U n ite d K ingdom rs d e v a lu a t io n
i n 19 6 7 , m ain ten a n ce o f v a lu e was made 33 d ays a f t e r and i n th e
c a se o f Canada i n 19 6 2 , 28 d ays a f t e r .
C.
II.
N et in c r e a s e i n A s s e t s — I n c r e a s e s i n a s s e t s t o t a l a b o u t $ 2 .5 b i l l i o n ;
in c r e a s e s i n l i a b i l i t i e s t o t a l a b o u t $ 1,9 0 0 m i l l i o n ; th e r e s u l t i s a
n e t in c r e a s e i n a s s e t s o f a b o u t $ 6 l8 m i l l i o n .
On R e co rd s o f C o n tin g e n t O b li g a t i o n s
In c r e a s e i n O b li g a t i o n to make A d d i t i o n a l C a p i t a l S u b s c r ip t io n t o t h e .
I F I ’ s , i f c a lle d .
— In th e W orld B a n k , th e In t e r -A m e r ic a n D evelopm ent Bank (ID B )la n d
th e A s ia n Developm ent Bank (A D B), our s u b s c r ip t io n o f c a l l a b l e
o r " g u a r a n te e " c a p i t a l i s den om in ated i n d o l l a r s o f a f i x e d w e ig h t
and f i n e n e s s , and th e change i n th e p a r v a lu e o f th e d o l l a r w i l l ' ' ;
mean an in c r e a s e o f 11.11% i n our c a l l a b l e c a p i t a l o b l i g a t i o n .
The U .S . c a l l a b l e c a p i t a l o b l i g a t i o n i n th e W orld Bank i s $7037
m i l l i o n , i n th e IDB i t i s $205 m i l l i o n , and i n th e ADB i t i s
$12 m i llio n o
The t o t a l in c r e a s e i n th e c u r r e n t d o l l a r amount
o f th e s e c a l l a b l e c a p i t a l s u b s c r ip t io n s amounts t o $920 m i l l i o n .
— T h is c a l l a b l e c a p i t a l i s a h i g h l y c o n t in g e n t l i a b i l i t y .
I t has
n ev e r been c a l l e d in th e p a s t and i t i s h i g h l y u n l i k e l y t h a t th e se
s u b s c r ip t io n s w i l l be c a l l e d i n th e f u t u r e , c o n s id e r in g th e s i z e
o f a lr e a d y e x i s t i n g c a l l a b l e c a p i t a l and th e r e s e r v e s w hich th e
i n t e r n a t i o n a l banks have b u i l t u p . T h e r e fo r e , no b u d g e ta r y im pact
i s a n t i c i p a t e d . N e v e r t h e le s s , fu n d s m ust be a v a i l a b l e to meet
th e s e o b l i g a t i o n s i f th e y a re e v e r c a l l e d , and an a p p r o p r ia t io n
o f $920 m i l l i o n w i l l be r e q u e s t e d .
- - O f th e t o t a l m a in ten a n ce o f v a lu e f o r th e ID B -FS0 o f $2^1
m i l l i o n , $72 m i l l i o n i s a c o n t in g e n t l i a b i l i t y r e p r e s e n t in g
lo a n s t h a t have been made i n d o l l a r s b u t a r e r e p a y a b le i n
e i t h e r d o l l a r s o r o th e r c u r r e n c i e s . I f r e p a id i n o t h e r
c u r r e n c i e s , and t h i s i s th e m ost l i k e l y p r o s p e c t , th e U n ite d
S t a t e s w i l l have no m a in ten a n ce o f v a lu e o b l i g a t i o n s on t h i s
sum;.
Ill.
On Maximum A p p r o p r ia t io n R e q u ir e d
A p p r o p r ia t io n s w i l l be r e q u ir e d f o r th e p a i d - i n c a p i t a l s u b s c r ip
t io n s t o th e i n t e r n a t i o n a l le n d in g i n s t i t u t i o n s and f o r th e c a l l a b l e
c a p i t a l s u b s c r ip t io n s t o th e s e i n s t i t u t i o n s . Paym ents t o th e I n t e r
n a t i o n a l M on etary Fund can be h a n d le d a s e i t h e r an a p p r o p r ia t io n o r
as an exch an ge o f a s s e t s . The maximum a p p r o p r ia t io n s t o be r e q u e s te d
a re a s f o llo w s :
($ m i l l i o n s )
p a id -in c a p it a l
c a lla b le c a p it a l
IMF
^77
992
796
2 ,2 2 5
The maximum amounts f o r e ach i n s t i t u t i o n a r e a s f o llo w s :
[ in m illio n s o f d o lla r s ]
C a lla b le
To b e p a id i n
IBRD .......................................................................
IDA ...........................................................................
IDB .................................... ......................................
A.DB • • • • • • • • • • • • • • • • • • • • • • • • * *
703
71
l6 l
277
12
233
s u b to ta l
992
0
b77
756
T o t a l .......................... ......................
992
1 ,2 3 3
IMF
12
These amounts a r e a p p r o x im a te . The e x a c t amount o f m a in ten a n ce
o f v a lu e o b l i g a t i o n s can be d ete rm in e d o n ly on th e b a s i s o f h o ld in g s
on th e day o f fo r m a l change i n p a r v a l u e .
IV .
On F o r e c a s t B u d g e ta ry E x p e n d itu r e
B u d g e ta ry e x p e n d itu r e s a re e x p e c te d i n th e n e a r f u t u r e o n ly fro m
a p o r t io n o f th e o b l i g a t i o n s f o r in c r e a s e d c a p i t a l t o th e i n t e r n a t i o n a l
le n d in g i n s t i t u t i o n s . I n m ost c a s e s th e s e o b l i g a t i o n s w i l l b e m e t, a t
l e a s t i n i t i a l l y , n o t b y c a s h e x p e n d itu r e s b u t r a t h e r b y th e i s s u e o f
l e t t e r s o f c r e d i t , w hich do n o t c o n s t i t u t e b u d g e t e x p e n d it u r e s . A l l
o f th e p a i d - i n c a p i t a l s u b s c r ip t io n s w i l l be p a id i n l e t t e r s o f c r e d i t
e x c e p t f o r th e A s ia n D evelopm ent B a n k . I n th e c a se o f t h a t i n s t i t u t i o n ,
o n e - h a lf o f th e p a i d - i n s u b s c r ip t io n i s r e q u ir e d t o be p a id i n c a s h .
M o re o v e r, th e l e t t e r o f c r e d i t p o r t io n i s e x p e c te d t o be drawn d u r in g
f i s c a l y e a r 197^-. T h u s, th e f u l l m a in te n a n ce o f v a lu e amount o f $12
m i l l i o n i s e x p e c te d to b e p a id t o th e A s ia n D evelopm ent Bank i n ca sh
d u r in g f i s c a l y e a r 19 7 ^ .
No draw-downs bn th e o th e r l e t t e r s o f c r e d i t a re e x p e c te d i n
f i s c a l y e a r s 1973 and 197^+. I t i s e x p e c te d t h a t draw-downs w i l l
b e g in i n f i s c a l y e a r 1975 and w i l l be sp re a d o u t e v e n ly o v e r a b o u t an
lX - y e a r p e r io d r e s u l t i n g i n draw-downs o f $U 0 m i l l i o n p e r annum.
PROPOSED MODIFICATION OF PAR VALUE OF DOLLAR,
Background Material
Department of the Treasury - February 1973
CONTENTS
1.
II.
III.
IV.
V.
Introduction
Relation of this Proposal to Foreign Economic Policy
World Payments in 1972 and the Exchange Crisis of
Early 1973
Financial Aspects of the Par Value Change
Annexes
Xfl
Statement on Foreign Economic Policy by Secretary
of the Treasury George P. Shultz
2.
Weighted Average Appreciation of Foreign Currencies
Against the Dollar, as of February 16, 1973
3.
Exchange Rates and Exchange Rate Changes Against the
Dollar by OECD Countries, as of February 16, 1973
4.
Charts
Department of the Treasury
February 17, 1973
I.
Introduction
1. The Administration has proposed legislation author
izing and directing the Secretary of the Treasury to take
the necessary steps to modify the par value of the dollar
in the International Monetary Fund, by an amount correspond
ing to an increase of 11.11 percent in the value of one
Special Drawing Right in the IMF, or, in terms of gold, of
II. 11 percent in the official value of an ounce of gold.
This modification is equivalent to a reduction of 10 percent
in the value of the dollar stated in terms of Soecial
Drawing Rights per dollar, from 0.9210 53 SDR to 0.828948 SDRj
or to the equivalent in terms of gold of one dollar equals
0.023684 fine troy ounces of gold. This corresponds to a
value of $42.22 per fine troy ounce of gold.
Ill
Relation of this Proposal to Foreign Economic Policy
2. The proposed change in par value is part of a
program outlined in a Statement on Foreign Economic Policy
made by Secretary of the Treasury George P. Shultz on
February 12 (See Annex 1). This program has three objec
tives :
(a)
to reinforce our trade and payments
position in a manner that will support
our effort to achieve constructive
reform of the monetary system;
(b)
to lay the legislative groundwork for
broad and outward-looking trade negotia
tions, paralleling our efforts to
strengthen the monetary system; and
(c)
to assure that American workers and
American businessmen are treated equitably
in our trading relationships.
3. The legislation proposed is the first of three
principal actions aimed at these objectives. It would
authorize the United States to change the par value of the
dollar in a manner that achieves a realignment of exchange
rates.
2
4. As a second step, the President has decided shortly
to send to Congress proposals for comprehensive trade legis
lation. This legislation is needed to provide the tools that
will permit us to take part in a mutual lowering of tariff
and non-tariff barriers to trade, assuming that our trading
partners are willing to participate fully with us in that
process. It should also provide necessary tools to help
assure fair access to foreign markets for American exporters.
It should, further, include means to safeguard particular
markets and types of production from disruption that results
from rapid changes in the impact of foreign trade, and to
protect the United States external position from large and
persistent deficits.
5.
- The Secretary of the Treasury also announced the
intention to phase out the controls over the outflow of
United States investment funds by December 31, 1974. The
controls to be so phased out are the Interest Equalization
Tax, the limitations imposed by the Commerce Department's
Office of Foreign Direct Investment, and the Voluntary
Foreign Credit Restraint program of the Board of Governors
of the Federal Reserve System.
6. Taken together, the actions proposed in the fields
of money, trade and investment, as well as actions taken by
other countries, should help to direct the world economy
toward conditions of international equilibrium, and to do
so in a context of more competitive freedom for producers
and investors both here and abroad.
7. In connection with the Secretary's announcement
here, a number of other countries have stated that they will
maintain their previous par or central values, so that the
central rates or par values of their currencies will appreci
ate by 11.1 per cent in terms of the dollar. Japan is per
mitting its currency to float for the time being, and the mar
ket rate has appreciated relative to the U.S. dollar by an amount
substantially in excess of 11.1 percent. The United Kingdom
and Italy also have floating currencies and their currencies
have appreciated against the dollar by smaller amounts. There
has been no significant appreciation thus far in the Canadian
dollar. The new pattern of world exchange rates provides a
basis for a thrust toward a viable equilibrium in world payments.
8. We believe the realignment, taking account of the
floating of a number of important currencies, will produce a
satisfactory and fair set of exchange rate relationships.
While a major step forward, however, exchange rate changes
£ 3b
L/
3
cannot substitute for long-term revisions in the monetary and
trading system. We contemplate vigorous pursuit of inter
national negotiations looking toward a more balanced economic
order for the longer run, and for fairer treatment of American
workers and producers. Moreover, the success of the action
taken requires the effective management of the domestic
economy of the United States. Budgetary restraint, appropri
ate monetary policy and wage-price stabilization must be
pursued with vigor to provide an essential foundation for
achieving the stronger international competitive position
necessary for our economy and for a stable monetary order.
III.
World Payments in 1972 and the Exchange Crisis of
Early 1973
9. Following the Smithsonian realignment in December
1971, there was a gradual return to a calmer situation in the
exchange markets* However# this period of relative tranquility
was punctuated in the middle of 1972 by speculation directed
against the pound sterling. As a result of this pressure, the
pound sterling was allowed to float and the market rate depre
ciated moderately below the Central value fixed under the
Smithsonian arrangement. During this period in the middle of
the year nearly one-half of the overall 1972 deficit of about
$10 billion in our official reserve transactions account took
place. Following this period of disruption in the markets,
more orderly conditions were again restored.
10. For the year as a whole, this United States balance
on official reservedtransactions of just over $10 billion
was about one-third of the extremely large total of nearly
$30 billion in 1971. This Wasy however, still much larger
than the highest deficit figure of about three and a half
billion dollars during the decade of the sixties. The net
capital outflow, if we include in this category the large
residual item not clearly identified, explains the smaller
overal1 deficit in 1972.
11. On the other hand, the merchandise trade deficit, at
$6.8 billion for the year, was larger by $4 billion than the
1971 figure. The bilateral trade deficit with Japan rose by
nearly a billion dollars, to $4 billion. The net trade posi
tion with Western Europe also worsened by 1-1/2 billion dollars,
and an equal deterioration took place with the developing
countries of Asia and Africa, a category that includes our
growing petroleum imports.
4
12. To a considerable extent this result was not unexpected,
In the initial months an exchange adjustment may not produce
favorable results in terms of export volume, while imports con
tinue to be acquired at higher dollar prices. The strong growth I
rate of the U.S. economy in 1972 stimulated a rising volume of
imports, while other industrial economies showed more moderate
year-to-year expansion, with a corresponding slower growth in
their demand for our exports. Oil imports were also rising for
reasons related to that commodity, though there were favorable
developments in our exports to the Communist areas. Moreover,
in the latter part of the year, the,United States was able to
report substantial progress in restraining inflation at a time
when prices and costs were rising more rapidly in most other
industrial countries.
13.
Allowing for these factors, the trade deficit in the
second half of 1 9 7 2 appeared to show a levelling off from the
sharp decline of 1971, and the prospect for 1 9 7 3 could reasonably
be one of some improvement. The question, however, was whether
this improvement would come rapidly enough, and be large enough,
to provide a firm basis for confidence in 19 7 3 . At the end of the
year, it had become evident that there still remained a large
disequilibrium in the current goods and services accounts. Our
monthly trade figures in November and December failed to bear
out earlier signs of gradual improvement. Moreover, the very
large and persistent trade and current account surplus of Japan
remained a prominent feature of the world disequilibrium in
payments. It also appeared that for the year as a whole the en
larged European Community might have a current account surplus
at about the same level as the Japanese, or about $6 billion.
For December, Germany reported a substantial bulge in its trade
surplus, even though the German current accounts for the year as
a whole did not show a large surplus. C r
f
14.
These developments raised questions as to whether the
Smithsonian exchange rate alignment, and other actions of the
past 18 months (including our progress toward restoring price
stability), even though beginning to show beneficial effects,
could itself be adequate to bring sufficiently rapid and complete
correction of the persistent underlying disequilibria in world
trade and payments. Recognizing that the adjustment process
might not be proceeding with sufficient vigor, the Administration
was actively in touch with our major trading partners, particu
larly the Japanese, calling their attention to the need for their
cooperation in dealing with the imbalances.
5
15. A period of renewed exchange speculation was touched
off by the Italian decision, taken on the weekend of January 20,
to establish a dual exchange market. The Italian reserve
position had been weakening for some time through substantial
capital movements. This outflow, which began in the middle of
the year, appeared to have been related to political factors
as well as uncertainty about the effect of rising costs in
Italy on the Italian trade position — even though tourism and
other invisible items gave Italy an extremely strong current
account surplus.
16. This announcement was followed by a sizable bulge
in the persistent movement of funds from Italy into Switzerland.
On January 23, the Swiss authorities suspended intervention in
the exchange market, and the Swiss franc appreciated against
the dollar and dollar-pegged currencies. This action appears
to have triggered very large and growing purchases of German DM
and Japanese yen, totalling about $7 billion, by February 9.
The German authorities adopted emergency measures to tighten
their restraints on inflows of funds during the week, but with
out appreciable effect in dampening the massive inward movements.
17. German authorities declared their intention not to
revalue their rate by unilateral action, out of concern over
their competitive position with respect to their closest trading
partners. In these circumstances, market pressures were spread
ing to other currencies and security markets and money markets
around the world were affected by the currency speculation and
uncertainty. In these circumstances, temptations to resort to
unilateral defensive action and reinforced controls were strong,
but this course of events promised little progress toward
dealing with the underlying imbalances in the payments of the
United States and other countries.
18. Against this background, the United States undertook
to explore with Japan and with several European countries the
possibilities for a cooperative solution that would halt the
crisis, establish a new pattern of exchange rates that would
be appropriate, provide strong thrust toward correction of the
underlying imbalances, and encourage fruitful negotiations in
reshaping the structure of the monetary and trading system.
19. Under Secretary Volcker left Washington on Wednesday,
February 7, for a series of meetings in Japan and in Europe.
These conversations, among other points, considered whether the
willingness of the United States to take overt action to
devalue the dollar, would produce an appropriate pattern of
exchange rates. In the course of these discussions, it became
- 6 apparent that this approach provided a means of achieving the
needed results in a manner that met the needs of all major
parties. There was a common and heartening recognition of the
mutual need to reinforce the adjustment of payments imbalances
and this cooperative spirit has been evident among many other
members of the Fund, who have agreed to allow their exchange
rates to reflect the appreciation of the dollar.
20. By taking such an initiative at this time and partici
pating in such a cooperative solution, we were able to convert
a crisis into an opportunity. The decisions taken posed
difficulties for all the participants in the realignment. How
ever, the consensus was clear that these decisions were required
to achieve the needed and desired results, including particularly
improvement in the competitive position of the United States.
21. In its main elements, the new structure of exchange
rates and exchange policies can now be identified. Information
is not yet available for all the members of the Fund, but the
table in Annex 3 lists the actions taken by OECD countries.
Broadly speaking, they fall into four categories — (a) countries
which, by maintaining their existing par values, will permit
11.11 percent appreciation vis-a-vis the dollar, (b) a few
countries fixing a new rate at a smaller appreciation against
the dollar, (c) several developing countries in the OECD group
that followed the depreciation of the dollar by the same amount,
and (d) countries floating for the time being.
22. In the first category appear the Benelux countries,
France, Germany, Austria, Australia, Denmark, Norway and Spain.
In the second group, Sweden, Finland and Portugal appreciated
by 5-7 percent. The third category includes Greece, Iceland,
Turkey and Yugoslavia. Finally, the floating group includes
not only Canada and the United Kingdom, which were floating
before February 1973, but also, for the present, Italy,
Switzerland and Japan. In the case of Japan, Secretary Shultz
has indicated our firm expectation that the yen will float into
a relationship vis-a-vis other currencies that is consistent
with achieving a balance of payments equilibrium not dependent
upon significant government intervention. In the market to date
the Japanese yen has appreciated about 14 percent from the actual
trading level on February 9, 1973.
23. Annex 2 shows the average appreciation against the
dollar for all OECD currencies, using February 16 market rates
where no central rate or par value has been announced, together
with the corresponding estimates for the Smithsonian realignment.
The two results are quite similar.
7
/
The cumulative effect of the two realignments taken together
is an average appreciation against the dollar, calculated on
the basis of U.S. cents per foreign currency unit, of 15.5
percent since April 30, 1971. If Canada is excluded, the
average appreciation is about 23 percent. These results are
derived as a weighted average of the rate changes, using as
weights the trade of the United States with the country in
question.
24. Important as it is, exchange rate realignment alone
can be only one part of a successful effort to deal with payments
imbalances and to lay the basis for a well-functioning inter
national economic order. We must reinforce this action by
appropriate domestic policies. In the international field
there is still much to be done to establish fair and equitable
competitive conditions in international trading arrangements
and trade policies and practices.
25. To support the exchange rate action, American pro
ducers must have equitable access to foreign markets. Their
opportunities have too frequently been closed or restricted by
administrative barriers, controls and preferences. The rules,
standards and procedures governing trading relationships in
many instances no longer apply equitably or effectively, and
need extensive reform, like those of the international monetary
system. We propose to deal with foreign barriers to trade.
In doing so, we must also recognize that the United States can
be cited for such barriers in some areas. The trade legislation
now under consideration will provide the tools essential for
a concerted attach on these problems.
26. The decisions taken here and abroad as a result of the
recent exchange crisis are entirely consistent with the major
thrust of the United States proposals for the long-term reform
of the international monetary system. More broadly, they under
line our basic principle that any meaningful and stable inter
national monetary system must rest on the determination of the
major participant countries to seek and attain an equilibrium
in their payments structures.
iV.
Financial Aspects of the Par Value Change
27. The par value change will result in increases in the
dollar value of United States reserve assets — gold. Special
Drawing Rights and gold tranche automatic drawing rights in
the International Monetary Fund — in the amount of $1.4
billion. There will also be increases in the dollar value of
subscriptions to the international financial institutions
totalling about $1.1 billion.
8
28. These increases in the value of assets are partially
offset by increases in direct and contingent liabilities for
international financial institutions totalling about $2.5
billion as well as increases in repayment costs of obligations
denominated in foreign currencies amounting to about $389
million. A separate submission attached to the par value
modification amendment contains the details of the effect of
the par value change on U.S. assets and liabilities.
29. Only the maintenance of value liabilities to the inter
national financial institutions will require appropriations.
Authority to maintain the value of our international financial
institutions subscriptions and an authorization of appropria
tions for this purpose are contained in the Par Value Modifi
cation Act. A maximum appropriation of $2.3 billion will be
requested.
30. This appropriation will have limited budgetary effect.
This results from the fact that (a) $1.8 billion of our
liabilities to the international financial institutions
represents monetary exchanges of assets, and contingent
liabilities are not expected to be called, and (b) because in
almost all cases payments to these institutions are made in
letters of credit which are drawn down gradually. In fact,
no expenditures are anticipated in FY 1973, $12 million in
1974, and thereafter at a rate of about $40 million a year
over ten years.
t
ANNEX 1
February 12, 1973
FOR IMMEDIATE RELEASE
STATEMENT ON FOREIGN ECONOMIC POLICY
BY
SECRETARY OF THE TREASURY GEORGE P. SHULTZ
The United States, as do other nations, recognizes the
need to reform and strengthen the framework for international
trade and investment. That framework must support our basic
objective of enhancing the living standards of all nations.
It must encourage the peaceful competition that underlies
economic progress and efficiency. It must provide scope
for each nation -- while sharing in the mutual benefits of
trade - - t o respect its own institutions and its own particular
needs. It must incorporate the fundamental truth that
prosperity of one nation should not be sought at the expense
of-another.
This great task of reform is not for one country alone,
nor can it be achieved in a single step. We can take
satisfaction in what has been accomplished on a cooperative
basis since the actions announced on August 15, 1971 clearly
signaled our recognition of the need for.decisive change.
-- Intense negotiations established an important
fact in December 1971: mutual agreement can be
reached on changes in the pattern of world exchange
rates, including the parity of the United States
dollar, in order to promote the agreed goal of a
better balance in international trade and payments.
-- Monetary-negotiations have been started by the
"Committee of Twenty" on the premise that better
ways must be found to prevent large payments
imbalances which distort national economies,
disturb financial markets, and threaten the free
flow of trade. The United States has made
practical and specific proposals for international
monetary reform.
-- The groundwork is being laid for comprehensive
trade negotiations. Those negotiations should look
beyond industrial tariffs to encompass also other
S-lU
*
-
2-
barriers to the free flow of goods. They should
assure fair competitive treatment of the products
of all countries. They should also seek agreed
ways of avoiding abrupt dislocations of workers
and businesses.
In September 1972 the President told the financial
leaders of the world that ’’The time has come for action
across the entire front of international economic problems.
Recurring monetary crises, such as we have experienced all
too often in the past decade; unfair currency alignments
and trading arrangements, which put the workers of one
nation at a disadvantage with workers of another nation;
great disparities in development that breed resentment; a
monetary system that makes no provision for the realities
of the present and the needs of the future -- all these not
only injure our economies, they also create political tensions
that subvert the cause of peace.”
At the same meeting, I outlined the principles of a
monetary system that would enable all nations, including
the United States, to achieve and maintain overall balance
in their international payments. Those principles would
promote prompt adjustment and would provide equitable treat
ment for all nations -- large and small, rich and poor.
Yet, in recent months we have seen disquieting signs.
Our own trade has continued in serious deficit, weakening
our external financial position. Other nations have been
slow in eliminating their excessive surpluses, thereby
contributing to uncertainty and instability. In recent days,
currency disturbances have rocked world exchange markets.
Under the pressure of events, some countries have responded
}
with added restrictions, dangerously moving away from the
basic objectives we seek.
Progress in the work of the Committee of Twenty has
been too slow and should move with a greater sense of
urgency. The time has come to give renewed impetus to our
efforts in behalf of a stronger international economic
order.
To that end, in consultation with our trading partners
and in keeping with the basic principles of our proposals
for monetary reform, we are taking a series of actions
designed to achieve three interrelated purposes:
-3(a) to speed improvement of our trade and payments
position in a manner that will support our effort
to achieve constructive reform of the monetary
system;
(b) to lay the legislative groundwork for broad and
outward-looking trade negotiations, paralleling *
our efforts to strengthen the monetary system;
and
(c) to assure that American workers and American
businessmen are treated equitably in our trading
relationships.
For these purposes:
First, the President is requesting that the Congress
authorize a further realignment of exchange rates. This
objective will be sought by a formal 10 percent reduction
in the par value of the dollar from 0.92106 SDR to the
dollar to 0.82895 SDR to the dollar.
Although this action will, under the existing Articles
of Agreement of the International Monetary Fund, result in
a change in the official relationship of the dollar to gold,
I should like to stress that this technical change has no
practical significance. The market price of gold in recent
years has diverged widely from the official price, and
under these conditions gold has not been transferred to any
significant degree among international monetary authorities.
We remain strongly of the opinion that orderly arrangements
must be negotiated to facilitate the continuing reduction
of the role of gold in international monetary affairs.
Consultations with our leading trading partners in
Europe assure me that the proposed change in the par value
of the dollar is acceptable to them, and will therefore be
effective immediately in exchange rates for the dollar in
international markets. The dollar will dec line in value by
about 10 percent in terms of those currencies for which there
is an effective par value, for example the Deutsche mark
and the French franc.
Japanese authorities have indicated that the yen will
be permitted to float.' Our firm expectation is that the yen
will float into a relationship vis-a-vis other currencies consistent
with achieving a balance of payments equilibrium not dependent upon
significant government intervention.
^
;;
i
4
These changes are intended to supplement and work in
the same direction as the changes accomplished in the
itiscnian Agreement of December 1971. They take into
account recent developments and are designed to speed
jYemeni in our trade and payments position.' In
particular, they are designed, together with appropriate
trade liberalization, to correct the major payments
l b s .ante between Japan and the United States which has
persisted in the past year.
*
Other countries may also propose changes in their par
values or central rates to the International Monetary Fund.
We will support all changes that seem warranted on the basis
o£ current and prospective payments imbalances, but plan to
vote against any changes that are inappropriate.
We have learned that time must pass before new exchange
relationships modify established patterns of trade and
capital flows. However, there can be no doubt we have
achieved a major improvement in the competitive position
of American workers and American business.
The new exchange rates being established at this time
represent a reasonable estimate of the relationships which
taken together with appropriate measures for the removal of
existing trade and investment restraints -- will in time
move international economic relationships into sustainable
equilibrium. We have, however, undertaken no obligations
for the U.S. Government to intervene in foreign exchange
markets.
Second, the President has decided to send shortly to
the Congress proposals for comprehensive trade legislation.
Prior to submitting that legislation, intensive consultations
will be held with Members of Congress, labor, agriculture,
and business to assure that, the legislation reflects our
needs as fully as possible.
This legislation, among other things, should furnish
the tools we need, to:
(i) provide for lowering tariff and non-tariff
barriers to trade, assuming our trading partners
are willing to participate fully with us in that
process;
f!.:^ provide for raising tariffs when such action
would contribute to arrangements assuring that
American exports have fair access to foreign
markets;
-5(iii) provide safeguards against the disruption of
particular markets and production from rapid
changes in foreign trade; and
(iv) protect our external position from large and
persistent deficits.
In preparing this legislation, the President is
particularly concerned that, however efficient our workers
and businesses, and however exchange rates might be altered,
American producers be treated fairly and that they have
equitable access to foreign markets. Too often, we have
been shut out by a web of administrative barriers and
controls. Moreover, the rules governing trading relation
ships have, in many instances, become obsolete and, like
our international monetary rules, need extensive reform. ,
We cannot be faced with insuperable barriers to our
exports and yet simultaneously be expected to end our
deficit.
At the same time, we must recognize that in some areas
the United States, too, can be cited for its barriers to
trade. The best way to deal with these barriers on both
sides is to remove them. We shall bargain hard to that end.
I am convinced the American workers and the American
consumer will be the beneficiaries.
In proposing this legislation, the President recognizes
that the choice we face will not lie between greater freedom
and the status quo. Our trade position must be improved.
If we cannot accomplish that objective in a framework of
freer and fairer trade, the pressures to retreat inward
will be intense.
We must avoid that risk, for it is the road to
international recrimination, isolation, and autarky.
Third, in coordination with the Secretary of Commerce,
we shall phase out the Interest Equalization Tax and the
controls of the Office of Foreign Direct Investment. Both
controls will be terminated at the latest by December 31,
1974.
I am advised that the Federal Reserve Board will
consider comparable s/teps for their Voluntary Foreign Credit
Restraint Program.
6
The phasing out of these restraints is appropriate in
view of the improvement which will be brought ,to our
underlying payments position by the cumulative effect of
the exchange rate changes, by continued success in curbing
inflationary tendencies, and by the attractiveness of the
U.S. economy for investors from abroad. The termination
of the restraints on capital flows is appropriate in the t
light of our broad objective of reducing governmental
controls on private transactions.
The measures I have announced today -- the realignment
of currency values, the proposed new trade legislation, and
the termination of U.S. controls on capital movements -will serve to move our economy and the world economy closer
to conditions of international equilibrium in a context of
competitive freedom. They will accelerate the pace of
successful monetary and trade reform.
They are not intended to, and cannot, substitute for
effective management of our domestic economy. The discipline
of budgetary and monetary restraint and effective wage-price
stabilization must and will be pursued with full vigor.
We have proposed a budget which will avoid a revival of
inflationary pressure in the United States. We again call
upon the Congress, because of our international financial
requirement as well as for the sake of economic stability
at home, to assist in keeping Federal expenditures within
the limits of the President’s budget. We are continuing a
strong system of price and wage controls. Recent inter
national economic developments reemphasize the need to
administer these controls in a way that will further reduce
the rate of inflation. We are determined to do that.
The cooperation of our. principal trading and financial
partners in developing a joint solution to the acute
difficulties of the last few days has been heartening. We
now call upon them to join with us in moving more rapidly
to a more efficient international monetary system and to a
more equitable and freer world trading system so that we can
make adjustments in the future without crises and so that
all of our people can enjoy the maximum benefits of exchange
among us.
0 O0
ANNEX 2
WEIGHTED AVERAGE APPRECIATION OF FOREIGN CURRENCIES
AGAINST THE DOLLAR, AS OF FEBRUARY 16, 1973
(Percent change in U.S. cents per foreign currency unit; based on
U.S. bilateral trade weights in 1970)
Resulting From
Smithsonian
Realignment 1/
OECD Countries
8.0
OECD, excluding
Canada
11.8
February 1973
Rate Changes to date
2J
Combined Changes,
Smithsonian
and February 1973 1 /
7.3
15.5
10.8
23.0
1/
Based on changes from April 30, 1971.
2/
Based on announced par values or central rates? or, where such rates have not been
announced, on market rates as of February 16, 1973. For all countries except Canada
and the United Kingdom, these February rates are compared with the Smithsonian par
values or central rates in deriving the percentage of appreciation in the middle
column. For the United Kingdom, the February 1973 change is calculated by comparing
the market rate on February 16 with a base rate of $2.35, which was roughly the
average market rate prevailing in the weeks preceding the exchange disturbances.
v
Also includes par value changes by Australia and Iceland in December 1972. These
changes are not included in computing the middle column above. In all cases,
the combined changes represent the percentage appreciation of the February r a t e s --- ^
used over the par values or market rates prevailing on April 30, 1971.
3/
December21, 1971 market rate for Canada used.
ANNEX 3
Exchange Rates and Exchange Rate Changes
Against the Dollar by OECD 1/ Countries
As of February 16, 1973
Country
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
Italy
Japan
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom
Yugoslavia
New Exchange Rate
(foreign currency
units per dollar)
% Change Against Dollar 2/
11.11
11.11
11.11
Float (0.7 as of Feb. 16)
11.11
5.13
11.11
11.11
-
0
-
-
0
-
V
Float (1.9 as of Feb. 16) 2/
Float (14.3 as of Feb. 16) z /
11.11
11.11
11.11
6.86
11.11
5.55
Float (5.7 as of Feb. 16) 3/
-0Float (2.3 as of Feb. 16) —^
-0-
0.71
20.97
40.33
1.007
6.28
3.90
4.60
2.90
30.00
98.56
570.00
263.50
40.33
2.92
5.98
25.50
58.03
4.56
3.37
14.00
2.44
17.00
1/
£/
1/
4/
1/
1/
Members of the Organization of Economic Cooperation and
Development.
2/
Expressed as percent change in U.S. cents per foreign currency
unit compared with par value or central rates prevailing
prior to February 13, 1973.
3/
For currencies which are floating, percentage changes show
changes in market rates between Feb. 9th and Feb. 16, 1973.
For Switzerland, market rate has changed 5.7 % since February 9,
or by 11.5 % since the beginning of the Swiss franc float.
4/
For currencies which are floating, market rates as of February 16
are shown.
February 17, 1973
ANNEX 4
CHARTS
I.
U.S. Reserve Assets and Liquid Liabilities
to Foreigners
II.
U.S. Official Reserve Transactions Balance
III.
IV.
Balance on Goods, Services, and Remittances
and on Government Grants, Credits and Private
Long-term Capital
Balance of Payments oh Current and Long-Term
Capital Account
y.
U.S. Merchandise Trade
VI.
Net Investment Income
VII.
Deterioration in U.S.
VIII.
World Reserves
Merchandise Trade Balance
CHART I
U.S. Reserve Assets and
Liquid Liabilities to Foreigners
Chart I shows how our short-term liabilities to
foreigners continued their dramatic increase in 1972,
reaching a level more than six times our reserve assets
by the end of the year with still further increases
early in 1973.
Our liabilities to foreign monetary authorities,
which are included in the figure for total liquid
liabilities to foreigners, are currently estimated,
including amounts purchased by a number of central
banks during the recent period of speculation, to be
nearly $70 billion.
Since the suspension of the convertibility of the
dollar into gold on August 15, 1971, there has been
little change in U.S. reserve assets except for the
adjustment in the value of our gold holdinas from $35
per fine ounce to $38 per ounce apd the alloca
tion to the U.S. of Special Drawing Rights of $700 million
in 1972.
CHART I
Sil.
[
80
U .S . R ES ER V E A S S ET S A N D LIQ U ID
LIA B ILITIES TO F O R E IG N E R S *
70
60
50
U.S. Liquid L ia b ilitie s
to A l l Foreigners *
40
30
U.S. Reserve Assets
M
20
v
U .S. L ia b ilities, Liquid and
N o n -liq u id , to Foreign O ffic ia l Agencies
10
0
11 51
*
'54
'56
'58
'60
'62
ing Non-liquid Liabilities to Foreign Official Agencies.
I Release Date February 2 7 ,1 9 7 3 .
: TREASURY BULLETIN, January 1973.
'64
'66
'68
70
1\
CHART
II
U.S. Official Reserve Transactions Balance
Chart II shows that although the official reserve transactions
deficit of $10.2 billion was much smaller in 1972 than the $29.5 billion
deficit incurred in 1971 it was still extremely large in relation to
the deficits experienced prior to 1970 and brought the cumulative
deficit for the three-year period to more than $50 billion.
CHART II
O FFIC IA L R ES ER V E T R A N S A C T IO N S B A LA N C E
* Unfcludes SDR allocation of $ 8 6 7 m illion in 1 9 7 0 , $ 7 1 7 m illion in 1 9 7 1 and $ 7 1 0 m illion in 1 9 7 2
* * P re lim in a ry
S O U R C E:
S U R VEY OF C U R R E N T B USIN ESS, J U N E A N D DEC. 1 9 7 2 .
CHART III.
BALANCE ON GOODS, SERVICES. AND REMITTANCES
---------------- ---- AND
---------------BALANCE ON GOVERNMENT GRANTS AND CREDITS
AND PRIVATE LONG-TERM CAPITAL
Chart III. traces changes in the balance on goods, services, and private
remittances, often called the current account excluding government grants.
The
United States has experienced an almost uninterrupted deterioration in this
balance since 1964,when there was a surplus of nearly $8 billion, with the
most serious deterioration occurring in 1972.
The deficit in 1972 was about
$6 billion.
Chart III. also traces trends in the balance of government grants and
credits and private long-term capital transactions.
balance are irregular.
The movements of this
In 1971, the U.S. experienced a deficit of $8.5 billion
but in 1972 that deficit appears to have been cut approximately in half.
C H A R T III
C O M P O S IT IO N O F U .S . B A L A N C E O F P A Y M E N T S
* Estimate
Source: SURVEY OF CURRENT BUSINESS
CHART IV.
Balance of Payments on Current and Long-Term Capital Account
Chart IV. illustrates the dramatic increase in the deficit on current and
long-term capital account (sometimes called the basic balance), which has occurred
in the last two years.
In 1972, the deficit in these transactions appears to have
been more than $10 billion.
The nation has not received enough money from the
sales of goods and services and from foreign investments in the United States to
pay for imports, military expenditures abroad, aid to developing countries and
long-term investments made by U.S. industry outside the U.S.
We have borrowed from others and have consumed more goods and services than
we produced.
CHART IV
U .S . B A L A N C E O F P A Y M E N T S O N C U R R E N T
A N D L O N G -T E R M C A P IT A L A C C O U N T
* Estimate
Source: SURVEY OF CURRENT BUSINESS
CHART V
U.S. Merchandise Trade
Chart V portrays the severe deterioration in our merchandise trade balance
from 1964 to mid 1972 when a levelling off occurred.
Our position is best when foreign countries are operating at or near capacity
levels and our own economy is operating with significant slack.
Thus we had a
record trade surplus of nearly $7 billion in 1964, but under similar conditions
in 1970 the surplus was only $2.1 billion.
On the other hand, when the domestic
economy is under inflationary strain our trade position tends to be weaker,
particularly if some of our major trading partners are going through periods
of relatively excess capacity.
The very small trade surplus recorded in 1968
reflects these conditions.
Cyclical conditions had a highly favorable effect on our actual balance
in 1971 and a much smaller but still favorable effect in 1972.
The change in
the cyclical conditions was one of the major reasons for the worsening of
the balance between 1971 and 1972.
Other important factors were the rising demand for imports of fuel and
the initial effects of the 1971 realignment of exchange rates which probably
were somewhat adverse in 1972.
CHART V
1960
1962
1964
1966
SOURCE: SURVEY OF CURRENT BUSINESS: June and December 1972
* 1st half at annual rate
* * Preliminary
1968
1970
1972
CHART VI
Net Investment Income
Chart VI traces the trends in net investment income from 1960 through
1972.
During this period there was a very substantial rise in receipts from
U.S. investments overseas— from $3.3 billion in 1960 to $11.2 billion in 1972.
Payments covering the earnings of foreiqn investment in the United States
also increased dramatically during the period.
in 1960 and $5.9 billion in 1972.
They were about $1.1 billion
Our net earninqs on investment income have
thus risen from $2.2 billion in 1960 to $5.3 billion in 1972.
The greater
part of this improvement in the net investment earnings occurred in the early
part of the 1960's.
Since 1967, payments have grown nearly as rapidly as
receipts and the net has improved by less than $1 billion.
The reason is
that our overall payments deficits are being financed by the buildup of liquid
liabilities on which we must pay interest and these growing interest payments
offset most of the increase in income from U.S. investments overseas.
CHART VII
Deterioration of U.S. Merchandise Trade Balance
Chart VII illustrates the shift in the United States trade balance with
major areas of the world which has occurred since 1964, the year in which
the U.S. had its largest trade surplus.
The over-all deterioration between
1964 and 1972 was nearly $14 billion, of which $4.3 billion was with Japan,
$2.6 billion with Canada, $1.4 billion with the European Community (including
United Kingdom) and $2.3 billion with other countries in western Europe.
The sharpest deterioration— some $4 billion— occurred between 1971 and
1972.
About two-thirds of this deterioration was in our trade with other
industrial countries, primarily Japan and the European Community, but about
one-third was with the developing countries.
CHART VII
D E T E R IO R A T IO N O F U .S . T R A D E B A L A N C E S IN C E 1964
* First three quarters at annual rate
* * Expanded E.E.C.
* * * Z e r o balance
Source: SURVEY OF CURRENT BUSINESS
CHART VIII
COMPOSITION OF WORLD RESERVES
Chart VIII depicts the growth of world reserves over the period since
1950.
By September 30, 1972, world reserves had reached $152 billion, more
than three times the level prevailing in 1950.
occurred since 1969.
Much of this increase has
In 1970 the rise was more than $14 billion; in 1971
the rise was $37 1/2 billion; and in the first 9 months of 1972 there was
a further growth of $22 billion.
The bulk of the increase in the reserves has been in the form of
foreign exchange.
Monetary gold holdings have been declining since 1965.
The other major addition to reserves in recent years resulted from creation
of $9.5 billion in Special Drawing Rights on the International Monetary
Fund.
SDR's
*+■IMFReserve
Position
- *
- *
Foreign
Exchange
Gold
TABLE I
U.S. RESERVE ASSETS AND LIQUID LIABILITIES TO FOREIGNERS i/
(billions of dollars)
U.S.
Reserve
Assets
U.S. Liquid
Liabilities
to all Foreigners
.
U.S. Liabilities
Liquid & Non-Liquid to
Foreign Official Agencies
1950
11951
11952
11953
11954
11955
11956
■1957
11958
■1959
19 6 0
15.3
15.8
16.8
19.4
21.0
(11.9)
19 6 1
11962
1.963
1964
22.9
24.3
26.4
29.4
29.6
(12 .6 )
(13.7)
(15.2)
(16.6)
(16.7)
1965
1966
19 6 7
1968
(15.9)
(19.2)
(18.4)
(17.0)
(24.3)
1969
1970
19 7 1
1972
n.a.
(10 .6 )
12.2
i3.2
y
67.8
82.7 2/
(51.2)
(61.3) y
1/ Including non-liquid liabilities to foreign official agencies.
1/ Normal release dates February 27, 1973.
PURCE:
Treasury Bulletin,
January 1973.
Treasury/OASIA/Research
February 13, 1973
TABLE II
MEASURE OF THE U.S. BALANCE OF PAYMENTS
OFFICIAL RESERVE TRANSACTIONS BALANCE
(billions of dollars)
Official Reserve
Transactions Balance
1960
1961
-3.4
-1.3
1962
1963
-2.7
-1.9
1964
1965
-1.5
-1.3
1966
1967
0.2
-3.4
1968
1969
1.6
2.7
1970
1971
-10.7 1/
-29.5 V
<N
•
O
H
1
1972
1/ 2/
1/ Includes SDR allocation of $867 million in 1970,
$717 million in 1971 and, $710 million in 1972.
2/ Preliminary
SOURCE:
Survey of Current Business, June and Dec. 1972
Treasury/OASIA/Research
February 13, 1973
TABLE III
Composition of U.S. Balance of Payments
(billions of dollars)
Balance on Goods,
Balance on Government
Services, and Remittances
Grants, Credits, and
Private long-term Capital
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
3.3
1.8
-.1
1.3
1.6
3.5
5.2
1.6
-.5
3.5
5.0
4.4
5.2
7.7
6.1
4.3
3.9
1.3
.7
2.2
-•8l/
-6. lì/
1/
-3.6
-3.4
-2.4
-2.3
-2.9
-4.4
-5.4
-5.1
-3.6
-4.7
-4.9
-5.4
-6.4
-7.7
-7.9
-5.9
-7.1
-2.7
-3.6
-5.2
-8.5
-4.3
Estimate
Treasury/OASIA Research
February 13, 1973
TABLE
III A
Balance on Current Account!/
(billions of dollars)
1.8
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971i/
1972—
3.1
2.5
3.2
5.8
4.3
2.3
2.1
-.5
1.0
.4
•2.8 I
■8.3^/
■
1/
Including Government Grants
2/
Preliminary
Treasury/OASIA Research
February 13f 1973
U.S. Balance of Payments on Current
and Long-term Capital Account
(Billion s or doliars)
1951
1952
-0.3
-1.7
1953
1954
-2.6
-0.9
1955
1956
-1.3
-0.9
1957
1958
-0.3
-3.5
1959
1960
-4.1
-1.2
1961
1962
0
-1.0
1963
1964
-1.3
0
1965
1966
-1.8
-1.7
1967
1968
-3.3
-1.4
1969
1970
-3.0
-3.1
-9.3i/
-10.4^'
1971
1972
1/
Estimate
Treasury/OASIA Research
February 13, 1973
TABLE V
U . S.
MERCHANDISE
TRADE
(billions of dollars)
Trade
Balance
1961
1962
5.6
4.6
1963
1964
5.2
6.8
1965
1966
4.9
3.8
1967
1968
3.8
0.6
1969
1970
0.6
2.2
2—
half!/
1972 1 ^ half!/
2üâ half—/
Source:
-1.4
-3.9
-6.7
i
'■j
•
o
1971 i£t halfl/
Survey of Current Business; June and Dec. 1972
i./
Annual Rate
2/
Preliminary
Treasury/OASIA Research
February 13, 1973
TABLE VI
INVESTMENT INCOME
(billions of dollars)
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
Receipts
Payments
Balance
3.3
3.9
4.4
4.6
5.4
5.9
6.3
6.9
7.7
8.9
9.5
10.7
11.2
-1.1
-1.0
-1.1
-1.3
-1.5
-1.7
-2.1
-2.4
-2.9
-4.5
-5.1
-4.8
-5.9
2.2
2.9
3.3
3.3
3.9
4.2
4.2
4.5
4.8
4.4
4.4
5.9
5.3
Treasury/OASIA Research
February 13, 1973
TABLE VII
M E R C H A N D I S E T R A D E B A L A N C E BY A R E A
( b i l l i o n s of d o l l a r s )
1964
1971
Japan
.2
-3.2
-4.1
Canada
.8
-1.7
-1.8
EC**
.6
.4
-.8
2.3
.5
.0
.1
.3
.1
Other Developing Countries
1.7
.3
-.9
Other Areas ***
1.1
.7
.6
Other Western Europe
Latin America
1972
* First three quarters, annual rates
** Expanded
to
*** A u s t r a l i a ,
include
New
United Kingdom,
Zealand,
South Africa
Denmark
and
Ireland
and Eastern Europe
Treasury/OASIA/Research
February 13, 1973
TABLE
V III
Composition of World Reserves, 1950-1972
(millions of dollars)
End of
Year
Gold
(All Countries)
Foreign
Exchange
Reserve
Position in Fund
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
33.8
33.9
33.9
34.3
35.0
35.4
36.0
37.3
38.0
37.9
13.3
13.7
14.2
15.6
16.7
17.0
17.8
17.0
17.1
16.4
1.7
1.7
1.8
1.9
1.8
1.8
2.3
2.3
2.6
3.3
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
38.0
38.9
39.3
40.2
40.8
41.9
40.9
39.5
38.9
39.1
19.0
19.6
20.0
22.5
24.0
23.8
25.4
29.0
31.9
32.3
3.6
4.2
3.8
3.9
4.2
5.4
6.3
5.7
6.5
6.7
1970
1971
1972
(3rd quarter)
37.2
39.2
38.8
44.5
77.6
97.0
7.7
6.9
6.7
SOURCE :
SDR's
—
—
—
—
—
—
—
—
——
Total
Reserves
48.7
49.4
49.9
51.8
53.5
54.3
56.2
56.6
57.7
57.5
—
——
60.6
62.7
63.1
66.6
69.0
71.0
72.6
74.3
71.3
78.2
3.1
6.4
9.5
92.5
130.1
152.0
— —
—
—
--- -
—
—
—
—
■
ifSS
International Financial Statistics, January 1972, February 1973, Supplement to 1966-67
February 16, 1973
Treasury/OASIA/Research
S
Department of th e T R E A S U R Y
----- M D
n C.
n 20220
nnnnn ' 1
1SHINGT0N.
FOR RELEASE
T E L E P H O N E W 04-2041
AT
1 0:00 A.M.
STATEMENT
SENATE
TUESDAY,
Mr.
Chairman
I am p l e a s e d
|
‘‘" V I41
B Y THE H O N O R A B L E G E O R G E P. S H U L T Z
S E C R E T A R Y OF THE T R E A S U R Y
B E F O R E THE
C O M M I T T E E ON A P P R O P R I A T I O N S
F E B R U A R Y 20, 1973, 1 0 : 0 0 A.M.
and M e m bers
to be w i t h
you
of
this
this
distinguished
morning
to d i s c u s s
Committee,
the
Federal
budget.
The
the
ta b l e s
revenue
a few of
attached
projections
in
the h i g h l i g h t s .
gain
in r e c e i p t s
$225
billion.
revenues.
strength
stem
to m y
For
Most
of
from
for
the
the b u d g e t ,
We
of
this
economy,
but
social
fiscal
anticipate
very
so
l arge
some
N e x t y e a r ’s r e c e i p t s ,
mention
year
to
a total
a $31 b i l l i o n
is
$8 b i l l i o n
taxes
then,
due
only
of
gain
to
in a d d e d
that were
are
of
a $ 16.3 b i l l i o n
increase
security
a summary
I will
are p r o j e c t i n g
current
1 974 w e
increased
l ast y e a r .
the
statement provide
in
the
receipts
legislated
estimated
at
$256
billion.
The
P r e s i d e n t has
recommended
Federal
expenditures
of $ 2 5 0
billion.
This
deficit
of a l m o s t
$25 b i l l i o n ,
be
roughly
S - 117
in b a l a n c e
for
the
will
an
current
produce
$18 b i l l i o n
fiscal year
a very
although
increase
to
a total
substantial
the b u d g e t w i l l
on a f u l l - e m p l o y m e n t
basis .
in
budget
again
2
Our budget
increase
This
fiscal
in F e d e r a l
increase
receipts
On
for
outlays
in spe n d i n g
will
cut
1974
the
calls
for
to a to t a l
coupled with
deficit
a full-employment basis,
almost
outlays
a $19 b i l l i o n
of about
$269 b i l l
the
rapid
more
in h a l f ,
and
to
ris
$12.7
receipts
are
billion.
in b a l
ance .
The
help
The
P r e s i d e n t ’s b u d g e t
the U n i t e d
States
substantial
requests
achieve
increases
military
needs
the A m e r i c a n p e o p l e .
These
economic
budgets
are
objectives.
extraordinary
also
to a b o u t
3 percent.
continue
to m o v e
•year
1973 will
ment
rate will,
end
slacken
prices
of
be
down
the
Real
to
provide
the
employment
total
rate
of
other
At
the
same
look
for
the
to
inflation
slowed
economy
growth
around
time,
or
for
less
an
to
calendar
The
unemploy
4 1/2 p e r c e n t by
inflation will
increase
2 1/2 p e r c e n t
our basic
output
the
an
growing
increased by
6 3/4 p e r c e n t .
drop
for
economic
expect
economic
approximately
we
of
1974 will
objectives.
consistent with
y e a r we
we believe,
further:
the y e a r .
and
This
ahead.
the y e a r .
to be
fully
2.3 m i l l i o n p e r s o n s ,
6 1/2 p e r c e n t ,
outlays
for m a n y
Last year,
advanced
the
and
and
important
in F e d e r a l
adequate
of
defense
many
for 197 3
in c o n s u m e r
by' the
end
of
3
Our
improving
this y e a r ,
private
is
accounted
sector,
deficits
has
economic performance,
the
stimulus
a contribution
important,
however,
approaches
its
In
for p r i m a r i l y by
although
made
to c u r t a i l
full p o t e n t i a l
this w a y
By k e e p i n g b o t h
the b u d g e t
the
both
1973
this
the v i g o r
provided by
the
stimulus
on guard
1974 b u d g e t s
of
of
1966-68.
developing
getting back
need
close
tive
Branch.
Such
policy.
into
that same
cooperation
Only
this w a y
Only
environment
employment
is
c a n be
the
the
crucial
to
Congress
the
properly
this w a y
To
of situation,
of massive
we
and
the
in
1969
avoid
again
the
integrity
serve
that
runaway
in fiscal
fiscal policy.
kind
can we
the k i n d
instrumental
Federal budget
to s o u n d
to b a l a n c e
conditions
created by
Committee was
cooperation between
American people.
economic
This
a return
outbreak
that were
the b i p a r t i s a n
that m a r k e d
a new
inflation.
close
are n e c e s s a r y
budgets
It is
the e c o n o m y
against
the
inflationary pressures
as
the
our budget
expansion.
on a f u l l - e m p l o y m e n t b a s i s , w e m a i n t a i n
to p r e v e n t
of
and
output.
is
and
to
last year
of
Execu
fiscal
needs
of
c a n we
maintain
a healthy
in w h i c h b u s i n e s s
activity
can
reduced
and
inflation
can continue
grow,
the
un
to slow.
4
If w e
beyond
fail
in
this
full-employment
to a r e s u r g e n c e
or b o t h.
]|
I
I
endeavor,
if
revenues,
of i n f l a t i o n
or
Federal
it
an
spending
cannot help
increase
in
soars
but
lead
taxation,
5
Budget Receipts
••" C->«« e"p%
* ? +\- ' ' '
i|•
-f
c
-■
Under Legislation Proposed in Fiscal 1974 Budget Document
•
■
(Billions of Dollars)
. .,
1972
actual
1973
estimate
1974
estimate
Individual^ income taxes ................. .. 94.7
Corporation income taxes ............... .. 32.2
Social 'insurance taxes and contributions:
Employment taxes and contributions .... .. 46.1
Unemployment insurance ................ .. 4.4
Contributions for other insurance and
retirement ...........- ......... .
... 3.4
Excise taxes ...................... ...... .. 15.5
Estate and gift taxes .... ............ »... , 5.4
Customs duties ... .. . . . .................. .. 3.3
Miscellaneous receipts ............... .. . . 3.6
99.4
33.5
111.6
37.0
55.6
5.3
67.9
6.3
3.7
16.0
4.6
3.0
4.0
4.0
16.8
5.0
3.3
4.1
Unified budget receipts ........ ...... . . 208.6
225.0
256.0
y
Deduct :
Trust fund receipts ..... ..........
.. 73.0
Intragovernmental transactions ...1.... .,*-13-.2
Federal funds receipts .............
■ -*•
y„ic -
..148.8
105.5
92.0
-21.2 ... ■ ,-20.8
154.2
171.3
Underlying Economic Assumptions
(Calendar years. In billions of dollar s)
1972
1971
I«
’
actual estimate
Gross national product ...... . ............ 1,050
Personal income . . . . . . v..;* ..... .......
861
Corporate profits before tax ..... .......
83
1,152
936
94
1973
estimate
1,267
1,018
108
6
Projected Changes in Budget Receipts
Fiscal Years 1973 and 1974
Fiscal 1973
from
Fiscal 1972
Fiscal 1974
from
Fiscal 1973
(billions of dollars)
Revenue changes
traceable to:
Economic growth
+ 22.0
+.
Tax Reform Act of 1969
-
2.7
-
1.6
Revenue Act of 1971
-
7.7
+
1.6
Changes in depreciation
regulations
-
0.2
Social security changes
+
6.6
+
8.1
Other changes
-
1.6
-
0.3
Total
+ 16.3
23.8
0.6
+ ■31.0
Embargoed For Release at 10:00 A.M.
Monday, February 19, 1973
MEMORANDUM TO CORRESPONDENTS:
Attached is a letter delivered today to the President
of the Senate which transmits a proposed bill entitled, "Environmental
Protection Tax Act of 1973/' The bill is designed to encourage the
preservation of coastal wetlands, open space, and historic buildings
and to encourage the preservation and rehabilitation of all structures
and for other purposes. A similar letter was delivered to the Speaker
of the House. Also attached is a copy of the bill.
oOo
S-119
Attachments
THE SECRETARY OF THE TREASURY
W ASHINGTON
FEB 1 ÿ 1973
/
D e a r M r. P r e s id e n t :
In a cco rd a n ce w ith th e P r e s i d e n t 's M essage o f F e b r u a r y 1 5 , 1 9 7 3 ,
w ith r e s p e c t t o e n v ir o n m e n ta l l e g i s l a t i o n , I am e n c lo s in g a d r a f t
b i l l e n t i t l e d th e "E n v iro n m e n ta l P r o t e c t io n T ax A c t o f 1 9 7 3 ", a lo n g
w ith a s e c t i o n - b y - s e c t i o n a n a l y s i s , f o r c o n s id e r a t io n b y th e C o n g r e s s .
The p ro p o se d l e g i s l a t i o n i s d e s ig n e d t o p r e s e r v e th e n a tu r e o f
ou r c o a s t a l w e tla n d a r e a s b y g e n e r a ll y r e d u c in g th e F e d e r a l incom e t a x
b e n e f i t s r e l a t e d t o in v e s tm e n ts and im provem ents i n th o s e a r e a s . The
b i l l w ould a d d i t i o n a l l y e n co u rag e g r e a t e r r e h a b i l i t a t i o n , r a t h e r th a n
d e m o lit io n , o f o ld e r b u i l d i n g s i n our urban a r e a s . The l e g i s l a t i o n
i s s i m i l a r l y d e s ig n e d t o make r e s t o r a t i o n o f h i s t o r i c s t r u c t u r e s more
a p p e a lin g t o p r i v a t e i n v e s t o r s . F i n a l l y , th e b i l l m o d ifie s c e r t a i n
r e s t r i c t i o n s on th e d e d u c t i b i l i t y o f c h a r i t a b l e g i f t s o f p a r t i a l
i n t e r e s t s i n la n d t o be u se d f o r c o n s e r v a tio n p u r p o s e s .
T hese p r o p o s a ls a r e d e s c r ib e d i n more d e t a i l i n th e accom p an yin g
m a te r ia ls .
I t w ould be a p p r e c ia t e d i f you w ould l a y th e p ro p o se d
l e g i s l a t i o n b e fo r e th e S e n a t e . A s i m i l a r com m u nication h a s been
a d d re s s e d t o th e S p e a k e r o f th e House o f R e p r e s e n t a t i v e s .
We have been a d v is e d b y th e O f f i c e o f Management and B u d g e t t h a t
t h e r e i s no o b je c t i o n t o th e p r e s e n t a t io n o f t h i s d r a f t b i l l t o th e
C o n g r e s s , and t h a t i t s e n actm en t w ould be i n a c c o r d w ith th e program
o f th e P r e s id e n t .
S i n c e r e l y y o u rs
G eorge P . S h u lt z
The H o n o ra b le
S p ir o T . Agnew
P r e s id e n t o f th e S e n a te
W a sh in g to n , D . C .
20510
E n c lo s u r e s
A
BILL
To amend the Internal Revenue Code of 195*+ to encourage the preservation
of coastal wetlands, open space, and historic buildings and to
encourage the preservation and rehabilitation of a l l structures,
and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
TITLE I.
Sec. 101.
SHORT TITLE, ETC.
SHORT TITLE.
This Act may be cited as the "Environmental Protection Tax
Act of 1973” .
Sec. 102.
AMENDMENT OF 195*+ CODE.
Whenever in this Act an amendment is expressed in terms of an
amendment to a section or other provision, the reference shall be
considered to be made to a section or other provision of the
Internal Revenue Code of 195*+.
TITLE II. PRESERVATION OF
COASTAL WETLANDS
Sec. 201.
DEPRECIATION OF IMPROVEMENTS ON HISTORIC SITES AND IN
COASTAL WETLANDS.
(a)
Section 1 6 7 (relating to depreciation) is amended by
r e d e s ig n a t in g s u b s e c t io n "(n)" as subsection "(p)", and by inserting
after s u b s e c t io n "(m )" th e f o llo w i n g new subsection:
i
■t
"(n) STRAIGHT LIRE METHOD IN CERTAIN''CASES.—
"(l) IN GENERAL.
u
In the case of any property in whole
or in part constructed, reconstructed, erected, or used —
"(A) in coastal wetlands (as defined in section
770l(a)(35)),
or
"(B) on a site which was, on -or after February
1 5 } 1 9 7 3 } occupied by a certified historic structure
(as defined in section 1 8 9 (d)( 1 )) which is demolished
or substantially altered (other than by virtue of a
certified rehabilitation as defined in section 1 8 9 (d)(2 ))
after such date,
subsections (b), (j), (k), and (l) shall not apply, and the
term ‘reasonable allowance' as used in subsection (a) shall
mean only an allowance computed under the straight, line
method.
"(2) EXCEPTION.
The limitations imposed by this subsection
H!
shall not apply to property which is not affixed to land or
C
improvements, or to property which is a certified coastal
Bl*
wetlands improvement (as defined in section 7 7 0 1 (a)(3 6 )).”
(b)
The amendment made by this section shall apply to property
placed in service after December 31} 1973*
Sec. 202.
11
RECAPTURE ON' DISPOSITION OF PROPERTY.
Section 12ii5 (relating to gain from disposition of certain
depreciable property) is amended as follows:
(l)
In section 12^5(a) (2) strike out "or" at the end
of su b p a ra g ra p h
(c);
i n s e r t ”or" at the end of subparagraph
(D); and immediately thereafter add a new subparagraph (E)
to read as follows:
"(E) with respect to any property referred to in
paragraph (3) (E), its adjusted basis recomputed by.'
adding thereto all adjustments."
(2)
In section
end of subparagraph
(c),
12b5(&)
(3)? stride out "or" at the
delete the period and insert", or"
at the end of subparagraph (D), and immediately thereafter
add a new subparagraph (E) to read as follows:
"(E) property piaced in service in coastal wetlands
after December 31? 1973 (other than certified coastal
wetlands improvements)."
Sec. 203.
SOIL AND WATER CONSERVATION EXPENDITURES AND LAND
CLEARING EXPENDITURES.
(a)
*
Section 175(c) (l) (relating to soil and water conservation
expenditures) is amended —
(1) by striking out "or" at the end of subparagraph (A),
by striking out "section" and inserting in lieu thereof,
"section, or" at the end of subparagraph (B), and by inserting
immediately after subparagraph (b ) a new subparagraph
(c)
to
read as follows:
"(c) any amount paid or incurred with respect to
coastal wetlands (other than amounts paid or incurred
with respect to certified coastal wetlands improvements)."
(2 ) by striking out "preceding sentences." in the flush
material immediately following new subparagraph (c) and
inserting in lieu thereof, "preceding sentences, except as
provided in subparagraph
(c)."
(b) Section 182(d) (l) (relating to expenditures by farmers
for clearing land) is amended- by striking out "or" at the end of
subparagraph (A), by striking out "section!* and inserting in iieu
thereof "section, or" at the end of subparagraph (B), and by adding
a new subparagraph (C) at the end thereof to read as follows:
"(C) any amount paid or incurred with respect to
coastal wetlands (other than amounts paid or incurred
with respect to certified coastal wetlands improvements)."
(c) The amendments made by this section shall apply to taxable
„years beginning after December 3 1 ? 1 9 7 3 .
Sec.
20b.
CARRYING CHARGES ON COASTAL WETLANDS PROPERTY.
(a) Part IX of subchapter B of chapter 1 (relating to items
not deductible) is amended by adding after section 2 7 9 the following
new section:
"Sec. 280.
CARRYING CHARGES ON COASTAL WETLANDS PROPERTY.
"(a) IN GENERAL.
Deductions for the taxable year of amounts
otherwise allowable under section 16 3 or l6 h, or under section 16 2
to the extent such amounts would also have been allowable under
section 16 3 or l 6 ^, which are attributable to land under development
and associated improvements in the coastal wetlands (other than land
and associated improvements which are certified coastal wetlands
improvements) shall be allowed only to the extent of net income
derived from such coastal wetlands.
If for any taxable year such
deductions exceed such income, the excess shall be charged to capital
account.
$
C•iV
- 5 -
%
4
"(b) NET INCOME FROM COASTAL WETLANDS.
section,
For purposes of this
’net income from coastal wetlands* means gross income for
the taxable year derived from land under development, and associated
improvements in the coastal wetlands (other than land and associated
improvements which are certified coastal wetlands improvements),
reduced by all deductions directly connected with the production of
such income, other than items of deduction described in section 16 3
or
l6b."
m
The amendment made by »this section shall apply to taxable
years beginning after December 31, 1973.
(c)
The Table of sections for part IX of subchapter B of
chapter 1 is amended by adding at the end thereof;
"Sec. 280. Carrying charges on coastal wetlands property."
Sec. 205.
DEFINITION OF COASTAL WETLANDS.
Section 7701 (a) (relating to definitions) is amended by adding
after paragraph (3 ^) the following new paragraph;
"(3 5 ) COASTAL WETLANDS.
The tern ’coastal wetlands’ means
those areas of open water, marsh, swamp, or other coastal
wetlands which —
"(A) correspond to types 12 through 20 identified
in Circular 39 °f the Fish and Wildlife Service, United
States Department of the Interior,
/
"(B) are of biological significance due to their
production of or capacity to produce vegetation and other
types of living organisms important to the maintenance
of the ecology of the coastal zone,
"(C)
are influenced by tidal water, and
” (D) lie shoreward within the territorial sea of
the three fathom depth line as shown on National Oceans
Survey Marine Charts,
and which are certified to the Secretary or his delegate as
falling within the above definition by the Secretary of the
Interior with the approval of the Secretary of Commerce.”
(b )
CERTIFIED COASTAL WETLANDS IMPROVEMENTS.
Section 7701(a)
(relating to definitions) is amended by adding after paragraph
(35)
the following new paragraph:
”(36) CERTIFIED COASTAL WETLANDS IMPROVEMENT. The term
’certified coastal wetlands improvement’ means any improvement,
change, or other alteration to coastal wetlands wh;i.ch the„
Secretary of the Interior, with the approval of the Secretary
o f ‘Commerce, has certified to the Secretary or his delegate
” (A) as not being in conflict with applicable
regulations of Federal and State agencies relating to
the protection of the coastal wetlands, and
"(b ) as not requiring an environmentally undesirable
degree of draining, dredging or filling in the coastal
wetlands affected."
TITLE III.
Sec. 301.
HISTORIC PRESERVATION
AMORTIZATION OF REHABILITATION EXPENDITURES.
(a)
Part VI of subchapter B of chapter 1 (relating to itemized
deductions) is amended by adding at the* end thereof the following
new section:
- 7 -
H
"Sec. I 89.
AMORTIZATION OF CERTAIN REHABILITATION EXPENDITURES
FOR CERTIFIED HISTORIC STRUCTURES.
"(a) ALLOWANCE OF DEDUCTION.
Every person at his election,
shall be entitled to a deduction with respect to the amortization
of the amortizable basis of any certified historic structure (as
defined in subsection (d)) based on a period of
60 months.
Such
amortization deduction shall be an amount, with respect to each
month of such period within the taxable year, equal to the
amortizable basis at the end of such month divided by the number
of months (including the month for which the deduction is computed)
remaining in the period.
Such amortizable basis at the end of the
month shall be computed without regard to the amortization deduction
for such month.
The amortization deduction provided by»this
section with respect to any month shall be in lieu of the depreciation
deduction with respect to such basis for such month provided by
section
167.
The 60-month period shall begin, as to any historic
structure, at the election of the taxpayer, with the month following
the month in which the basis is acquired, or with the succeeding
l '*1
taxable year.
” (b) ELECTION OF AMORTIZATION.
The election of the taxpayer
to take the amortization deduction and to begin the
60-month
.
period
with the month following the month in which the basis is acquired,
or with the taxable year succeeding the taxable year in which such
basis is acquired, shall be made by filing with the Secretary or his
delegate, in such manner, in such form, and within such time, as the
Secretary or his delegate may by regulations prescribe, a statement
À
"(c) TERMINATION OF AMORTIZATION DEDUCTION.
A taxpayer who
has elected under subsection (b) to take the amortization deduction
provided in subsection (a) may, at any time after making such
election, discontinue the amortization deduction with respect to
the remainder of the amortization period, such discontinuance to
begin as of the bèginning of any month specified by the taxpayer
in a notice in writing filed with the Secretary or his delegate
before the beginning of such month.
provided under section
167
The depreciation deduction
shall be allowed, beginning with the
first month as to which the amortization deduction does not apply,
and the taxpayer shall not be entitled to any further amortization
deduction under this section with respect to such certified historic
structure.
"(d) DEFINITIONS.
For purposes of this section —
” (l) CERTIFIED HISTORIC STRUCTURE.
The term ‘certified
historic structure’ means a building or structure subject to
the allowance for depreciation provided in section
167
which —
"(A) is listed in the National Register, or
"(B) is located in a Registered Historic District
and is certified by the Secretary of the Interior or
his delegate as being of historic significance to the
District.
"(2) CERTIFIED REHABILITATION.
The term ’certified
rehabilitation’ means any rehabilitation of a certified
historic structure or of any other structure located in a
Registered Historic District, which the Secretary of the
Interior or his delegate has certified as being consistent
with the historic character of such property or district.
"(3) AMORTIZABLE BASIS.
The term ’amortizable basis*'
means the portion of the basis attributable to additions
to capital account which —
"(i) are amounts expended for certified rehabilitation,
and
”(ii) are described in section
"(e) DEPRECIATION DEDUCTION.
provided by section
167
167(0) (2).
The depreciation deduction
shall, despite the provisions of subsection
(a), be allowed with respect to the portion of the adjusted basis
which is not the amortizable basis.
"(f) LIFE TENANT AND REMAINDERMAN.
In the case of property
held b y one person for life with remainder to another person, the*
deduction under this section shall be computed as if the life tenant
were the absolute owner of the property and shall be allowable to
the life tenant.
"(g) CROSS REFERENCE.
11
(l) For rules relating to the listing of buildings
and structures in the National Register and for defini- .
tions of 'National Register' and 'Registered Historic
District', see section U 70 et seq. of title l6 of the
United States Code.
"(2) For special rule with respect to certain gain
derived from the disposition of property the adjusted
basis of which is determined with regard to this section,
see section 1238."
(b)
GAIN ON DISPOSITION OF REGISTERED STRUCTURES.
Section 1238
(relating to amortization in excess of depreciation) is amended to
read as follows:
-
"Sec. 1238.
?AMORTIZATION
10
-
aJ
IN EXCESS OF DEPRECIATION.
/v
"Gain from the sale or exchange of property, to the extent
that the adjusted basis of such property is less than its adjusted
basis determined without regard to section
168
or
189,
shall be
considered as ordinary income.”
(c )
CONFORMING AMENDMENTS.
(1 )
The table of sections for part VI of subchapter B
of Chapter 1 is amended by inserting at the end thereof the
following new item:
"Sec.
(2)
189.
Amortization of rehabilitation expenditures on
certified historic structures."
The heading and first sentence of section
6b2
(f)
(relating to special rules for credits and deductions of
estates and trusts) are amended to read as follows:
"(f) AMORTIZATION DEDUCTIONS.
The benefit of the deductions
for amortization provided by sections
168 , 169, 18^, 187, 188,
and
I 89 shall be allowed to estates and trusts in the same manner as in
the case of an individual."
(3) Section 1082(a)
(2) (B) (relating to basis for
determining gain or loss) is amended by striking out "or
and inserting in lieu thereof "188, or
(*0 Section 1250(b)
188;"
*
189;".
(3 ) (relating to depreciation
adjustments) is amended by striking out "or 188)." and inserting
in lieu thereof "188, or
189)."
(d)
4
-'ll -
i
EFFECTIVE DATE.
The amendments made by this section
shall apply with respect to additions to capital account made
after February 15? 1973»
Sec. 302.
(a)
DEMOLITION.
DISALLOWANCE OF DEDUCTIONS.
Part X of subchapter B
of chapter 1 (relating to terminal railroad corporations and
their shareholders) is amended by redesignating section 28l as
section 291 and part IX of such subchapter (relating to items
not deductible) is amended by adding after section 280 the
following new section:
"Sec. 281.
DEMOLITION OF CERTAIN HISTORIC STRUCTURES.
"(a) GENERAL RULE.
In the case of the demolition of a
certified historic structure described in section 1 8 9 (d). (l)
(but without regard to paragraph (C) of that section) —
II(l)
no deduction otherwise allowable under this
chapter shall be allowed to the owner or lessee of such
structure for —
"(A) any amount expended for such demolition,
or
"(B) any loss sustained on account of such
demolition.
”(2 ) Amounts described in paragraph (l) shall be
treated as property chargeable to capital account with
respect to the land on which the demolished structure
was located.
"(b) SPECIAL RULE FOR REGISTERED HISTORIC DISTRICTS.
-
12
-
3
7
^
located, in a Registered Historic District shall be treated as
a ’certified historic structure’ unless the Secretary of the
Interior or his delegate has certified, prior to the demolition
of such structure, that such structure is not of historic
significance to the District.”
(b)
EFFECTIVE DATE.
The amendments made by this section
shall apply with respect to demolitions commencing after the
date of enactment of this bill.
(c)
CONFORMING AMENDMENTS.
(X)
The table of sections for part X of subchapter B
of chapter 1 (relating to terminal railroad corporations
and their shareholders) is amended by redesignating "Sec. 28l”
as "Sec. 291".
(2) The table of sections for part IX of subqhapter^B
of chapter 1 (relating to items n o t ‘deductible) is amended
by-adding at the end thereof the following new item:
"Sec. 28l. Demolition of certain historic structures".
TITLE IV.
Sec. 1*01.
REHABILITATION
SUBSTANTIALLY REHABILITATED PROPERTY.
(a) Section
167
(relating to depreciation) is amended by
inserting after subsection (n) the following new subsection:
"(o) SUBSTANTIALLY REHABILITATED PROPERTY.
"(l) GENERAL RULE.
Pursuant to regulations prescribed
by the Secretary or his delegate, the taxpayer may elect
to compute the depreciation deduction attributable to
substantially rehabilitated property as though the original
use of such property commenced with him.
- 13 -
0
*#■
4
"(2) SUBSTANTIALLY REHABILITATED PROPERTY.
The
term 'substantially rehabilitated property' means property
which is of a character subject to the allowance for depre
ciation under section
section
1250
167,
and is property described in *
with respect to which the additions to capital
account during the
2*+-month
period ending on the last day
of any taxable year, reduced b y any amounts allowed or
allowable as depreciation or amortization allowable thereto,
exceeds the greater of—
"(A) the adjusted basis of such property, or
"(B) $5,000.
The adjusted basis of the property shall be determined as
of the beginning of the first day of such
2*+-month
period,
or of the holding period of the property (within the meaning
of section
1250(c)),
(b) EFFECTIVE DATE.
whichever is later."
The amendment made by this section shall
apply with respect to additions to capital account occurring after
June 30, 197*+.
TITLE V. CHARITABLE TRANSFERS
FOR CONSERVATION PURPOSES
Sec. 501.
TRANSFERS OF PARTIAL INTERESTS IN PROPERTY FOR
CONSERVATION PURPOSES.
(a) INCOME TAX DEDUCTIONS FOR CHARITABLE CONTRIBUTIONS OF
PARTIAL INTERESTS IN PROPERTY FOR CONSERVATION PURPOSES.
Section 170
(f) (3) (relating to charitable contributions) is amended —
(l) by striking out "or" at the end of subparagraph (B) (i),
-
Ik
-
(2) b y striking out "property.", at the end of
subparagraph (B) (ii) and inserting in lieu thereof
"property,"
(3)
hy adding after clause (ii) of subparagraph (B)
the following new clauses:
"(iii) a lease on, option to purchase,
or easement with respect to real property of
not less than 30 years duration granted to an
organization described in subsection (b)
(l) (A)
exclusively for conservation purposes, or
"(iv) a remainder interest in real
property which is granted to an organization
described in subsection (b) (l) (A) exclusively"
for conservation purposes." and
(V) by adding at the end thereof the following new
subparagraph:
"(C) CONSERVATION PURPOSES DEFINED.
For purposes
of subparagraph (B), the term ' conservation purposes’
means—
"(i) the preservation of land areas for
public outdoor recreation or education, or
scenic enjoyment;
"(ii) the preservation .of historically impor
tant land areas or structures; or
"(iii) the protection of natural environ
mental systems."
(b) ESTATE TAX DEDUCTION FOR TRANSFERS OF PARTIAL INTERESTS
IN PROPERTY FOR CONSERVATION PURPOSES.
Section 2055(e) (2)
(relating to deductions from gross estate) is amended by striking
out "(other than a remainder interest in a personal residence or
farm or an undivided portion of the decedent-’s entire interest in
property)" and inserting in lieu thereof "(other than an interest
described in section 170 (f) (3) (B))."
(c) GIFT TAX DEDUCTION FOR TRANSFERS OF PARTIAL INTERESTS
IN PROPERTY FOR CONSERVATION PURPOSES.
Section 2522 (c) (2)
(relating to deductions from taxable gifts) is amended by striking
out "(other than a remainder interest in a personal residence or
farm or an undivided portion of the donor’s entire interest in
property)" and inserting in lieu thereof "(other than an interest
described in section 170 (f) (3) (B))".
(d) EFFECTIVE DATE.
The amendments made by this section shall
apply with respect to contributions and transfers made after
February 15, 1973.
'*■
4
ENVIRONMENTAL PROTECTION TAX ACT OF 1973
TITLE I SHORT TITLE, ETC.
Title I labels the Act as the "Environmental Protection Tax Act
of 1973,” and specifies that all amendments contained in the Act are
amendments to the Internal Revenue Code.
TITLE II PRESERVATION OF COASTAL WETLANDS
Section 201
Section 201 adds a new subsection (n) to.section 167 of the Code,
providing that the depreciation deduction for property constructed,
reconstructed or erected in the coastal wetlands may be computed only
by use of the straight line method of depreciation. A similar rule is
applied in the case of buildings constructed on sites where a registered
historic structure has been demolished.
i
«
The limitation of depreciation methods will apply with respect to
property placed in service after December 31? 1973»
Section 202
Section 202 amends section 12^5 of the Code to provide that gain
on the disposition of improvements located in coastal wetlands will be
treated as ordinary income to the extent of all depreciation deductions
claimed with respect to such improvements.
This amendment will apply
I
to dispositions of property placed in service in the coastal wetlands
after December 31? 1973-
Section 203
Section 203 of the bill adds a new subparagraph C to sections
175(c)(1) and 182(d)(1) of the Code, providing, in effect, that certain
land clearing expenditures and certain soil and water conservation
expenditures (such as expenses for draining, dredging or filling) with
regard to coastal wetlands are not deductible under the special rules
of Code sections 175 and 182.
Thus, these expenses would have to be
capitalized.
Disallowance of deductions for these expenditures would apply to
taxable years beginning after December 31, 1973.
Section
20b
Section 20^ of the bill adds a new section 280 to the Code, pro
viding in effect that no deduction for interest and taxes will be
allowed where it is attributable to land under development and
associated improvements in the coastal wetlands. However, these deduc
tions would be allowed to the extent of any income derived from such
i
coastal wetlands.
*•
The amount of such disallowed deductions is to be
charged to the capital account.
This section will apply to taxable years beginning after
December 31? 1973.
/
- 3 -
7
Section 205
Section 205 of the bill defines coastal wetlands as areas of open
water, marsh, swamp, etc., corresponding to types 12 through 20 in
Circular No. 39 of the Fish and Wildlife Service of the U.S. Department
of Interior, which are of biological significance, are influenced by
tidal water, and which lie shoreward within the territorial sea of the
three fathom depth line as shown on National Oceans Survey Marine
Charts.
It is further provided that the Secretary of the Interior,
after consultation with the Secretary of Commerce, will provide the
Secretary of the Treasury with a detailed description
(in the form
of maps) of lands which fall within this definition.
Section 205 also defines certified wetlands improvements which
will be exempt from the provisions of the Act.
Certification requires
a finding by the Secretaries of the Interior and Commerce that the
improvement does not conflict with regulations and does not require
an environmentally undesirable degree of draining, dreeing,
or
filling.
(
TITLE III HISTORIC PRESERVATION
Title III contains provisions intended to encourage preservation
of historic buildings and structures certified by the Secretary of the
Interior as registered or qualified for registration on the National
Registry.
In addition to the provisions of Title III, Section 201 of
the Bill limits depreciation to the straight line method in the case
of buildings constructed on sites which were fomerly occupied by
demolished historic structures.
Section 301
Section 301 adds a new section 189 to the Code, permitting a
5-year write-off of rehabilitation expenditures incurred with respect
to historic structures which are used in the taxpayer’s trade or
■Ip
business or held for the production of income provided that property
acquired in connection with such expenditure is otherwise eligible for
the depreciation allowance.
On the disposition of(a certified historic structure, gain would
be treated as ordinary income to the extent that the special write-off
provided under this section exceeded the depreciation deduction which
would have otherwise been allowable (without regard to this provision).
This section would apply with respect to all expenditures made after
February 15, 1973-
>
- 5 4
Section 302
Section 302 would add a new section 28l to the Code (while re
designating the present section 28l as section 2 9 1 ). Under the new
section 2 8 1 , no deduction would he allowed for amounts expended in
the demolition of a registered historic structure, or for the
undepreciated cost of such a structure.
allocated to the basis of the land.
Both items would have to be
*
The section would apply to all
demolitions occurring after the date of enactment.
TITLE IV. REHABILITATION
Section ^-01
Section ^01 would add a new subsection (o) to the general
depreciation rules of section 1 6 7 . Under this new provision, if a
taxpayer substantially rehabilitated depreciable property, he would
be permitted to elect to compute depreciation with respect to his
pre-existing basis in the building as though the entire structure
was first placed in service by him.
i
This will permit a taxpayer who
f ■
purchases a used building and rehabilitates it to utilize so-called
accelerated methods of depreciation, a privilege which is not now
accorded taxpayers under the law.
In order to qualify for this special treatment, the amounts
added to capital account during a 2 U-month period must be at least
$5>000 in amount and must be greater than the undepreciated cost of
the property, determined at the beginning of the 2 l+-month period.
5*
The provision is effective with respect to such expenditures incurred
after June 30, 197^.
TITLE V.
CHARITABLE TRANSFERS FOR CONSERVATION PURPOSES
Title V provides several amendments to the charitable contribu.#
tion provisions in section 170 of the Code, the effect of which is to permit
a charitable contribution deduction for certain types of transfers which
are not presently allowed under the law.
Specifically, section 501(a)
provides that a charitable deduction will not be denied on the transfer
of a partial interest in property, where the interest is either an
easement of 30 or more years duration granted exclusively for conser
vation purposes, or is a remainder interest in real property which is
granted exclusively for conservation purposes.
"Conservation purposes"
mean the preservation of open land areas for public outdoor recreation
or education, or scenic enjoyment; the preservation of historically
important land areas or structures; or the protection of natural
i
environmental systems.
These amendments would apply with respect to contributions made
after February 15, 1973«
/
/
jSHINGTCM, D:€ . 2 0 2 2 0
T E LE P H O N E W 04-2041
February 20, 1973
FOR IMMEDIATE RELEASE
W I T H H O L D I N G OF A P P R A I S E M E N T OF
A L U MINUM INGOT FROM CANADA
Assistant Secretary of the Treasury Edward L. Morgan
announced today the withholding of appraisement of
aluminum ingot from Canada pending a determination as to
whether it is being sold at less than fair value within the
meaning of the Antidumping Act, 1921, as amended.
The decision will appear in the Federal Register of
February 20, 1973.
Under the Antidumping Act, the Secretary of the Treasury
is required to withhold appraisement whenever he has reasonable
cause to believe or suspect that sales at less than fair value
may be taking place.
A final Treasury decision in this investigation will be
made within three months. Appraisement will be withheld for a
period not to exceed six months from the date of publication
of the "Withholding of Appraisement Notice" in the Federal
Register.
Under the Antidumping Act, a determination of sales in the
United States at less than fair value requires that the case be
referred to the Tariff Commission, which would consider whether
an American industry was being injured. Both sales at less
than fair value and injury must be shown to justify a finding
of dumping under the law. Upon a finding of dumping, a special
duty is assessed.
During the period of January 1971 through August 1972 imports
of aluminum ingot from Canada were valued at approximately
$350 million.
# # #
Department of t h e J R E A $ U R Y
ISHINGION, D C 20220
T ELEP H O N E W04-2O41
FOB IMMEDIATE RELEASE
February 20, 1973
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 $4,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing March 1, 1973, in the amount of
$4,201,685,000 as follows:
91-day bills (to maturity date) to be issued March 1, 1973, in the amount of
$2,400,000,000, or thereabouts, representing an additional amount of bills dated
May 31, 1972, and to mature May 31, 1973 (CUSIP No. 912793 PX8) originally issued
in the amount of $1,200,180,000 (an additional $500,950,000 was issued on August 31,
1972, and an additional $1,902,735,000 was issued on November 30, 1972), the addition
al and original bills to be freely interchangeable.
182-day bills, for $1,800,000,000, or thereabouts, to be dated March 1, 1973,
and to mature August 30, 1973 (CUSIP No. 912793 RS7).
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 $10,000, $15,000, $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 clos
ing hour, one-thirty p.m., Eastern
Standard time, Monday, February 26, 1973.
Tenders will not be received at the Treasury Department, Washington.
®ist be for a minimum of $10,000.
$5,000.
Each tender
Tenders over $10,000 must be in multiples of
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.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded 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.
2
-
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities.
Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids.
Only those!
submitting competitive 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 any one bidder will be accept^
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
March 1, 1973,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing
treatment.
March 1, 1973.
Cash and exchange tenders will receive equal
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.
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 considered to accruel
when the bills are sold, redeemed or otherwise disposed of, and the bills are ex
cluded from consideration as capital assets.
Accordingly, the owner of Treasury
bills (other than life insurance companies) issued hereunder must include in his
income tax return, as ordinary gain or loss, the difference between the price paid;
for the bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the ta xa b le
year for which the return is made.
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.
1
2
DEPARTMENT OF THE TREASURY
PRESS BRIEFING
Participants:
,,
H O N O R A B L E P A U L A. V O L C E E R ,
UNDER SECRETARY
OF THE TREASURY FOR MONETARY
AFFAIRS
A c c o m p a n i e d bv J a c k B e n n e t t ,
Deputy Under
for M o n e t a r y A f f a i r e ;
Infornation Officer?
and Bill Weber,
Secretarv
Public
and
.M E M B E R S OF T H E P R E S S
R o o m 4 121
Deoartiient o f the. T r e a s u r y
W a s h i n g t o n , D. C.
T u e s d a y , F e b r u a r y 13, 1 973
5 :10 p.m.
MR. W E B E R :
Ladies
and gentlemen, w i l l y o u all p ay
a t t e n t i o n for a second.
W e h a v e h a d a f a i r n u m b e r of i n q u i r i e s
m e c h a n i c s of Mr. V o l c k e r ' s
would like to d i s c u s s
31,000-olus
t h a t o n t h e rec o r d .
all q u e s t i o n s p e r t a i n i n g to t h a t s u b j e c t b e
then tee w i l l
statement
s h i f t g ears,
last night,
■ield last niaht,
'Qckground.
the
and a n y m a t e r i a l
the p r e s s
conference
mile
journey.
So w e w i l l
handled
ask
first,
We
that
and
n e r t a i n i n g to t he
that Secretary
substantive material w i n
(See page 6)
about the nure
Shultz
b o s t r i c t l v on
QUESTION:
W h a t are y o u r terms
for background,
Administration officials?
MR.
WEBER:
QUESTION:
Treasury officials
Paul,
is fine.
how d i d y o u g e t t h r o u g h T o k y o without
b e i n g spotted?
MR.
VOLCKER:
Y o u do it in the m i d d l e of the night.
left my h at s o m e p l a c e in Tokyo,
and I don'-t k n o w where.
a h a t w i t h a n i c e sign on it saying,
Pau l Volcker,
this
is the p r o p e r t y of
b u t I d o n ' t k n o w w h e r e it is in Tokyo.
a little b it like I s h o u l d say,
I had
t oday is W e dnesday,
I feel
it m u s t
be W a s hington.
QUESTION:
MR.
Japan.
It is Tuesday.
VOLCKER:
Is it T u e s d a y ?
I h ave h a d to k e e p this
It is W e d n e s d a y in
straight.
J ust on the b a r e facts of this,
W e d n e s d a y afternoon,
d o e s n ' t it?
I guess
w h i c h m e a n t I g ot t h e r e Thursday,
I guess,
I h a v e a l i t t l e t r o u b l e g o i n g o v e r the d a t e line.
l e a v i n g h ere W e d n e s d a y a f t e r n o o n puts y o u in T o k y o
T h u r s d a y evening.
A n d I was
P a ris —
I w e n t o ff to T o k y o
A n d then I f lew b a c k o v e r the p ole to Bonn.
there half a day,
no,
London,
or whate v e r .
A n d I w e n t d o w n to
I a m s o r r y — and s p e n t the n i g h t there,
I
3
and o n to Paris,
and s p e n t the n i g h t t h e r e
—
I s n e n t the n i g h t in L o n d o n and on to P aris,
to R ome and
and
niched
had a chance
up Mr.
M a l a g o d i , the
to t a l k to
hin
night
in P aris,
and
I a m s orry,
I went down
Italian Finance
Ministe
on the w a y b a c k to Paris,
w h e r e he w a s m e e t i n g w i t h his c o u n t e r p a r t s .
spend.t h e
no,
and t h e n v e n t
ing and snent the last n i g h t in Bonn.
And then
I did
to B o n n t h e n e x t m o r n
And then back
to W a s h i n g
ton.
QUESTION:
H o w d i d y o u g e t s p o t t e d in Bo n n ?
MR. V O L C K E R :
»•’■ere —
I d i d n ’t k n o w I w as.
I s a w some r e p o r t s to t h a t e f f e c t .
reporters
around when
that t here w e r e
I w e n t to see Mr.
I knew that there
There were
Schm i d t , b u t w e h e a r d
some b y the t i m e the m e e t i n g w a s over.
>
t h o u g h t it w a s p r o b a b l y
no
But I
they k n e w
just b e c a u s e / M r . S c h m i d t was^ t h e r e , anc!
w a i t i n g for h i m to come o u t and m a k e s o m e k i n d o f a s t a t e m e n t .
Anyway I
just went o u t the b a c k door, I d o n ’t k n o w w h e t h e r a n y o n e s a w
me
t here or not.
I
I s h o u l d say,
I w e n t w i t h Mr.
Sam Cross, w h o m
I am
*<
sure y o u know,
just t h e t w o of us.
V7e a r e b o t h v e r y i n c o n s p i c u
ous neonle.
Bill is s u g g e s t i n g to me Sam's c o m m e n t a l o n g a b o u t
m i d d l e of last ni g h t
to an end,
because
t h a t t his n e g o t i a t i o n w i l l
1
h a d r u n o u t of b o t h s h i r t s
o n the triD, w h i c h w a s true.
QUESTION:
W h a t p l a n e d i d y o u t r a v e l in?
the
soon come
and c i g a r s
Jin
4
1
MR. V O L C K E R :
An Air Force plane.
2
QUESTION:
U h e r e d id v o u
stay
in t h e s e p l a c e s ,
in
3
the U .S . Emb as s v ?
4
MR. V O L C K E R :
I u s u a l I v s t a y e d w i t h the A m b a s s a d o r
in
5
the U.S.
E m b a s s y or some o t h e r A m e r i c a n o f f i c i a l .
6
QUES T I O N :
D i d y o u h a p p e n to
see Mr.
Eberla
in T o h y o
7
at all?
8
MR. V O L C K E R :
No,
I d i d not.
9
QUESTION:
D i d he k n o w y o u w e r e
there?
10
MR, V O L C K E R :
Yes,
I did
talk
to him b r i efly on
the
11
telephone while
I was
there.
12
QUESTION:
13
14
15
MR. V O L C K E R :
frequence
18
.19
20
21
22
23
24
25
Frequently,
as t he w e e k e n d p a s s e d .
and w i t h
I was
Shultz?
increasing
in pretty con s t a n t
c o n t a c t w i t h him.
16
17
H o w o f t e n d i d y o u t a l k to Mr.
QUESTION:
Was this
f r o m t he a i r p l a n e w h i l e y o u w e r e
fly i n g ?
MR, V O L C K E R :
a p l a c e and
Occasionally,
but
usually when
I c o u l d r e p o r t to h i m h o w t h i n g s w e r e
QUESTION:
Did the
I was
at
progressing.
President ever oersonallv direct
your negotiating?
MR. VOLCKER:
N o t w i t h me d i r e c t l v .
Mr.
Shultz
was
in c o n t a c t w i t h him.
QUESTION:
Did you
MR. V O L C K E R :
No
see the P r e s i d e n t b e f o r e
you
l 2 rz?
1
2
QUESTION:
D i d y o u t a l k to h i m w h i l e y o u w o r e
tri p ?
5
MR. V O L C K E E :
4
QUESTION:
5
MR. V O L C K E E :
6
QUESTION:
7
a b o u t Tokyo.
8
9
on your
Wore
The President?
D i d y o u t a l k to t he P r e s i d e n t ?
No.
I think m aybe we
you there
MR. V O L C K E E :
night,
should clarify a point
in f a c t at nig h t ,
By the t i m e
l ate at n i g h t ?
I l e f t it w a s
l ate
at
yes.
10
Actually,
I got a little stuck in Tokyo,
because
the
11
c r e w h a d to h a v e
12
this,
13
o u t of T o k y o as q u i c k l y as
14
w a s t h e r e in late e vening,
15
u n t i l w e c o u l d g e t t h e p l a n e g e a r e d up t o g e t o u t of t h e r e ,
a l i t t l e rest,
a nd it n u t us b a c k
16
QUESTION:
17
MR. V O L C K E E :
18
QUESTION:
19
MR. VOLCKEE:
20
QUESTION:
21
MR. V O L C K E E :
22
23
ates.
Mr.
Was
s e v e r a l hours,
I thought
I got d e l a y e d on
and
I was
I didn't get
g o i n g to.
But
I
a nd t h e n h a d to stay a f e w h o u r s
it the. s ame c r e w t h r o u g h o u t the,.trip? .
We
shifted crews after Tokyo
in A n c h a r a ;
Ilow l o n g w e r e v o u i n T o k y o ?
J u s t a few h o u r s .
W h o d i d y o u see t h e r e ?
Mr. A i c h i a n d o n e o r t w o o f h i s
Hosomi, w h o m
QUESTION:
unexpectedly
Mr.
24
t h a t t he d e c i s i o n w a s
25
a n n r o a c h w a s d e c i d e d on.
I l a t e r s a w in Bonn, w a s
Volcker,
Mr.
Shultz
t a k e n T u e s d a y of
Vou didn't
said
associ
also t h e r e .
last night
l a s t w e e k w h e n t h e U.S.
le a v e
until Wednesday.
,1R. V O LCKER:
timi n g
I h ad to t e s t i f y W e d n e s d a y mor n i n g .
l ooked a b o u t r i g h t in t e r m s of the c a l e n d a r
And th
and in terms
of w i n d i n g the thing urn s o m e t i m e d u r i n g the w e e k e n d .
QUESTION:
MR.
C a n we get to the s u b s t a n c e now?
WEBER:
Let's
shift gears
now.
We w i l l b e o n
b a c k g r o u n d f r o m h e r e o n out.
Q U ESTION:
the F r e n c h
Ilr. V o l c k e r , iti&SSXXG&iK w i r e
service
said
t o d a y t h a t ilr. S c h m i d t ' s h o l d i n g the l i n e o n t h e D e u t s c h e mark
imadh
WARD a&.baih
PAUL.
was really nressuring the Americans
Was
t o w a r d d o l l a r d e valuation .
'that the r i g h t i n t e r p r e t a t i o n ?
MR. V O L C K E R :
pretation.
I d o n ' t t h i n k t h a t is t h e r i g h t i n t e r
I think we had a p r o b l e m here essentially reaching
a s o l u t i o n to s e v e r a l d i f f e r e n t and c o n v e r g i n g p r o b l e m s
simultaneously.
We h a d a n e x c h a n g e m a r k e t p r o b l e m ,
wasnino¥ton,1D.C.20003
''
But u n d e r n e a t h that,
problem,
our t rade
we had our balance of payments
and t he o t h e r d i s e q u i l i b r i a in p a y m e n t s ,
w i t h the Japan e s e .
legislation.
We
h ad
a p r o b l e m of r e a c h i n g a s o l u
and p r o v i d i n g t he b a s i s
i m p r o v e m e n t in o u r t r a d e and b a l a n c e of p a y m e n t s
a more
legislation.
partners
particularly
We h a d the p r o b l e m o f an a p p r o a c h t o w a r d
t ion to the d i s e q u i l i b r i a ,
provides
o f course.
favorable environment
for a n
p o s i t i o n that
f or c o n s i d e r i n g
t h e trade
We h ave t h e p r o b l e m of the n e e d s of all t h e
in e f f e c t in the w o r l d
trading community,
or t h e major
1.1011*(A(M>02)M4-4000
^
Phon#(Ar«a202)544-6000
G i v e n t he u r g e n c y of t he s i t u a t i o n , is th e r e a n y t h i n g to say
afternoon
this
a b o u t the h i a t u s b e t w e e n T u e s d a y and W e d n e s d a y ?
0009-»»«(IO<mv) >uoth|
o n e s , and how they could best mesh
requirements.
to
proceed,
A n d there w e r e o b v i o u s l y s e v e r a l p o s s i b l e w a y s
but
I th i n k
the w a v t h a t .was d e c i d e d u p o n w a s b y
c o m m o n consensus, a w a y t h a t b e s t m e t t hese
r e a l i z a t i o n t h a t there w a s
a step,
with these diseguilibria
v a r y i n g needs,
a
a d i s e q u i l i b r i u m , that we s h o u l d m a k e
and a v e r y i m p o r t a n t a nd f o r c e f u l
I think,
to m e e t varying
together
t hat n l a g u e us.
in a w a y t h a t m e e t s
stop,
toward dealing
A n d we h a v e d o n e
it,
the -'broader n e e d to m e e t t he
p o l i t i c a l and e c o n o m i c o b j e c t i v e s o f
the v a r i o u s m e m b e r s
o f the
w o r l d community.
QUESTION:
Nas the a c r o s s - t h e - b o a r d d e v a l u a t i o n of the
dollar your preferred strategy?
MR. V O L C K E R :
I t h i n k it w a s c e r t a i n l y t h e p r e f e r r e d
s t r a t e g y in t h e s e n s e o f the b l e n d i n g o f a l l t h e s e c o n s i d e r a
tions,
i n c l u d i n g the c o n s i d e r a t i o n of f i n d i n g a s o l u t i o n t h a t
f i t t e d in b e s t w i t h o t h e r p e o p l e ' s needs.
a S m i t h s o n i a n t ype s i t u a t i o n ,
Thi*s w a s
n o t l ik e
o r t he p r e - S m i t h s o n i a n t y p e
s i t ua t i o n , w h e n it s e e m e d c l e a r t h a t a n u m b e r of e x c h a n g e
w e r e o u t of line b v v a r y i n g d e g r e e s .
Here we have
there is a b i g d i s e q u i l i b r i u m in Japan,
g e n e r a l i z e d b a l a n c e of p a y m e n t s
to m a k e a case,
w i t h e a c h other.
nroblem,
th i n g s
a case where
in the U.S.
a n d we /have h a d a m o r e
b u t it is m u c h h a r d e r
that, the E u r o p e a n r a t e s
So all those
r a tes
had
are o u t o f
to be
l in e
taken into
account.
QUESTION:
T h e n do
I understand you correctly
to say
8
L
that with Janan being the main oroblem,
ourselves,
2
vis-a-vis
5
MR.
the d o l l a r , w e r e
VOLCKER:
I think
Euronean rates vis-a-vis
not particularly out of
the a s s e s s m e n t
is t h a t w e h a d
4
a g e n e r a l i z e d p r o b l e m o f some d e g r e e of m a g n i t u d e ,
5
particularly
6
the
large p o r t i o n of t h a t p r o b l e m
remedy
7
is d e s i g n e d
QUESTION:
an across-the-board deval u a t i o n ?
9'
MR. V O L C K E R :
W ell,
LO
it alone,
11
in a n y s e n s e to d o a n y t h i n g .
12
13
I don't think
Exactly.
a
So
to fit.
have b een
T h a t is w h y
to
the U.S., l o o k i n g at
was n e c e s s a r i l y in a o o s i t i o n w h e r e w e w e r e
QUESTION:
the
but that
is w i t h Japan..
What would vour alternatives
8
line?
I want
forced
to k n o w w h a t
a l t e r n a t i v e s were.
14
iiR. V O L C K E R : T h a t c o u l d h a v e led to p e r h a p s
s ome
15
more generalized
floating.
The E u r o p e a n s
16
c o n s i d e r a t i o n to a p a r t i a l
joint float at
17
s e e m e d t o b e the s o l u t i o n t h a t f i t t e d e v e r y b o d y ' s
18
e f f e c t i v e l y , in g i v i n g us the k i n d of a d j u s t m e n t w e w a n t e d ,
and
19
m e e t i n g s ome of t h e o t h e r r e q u i r e m e n t s
of
20
the o t h e r t r a d i n g p a r t n e r s .
QUESTION:
21
22
W h a t are s o m e
apparently gave
least.
But this
some
again
needs m o s t
and desires
of s o m e
of t h o s e o t h e r d e s i r e s
and
requirements?
MR.'VOLCKER:
23
24
countries
25
desire.
WTell,
for t h e g r o u p of E u r o p e a n
t h a t w a n t to m a i n t a i n
It d i d n ' t d i s t u r b
the
fixed oar value
the e x c h a n g e
rate
it m e t
relationship
t hat
among
9
1
t h a t g r p u n of c o u n t r i e s .
It m e t the J a p a n e s e d e s i r e .
If t h e y
2
w e r e g o i n a to be w i l l i n g to m a k e
an adjustment, in e f f e c t
they
5
w a n t e d to d o it by this m e t h o d r a t h e r
t h a n by a s t r a i g h t
4
forward revaluation.
5
8
9
10
QUEST I O N :
T h a t is,
J a p a n ese.
B u t t h e y d i d n o t v/ant to m a k e
QUEST I O N :
QUES T I O N :
MR. VOLCICER:
15
QUEST I O N :
m u c h now,
17
the d ol l a r .
19
float.
24
25
T h e y did.
to f l o a t as
r i g h t now.
18
It d e p e n d s
They have
to f l o a t by as m u c h v i s - a - v i s
In the c i r c u m s t a n c e s ,
o n w h a t y o u l o o k at./ J a o a n w a n t e d to
I don't know w hat else
QUEST I O N :
not have
just floated?
T h e p o i n t is, t h e y d o n ’t h a v e
MR. V O L C K E R :
20
By t h e m s e l v e s or o t h e r w i s e .
W h y c o u l d n ’t t h e y h a v e
14
23
a d e c i s i o n to r e v a l u e
By t h e m s e l v e s ?
MR. V O L C K E R :
13
22
to g a i n p a r t of
e x p l i citly.
12
21
they were able
the r e v a l u a t i o n via a c u r r e n c y c h a n g e on o u r oart.
is t e r r i b l y impor
HR. V O L C K E R :
I d o n ’t k n o w t h a t t h a t
to the
11
16
t o g e t h e r all o f
those.
6
7
So this p a t t e r n o u t s
i
c a n say.
T h e q u e s t i o n is, w h y c o u l d the J a p a n e s e
just f l o a t e d b y t h e m s e l v e s ?
MR. V O L C K E R :
C o n c e i v a b l y t h e y c o u l d h ave.
have also achieved a more general
adjustment.
only
If/Japan had
floated, y o u would, h a v e g o t t e n an a d j u s t m e n t j ust
QUESTION:
Was J a o a n u n w i l l i n g
B u t we
for J a n a n
to f l o a t b e c a u s e o f it
10
1
with
1
concern
its c u r r e n c y r e l a t i o n s h i p w i t h W e s t e r n
Europe?
2
2
HR. V O L C K E R :
J a p a n is w i l l i n g
to float.
Jaoan
is
5
5
floating.
4
4
QUESTION:
I m e a n to
float alone w i t h o u t
a n y U .S.
5
5
devaluation.
6
7
8
HR. V O L C K E R :
a U.S.
devaluation
m a k i n g an a s s u m p t i o n h e r e
13
14
15
16
d i f f e r e n t th i n g t h a n s a y i n g
j u s t in i s o l a t i o n .
11
B u t t h a t is a
[li
t h a t the d o l l a r h a d to be d e v a l u e d ,
setting.
1 i;
I
li
d o n ’t k n o w if t hey h a v e a n y g r e a t c o n v i c t i o n a b o u t the n a t u r e
|i
of the p r e c i s e m u l t i l a t e r a l m o v e s .
li
But they w o u l d
like to be
a l i t t l e m o r e m u l t i l a t e r a l t han u n i l a t e r a l .
QUESTION:
W h y d i d y o u go to J a p a n
MR. V O L C K E R :
And
20
Japanese
attitude was
25
f i n d out.
is a f e e l i n g i n J a p a n
t h a t t hey like to be i n a m o r e m u l t i l a t e r a l
problem.
24
I think there
t h a t t h e y d o n ' t like to m o v e
19
23
some h o w .
T h a t is w h a t w e w a n t to
!IR. V O L C K E E :
18
22
Y o u are
10
17
21
is c r i t i c a l to J a p a n .
9
QUESTION:
10
12
I a m n ot s u r e
7
8
9
11
6
they would
I d o n ’t k n o w w h e t h e r / —
t he q u e s t i o n of
first,
Because that seemed
I t h i n k w e h a d to g e t s ome
QUESTION:
li
to u n l o c k
Tlr. V o l c k e r ,
Paul?
11
t he b i g g e s t
I]
I
■i
t
feeling of w h a t the
the key.
Ii
about a year
t h a t t h ere w o u l d be an i m p r o v e m e n t soon
ago you
in t he A m e r i c a n
forecast
trade
acc o u n t s .
And you stated what happened —
it s t a r t e d g e t t i n c ? v:c:
and d i d n ' t get v e r y m u c h better.
W o u l d y o u care to c o m m e n t on thi
!1R. V O L C K E R :
It b e a a n p e t t i n g
the las t two m o n t h s w e r e d i s a p p o i n t i n g
a little better,
figures.
And
but
I rerun in::;u
!
~za
J
«11%
1
of the opinion in the last two months
2
But^when we evaluated the nosition in its totalitv, taking
5
4
5
6
7
8
9
account of everything that had gone on, it
the ,judgment that another
QUESTION:
. MR. VOLCKER:
16
17
•18
19
initially
That is right.
QUESTION:. As the first one was.
QUESTION:
15
a n d m a g n i t u d e w as
will be perverse?
11
14
of this nature
The impact of this devaluation
MR. VOLCKER:
13
move
s e e m e d to confirm,
desirable in the interest of world equilibrium.
10
12
were the odd figures.
That is right.
When did you expect realistically to see
an improvement?
MR. VOLCKER:
There is no way around this problem.
17e will get perverse reactions from this exchanae rate chanae.
And I can't wave a magic wand and bring instantaneous equilibria
in time.
um. But that will come about/. I think this is a fair estimate
of a move that will in time, not just in the American payments,
but also in the Japanese payments, and in other countries' pay
ments, give us the thrust to restore equilibrium.
20 going to take time.
And that is
I suppose we will go through another
21 period when everybody is sitting around waiting for the improve
22 ment to appear.
23
24
25
I beg of you not to get too alarmed when
you.don't see the improvement appearing instantaneously.
pxpept pervers e
reactions and all the rest.
you mu
You just have to
expect that, it is going to happen, there is no question
about
We think t hese n e w l y
reasonable
set e x c h a n g e
from a n y o n e ' s v i e w p o i n t ,
too,
course,/the
t a k i n g i nto a c c o u n t ,
arc
of
fact that we have b e e n d o i n g b e t t e r o n i n f l a t i o n
than N o s t o r n hurc"e
in p a r t i c u l a r .
disequilibrium with
eastern Europe
w i t h Janan.
The
f e e l i n g is
is n o t n e a r l y
J a n a n is t h e core of the o r o b l e m .
one siz a b l e r e - e v a l u a t i o n ,
d o l l a r is g oing to m o v e
range.
rate r e l a t i o n s h i p s
It
so e x t r e m e as
T h e y h a v e had
and the e x c h a n g e r ate v i s - a - v i s
the
a g a i n b y p r e s u m p t i o n o v e r a substantial
is g o i n g to take a w h i l e t o e f f e c t this
the m a g n i t u d e
t hat an’
situation
is siza b l e .
QUESTION:
Do you have assurances
that the-Japanese
W A R D a PAUL.
float w i l l be a b s o l u t e l y cl e a n ?
MR. V O L C K E R :
clean" me a n s
in this
Well,
I don't know what
cont e x t .
I c e r t a i n l y w o u l d n o t w a n t to
s u g g e s t that t h e y w e r e g o i n g to e n g a g e
means.
We,
"absolutely
in a d i r t y
f l o a t b y any
as a r e s u l t of o u r d i s c u s s i o n s w i t h them,
firm conviction,
which was expressed
s t a t e m e n t l a s t night.
in S e c r e t a r y
I think that represents
have a
Shultz'
our conclu
410 Firij Street, S.E,, Washington, D.C. 20003
sion .
QUESTION:
Do y o u h a v e
any k i n d o f a n u m e r i c a l
of w h a t t h a t w o u l d be t o s a t i s f y the b a l a n c e of p a y m e n t s
MR.
Secretary
it
will
VOLCKER:
I think
Shultz p r o b a b l y
it is
f a i r to say,
said l a s t ni g h t ,
as
sense
needs?
I think
that we presume
that
r e q u i r e a larcrer a d j u s t m e n t v i s - a - v i s the d o l l a r in
than
the case of the y e n
the a d j u s t m e n t a p p l i e d b y t h e s e a c t x o r . :
(Area 202» 54«-«000
544-6000
Ptione (Area 202)
it.
13
a g a i n s t E u r o p e a n c o u ntries.;
QUESTION:
y
IX p ï ’S O W o c
We k n o w that.
T h a t w a s n ' t the q u e s t i o n .
I d o n ' t k n o w w h e t h e r v o u c a n a n s w e r it.
HR. V O L C K E R :
I don't think
t h e r e w i l l be a n y m o r e ,
or t here can be anv- m o r é .
QUES T I O N :
i D i d n ' t Mr.
Sh u l t z
suggest last night
that
it m i g h t be d o u b 1e the 10?
M R . V O L C K E R :*T
.-QUESTION a
see a m o r e
Î don 't believe he did .
Two; cpièstipits
w o u l d y o u e x p e c t to
f a v o r a b l e t r e n d in t he b a l a n c e i c f t r a d e a p p e a r ?
s e c ondly, w h a t kindïïof t r a d e
legislation do you have
aàvè ÀttXéâ bluov I «
.
now?.
MR. V O L C K E R :
and
in m i n d
:Y'rîSdCH
It was pointed out on the first ques
I h a v e been expecting a more favorable trend to
tion that
Indeed • I think there
d e v e l o p for a few months anyway.
w e r e some g l i m m e r i n g s " of a-more favorable trend developing.
Then
we h a d t wo had months in a row.
bad months
Now, whether the t w o
are mòre indicative.than thé other earlier months
w h e r e the t r e n d w a s gently turning around I suppose remains to
be seen.
But
I t h i n k it is fair to say that apart from this
we expected
improvement in our trade balance next
still
a nd w o u l d xasxexpect an improvement in our trade b a l a n c e
a ction,
year,
n e x t year.
But n o w w e have this perversity to interfere w i t h
t hat t r e n d a b i t in the short run.
that i n i t i a l r
e
a
c
t
i
But if you can look b e y o n d
o
n
expect that this
14
kind of action w i l l p o w e r f u l l y r e i n f o r c e
an improving
' w h i c h we w e r e p r e t t y c o n f i d e n t w o u l d be i m p r o v i n g ,
! a s u f f i c i e n t r a t e of speed.
trend
b u t -not a t
So w e a r e g i v i n g it n e e d e d
addi
t i o n a l thrust.
5
QUESTION:
6
7
ME. V O L C K E R :
10
Well,
I e x p e c t the t r a d e b a l a n c e
8
9
The a n s w e r to t h e q u e s t i o n is,
’MR. BENNETT:
I guess
next year?
I a m o n r e c o r d as
saying
to i m p r o v e n e x t year.
You m ean
'74?
.
'
*’
MR. VOLCKER:
N e x t year?
I ' m sorry, I k e e p f o r g e t t i n g
w e ' r e in the e a r l y p a r t o f a n e w year.
B y '74 I" c e r t a i n l y w o u l d "
e x p e c t a s i q n i f i c a n t l y i m p r o v i n g tr a d e b a l a n c e .
significantly improving trade balance.
11
QUESTION:
But evidently you meant
1973.
I* V12
MR. V O L C K E R :
13
T h e o n l y p r o b l e m is,
Yes,
I w o u l d t h i n k e v e n in 1973.
we may have some pervers
14
a c t i o n s d u r i n g t he f i r s t h a l f o f t h i s y e a r
15
f i r s t h a l f of l a s t y e a r .
16
17
QUESTION:
as w e d i d d u r i n g
The second p a r t of m y que s t i o n a bout
the
trade
legislation.
18
MR. V O L C K E R :
Well,
t h e n a t u r e o f the t r a d e
19
tion,
20
Shultz'
21
there
22
tions w i t h business,
23
l e g i s l a t i o n is
f o r m e d i n full d e t a i l .
24
indicated here
is to h a v e
25
are cited.
as y o u k n o w ,
is
just very broadly
statement.
outlined
I can't go.a lot beyond
is a d e s i r e h e r e t o h a v e
labor,
v w o u l d
some ra t h e r
congressional
these
provide
four,
legisla
i n Mr.
t hat,
intensive
leaders,
because
consulta
before
B u t the i n t e n t i o n
the
as
I think., c o m p o n e n t s
authority
for m u l t i l a t e r a l
that
c/ Um
1
negotiations in the trade area x/here
2
ing both tariff and non-tariff barriers.
5
ourselves with more adequate procedures and devices for dealing
4
5
6
we
would look toxvard lower
And we would provide
nractices that distort a
with unfair practices of others ,
also
The bill
competitive relationship.
would/provide an ability to
?
negotiate a safeguard apparatus, as has been discussed rather
there would be
widely» And/sone provisions, as we have touched upon in our
8
monetary reform proposals, for providing a kind of emergency
9
power for protecting one's external position from persistant
10
balance of payments problems.
11
QUESTION:
12
When you set out, is it fair to say that
as
you v;ere attempting to derive some kind of solution
my mind
13
goes back to the British devaluation of *67,-where the purpose
14
uas
15
would not follow us dox7n if we were to make a general devalua
16
tion —
to gain
a devaluation, but be assured_that other countries
or did you in fact have other alternatives in mind?
17
MR. VOLCKER:
It could have culminated in more than
18
one direction.
19
take, the kind of assurance that you suggest was certainly one
20
component of that kind of solution.
If
it culminated in the direction which it did
21
QUESTION:
22
MR. VOLCKER:
But what are the other directions?
Well, we touched upon those earlier.
23
Basically, if x\re found an unforthcominq attitude every place
24
else, x*e could have stood pat in effect.
25
*
QUESTION:
And hox>/ would xv’d have stood pat?
MR. V O L C K E R :
®6
here is
no i n i t i a t i v e
Veil,
wg
have an exchange p r o b le m ,
t h a t v/e are g o i n g
but
for our p a r t
to take/.
T h a t would
have been a solution , in q u o t a t i o n marks , anvv/ay, if no m o r e
desirable solutions c o u l d be n e g o t i a t e d .
I t h i n k wc negotiates
a m ore d o s i r a b 1e so 1u t i o n .
any
Is t h e r e /iresistancc to d e v a l u a t i o n o f the
QUESTION:
dol lar?
MR. V O L C K E R :
to d e v a l u a t i o n o er se.
g e n e r a l assent.
I d o n ’t 'think t h e r e is a n y r e s i s t a n c e
I t h i n k this k i n d of s o l u t i o n m e t with
that it
I t h i n k xfc is fair to say,
and d i f f e r e n t places,
in v a r y i n g degrees
t h a t b a s i c a l l y t h e r e w a s a c o n v e r g e n c e of
o p i n i o n that this k i n d of a c tion, w i t h t h e U.S.
taking the
chief ini t i a t i v e , w i t h c o n d i t i o n s t h a t o t h e r s . w o u l d s t a n d still
that
and so forth, a n d / t h e J a p a n e s e w o u l d float, w a s t h e d e s i r a b l e
overall
q u i te
s o l u t i o n in the c i r c u m s t a n c e s .
common.
And
I think there was
1 think t h a t v i e w was
a h i g h d e g r e e of w i l l i n g
ness to c o o p e r a t e on a l l s ides to m a k e t his
QUES T I O N :
W e a re t r y i n g to f i n d o u t w h a t t h e alterna
mooted
in fact
s e r i o u s l y so. ‘
that w e r e h s d if /there w e r e a n y o t h e r s / Y o u w e r e
tives were
4 1 0 F irs t S tre e t, S .E ., W ashington, D .C . 2 0 0 0 3
s o l u t i o n possible.
face to face w i t h t h e s e people.
MR.
VOLCKER:
n a v h ave gone on a m o n g
I d o n ’t k n o w a l l the d i s c u s s i o n s
European c o u n t r i e s .
B ut
I did mention
that the idea at l e a s t of some of t h o s e c o u n t r i e s
t o g e t h e r was
theoretical
that
floating
certainly a theoretical — would have been a
w h i c h I think t h e y tho u g h t
alternative,
c e r t a i n l y less s a t i s f a c t o r y .
«a 2 0 2 ) * 4 . - 6 0 0 0
lb
P
r
.
o
n
t(Area2
0 2
)5
4 4 -6 0 0 0
17
1
QUEST I O N :
Did you suggest a joint
f l o a t at a n y time
2
in y o u r t alks?
5
MR. V O L C K E R :
No,
I d o n ' t t h i n k we s u g g e s t e d
it in
4
any s ense
as a
U.S.
oronosal.
5
QUESTION:
D i d a n y o n e c ome b a c k to y o u on the q u e s t i o
6
of i m p o r t s u r c h a r g e s w h i c h h a d b e e n
floated while you w e r e
in
7
fact a way?
Did
in e f f e c t the
Europeans
or the o t h e r s
approach
8
you,
or the J a p a n e s e
in p a r t i c u l a r ,
on t h e q u e s t i o n of t h e
9
States t a k i n g u n i l a t e r a l a c t i o n o n i m p o r t s u r c h a r g e s ,
w h i c h was
10
widely
floated while y o u were
f l o a t i n g a r o u n d the w o r l d ?
11
MR. V O L C K E R :
No,
n o b o d y a p p r o a c h e d m e o n that.
QUES T I O N :
ward
T h a t q u e s t i o n was not r a i s e d in d i s c u s
13
sions?
a
PAUL
12
14
MR. V O L C K E R :
15
»
sions a g a i n s t
a
I t h i n k t h a t w e h a d a ll t h e s e d i s c u s -
*
b a c kground that there was a common de s i r e
to
16
reach a solution that w o u l d deal w i t h the un d e r l y i n g i m balances
17
inevitably
that?' c r e a t e
t he t e n s i o n s ,
economic or political,
m o n e t a r y or
18
e c o n omic,
a nd
pressures
for t h a t k i n d of a c t i o n .
4 1 0
F
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r
s
tS
t
r
e
e
t
,S
.
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.
,Washington, O.C. 2
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19
And
20
I t h i n k by c o m m o n a s s e n t w e w a n t e d
ÏJO '■
i
-
O
1/ ' •Mwf V
to m a n a g e
Îtil * -O ■ JEj.fTJ§•(.*
2! JTfl
the s i t u a t i o n
i-: h
r a t h e r t h a n h a v e it m a n a g e us i n t h a t sense.
Mr.
21
QUESTION:
22
23
24
25
s u g g e s t e d a joint float,
s a y i n g that y o u
Volcker,
XXSXXXXXXm the
had
q u e s t i o n of w h e t h e r w e
I th i n k G i s c a r d was q u o t e d
as
s aid e i t h e r a d e v a l u a t i o n of t he
d o l l a r or a j o i n t E u r o p e a n f l o a t w o u l d be a c c e p t a b l e
MR. V O L C K E R :
today
That doesn't sav
to t h e U . S
I s u g g e s t e d it.
18
1
QUESTION:
Is t h a t a c c u r a t e ?
2
MR. V O L C K E R :
I t h i n k t h e r e was m o r e
than one
solution
5
that could have been reached.
4
QUESTION:
Is G i s c a r d ' s v e r s i o n of y o u r
conversation
5
accurate?
6
MR. VOLCKER:
7
I don't think
I could go beyond
saving
and more
solu
was
that there
more than one solution,
t h a n one
8
tion that would have been
acceptable
to u s .
9
QUESTION:
Mr.
Volcker,
Mr.
Shultz has
committed
the
10
U.S.
to phase out capital
controls by the end of next year,
11
December
1974.
Does tha t imply that you w o u l d have
a sufficien
12
surplus on your invisible
and m e r c h a n d i s e trade a c c o u n t s
to
13
finance
the o u t f l o w of A m e r i c a n c a p i t a l
that would
take place
14
under that action offset by foreign inve s t m e n t in this
country?
15
MR. V O L C K E R :
It c o n t e m p l a t e s
that by that
time
our
16
b a l a n c e of p a y m e n t s p o s i t i o n w i l l b e v i g o r o u s l y m o v i n g t o w a r d .
17
equilibrium.
w e have
said repeatedly that
w h e n we
18
l ook at t he m o n e t a r y
19
20
21
22
23
24
25
s y s t e m in t h e
longer run
will
plate arrangements tha t permit countries
t h i s k i n d of r e s t r i c t i o n .
c o n v i c t i o n t h a t this
ing
f o r w a r d to,
in a w a y
this
that we have
e n t w i t h t h a t n o t i o n a re a i m e d a t o u s h i n g us
equilibrium.
This
expresses
contem-
to o p e r a t e w i t h o u t
is t he k i n d of m o n e t a r y
a nd the a c t i o n s
we
is r e i t e r a t i n g
system we
taken here
are
i n d e e d p u s h us t o w a r d t h a t k i n d of e q u i l i b r i u m .
that
look
consist
to t h a t k i n d
our confidence
o ur
of
it will
0
0
19
'
I mean specifically
For what reason do w e ,/the U.S.,/in our
for
own interest need monetary reform /tit all now? I7e have obvious 1
QUESTION:
shown that we
can handle
the adjustment process.
The Presi
dent is also talking about what he calls a safeguard system as
a backup,
What is in it for the U.S. to continue?
MR. VOLCKER:
What is in it for the U.S. ,X think,is
in a sense what is in it for other countries and for the world.
I think basically when you come down to the rock bottom guts
of the matter, what you are talking about in monetary reform is
developing some agreed code of conduct, so that people know how
know
they are supposed to act, and/how other people Will react in
given situations, in the interest of having a kind of agreed
framework in which both trade and money can proceed without
restrictions, or'with a minimum of restrictions.
That is what
monetary reform is all about in its essence. Stated so
generally
*— and I do think this is the guts of the matter — • it
doesn't itself imply any*particular kind of mechanical arrange
ments.
More than one set of mechanical arrangements can meet
this need.
But I don't think you can escape a need, if you are
and
going to avoid recurrent tensions,/economic and political crise:
of having some kind of agreed code of conduct.
That is as
important to the U.S. if it wants to live harmoniouslv in a
world and facilitate the flow of trade
to others.
If
you say it is directly important to the U.S. economy in terms
reform
of our prosperity at home, in some sense* / may be less
20
d i r e c t l y r e l e v a n t to us t h a n to some o t h e r s ,
dircctlv relevant to us as
a
b u t it is v e r y
leading member
of the w o r l d
community.
QUESTION:
I v:ould like
I was raising earlier.
to come Lac]; to the q u e s t i o n
set out on this m i s s i o n ,
vJhen y o u
was
it with the intention of bringing back an a c r o s s - t h e - b o a r d
devaluation of the dol l a r ; was t h a t y o u r p r e f e r r e d s o l u t i o n ?
MR. V O L C K E R :
solution.
this
And
feeling that among
solutions,
a d j u s tment,
t h o u g h t that
the o t h e r so l u t i o n s ,
I t h i n k t h a t is a f a i r
A n d t h a t t u r n e d o u t to be the case.
or gi v e s
us a d j u s t m e n t t h a t w e need,
some of the o t h e r n e e d s of this
QUESTION:
It g a v e us
a n d it m e e t s
s i t u a t i o n as well.
Wouldn't a simultaneous
f l o a t of t h e
E u r o p e a n and J a p a n e s e c u r r e n c i e s h a v e b e e n p r e f e r a b l e
U.S.
one
this is one w h e r e w e c o u l d m e e t o ur
m u t u a l d e s i r e s p e r h a p s m o s t easily.
way to n u t it.
thought that that w as
I s u p p o s e it is fair to s a y t h a t w e
-- I w e n t w i t h t h e
other possible
We c e r t a i n l y
f r o m the
p o i n t of v iew?
MR. V O L C K E R :
I think
preferable
• is h a r d to say.
So m u c h
w o u l d h a v e d e p e n d e d u p o n the c o n d i t i o n s a n d c i r c u m s t a n c e s under
w h i c h such
lot m o r e
floats w e r e c o n d u c t e d .
And
I would have
to k n o w a
about t h o s e t e r m s and c o n d i t i o n s b e f o r e I c o u l d b e g i n
to make t h a t judgment.
Certainly
this w a y
it
gives
us
the maximum a d j u s t m e n t thrust.
QUESTION :
What disadvantages do
you
see
to the U.S.
(21
^
in this d e v a l u a t i o n ?
MR. V O L C K E R :
o
4
5
6
7
8
9
difficult political decision
k i n d of a move.
image,
But b a s i c a l l y
14
it is alv/ays a h a r d
for the P r e s i d e n t
T h e r e a re c e r t a i n p o l i t i c a l
I th i n k
this
t h a t are
t h e d e c i s i o n is,
the U n i t e d
to m a k e
ri s k s ,
inevitably
it is a g o o d d e c i s i o n
f r o m the
QUESTION:
The principal objectives
of w h a t ,
MR. V O L C K E R :
Yes,
w i t h it,
25
of
but dealing w i t h
it in a w a y
but n o t
just d e a l i n g
that sunnorts,
I think,
and o p e n
longer range
objec
tives.
QUESTION:
19
24
of
t h a t i m m e d i a t e k i n d of c o n s i d e r a t i o n
d e a l i n g w i t h this p e r s i s t e n t e q u i l i b r i u m ,
18
23
States
reversing our trade deficit?
m o n e t a r y system, w h i c h is o n e o f o u r b a s i c
22
involved.
States.
16
21
of
standpoint
the P o s s ^ ^•^1 ^ iesfor a n o p e n t r a d i n g r e l a t i o n s h i p
20
risks
So h o w e v e r d i f f i c u l t
15
17
and
thirl
is a s o l u t i o n t h a t t h e U n i t e d
a c h i e v e s the U .S , p r i n c i p a l o b j e c t i v e s .
12
13
I th i n k
a n d r isks of p s y c h o l o g y
10
11
Well,
But you see no economic
MR. V O L C K E R :
c e r t a i n l y has s ome
An exchange
inflationary
rate
are i n t h i s
position,
is
trade
a d j u s t m e n t of
consequences.
e m p h a s i z e that, b e c a u s e w e
that while
sense
in a f o r t u n a t e
So
as a p e r c e n t a g e
while
a c t i o n is to send un the n r i c c s
imported g o o d s , imported goods
t h i s sort
I would not
i m p o r t a n t to us,
of o u r G N P it is s t i l l r e l a t i v e l y s m all. '
r e n e r c u s s i o n of' this
disadvantage?
are a r e l a t i v e l y
small
the
of
some
fraction
2
5
X
of our GHP, and therefore, I d o n ' t th i n k the i m m e d i a t e i n f l a
tionary repercussions should be d r a m a t i z e d , b e c a u s e t h e y are
not that large in the overall context of things.
negative, there is no question about it.
5
6
7
8
9
o u rSTIOh:
12
Apart
f r o m the d e v a l u a t i o n itself,
is
there any way to d e s c r i b e w h a t k i n d of i m p a c t w o u l d be n e e d e d
from the trade talks in S e p t e m b e r to m a k e m u c h d e n t in o u r
overall trade b a l a n c e ?
Is t h a t .a v e r y i m p o r t a n t part,
or
is
that m o r e or less long r a n g e in the d e v a l u a t i o n ?
10
11
But it is a
fiR. V O L C K E R :
Well,
a lot of the r e s u l t s
of t h e s e
t r a d e talks a re g o i n g t o be l o n g e r r a n g e r s .i n d e e d , the results
of the d e v a l u a t i o n are g o i n g to t a k e t i m e to m a t e r i a l i z e .
And
13
it is still v e r y i m p o r t a n t t h a t w e be a b l e to e x p o r t .
14
rate
is not unrelated to t h e e x c h a n g e / m o v e
15
r e l a t i v e p r i c e s d o e s n ' t d o y o u a n y g o o d if y o u a re s h u t o u t of
16
markets.
17
areas of the w o r l d w h e r e
18
d i f f i c u l t or i m p o s s i b l e t o c a p i t a l i z e
19
change.
20
m o v e s be s u p p l e m e n t e d a n d r e i n f o r c e d o v e r time b y t he k i n d of
21
trade
22
eff e ctive.
23
itself.
A n d it
T h e change- in
A n d t h e r e a re i m p o r t a n t c o m m o d i t i e s o r i m p o r t a n t
import barriers
and p r a c t i c e s m a k e it
an
f ully o n / e x c h a n g e
So it is v e r y i m p o r t a n t t h a t t h e s e k i n d s
l i b e r a l i z a t i o n t h a t in f a c t m a k e s
of monetary-
price c o m p e t i t i v e n e s s
A n d t hat is n o t true in some i m p o r t a n t
0UR3TI0IJ:
rate
I wonder if you would describe
—
t h e trend
24
of the we e k ’s a c t i v i t i e s .
n0o
c
¿
on the one prior leading to a l o g i c a l c o n c l u s i o n , or v;ere you
D i d e a c h of the s tops
sort of build
prior»« (Area 202) 544-6000
1
1
sort of blowing in the wind, playing catch as catch can?
2
5
4
5
6
7
8
9
10
11
12
13
14
IS
MR. VOLCKER:
trend was fairly persistent.
20
21
I
have referred to the difficult decision that it involved
for us and for the President.
cult decision for the Japanese.
24
25
It certainly involved a diffi
And it involved difficult
decisions for some of the European countries as to whether they
were in fact willing
to stand still.
There is no way to do
any of this without some willingness to make difficult deci
sions.
And I think the characteristic of the weekend was that
in the end people were together willing to make difficult
decisions to deal with, a package that I think they all thought
was the best way to approach this.
QUESTION:
Was there a moment in which it looked like
the whole thing was coming unglued?
MR. VOLCKER:
I don't think so, no.
You never know
until the end whether it is all.going to be nut together.
It didn't have sharp ups and downs.
the end.
22
23
But there are some ups and downs.
This kind of thing involves difficult decisions for everybody.
18
19
you know,
there are ups and downs in those things, but by and large the
16
17
No, I think by and large —
But you never know until
,,
QUESTION:
How did your trio affect the timetable for
the C-20 and the Nairobi meeting, the trip and the results of
the trip?
MR. VOLCKER:
I think this whole kind of experience
24
1
2
5
lends p o i n t a nd e m p h a s i s
to t h o s e k i n d s o f d i s c u s s i o n s .
don^t k n o w w h e t h e r it a f f e c t s t h e t i m e t a b l e in a n y c o n c r e t e and
identifiable way.
Hut I certainly think it is a mental snur to
coming to grips with the problems b e f o r e us.
5
6
7
8
9
10
11
12
13
16
17
18
19
20
I t h i n k the
kind of experience we h a v e h a d r e c e n t l y , w h i c h p e r h a p s b r o a d
ened horizons in some r e s p e c t , w i l l c a u s e s ome r e - t h i n k i n g in .
other respects.
XK&
this
I t h i n k x i is b a s i c a l l y a h e a l t h y p r o c e s s .
T h e r e is n o t h i n g like a l i t t l e c r i s i s
c a u s e a li t t l e r e - t h i n k i n q .
■
t o f ocus
Of c o u r s e ,
the m i n d
and
o n e of t h e c o n c l u s i o n s
that
I s u p o o s e it is e a s y to d r a w f r o m t h i s , swsbc I i m m e d i a t e l y d r a w
f rom
t h at
from
/it, a n d / I w o u l d t h i n k & & & £ p e r h a p s o t h e r s w o u l d drat/ it,
that we have got to get on with d e s i g n i n g a m o n e t a r y
that d o e s n ' t r e q u i r e t h e s e k i n d s o f tri p s .
14
15
I
QUESTION:
Mr.
Volcker,
is
system
*
your remarks have
focused
o n E u r o p e a nd J a n a n r l i k e t h o s e o f t h e P r e s i d e n t t o d a y a n d
S e c r e t a r y l a s t night.
W h a t e v e r h a p p e n e d t.o C a n a d a ?
a yea r and a ha l f ago they w e r e three
and Canada.
folk high,
the
A y e a r or
Europe,
And yet Canada isn't m e ntioned anymore.
in
Japan
W h a t has
changed?
MR. V O L C K E R :
Well,
maybe
t h e t r o u b l e is,
nothing.
21
Me have certain problems w i t h C a n a d a , as y o u k n o w , t h a t have
22
pot been resolved.
23
with a floating currency, w a s a l i t t l e b i t r e m o v e d f r o m the
24
25
B u t in this p a r t i c u l a r
situation Canada,
center of trie concern.
QUESTION:
Put
the P r e s i d e n t ' s
a nd t h e
Secrctarv's
r e f e r e n c e s to trade a l s o
focus
in on E u r o p e
and J a p a n and
i g n o r e d C a n a d a as w e l l . MR. V O L C K E R :
I d o n ’t thin!: we m e a n to ig n o r e
I d o n ’t k n o w just w h a t e a r t i c u l a r r e f e r e n c e s
d o n ' t w a n t to leave
exclude Canada
any i m p r e s s i o n t h a t
f rom t h o s e d i s c u s s i o n s ,
Canada;.
they made.
But
I
I w o u l d w a n t to
because obviously,
there are important Problem's there.
QUEST I O N :
A r e the U.5.
problems with Canada being
minority
p u t o n the s h e l f b e c a u s e of t h e / g o v e r n m e n t
decreasing
—
MR. V O L C K E E :
lems as
b e c a u s e of
situation or/the
No, we d o n ’t c o n s i d e r a ny of o u r p r o b -
I think
"on the she l f , " /they all o u g h t to be xrgxrdealt i^ith.
Q U ESTION:
Mr.
V o l c k e r , w h a t d o e s this k i n d of
s e t t l e m e n t do to the l o n g r a n g e g o a l
for a symmetrical
had
It seems that w e h a v e / a n o t h e r i n s t a n c e o f
asymmetry
a
system?
i n xvhich
the d e f i c i t c o u n t r y h a s h a d to b e a r the s o - c a l l e d b u r d e n of
your"
adjustment.
D o e s n ' t t his
s o r t of t o r p e d o
oxvn p r o p o s a l ,
long r a n g e p r o p o s a l ?
MR. V O L C K E R :
I d o n ' t t hink
so.
deep-seated suspicion among man y peoole,
the U n i t e d St a t e s m a y t a l k s y m m e t r y ,
of a facade,
a fac tor in o ur o w n t h i n k i n g
p r o v e s .this thesis,
there has been,
b u t this
it is n o t r e a l l y m e a n i n g f u l ,
d o l l a r i m p e r i a l i s m or s o m e t h i n g ^
T h e r e is a c e r t a i n ’
that
is all- s o m e k i n d
and all t h e y \-/ant is
I x\To u l d t hink
—
a n d - t h i s was
-- that t h i s k i n d of a c t i o n " d i s -
t hat u n d e r the p r o p e r c o n d i t i o n s w e
can
,
1
2
5
4
5
6
7
8
9
10
26
operate a symmetrical
system.
b a l a n c e of n a y m e n t s n r o b l c m .
Nov/, h e r e v/e h a v e
Japan has
a generalized
a b a l a n c e of p a y m e n t s
problem, you h:ivc some movement in opposite directions in this
solution, and the United States too): a part of the initiative,
t o o ’: a l a m e p a r t of the i n i t i a t i v e .
It w a s a p p r o p r i a t e
these
t h i s p a r t i c u l a r set of c i r c u m s t a n c e s .
Ir. a n o t h e r set o f
sta n c e s
it w o u l d n o t be
appropriate.
And
I see n o t h i n g
in
circum
incon
s i s t e n t in w h a t we h a v e d o n e in t erms o f a d v o c a c y of a s y m m e t r i
cal system.
any m e a n s .
I d o n ' t t h i n k v/e h a v e
s o l v e d a ll t h e p r o b l e m s
T h e p o s i t i o n of t he d o l l a r
in t he s y s t e m is n o t
11
j u s t l ike any o t h e r c u r r e n c y ,
12
United
13
a devaluation here that required
14
negotiation that reflects
15
and the special c h a r acter of the dollar.
16
—
States
bv
o b v i o u s l y , t he p o s i t i o n o f
country.
is n o t j u s t like a n y o t h e r xxjcconcKX.
the
We h a v e h ad
a certain amount of special
that special
c h a r a c t e r of t h e U.S.
But
I think basically
17
a n d o f cou r s e , w e h a v e to s e e h o w i t .vorks o u t o v e r t h e
the e f f e c t of o ur c h a n g e
l o n g e r r u n — * jfc&xjQik b e ero d e d .
That would be unfortunate.
18
T h a t v/ould be a s i g n t h a t the s y s t e m v/as w o r k i n g i n t h a t
19
u n s y m m e t r i c a l w a y t h a t y o u r e f e r r e d to.
20
21
HR.
22
QUESTION:
WEBER:
Gentlemen,
last q u e s t i o n .
Mr. V o l c k c r , y o u hare said, as I u n d e r
23
s t o o d it,
24
the c h a n g e
25
d e v a l u a t i o n w o u l d b r i n g y o u a r o u n d to
that despite
the
in the trend,
last quarter's b a d d e f i c i t f i g u r e s ,
that y o u
f o r e mm.: t h a t
time r e a l
the
of
last
ch an g in g
taep
/
1
deficit picture.
2
MR. VOLCKER:
3
QUESTION:
4
Bringing us an improvement.
Improvement this year.
So that that would mean that the crisis which tool:
5
place last week was an artificial one, at least in your point'
6
of view?
7
MR. VOLCKER:
8
9
10
QUESTION:
13
14
15
16
17
18
19
20
21
22
And would that mean, if I may finish the
question, that you then in fact yielded again to the specu
lators?
11
12
I don't think entirely artificial.
MR. VOLCKER:
No.
I would judge the situation, I
think, somewhat differently. Most
crises in one sense are
:w do ©dsmldesi m
off
artificial. This one was set kjs by some entirely unrelated
2 D v h a m od b o o n b l u e "
materialized
events. But one of the reasons that it ¿Erxshaixxss in the way
•\'-iovdidinJ:'rkt
it & & & & is, I think, the persistent underlying concern about
our balance of payments, and the fact of" a very large deficit.
While
I feel confident that the trend would have been
improving this year in any event, an improving trend from a
deep trough depends partly on how fast the trend is improving,
how vigorously it improves, and where the end of the inorove.
rr> *r J
js
ment will bring us.
question could arise.
I think that is where
This
a legitimate
action, I think , reflects the
23
common consensus that wo need a little more imoo tus to the
24
improving trend to bring us where'we want to g o , not ehat th.or
25
would not have been an improving trend anyway.
But wo are
2f]
§
0
S
O
1
1
2
o
pretty
far b e n e a t h
the
zero lino.
vigorous
i n una in o ur j u d g m e n t — and we h a v e n o w a n o l i e d t h a t m o r e
I
"
that
l| v ig o r o u s
— to m a k e /tre n d
a c c e le r a t e o v e r time — acc'bv¡1
...
Z
5
o
o
itj ate m.avbc i s n ’ t th e r i g h t w o rd ' as 1 m e n t i o n e d e a r l i e r a ll these
!
..
."
zi&\'7 yisc*.'? 3 rts i
5
j d e la y s i n to o p ro c e s s - - ’out to m a k e the a d j u s t m e n t b i g g e r and
!|
6
more e f f e c t i v e o v e r t h e o e r io d of tim e t h a t is i n e v i t a b l y
c
f
7
n e c e s s a ry .
8
9
Q U ESTION:
a d j u s t m e n t g oal
10
famous
11
nurnsr ical aoal?
M
OJ
Do we
in t e r m s
still- h a v e
of d o l l a r s ?
13 b i l l i o n of a y e a r ago.
12
H
^
WARD 8t PAUL.
\
MR. V O L C K E R :
we t h o u g h t all m e a s u r e s
The
I a m t a l k i n g a b o u t our
Is t h e r e s t i l l a s p e c i f i c
13 b i l l i o n w a s
15
t h i n g t h a t h as h a p p e n e d
16
the
an e s t i m a t e o f what
t a k e n t o g e t h e r w o u l d n e e d to p r o d u c e
since
then,
if
I t h i n k .every-
I m a y s ay so,
confirms
v a l i d i t y of t h a t analysis.
QUESTION:
H ave y o u d o n e any c a l c u l a t i o n s
:
t
I
n
is
trade w e i g h t e d a v e r a g e
19
the b u l k of the d e v a l u a t i o n ?
1
20
c*
o
cn
I<
0
$
k
t/>
21
we h a v e n ’t c o m p u t e d o ne
22
a s i t u a t i o n in w h i c h
23
mak e s
I
24
o b v i o u s l ■ /, a d d i n g
l
*
25
h a v e 'a c h ie v e d
(j
a b a l a n c e of p a y m e n t s
a g a i n s t the t r e n d t h a t o t h e r w i s e e x i s t e d .
17
tfc e t, S .E ., W ashington, D .C . 2 0 0 0 3
So it takes a n o r c
MR. V O L C K E R :
it
is of the
in w h a t the
S m i t h s o n i a n d e v a l u a t i o n plus
I c a n ’t g i v e y o u a f i g u r e
for that;
will
and m a y b e nevep/, b e c a u s e we n o w have
more
a g o o d m a n y /Currencies are f l o a t i n g , which
a l ittle d i f f i c u l t to m a k e t h a t c a l c u l a t i o n .
this
to tine S m i t h s o n i a n ,
by ¿my
But
s t a n d a r d we
a v e ry s i g n i f i c a n t - e x c h a n g e rate a d j u s t m e n t .
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
We
thought that was appropriate, so
we now feel that
we are in a position that, looking ahead, and allowing sufficicnt time for this process, remembering all the nice things
about domestic policy,'which are crucially important, this can
produce the kind of equilibrium that we seek.
QUESTION:
Thank you, |lr. Volcker.
(Whereupon, at 5:45 p.m., the press briefing was
concluded.)
Removal Notice
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Citation Information
Document Type: Transcript
Number of Pages Removed: 13
Author(s):
Title:
"Face the Nation"
Date:
1973-02-18
Journal:
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Departmentof theTREASURY
L u G T O N .D C
202$®
T ELEP H O N E W04-204Ì
FOR IMMEDIATE RELEASE
February 21, 1973
LESLIE So SHAPIRO
NAMED DIRECTOR OF PRACTICE
Appointment of Leslie So Shapiro as Director of
Practice was announced today by General Counsel of
the Treasury Samuel R 0 Pierce, JrD M r 0 Shapiro
succeeds William Ho Sager who was recently appointed
General Counsel in Treasury*s Office of Revenue Sharing0
Among other duties, the Director of Practice
administers regulations regarding practice before the
Internal Revenue Service and provides for the conduct
of disciplinary proceedings relating to attorneys,
certified public accountants and enrolled agents who
practice before the Internal Revenue Serviceo
Prior to his appointment as Director, M r 0 Shapiro
had served as an attorney in the Office of Director of
Practice since 1964o
A native of Duluth, Minnesota, Mr0 Shapiro was
graduated from the University of Minnesota in 19570 He.
received a J 0D 0 from the University of Minnesota School
of Law in 1959„
M r 0 Shapiro is married to the former Sandra Heims
of Minneapolis, Minn0 Both Mr0 and Mrs0 Shapiro are
members of the Minnesota Bar0 They have two sons and
live at 400 Eisner Street, Silver Spring, Md0
Department o
là i r r n M n r nnnnn
SHINGTON.
D .C . 20220
f
IheTREASURY
T c i c o u n w c \Air\A
on/i
TELEPHONE
WÖ4-2041
FOR IMMEDIATE RELEASE
, j j
u v.
February 21, 1973
T R E A S U R Y M O V E S T O A S S U R E R E T U R N I N G P O W ’s
THEY W I L L FACE N O T A X H A R D S H I P S
W a s h i n g t o n , D.C. -- T r e a s u r y S e c r e t a r y G e o r g e P.
Shultz today a n n o u n c e d that extensive pr e p a r a t i o n s
h a v e b e e n m a d e to a s s u r e p r o m p t , s y m p a t h e t i c , a n d
t r o u b l e - f r e e r e s o l u t i o n of F e d e r a l i n c o m e t a x m a t t e r s
i n v o l v i n g r e t u r n i n g p r i s o n e r s of w a r , s u r v i v o r s a n d
m e m b e r s o f the f a m i l i e s of d e c e a s e d s e r v i c e m e n , a n d
f a m i l i e s of t h o s e s t i l l l i s t e d as m i s s i n g in act i o n .
T h e I n t e r n a l R e v e n u e S e r v i c e h a s i n s t r u c t e d all
of its d i s t r i c t o f f i c e s to p r o v i d e i m m e d i a t e c o u r t e o u s ,
r e s p o n s i v e , a n d p e r s o n a l a t t e n t i o n to e a c h P O W - r e l a t e d
i n c o m e t a x q u e r y it r e c e i v e s .
To m a k e c e r t a i n o f this, IRS h a s s e l e c t e d e m p l o y e e s
q u a l i f i e d in t h e s e tax m a t t e r s to s e r v e as the p e r s o n a l
c o n t a c t s in d i s t r i c t o f f i c e s in all 50 S t a t e s .
These
hand-picked experts have received additional special
i n s t r u c t i o n a n d are r e a d y to a n s w e r q u e s t i o n s , a s s i s t
in p r e p a r i n g t ax r e t u r n s w h e n n e c e s s a r y , a n d g e n e r a l l y
to a s s u r e s p e e d y a n d s a t i s f a c t o r y r e s o l u t i o n o f t hese
tax s i t u a tions.
A l i s t of t he n a m e s a n d l o c a t i o n s of
the IRS e m p l o y e e s is a t t a c h e d .
T o f u r t h e r g u a r d a g a i n s t a n y i n c o n v e n i e n c e or
h a r d s h i p f o r the m i l i t a r y p e r s o n n e l or t h e i r f a m i l i e s ,
the IRS S e r v i c e C e n t e r at A u s t i n , T e x a s , has b e e n
d e s i g n a t e d the p r o c e s s i n g c e n t e r to e x p e d i t e h a n d l i n g
o f tax r e t u r n s a n d c l a i m s of P O W ' s s e r v i c e f a m i l i e s ,
and survivors.
In a d d i t i o n , IRS is p r e p a r i n g a b o o k l e t
d e a l i n g w i t h P O W - r e l a t e d tax i n f o r m a t i o n w h i c h w i l l
be a v a i l a b l e to the p u b l i c s h o r t l y .
Another booklet
d e a l i n g w i t h s p e c i a l tax p r o b l e m s o f f a m i l i e s of
t h o s e m i s s i n g in a c t i o n a n d the s u r v i v o r s of t h o s e
k i l l e d in a c t i o n w i l l be i s s u e d at a l a t e r date.
OVER
S-121
2
One s p e c i f i c q u e s t i o n that has a l r e a d y bee n r aised
c o n c e r n s the m i l i t a r y p a y w h i c h h as a c c u m u l a t e d w h i l e
t h e s e m e n w e r e in c a p t i v i t y .
U n d e r p r o v i s i o n s of a
l a w p a s s e d in 1972 (PL 9 2 - 2 7 9 ) , r e t u r n i n g P O W ’s w i l l n o t
h a v e to p a y F e d e r a l i n c o m e t a x on t h a t m i l i t a r y pay.
T h e r e are, h o w e v e r , o t h e r p r o b l e m s in m o r e
c o m p l i c a t e d s e r v i c e m a n - f a m i l y r e l a t i o n s h i p s w h i c h are
n o t s p e c i f i c a l l y c o v e r e d b y e x i s t i n g law.
To a s s u r e
h u m a n e a n d e q u i t a b l e t a x t r e a t m e n t in t h o s e m o r e c o m p l e x
tax s i t u a t i o n s , Secretary Shultz announced that proposed
l e g i s l a t i o n h as b e e n s u b m i t t e d to C o n g r e s s today.
T r e a s u r y a n d IRS o f f i c i a l s h a v e a d v i s e d D e p a r t m e n t
o f D e f e n s e a u t h o r i t i e s of t he d e t a i l s o f the p l a n s a n d
p r o p o s e d l e g i s l a t i o n , a n d the A g e n c i e s w i l l c o o p e r a t e
c l o s e l y in a s s i s t i n g the s e r v i c e m e n , m e m b e r s of t h e i r
families and survivors.
oOo
DepartmentoftheTREASURY
iSHINGTON, O .C . 2 0 2 2 0
T E L E P H O N E W 0 4-20 41
FOR IMMEDIATE RELEASE
Feb. 21, 1973
MEMORANDUM FOR THE PRESS:
Secretary of the Treasury George P. Shultz today
sent to Congress legislation to deal with income tax
problems faced by some returning prisoners of war, and
by the families of some men who have been listed as
missing in action.
A copy of the letter of transmittal is attached,
as well as a copy of the legislation and the Analysis
of the bill.
In addition, a news release on other efforts to
solve income tax problems of prisoners and their famines
is attached.
oOo
4
S-122
THE SECRETARY OF THE TREASURY
W A SH IN GT O N
FEB 2 i 1973
Dear Mr. Speaker:
I am enclosing a draft 1111 to amend certain sections of the In
ternal Revenue Code of I95 U for the relief of certain members of the
Armed Forces of the United States returning from the Vietnam conflict
combat zone. Also enclosed is a section-by-section analysis of the
proposed legislation.
In general, this legislation would resolve several problems that
have arisen for servicemen, their families, and the families of de
ceased servicemen. The proposed legislation would change the law in
.order to permit hospitalized servicemen to continue to treat their
military pay in the same manner as combat pay up to the month hospitali
zation ceases even if all combat activities have terminated. Also the
proposal would extend current law to forgive any income tax liability
until the date the serviceman’s missing status is terminated in cases
where that date occurs later than the date of death. The proposal
would also permit the wife of a deceased serviceman to claim the
benefits of this forgiveness despite the expiration of the statute
of limitations.
The proposed legislation would also permit the wife of a service
man or the representative of his estate to defer filing any returns or
the payment of any taxes until afber the serviceman returns or his
missing status is terminated. Also, it would permit the filing of joint
returns by the spouse of a serviceman during the period he is missing in
action, even though it is later determined that he died at an earlier
date.
. It would be appreciated if you would lay the proposed legislation
before the House of Representatives. A similar communication has been
addressed to thè President of the Senate.
-
2
-
We have been advised by the Office of Management and Budget
that there is no objection to the presentation of this draft bill
to the Congress, and that its enactment would be in accord with
the program of the President.
Sincerely yours,
George P. Shultz
The Honorable
•Carl Albert
Speaker of the House
of Representatives
Washington, D. C. 20515
Enclosures
THE SECRETARY OF THE TREASURY
W A S H IN G T O N
FEB 211873
Dear Mr. President:
I am enclosing a draft bill to amend certain sections of the In
ternal Revenue Code of 1 9 5 b for the relief of certain members of the
Armed Forces of the United States returning from the Vietnam conflict
combat zone. Also enclosed is a section-by-section analysis of the
proposed legislation.
In general, this legislation would resolve several problems
that have arisen for servicemen, their families, and the families of
deceased servicemen. The proposed legislation would change the law
in order to permit hospitalized servicemen to continue to treat their
military pay in the same manner as combat pay up to the month hospitali
zation ceases even if all combat activities have terminated. Also, the
proposal would extend current law to forgive any income tax liability
until the date the serviceman*s missing status is terminated in cases Where
that date occurs later than the date of death. The proposal would also
permit the wife of a deceased serviceman to claim the benefits of this
forgiveness despite the expiration of the statute of limitations.
The proposed legislation would also permit the wife of a
serviceman or the representative of his estate to defer filing any
returns or the payment of any taxes until after the serviceman
returns or his missing status is terminated. Also, it would permit
the filing of joint returns by the spouse of a serviceman during the
period he is missing in action, even though it is later determined
that he died at an earlier date.
It would be appreciated if you would lay the proposed legisla
tion before the Senate. A similar communication has been addressed
to the Speaker of the House of Representatives.
We have been advised by the Office of Management and Budget
that there is no objection to the presentation of this draft bill
to the Congress, and that its enactment would be in accord with
the program of the President.
Sincerely yours
George P. Shultz
The Honorable
Spiro T. Agnew
President
United States Senate
Washington, D. C. 20515
Enclosures
A BILL
To amend sections 112, 692 , 6013, and 7508 of the Internal Revenue
Code of 195*+ for the relief of certain members of the Armed
Forces of the United States returning from the Vietnam con
flict combat zone, and for other purposes.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress Assembled,
(a) Certain Combat Pay of Members of the Armed Forces.—
Section 112 of the Internal Revenue Code of 195** (relating to
certain combat pay of members of the Armed Forces) is amended by
revising subsections (a) (2 ) and (b) (2 ) respectively by striking
out the words: "; but this paragraph shall not apply for any month
during any part of which there are no combatant activities in any
combat zone as determined under section (c) (3 ) of this section".
(b) Income Taxes of Members of Armed Forces on Death.—
(l) Section 692 (l) of such Code (relating to
income taxes of members of aimed forces on death) is
amended by striking out the word "death," and inserting
2
in lieu thereof the following:
"death (or, if later,
in which falls the last date in which he is in missing
status within the meaning of section 11 2 (d)),M.
(2) If refund or credit of any overpayment for
any taxable year resulting from the application of
section 692 of such Code (as amended by paragraph (l))
is prevented at any time before the date one year after
the date of the enactment of this Act by the operation
of any law or rule of law, but would not have been so
prevented if claim for refund or credit therefor were
made on the due date for the return for the taxable year
of his death (or any later year), such refund or credit
of such overpayment may, nevertheless, be made or allowed
if claim therefor is filed before one year after the date
of the enactment of this Act.
(c)
Joint Returns. -- Section 6013 of such Code (relating
to joint returns of income tax by husband and wife) is amended
by adding at the end thereof the following new subsection:
"(f) Missing in Action, etc. — For purposes of this
section and subtitle A —
"(l) General rule. -- The spouse of a serviceman
or civilian who is missing as a result of service in a
combat zone may elect in accordance with this subsection
-3 -
to file a joint return for any taxable year in which
he is in a missing status, if such spouse is otherwise
eligible to file a joint return.
Such election shall
be valid even if the missing serviceman or civilian
was deceased prior to such taxable year, and in such
event, except for purposes of section 692 (relating
to income taxes of members of armed forces on death)
the income tax liability of the missing serviceman or
civilian, his spouse and his estate shall be determined
as if he were alive for such year so long as the election
remains unrevoked.
"(2) Missing. — For purposes of this subsection
a serviceman or civilian to which this subsection appliep
includes any individual referred to in 37
and 5
U.S.C.
U.S.C, 558
5568, and the term "missing status" has the
same meaning as contained in 37
U . S.C 0 5 5 1
(2) and
5 U.S.C. 5561 respectively, except that the period 6f
missing status shall not include a period with respect
to which it is officially determined under 37
U.S.C.
552 (c) that such a person is officially absent from
his post of duty without authority.
"(3)
Election. —
The election referred to
in paragraph (l) may be made with respect to each
taxable year by filing a joint return in accordance
with subsection (a) and under such regulations as
may be prescribed by the Secretary or his delegate.
The election may be revoked by either spouse on or
before the due date (including extensions) for such
taxable year, and in the case of an executor or
administrator, in accordance with subsection (a) (3 )*"
(d)
Time for Performing Certain Acts Postponed by Reason
of War —
(1)
Section 7508 (a) of such Code (relating to time
for performing acts postponed by reason of war) is amended
b y striking out the words "of such individual--" which
appear immediately before paragraph (l) and inserting in
lieu thereof "of such individual or the spouse of such
individual- - "«
(2)
Subsection (b) of section 7508 of such Code
is redesignated subsection (d) and there are inserted
immediately after subsection (a) the following:
"(b)
Extension of Benefits. -- With respect to any tax
liability of any person or his estate entitled to the benefits
of subsection (a), the provisions of this section shall apply
- 5 -
to the executor, administrator or conservator of the estate
of such person.
"(c) Special Rule. -- The period of service in the
area referred to in subsection (a), shall include the period
during which an individual entitled to benefits under sub
section (a) is in a missing status, within the meaning of
section 11 2 (d)."
(e)
Effective Date. —
The amendments made by subsections
(a), (b), (c) and (d) shall apply for taxable years ending on
or after February 28, 1 9 6 1 .
ANALYSIS OF TAX LEGISLATION PROPOSED FOR THE RELIEF
OF CERTAIN MEMBERS OF THE ARMED FORCES OF THE UNITED STATES
RETURNING FROM THE VIETNAM COMBAT ZONE
Section (a)— Combat Pay of Members of the Armed Forces
Section 112(a) and (b) of the Internal Revenue Code of 195^+ currently
exempts from gross income combat pay received for active service in the
Armed Forces of the United States for any month in which the serviceman
served in a combat zone or was hospitalized as a result of wounds, disease,
or injury incurred while serving in a combat zone. This exclusion may
not exceed $500 per month for commissioned officers.
A member of the Armed Forces who is hospitalized as a result of
injury incurred in a combat zone in the waning days of the Vietnam
conflict will not have his military pay excluded under section 1 1 2 for
any month following the month of his injury in which there are no com
batant activities in any combat zone. However, a serviceman injured at
an earlier date whose period of hospitalization was entirely within the
period of combatant activities would have had his military compensation
treated as combat pay and excluded from gross income as provided by
section 112.
This provision of the bill would extend the exclusion of
section 1 1 2 to cover military pay received by servicemen up through the
month hospitalization ceases even if all combatant activities have
terminated.
2
Section (b)— Income Taxes of Members of Armed Forces on Death
Section 692 (1 ) of the Code forgives income taxes of servicemen dying
while in active service in a combat zone or as a result of wounds, disease
or injury incurred while serving in a combat zone.
The forgiveness applies
to the year of death and prior years of service in the combat zone.
When a serviceman is reported in a missing status for a number of
years, and it is subsequently determined that he died at an earlier
time while in missing status, his income (other than his combat pay
excluded pursuant to section 1 1 2 ) is subject to taxation for years after
the year of his death.
In general, the policy underlying section 692 was to recognize the
hardships borne by the survivors of servicemen dying as a result of
service in a combat zone and to attempt to alleviate such hardships by
relieving their income from taxation for the period of service in a
combat zone.
In the case of families of servicemen classified as missing
and later determined to have died at an earlier date, this status creates
unusual difficulties, and the affairs of such families are subject to
great uncertainty.
Accordingly, this bill would extend the benefits of current law
and forgive the income tax liability of a serviceman who dies while in
missing status for the entire period he was missing.
In those instances
when a widow has filed returns after the death of a deceased serviceman
-3 without claiming the benefits of section 692 , this provision would
permit her to claim the benefits of this income tax forgiveness within
one year from the date of enactment of this bill.
Section (c)— Joint Returns
Section 6013 of the Internal Revenue Code permits the spouse of
a deceased taxpayer to file a joint return for the year in which he
died. This bill provides that the spouse of an individual who is a
member of the Armed Forces or who is serving in support of the Armed
Forces, and who is listed in a missing status, may file a joint return
for such year even if it is subsequently determined that he was killed
in an earlier year.
If the spouse does file a joint return for a year
after the serviceman or civilian has actually died, the serviceman
or civilian will be considered to be alive for purposes of computing
any income tax liability.
Section (d)—-Disregarding Compliance Periods
Section 7508 of the Internal Revenue Code provides that the time
an individual serves in, or in support of, the Armed Forces in an area
designated by the President as a combat zone, plus any period of
continuous hospitalization outside the United States as a result of
injury received while serving in such combat zone, and the next 180
days thereafter, are to be disregarded in determining whether certain
enumerated acts required under the Federal tax laws, (i.e., filing
any returns or paying any taxes) are timely.
-
k
-
It is common for these individuals and their spouses to file
joint returns under section 6013.
This bill would, in general,
permit the spouse of a serviceman and the representatives of his
estate to defer filing any returns or paying any taxes until after
the serviceman returns or his missing status is terminated.
Department o f
^T
OFFICE OF REVENUE SHARING
W ASHINGTON, D.C. 20220
FOR IMMEDIATE RELEASE
4
WÈÊÈÈË
TELEP H O N E WQ4-8711
February 21, 1973
PROPOSED FINAL REGULATIONS FOR ADMINISTRATION OF
REVENUE SHARING PROGRAM ARE PUBLISHED
Graham W, Watt, Director of the Office of Revenue Sharing,
announced today the publication of the proposed final regulations
for the administration of the revenue sharing program in the
Federal Register of February 22, 1973.
MIn promulgating these regulations we have tried to reflect
the philosophy of general revenue sharing which is to return the
decision-making authority to the state and local governments
which are closest to the needs of their citizens," Mr. Watt
stated,
The proposed regulations, which establish criteria for
compliance with the State and Local Fiscal Assistance Act,
provide for review and comment as stipulated under the
Intergovernmental Cooperation Act of 1968. Local and state
governments which would be affected by the new provisions are
invited to submit comments, in triplicate, to the Chief Counsel,
Office of Revenue Sharing by March 19, 1973. In addition, public
hearings will be held on March 26, 1973.
"The regulations already reflect many of the comments which
have been received on the interim regulations, published
October 28, 1972," Mr. Watt pointed out. In addition, those
comments resulting from this publication of proposed regulations
will be thoroughly considered before the promulgation of the
final regulations.
The Office of Revenue Sharing has updated, expanded and
added to previous regulations.
In light of careful review of comments received on the
interim regulations the section dealing with the discriminatory
use of funds has been expanded.
(OVER)
2
In addition the section dealing with reporting and publicity
of use of funds has been rewritten to require not only publication
of fund use reports but to require that recipients make available
the backup information on the reports to the news media and the
public.
Also, the Office of Revenue Sharing has attempted to clarify
the guidelines on the prohibition on the use of revenue sharing
monies to obtain federal matching funds.
Finally, a new section has been added to the regulations
setting out procedural requirements for the withholding and
repayment of revenue sharing funds in instances of noncompliance with the Act.
Once adopted, these regulations will supersede the interim
regulations, (published October 1972 and technically amended
December 27, 1972) which have been in effect for the first two
entitlement periods of this program.
oOo
,
THURSDAY, FEBRUARY 22 1973
WASHINGTON. D.C.
DEPARTMENT O F
THE TREASURY
M ON ETARY
OFFICES
■
F I S C A L
S T A T E
A S S I S T A N C E
A N
D
G O V E R N M
L O
C
T O
A L
E N T S
ENTITLEMENT PAYMENTS
Proposed Rule Making
4918
RULES AND REGULATIONS
DEPARTMENT OF THE TREASURY
Monetary Offices
[ 31 CFR Part 51 j
FISCAL ASSISTANCE TO STATE AND
LOCAL GOVERNMENTS
Entitlement Payments
Notice is hereby given that the regula
tions set forth in tentative form below
are proposed to be prescribed in order to
disburse entitlement payments to the
States and units of local government
under the State and Local Fiscal Assist
ance Act of 1972 for the entitlement
period beginning January 1,1973, and for
entitlement periods subsequent thereto.
The State and Local Fiscal Assistance
Act of 1972, (Public Law 92-512) , cus
tomarily known as the General Revenue
Sharing Act, provides for a total of $30.2
billion of assistance to State governments
and general purpose units of local gov
ernment over a 5-year period. While the
fiscal assistance provided by the Act gives
local governments considerable latitude
in the use of the entitlement funds, the
local governments must use the funds for
priority operating expenditures (public
safety, environmental protection, public
transportation, health, recreation, liberaries, social services for the poor or aged,
and financial administration) or for cap
ital expenditures. The States are given
complete flexibility with regard to the
type of expenditures made with entitle
ment funds.
All recipient governments must provide
for the expenditure of entitlement funds
in accordance with laws and procedures
applicable to the expenditure of their
own funds. Recipient governments must
also use fiscal, accounting, and audit
procedures conforming to the regulations
proposed herein. Additionally, recipient
governments may not use entitlement
funds to match Federal funds for other
Federal grant-in-aid programs where
there is a requirement for matching Fed
eral funds; nor may recipient govern
ments use entitlement funds in any proj
ect or activity that discriminates on the
basis of race, color, national origin, or
sex. Recipient governments must comply
with the provisions of the Davis-Bacon
Act in the case of a construction project
25 percent or more of the costs of which
are paid out of entitlement funds; and,
must pay prevailing wage rates to certain
governmental employees who are paid
from entitlement funds.
Two-thirds of the amount allocated to
each State area during each of the en
titlement periods covered by the Act goes
to the general purpose units of local gov
ernment in that State area; the remain
ing one-third share goes to the State
government.
Prior to the final adoption of these
proposed regulations, consideration will
be given to any comments or suggestions
pertaining thereto which are received, in
writing, in triplicate, on or before
March 19, 1973. Written comments
should be directed to the Director, Ofiice
of Revenue Sharing (Symbols CC) , De
partment of the Treasury, Washington,
D.C. 20226. In accordance with 31 C F R
1.4(h) written comments submitted in
response to this solicitation are available
to the public upon request therefor, un
less confidential status of the submis
sion has been requested in writing, and
approved.
In addition, any person timely sub
mitting written comments or suggestions
who desires an opportunity to comment
orally at a public hearing on these pro
posed regulations should submit his re
quest, in writing, to the Director, Office
of Revenue Sharing. A public hearing oh
these proposed regulations will be held on
March 26, 1973, beginning at 10 a.m. in
Conference Room B of the Departmental
Auditorium on Constitution Avenue be
tween 12th and 14th Streets NW., Wash
ington, D.C. Such public hearing will be
conducted pursuant to the following rule:
A person who wishes to be assured of
being heard shall submit, within the time
prescribed in this notice, an outline of
the topics he wishes to discuss, and the
time he wishes to devote to each topic.
An agenda will then be prepared con
taining the order of presentation of oral
comments and the time allotted to each
presentation. Ordinarily, a period of 10
minutes will be the maximum time al
lotted to each person for making his oral
comments. The oral comments, however,
shall not be merely a restatement of mat
ters the person has submitted in writing.
Persons making oral comments should be
prepared to answer questions not only on
the topics listed in his outline, but also in
connection with the matters relating to
his written comments.
These proposed regulations are Issued
under the authority of the State and
Local Fiscal Assistance Act of 1972 (title
I, Public Law 92-512), and Treasury De
partment Order No. 224 dated Janu
ary 26, 1973 (38 F R 3342).
[seal!
G raham W. W
att,
D ir e c to r ,
O ffic e o f R e v e n u e S h a r in g .
Approved: February 16, 1973.
Samtjel R. Pierce,Jr.,
G e n e r a l C o u n s e l.
Sec.
51.26
State must maintain transfers to loci
governments.
51.27 Optional formula.
51.28 Adjustment of data factors.
51.29 Adjustment of maximum or minlmur!
per capita entitlement.
Subpart D— Prohibition and Restrictions oh Us*
of Funds
51.30
51.31
51.32
51.33
51.34
Matching funds.
Permissible expenditures.
Discrimination.
Wage rates and labor standards.
Restriction bn expenditures by Indiail
tribes and Alaskan native village!
Subpart E— Fiscal Procedures and Auditing
51.40 Procedures applicable to use of fund|
51.41 Auditing and evaluation; Bcope
audits.
Subpart F— Proceedings for Reduction in Entitlj
ment, Withholding or Repayment of Funds
51.50 Scope of subpart.
51.51 Liberal construction
51.52 Reasonable notice and opportunity
for hearing.
51.53 Opportunity for compliance.
51.54 Institution of proceeding.
51.55 Contents of complaint.
51.56 Service of complaint and other papers!
51.57- Answer; referral to administrative!
law Judge.
51.58 Supplemental charge.
51.59 Proof; variance; amendment of pleadf
ings.
51.60 Representation.
'
51.61 Administrative law Judge; power.
51.62 Hearings.
51.63 Stipulations.
51.64 Evidence.
51.65 Depositions.
51.66 Stenographic record; oath of reporteif
transcript.
51.67 Proposed findings and conclusion.
51.68 Initial decision of the administrative!
law Judge.
51.69 Certification and transmittal of recorcj
and decision.
51.70 What constitutes record.
51.71 Procedure on review of decision of ad|
ministrative law judge.
51.72 Decision of the Secretary.
51.73 Effect of order of repayment or withj
holding of funds.
51.74 Publicity of proceedings.
51.75 Judicial review.
A u t h o r i t y : The provisions of this Part 5lJ
PART 51— FISCAL ASSISTANCE TO STATE are issued under the State and Local Fiscal
' Assistance Act of 1972 (title I, Public Lawy
AND LOCAL GOVERNMENTS
Sec.
51.0
51.1
51.2
51.3
Subpart A— General Information
Scope and application of regulations.
Establishment of Office of Revenue
Sharing.
Definitions.
Procedure for effecting compliance.
Subpart B— Reports and Written Communications
51.10
51.11
51.12
51.13
Reports to the Secretary; assurances.
Report on use and actual use of funds.
Certifications.
Publication and publicity of reports;
public inspection.
51.14 Reports to the Bureau of the Census.
Subpart C — Computation and Adjustment of
Entitlement
51.20
51.21
51.22
51.23
Data.
Adjusted taxes.
Date for determination of allocation.
Boundary changes, governmental re
organization, etc.
51.24 Waiver of entitlement; nondelivery of
checks; insufficient data.
51.25 Reservation of funds and adjustment
of entitlement.
92-512); and 5 U .S.C. 301.
Subpart A— General Information
§ 51.0 Scope and application of regulaj
tions.
(a)
I n g e n e r a l . The rules and regula
tions in this part are prescribed for car-j
rying into effect the State and Local Fisl
cal Assistance Act of 1972 (Title I,Public
Law 92-512) applicable to entitlemenl
periods beginning January 1, 1973. Sub'l
part A sets forth general information
and definitions of terms used in thispar«
Subpart B prescribes reports require^
under this part and publicity concomit
tant thereto. Subpart C contains rules
regarding the computation, allocation
and adjustment of entitlement. Subpail
D prescribes prohibitions and restrictions
on the use of funds. Subpart E prescribe
fiscal procedures and auditing rgqtggjl
ments. Subpart F contains rules,relating
to procedure and practice requirement«
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
RULES AND REGULATIONS
where a recipient government has failed
(4) The fiscal year beginning July 1,
1975, and ending June 30, 1976.
I (b) S a v i n g c l a u s e . Any cause of action
(5) The 6-month period beginning
arising out of noncompliance with the July 1, 1976, and ending December 31,
Interim regulations covering payments 1976.
made for the first and second entitle
(g) “Governor” means the Governor
ment periods (January 1, 1972, through of any of the 50 States or the Commis
June 30,JL972, and July 1, 1972, through sioner of the District of Columbia.
Decembéi 31, 1972) shall continue to be
(h) “Independent public accountants”
covered by such regulations and any pro means independent certified public ac
ceeding commenced thereon shall be gov countants or independent licensed pub
erned by the procedures set forth in lic accountants certified or licensed by a
Subpart P of this part.
regulatory authority of a State or other
I§51.1 Establishment o f Office o f Reve political Subdivision of the United States.
(i) “Indian tribes and Alaskan native
nue Sharing.
villages’ means those Indian tribes and
! There is established in the Office of the Alaskan native villages which have a rec
Secretary of the Treasury the Office of ognized governing body and which per
‘Revenue Sharing. The office shall be form substantial governmental func
headed by a Director who shall be ap tions. Certification to the Secretary by
pointed by the Secretary of the Treas the Secretary of the Interior or by the
ury. The Director shall perform the func Governor of a State that an Indian tribe
tions, exercise the powers and carry out or an Alaskan native village has a recog
theduties vested in the Secretary of the nized governing body and performs sub
Treasury by the State and Local Fiscal stantial governmental functions, shall
Assistance Act of 1972, Title I, Public constitute prima facie evidence of that
Law92-512.
fact.
(j) “Recipient government” means a
§51.2 Definitions.
government or unit of local gov
As used in this part (except where the State
context clearly indicates otherwise, or ernment as defined in this section.
(k) “Secretary” means the Secretary
where the term is defined elsewhere in
of
the Treasury or any person duly au
thispart) the following definitions shall
thorized by the Secretary to perform the
apply:
: (a) “Act” means the State and Local function mentioned.
(l) “State government” means the
Fiscal Assistance Act of 1972, Title I of
Public Law 92-512, approved October 20, government of any of the 50 States or
the District of Columbia.
1972.
(b)
“Chief executive officer” of a unit (m) “Unit of local government” means
oflocal government means the elected the government of a county, municipal
official, or the legally designated official, ity, township, or other unit of govern
who has the primary responsibility for ment below the State which is a unit of
Itheconduct of that unit’s governmental general government and which shall be
affairs. Examples of the “chief execu- determined on the basis of the same
Itive officer” of a unit of local govern- principles as used by the Bureau of the
Iment may be; The elected mayor of a Census for general statistical purposes.
municipality, the elected county execu- The term “unit of local government”
|tive of a county, or the chairman of a shall also include the recognized govern
|county commission or board in a county ing body of an Indian tribe or Alaskan
Ithathas no elected county executive, or native village which performs substan
Nuch other official as may be designated tial governmental functions. The Dis
pursuant to law by the duly elected gov- trict of Columbia, in addition to being
[eming body of the unit of local govern treated as a State, shall also be treated as
ment; pr the chairman, governor, chief, a county area which has no units of local
orpresident (as the case may be) of an government (other than itself) within its
Indian tribe or Alaskan native village, geographic area.
I (c) “Department” means the Depart § 51.3 Procedure for effecting compli
ment ofthe Treasury.
ance.
p (d) “Entitlement” means the amount
If the Secretary determines that a
|of payment to which a State govern
ment or unit of local government is en- recipient government has failed to com
Ptled as determined by the Secretary ply substantially with any provision of
iPursuant to an allocation formula con- this part, and after giving reasonable
!tamed in the Act and as established by notice and opportunity for a hearing to
the Governor of the State or the chief
iregulationunder this part.
executive office of the unit of local gov
l (e) “Entitlement funds” means the
ernment pursuant to Subpart F of this
famount of funds paid or payable to a part, the Secretary shall notify the re
°tate government or unit of local gov cipient government that if it fails to
ernment for the entitlement period.
take corrective action within 60 days
¡^(f) “Entitlem ent period” means one from the date of receipt of such notifica
tor the following periods of tim e:
tion further payments to it will be with
(1) The 6-month period beginning held for any subsequent entitlement pe
jj^hary 1, 1973, and ending June 30, riod until such time as the Secretary is
satisfied that appropriate corrective ac
The fiscal year beginning July 1, tion has been taken and that there will
and ending June 30, 1974.
no longer be any failure to comply. Until
§^7 The fiscal year beginning July 1, he is satisfied, the Secretary shall make
18'4, and ending June 30, 1975.
no further payments of such amounts.
to comply with any provision of this part.
4919
The procedure prescribed in this section
shall not be used if another procedure is
specified in another section of this part.
Subpart B— Reports and Written
Communications
§ 51.10 Reports to the Secretary; Assur
ances.
(a) R e p o r t s f o r r e v i e w a n d e v a l u a t i o n .
The Secretary may require each recip
ient government receiving entitlement
funds to submit such annual and interim
reports (other than those required by
§ 51.11) as may be necessary to provide a
basis for evaluation and review of com
pliance with and effectiveness of the
provisions of the Act and regulations of
this part.
(b) R e q u i s i t e a s s u r a n c e s f o r r e c e i p t
o f e n t i t l e m e n t f u n d s . Each Governor of
a State or chief executive officer of a
unit of local government, in order to
qualify for entitlement funds, must file
a statement of assurances when re
quested by the Secretary, on a form to
be provided, that such government will
abide by certain specific requirements of
the Act and the prohibitions and restric
tions of Subparts D and E of this part,
with respect to the, use of entitlement
funds. The Secretary will afford each
Governor the opportunity for review and
comment to the Secretary on the ade
quacy of the assurances by units of local
government in his State.
§ 51.11 Report on Planned Use and
Actual Use o f Funds.
(a) P l a n n e d u s e r e p o r t . Each recipient
government which expects to receive
funds under the Act shall submit to the
Secretary a report, on a form to be pro
vided, of the specific amounts and pur
poses for which it plans to spend the
funds which it expects to receive for an
entitlement period. The initial planned
use report for the entitlement period
January 1, 1973, through June 30, 1973,
shall be filed with the Secretary on a
date he shall determine. Thereafter,
each planned use report shall be filed
prior to the beginning of an entitlement
period as defined in § 51.2(f).
(b) A c t u a l u s e r e p o r t ; s t a t u s o f t r u s t
f u n d . Each recipient government which
receives funds pursuant to the Act shall
submit to the Secretary an annual re
port, on a form to be provided, of the
amounts and purposes for which such
funds have been spent or otherwise
transferred from the trust fund (as de
fined in § 51.40(a) ) during the reporting
period. Such report also shall state any
interest earned on entitlement funds
during the period and the balance of the
trust fund as of the date of the report’s
submission. Such reports shall be filed
annually with thé Department within 60
days of June 30. All such funds must be
used, obligated, or appropriated within
the time period specified in § 51.40(b).
§ 51.12
Certifications.
The Secretary shall require a certifica
tion by the Governor, or the chief ex
ecutive officer of the unit of local gov
ernment, that no entitlement funds have
been used in violation of the prohibition
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 2 2. 1973
-4920
RULES AND REGULATIONS
contained in § 51.30 against the use of
entitlement funds for the purpose of ob
taining matching Federal funds. In the
case of a unit of local government the
Secretary shall require a certification by
the chief executive officer that entitle
ment funds received by it have been used
only for priority expenditures as pre
scribed by § 51.31. The certifications re
quired by this section shall be in such
form as the Secretary may prescribe.
§ 51.13 Publication and publicity o f re
ports ; public inspection. '
(a) Publication of required reports.
Each recipient government must pub
lish in a newspaper a copy of each report
required to be filed under § 51.11 (a) and
(b) prior to the time such report is filed
with the Secretary. Such publication
shall be made in a newspaper which is
published within the State and has gen
eral circulation within the geographic
area of the recipient government in
volved. In the case of a recipient governinent located in a metropolitan area
which adjoins and extends beyond the
boundary of the State, the recipient gov
ernment may satisfy the requirement of
this section by publishing its reports in
a metropolitan newspaper of general cir
culation even though such newspaper
may be located in the adjoining State
from the recipient government.
(b) Publicity. Each recipient govern
ment, at the same time as required for
publication of reports under paragraph
(a) of this section, shall advise the news
media within its geographic area of the
publication of its reports made pursuant
to paragraph (a) of this section, and
shall provide copies of such reports to
the news media on request.
(c) Public inspection. Each recipient
government shall make available for
public inspection such additional detailed
Inform ation pursuant to such guidelines
as the Secretary may provide, to support
the inform ation and data submitted on
each of the reports required under §51.11
(a) and (b). Such additional detailed in
form ation shall be available for public
Inspection at a specified location during
normal business hours.
§ 51.14 Reports to the Bureau o f the
Census.
It shall be the obligation of each re
cipient government to comply promptly
with requests by the Bureau of the Cen
sus (or by the Secretary) for data and
inform ation relevant to the determina
tion of entitlement allocations. Failure
of any recipient government to so comply
may place in jeopardy the prompt re
ceipt by it of entitlement funds.
Subpart C— Computation and Adjustment
of Entitlement
§ 51.20 Data."
(a) In general. The data used in de
termination of allocations and adjust
ments thereto payable under this part
will be the latest and most complete data
supplied by the Bureau of the Census or
such other sources of data as in the judg
ment of the Secretary will provide for
equitable allocations.
(b) Computation and payment of en
titlements. (1) Allocations will not be
made to any unit of local government
if the available data is so inadequate as
to frustrate the purpose of the Act. Such
units of local government will receive an
entitlement and payment when current
and sufficient data become available as
necessary to permit an equitable alloca
tion.
(2) Payment to units of local govern
ment for which the Secretary has not
received an address confirmation will be
delayed until proper information is avail
able to the Secretary.
(3) Where the Secretary determines
that the data provided by the Bureau of
the Census or the Department of Com
merce are not current enough, or are not
comprehensive enough, or are otherwise
inadequate to provide for equitable al
locations he may use other data, includ
in g estimates. The Secretary’s deter
m ination shall be final and such other
tadditional data and estimates as are
used, including the sources, shall be pub
licized by notice in the Federal R egister.
(c) Special rule for 6 month entitle
ment periods. For entitlement periods
which encompass only one-half of a year,
the adjusted taxes and intergovern
mental transfers of any unit of local gov
ernment for that half-year will be esti
mated to be one-half of the annual
amounts.
(d) Units of local government located
in more than one county area. In cases
where a unit of local government is lo
cated in more than one county, each part
of such unit is treated for allocation pur
poses as a separate unit of government,
and the population, adjusted taxes, and
intergovernmental transfers of such
parts are estimated on the basis of the
ratio which the population of such part
bears to the population of the entirety of
such unit. .
§ 51.21
Adjusted taxes.
(a) In general. Tax revenues are com
pulsory contributions to a unit of local
government exacted for public purposes,
as such contributions are determined by
the Bureau of the Census for general
statistical purposes. The term "adjusted
taxes" means the tax revenues adjusted
by excluding ail amount equal to that
portion of such compulsory contributions
which is properly allocable to school op
erations, debt service on school indebted
ness, school capital outlays, and other
educational purposes.
(b) Procedure for exclusion of tax
revenues for education. The tax revenues
exacted by a unit of local government
shall be adjusted to exclude any such tax
revenues used for financing education in
a manner consistent with the following
provisions:
(1) Where a unit of local government
finances education from a specific fund
and lists tax revenues to the fund or
levies a separate tax for purposes of edu
cation, such amounts as determined will
constitute the tax revenues for education.
(2) I f tax revenues for purposes of
education are not separately identifiable
because education is financed by ex
penditure or transferring of moneys!
from a general fund (or similarly named!
fund> to a school fund or funds, then the)
ratio of tax revenues (as defined in para-|
graph (a) of this section) to the total}
revenues in such fund shall be calculated,!
and that ratio multiplied by the expendi-)
ture or transfer of moneys from suchj
fund to the school fund shall be equated!
with the tax revenues properly allocable)
to expenses for education. The phrase)
"total revenues in such fund” means cashj
and securities on hand in the general)
fund (or sim ilarly named fund) at the|
beginning of the fiscal year, plus all)
revenues to the fund (other than trust)
or agency revenues) less cash and se
curities on hand at the end of the fiscal!
year. Trust and agency funds are those)
held specifically for individuals or gov-J
emments for which no discretion can be!
exercised as to the amounts to be paid)
to the recipient.
(3)
I f any instance where neither par
agraph (b) (1) nor (2) of this section!
permits determination of school taxes!
then any procedure' deemed equitable by)
the Secretary shall be utilized to ascer-j
tain adjusted taxes.
(c)
Validity of adjusted tax data. Al
location of funds under the Act will be]
based on data reported by States and]
units of local governments to the Bureau)
of the Census and shall be in accord-f
ance with definitions established by the!
Bureau. No unit of government shall!
report to the Department of the Treas-J
ury or the Bureau of the Census in aj
manner which attempts to circumvent or)
frustrate the intent of this section.
§ 51.22 Date for determination of allo-J
. cation.
(a) In general. Pursuant to the provi-l
sionsof § 51.20 (a) and (b) (3) , the deter-]
m ination of the data definitions upon!
which the allocations and entitlements]
for an entitlement period is to be calcu-T
lated shall be made as of the day im-l
mediately preceding the beginning of the!
entitlement period. The final date upon]
which determinations of allocations and]
entitlements, Including adjustments]
thereto, may be made for an entitlement]
period shall be determined by the Secre
tary an soon as practicable after the]
close of that entitlement period and shall]
be publicized by notice in the F ederal]
R egister.
(b) Time limitation and minimum aa-j
justment. I f prior to the date determined]
by the Secretary pursuant to paragraph]
(a) of this section, it is established to the]
satisfaction of the Secretary by factuaj
evidence and documentation that the]
data used in the computation of an allo-J
cation is erroneous and, if corrected!
would result in an increase or decrease oh
an entitlement of $200 or more of entitle-!
ment funds, an adjustment will be made!
(c) Adjusted taxes and intergovern-X
mental transfers. The dates for deter-]
mining the amount of adjusted taxes an®
intergovernmental transfers of a unit oi
local government will be the fiscal year£ i
such unit ending during the 12 months]
prior to Ju ly 1, 1971. I f a more recena
period is used, It shall be such fiscal year]
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
RULES AND REGULATIONS
{hat can be uniformly assembled for all
units of government prior to the begin
ning of the affected entitlement period5851.23 Boundary changes, government
I
tal reorganization, etc.
[ (a) In general. Boundary changes,
governmental
reorganizations,
or
changes in State statutes or constitu
tions occurring prior to or during an
'entitlement period which were not token
into account during the initial allocation
shall, if not within the scope of para
graph (d) of this section, affect such al
location or payments in a manner con
sistent with the following provisions:
[ (1) A boundary change, governmental
reorganization, or change in State
statutes or constitution relevant to the
computation of an entitlement of a unit
of local government under the Act, occuring prior to the beginning of an en[Mement period shall result in an altera
tion to the entitlement of that unit if
ibrought to the attention of the Bureau
of the Census within 60 days Cor by
[June 30,1973, in case of the third entitle
ment period) after the beginning of such
[entitlement period.
I (2) A boundary change, governmental
reorganisation, or change in State
statutes or constitution relevant to the
[computation of entitlement of a unit of
¡local government under the Act, occur
ring during an entitlement period shall
not result in a change to the entitlement
of that unit until the next entitlement
[period. However, payment tendered to
[such unit for the entitlement period may
be redistributed pursuant to the provi
sions of paragraphs (b) and (c) of this
section.
f (b) New units of local government. A
. unit of local government which came
Iinto existence dining an entitlement pe
riod shall first be eligible for an entitle
ment allocation for the next entitlement
period. However, if such unit is a succes|sor government, it shall be eligible to
receive the entitlement payment of the
[unit or units of local government to
Which it succeeded in accordance with
|the conditions of the succession.
l (c) Dissolution of units of local gov
ernment. A unit of local government
[which dissolved, was absorbed or ceased
;to exist as such during an entitlement
Period is eligible to receive an entitle
ment payment fo r that entitlement pe
riod: Provided, That such unit of local
government is in the process of winding
up its governmental affairs or a suc
cessor unit of local government has legal
capacity to accept and use such entitle
ment funds. Entitlem ent payments
¡which are returned to the Secretary be
cause of the cessation of existence of a
¡unit of local government shall be placed
[mthe State and Bocal Government Fiscal
[Assistance Trust Fund u n til such times
j us they can be redistributed according
to the conditions under which the unit
[of local government ceased to exist.
| (d) Limitations on adjustment for an
nexations, (1) Annexations by units of
i local government having a population
¡ 01less than 5,000 on April 1, 1970, shall
¡bot affect the entitlement of any unit of
local government for an entitlement
4921
period unless the Secretary determines able so that all recipient governments
that adjustments pursuant to such an will receive their fu ll entitlements. Those
nexations would be equitable and would reserve funds will be distributed during
not be unnecessarily burdensome, ex subsequent entitlement periods to recip
ient governments as promptly as possible
pensive, or otherwise impracticable.
(2)
Annexations of areas with a popuafter the close of the time for adjust
lation of less than 250, or less than 5 per ments pursuant to § 51.22.
(b)
Adjustment to future entitlement
cent of the population of the gaining
government, shall not affect the en payments. Adjustment to an entitlement
titlement of any unit of local govern of a recipent government will ordinarily
be effected through alteration to entitle
ment.
(e)
Certification. Units of local govment payments for future entitlement
ernment affected by a boundary change, periods unless there is a downward ad
governmental reorganization, or change justment which is so substantial as to
in State statutes or constitution shall, make future payment alterations im
before receiving an entitlement adjust practicable or impossible. In such case
ment or payment redistributiqn pur the Secretary may demand that the
suant to this section, obtain State cer funds in excess of the initial entitlement
tification that such change was ac included in an entitlement payment be
complished in accordance with State repaid to the Secretary, and such funds
law. The certifying official shall be des shall be promptly repaid on demand.
ignated by the Governor, and such cer
tification shall be submitted to the § 51.26 State must maintain transfers to
local governments.
Bureau of the Census.
(a)
General rule. The entitlement of
§ 51.24 Waiver of entitlement; nonde
any State government for any entitle
livery o f check; insufficient data.
ment period beginning on or after Ju ly 1,
(a) Waiver. Any unit of local govern 1973, shall be reduced by the amount (if
ment may waive its entitlement for any any) by which—
entitlement period: Provided, The chief
(1) The average of the aggregate
executive officer of such unit notifies the
Secretary that the entitlement payment amounts transferred by the State gov
is being waived, and returns the entitle ernment out of its own sources during
ment payment to the Secretory within_ such period (or during that State’s fis
60 days of the date of the check. The cal year ending on or immediately prior
amount of entitlement waived shall be to the end of such period) and the pre
added to and shall become a part of, the , ceding entitlement period (or such fiscal
applicable entitlement of the next high year) to all units of local government (as
est unit of government eligible to receive defined in § 51.2(m)) in such State, is
entitlement funds in that State in which less than,
(2) The similar aggregate amount for
the unit of government waiving entitle
ment is located. A waiver of entitlement the 1-year period beginning Ju ly 1, 1971
by such unit of local government shall (or that State’s fiscal year ending on or
be deemed an irrevocable waiver for that immediately prior to the end of such
period).
entitlement payment.
(b) Nondelivery. Entitlem ent funds for For purposes of paragraph ( a l( l) of
any entitlement period which are re this section, the am ount of any reduc
turned by the U .S. Postal Service to the tion in the entitlement of a State gov
Department of the Treasury as being ernment under this section for any en
nondeliverable because of incorrect ad titlem ent period shall, for subsequent
dress inform ation, or which are un entitlement periods, be treated as an
claimed for any reason, shall be placed amount transferred by the State gov
in the State and Local Government Fis ernment out of its own sources during
cal Assistance Trust Fund until such such period to units of local government
time as payment can be made.
in such State. The phrase “own sources”
(c) Insufficient data. Entitlem ent means all sources of State revenue (in
funds for any entitlement period which cluding the State’s revenue sharing en
are withheld from payment because of titlem ent funds) but excluding inter
insufficient data upon which to compute governmental revenues received from the
the entitlement, or for which payment Federal Government.
cannot be made for any other reason,
(b) Measurement of maintenance of
shall remain in the State and Local Gov effort. In those States that do not have
ernment Fiscal Assistance Trust Fund an accounting system providing an audit
until such time as payment can be made. trail for all funds concerned (from own
.§ 51.25 Reservation o f funds and ad source to final application) in intergov
ernmental transfer to units of local gov
justment o f entitlement.
ernment (such as those States in which
(a)
Reservation of entitlement, funds.intergovernmental transfers to units of
In order to make subsequent adjust local government are made from a com
ments to an entitlement payment under mingled fund with no identification as
this part which may be necessitated be to specific revenue source), the following
cause of insufficient or erroneous data, formula may be applied by the Secretory
or for any other reason, the Secretary to establish the base year intergovern
shall reserve in the State and Local Gov mental transfers to units of local govern
ernment Fiscal Assistance Trust Fund ment from own sources and to generally
such percentage of the total entitlement monitor level of accordance with the
funds for any entitlement period as in maintenance provision of paragraph (a)
his judgment shall be necessary to insure of this section during future entitlement
that there will be sufficient funds avail periods:
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
4922
RULES AND REGULATIONS
(1) It shall be assumed that the ratio cedure, or method deemed equitable by
of a State’s own source intergovern the Secretary, may be utilized to measure
mental transfers to units of local govern such transfer effort for the purpose of
ment to that State’s total intergovern implementing, the maintenance provi
mental transfers to units of local gov sion.
ernment is equal to the ratio of that
(d) Adjustment where State assumes
State’s own source revenues to its total responsibility for category of expendi
revenues. Thus, for a State in which such tures. I f the Statò government establishes
form ula may be applied, its base year to the satisfaction of the Secretary that
own source intergovernmental transfers since June 30, 1972, it has assumed re
to units of local government shall be sponsibility for a category of expendi
assumed to equal its total intergovern tures which (before Ju ly 1,1972) was the
mental transfers to units of local gov responsibility of local governments lo
ernment in the base year multiplied by cated in such State, then, the aggregate
its own source revenue in the base year amount taken into account under para
divided by its total revenues in the base graph (a) (2) of this section shall be
year.
reduced to the extent that increased
(2) In a State in which the formula is. State government spending (out of its
applied, the State’s own source inter own sources) for such category has re
governmental transfers to units of local placed corresponding amounts which for
government in a future entitlement pe the 1-year period beginning Ju ly 1, 1971,
riod shall be assumed to equal the aver it transferred to units of local govern
age of—
ment.
(i) The State’s total intergovern
(e) Adjustment where new taxing
mental transfers to units of local gov powers are conferred upon local govern
ernment during that period (or that ments. I f a State establishes to the satis
State’s fiscal year ending on or imme faction of the Secretary that since June
diately prior to the end of such period) 30, 1972, one or more units of local gov
multiplied by its own source revenue in ernment within such State have had con
that period (or such fiscal year) divided ferred upon them new taxing authority,
by its total revenues in that period (or -then, the aggregate amount taken into
such fiscal year) and
account under paragraph (a) (2) of this
(ii) The State’s total intergovern section shall be reduced to the extent of
mental transfers to units of local gov the larger of—
ernment during the preceding entitle
An amount equal to the amount of
ment period (or that State’s fiscal year the(1)
taxes
collected by reason of the exer
ending on or immediately prior to the cise o f such
new taxing authority by such
end of such period) multiplied by ite own local governments, or
source revenue in that period (or such
(2) An amount equal to the amount of
fiscal year) divided by Its total revenues the loss of revenue to the State by reason
in that period (or such fiscal year).
of such new taxing authority being con
(3) Therefore, in a State in which the
form ula is applied, maintenance (for a ferred on such local governments.
given entitlement period) of intergovern No amount shall be taken into consider
mental transfer effort to units of local ation under paragraph (e) (1) of this sec
government will be measured by the d if tion if such new taxing authority is an
ference between that State’s average ag increase in the authorized rate of tax
gregate intergovernmental transfers to under a previously authorized kind of tax,
units of local government (over the ap unless the State is determined by the
propriate periods) as calculated by em Secretary to have decreased a related
ploying the method described in para State tax.
(f) Special rule for period beginning
graph (b) (2) of this section and that
State’s own source intergovernmental July 1, 1973. In the case of the entitle
transfers to- units of local government in ment period beginning Ju ly 1, 1973, the
the base period as calculated by employ preceding entitlement period for purposes
ing the method described in paragraph of paragraph (a) (1) of this section shall
be treated as being the 1-year period be
(b) (1) of this section.
(4) Should thé application of this for ginning Ju ly 1,1972.
(g) Special rule for period beginning
mula during any entitlement period indi
cate nonmaintenance, for example, July 1, 1976. In the case of the entitle
should a State’s calculated own source ment period beginning Ju ly 1, 1976, and
average aggregate intergovernmental ending December 31, 1976, the aggregate
transfers to Units of local government amount taken into account under para
(over the appropriate periods) be less graph (a) (1) of this section for the pre
than such transfers as calculated for the ceding entitlement period and the aggre
base period, the difference (as defined in gate amount taken into account under
paragraph (b) (3) of this section) shall paragraph (a) (2) of this section shall be
constitute the future indicated reduction one-half of the amounts which (but for
in that State’s entitlement unless such this paragraph (g) ) would be taken into
State can document to the Secretary that account.
the fact or amount of nonmaintenance
(h) Report by Governor. Pursuant to
as determined by application of the for the authority of § 51.10, and in order to
mula is inaccurate.
effect compliance with this section, the
(c)
Alternative procedure. I f the SecGovernor of each State shall submit to
retary shall determine that application the Secretary within 90 days from June
of the formula set forth in paragraph (b) 30 of each year (or within 90 days of the
of this section in a particular case pro State’s fiscal year ending on or immedi
vides an inaccurate or unfair measure of ately prior to June 30), on a form to be
transfer effort, then any form ula, pro provided, the following data for those
entitlement periods or that State’s fiscal
years specified on the report:
(1) ffhe State’s own source revenues
(2) The State’s total revenues.
(3) The State’s own source transfers^
units of local government.
(4) The State’s total transfers to unit1
of local government.
(i) Reduction in entitlement. If th'
Secretary has reason to believe that par]
agraph (a) of this section requires
reduction in the entitlement of any Stat1
government for any entitlement period!
he shall give reasonable notice and op'
portunity for hearing to the State. If)
thereafter, he determines that paragraph
(a) of this section requires the reductio1
of such entitlement, he shall also deter)
mine the amount of such reduction an'
shall notify the Governor of such Sta ’
of such determinations and shall with!
hold from subsequent payments to sue;
State government under this subtitle
amount equal to such reduction.
(j) Transfer to general fund. A'1
amount equal to the reduction in the eni
titlem ent of any State government whic
results from the application of this sec!
tion (after any judicial review) shall tr
transferred from the trust fund to th1
general fund of the Treasury on the da]
on which such reduction becomes finaj
§ 51.27
Optional formula.
(a) In general: A State government
may by law provide for the allocation o[
entitlement funds among county areas
or among units of local government
(other than county governments, India*
tribes, and Alaskan native villages): (l)j
O n the basis of the population multipli'
by the general tax effort factors of sue
areas or units of local governments; oil
(2) on the basis of the population multi)
plied by the relative income factors o(
such areas or units of local government'
or, (3) on the basis of a combination o’
those two factors. Any State which pro]
vides by law for such a variation in th:
allocation formula provided by subsecj
tions 108(a) or 108(b) (2) and (3)
the A ct, shall notify the Secretary d.
such law not later than 30 days befor
the beginning of the first entitlement!
period to which such law is to apply. An
such law shall:
(1) Provide for allocating 100 percei^
o f the aggregate amount to be allocate,
under subsections 108(a) or 108(b) (2)
and (3) of the A ct;
(2) Apply uniformly throughout thj
State; and
(3) Apply during the period beginnta
on the first day of the first entitlement
period to which it applies and ending o|
December 31,1976.
(b) Single legislation required. If |
State government alters its county are.
allocation formula or its local governj
ment allocation form ula, or both, sue.
alteration may be made only once an|
must be made in the same legislate,
enactment.
(e) C e rtifica tio n required. Paragrap'
(a) of this section shall apply within |
State only if the Secretary certifies tna|
the State law complies with the reqmn^
ments of such paragraph. The Secretary
shall not certify any such law with re.
FEDERAL REGISTER, VOL. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
4923
RULES AND REGULATIONS
ernments of a State do not total 100
percent of the amount allocated to that
State, the amount to be allocated to
county areas shall be adjusted appro
priately, and the allocation process shall
§51.28 Adjustment o f data factors.
be repeated until the amounts allocated
The data factors and data definitions to recipient governments of a State total
(usedin computing entitlements under the 100 percent of the amount allocated to
Act for any entitlement period will be that State.
made available to each State government Subpart D— Prohibition and Restrictions on
land unit of local government as soon as
Use of Funds
[practicable after the beginning of an
applicable entitlement period. Each such § 51.30 Matching funds.
government will be given a reasonable
(a) In general. No recipient govern
(opportunity to question those data fac- ment may use, directly or indirectly, any
'tors by providing the Department with part of its entitlement funds as a con
(factual documentation demonstrating tribution in order to obtain any m atching
evidence of error. I f the Secretary deter Federal funds under any Federal pro
mines that any data factors used were er gram. The indirect use of entitlement
roneous, necessary adjustments will be funds to match Federal funds is defined
made. Data factors which are used for to mean the allocation of entitlement
more than one entitlement period will funds to a nonmatching expenditure and
be subject to challenge and adjustment thereby releasing or displacing local
only for the first entitlement period in funds which are used for the purpose of
which they were used. •
m atching Federal funds. This prohibition
§51.29 Adjustment for maximum and on use of entitlement funds as matching
minimum per capita entitlement; 100 funds applies to Federal programs where
Federal funds are required to be matched
percent criterion.
non-Federal funds and to Federal pro
(a) County area maximum and mini by
which allow m atching from either
mum per capita entitlement— (1) In grams
or non-Federal funds.
general. Pursuant to section 108(a) (6) Federal
(b) Certification required. Pursuant to
of the Act, the per capita amount allo § 51.12, the chief executive officer of each
cated to any county area shall be not recipient government must certify to the
less than 20 percent, nor more than 145 Secretary that entitlement funds re
percent, of two-thirds of the amount ceived by it have not been used in viola
allocated to the State under section 106 tion of this section.
of the Act, divided by the population of
(c) Increased State or local govern
that State.
ment revenues. No recipient government
(2) One hundred forty-five-percent shall be determined to have used funds
rule. If a county area allocation is greater in violation of paragraph (a) of this sec
than the 145-percent lim it, its allocation tion with respect to any funds received
shall be reduced to the 145-percent level for any entitlement period to the ex
and the resulting surplus shall be shared tent that net revenues received by it from
proportionately by all remaining uncon its own source during such period exceed
strained county areas.
the net revenues received by it from its
(3) Twenty-percent rule. If, after the own sources during the 1-year period
application of paragraph (a) (2) of this beginning Ju ly 1, 1971 (or one-half of
section, a county area allocation is less such net revenues, in the case of an en
than the 20-percent lim it, its allocation titlem ent period of 6 m onths).
shall be increased to the 20-percent level
(d) Presumptions of compliance. No
and the resulting deficit shall be shared recipient government shall be determined
Proportionately by all remaining uncon to have used entitlement funds in viola
strained county areas.
tion of this section to thè extent that:
(b) Local government (other than a
(1) The expenditure of entitlement
county government) —(1) In general. funds was accompanied by an aggregate
Except as provided below, the per-capita increase in nonmatching funds expendi
amount allocated to any unit of local tures.
government (other than a county govern
(2) The receipt of entitlement funds
ment) shall be not less than 20-percent, permitted that government to decrease
nor more than 145-percent, of two-thirds its other revenues without a commensu
of the amount allocated to the State rate reduction in its nonmatching ex
under section 106 of the Act, divided by penditures: Provided, Nonentitlement
the population of that State.
revenue is not less than the local m atch
(2) One hundred forty-five-percent ing funds contribution.
rule. If a unit of local government is al
(3) The matching funds contribution
located an amount greater than the 145- in question is accounted for by ah in-kind
Percent lim it, its allocation shall be re contribution which was not financed di
duced to that level.
rectly or indirectly with entitlement
(3) Twenty-percent rule. I f a unit of funds.
local government is allocated an amount
(e) Determination by Secretary of the
less than the 20-percent limit, its alloca Treasury. I f the Secretary has reason to
tion shall be increased to the lower of believe that a recipient government has
the 20-percent limit or 50 percent of the used entitlement funds to match Federal
sum of that unit’s adjusted taxes and funds in violation of the Act, the Secre
transfers.
tary shall give such government notice
■ pi One hundred-percent criterion. I f and opportunity for hearing. I f the Sec
the amounts allocated to recipient gov retary determines that such government
meet to which he receives notification
later than 30 days prior to the first
entitlement period during which it is to
apply-
has, in fact, used funds in violation of
this section, he shall notify such govern
ment of his determination and shall re
quest repayment to the United States
of an amount equal to the funds so used.
To the extent that such government fails
to repay such amount, the Secretary shall
withhold from subsequent entitlement
payments to that government an amount
of entitlement funds equal to the funds
used in violation of this section or, if
this method is impracticable, the Sec
retary may refer the m atter to the A t
torney General for appropriate civil
action.
(f)
Use of entitlement funds to supple
ment Federal grant funds. The prohibi
tion on use of entitlement funds con
tained in paragraph (a) of this section
does not prevent the use of entitlement
funds to supplement other Federal grant
funds. For example, if expenditures for
a project exceed the amount available
from non-Federal funds plus matched
Federal funds, the recipient government
may use entitlement funds to defray the
excess costs: Provided, however, That
the entitlement funds are not used to
m atch other Federal funds; and: Pro
vided further, That in the case of a unit
of local government, the use of entitle
ment funds to supplement Federal grants
is restricted to the category of expendi
tures as set forth in § 51.31.
§ 51.31
Permissible expenditures.
(a) In general. Entitlem ent funds re
ceived by units of local government may
be used only for priority expenditures.
As used in this part, the term “priority
expenditures” means:
(1) Ordinary and necessary m ainte
nance and operating expenses for—
(1) Public safety (including law en
forcement, fire protection, and building
code enforcem ent);
(ii) Environmental protection (in
cluding sewage disposal, sanitation, and
pollution abatem ent);
(iii) Public transportation (including
transit systems and streets and roads);
(iv) Health;
(v) Recreation;
(vi) Libraries;
(vii) Social services for the poor or
aged; and
(viii) Financial administration, and '
(2) Ordinary and necessary capital
expenditures authorized by law. No unit
of local government may use entitlement
funds for nonpriority expenditures which
are defined as any expenditures other
than those included in paragraph (a) (1)
and (2) of this section. Pursuant to
§ 51.12, the chief executive officer of each
unit of local government must certify to
the Secretary that entitlement funds re
ceived by it have been used only for
priority expenditures as required by the
A ct.
(b) Effect of noncompliance. In the
case of a unit of local government which
uses an amount of entitlement funds for
other than priority expenditures as de
fined in paragraph (a) of thlS'section, it
will pay over to the Secretary (for deposit
in the generál fund of the Treasury) an
amount equal to 110 percent of any
FEDERAL REGISTER, VOL. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
4924
RULES AND REGULATIONS
amount expended in violation of para
graph (a) of this section, unless such
amount of entitlement funds is promptly
repaid to the trust fund of the local
government after notice by the Secretary
and opportunity for corrective action,
§ 51.32 Discrimination. ,
(a) Discrimination prohibited. NO per
son in the United States shall, on the
ground of race, color, national origin, or
sex, be excluded from participation in, be
denied the benefits of, or be subjected to
discrimination under, any program or ac
tivity funded in whole or in part with
entitlement funds made available pur
suant to subtitle A of title I of the Act.
For purposes of this section “program or
activity” is defined as any function con
ducted by an identifiable administrative
unit of the recipient government.
“ Funded in whole or in part with en
titlem ent funds” means that entitlement
funds in any amount have been trans
ferred from the recipient government’s
trust fund to an identifiable adminis
trative unit and disbursed in a. program
or activity.
~ (b) Specific discriminatory actions
prohibited. (1) A recipient government
may not, under any program or activity
to which the regulations of this section
may apply, directly or through con
tractual or other arrangements, on the
grounds of race, color, natural origin, or
sex:
(1) Deny any service or other benefit
provided under the program or activity.
(ii) Provide any service or other bene
fit which is different, or is provided in a
different form from that provided to
others under the program or activity.
(iii) Subject to segregated or separate
treatment in any facility in, or in any
matter or process related to receipt of
any service or benefit under the program
or activity.
(iv) Restrict in any way the enjoyment
o f any advantage or privilege enjoyed by
others receiving any service or benefit
under the program or activity..
(v) Treat an individual differently from
others in determining,whether he satis
fies any admission, enrollment, eligibility,
membership, or other requirement or
condition which individuals must meet
In order to be provided any service or
other benefit provided under the pro
gram or activity.
(vi) Deny an opportunity to participate
In a program or activity as an employee.
(2) A recipient government may not
utilize criteria or methods of adminis
tration which have the effect of subject
ing individuals to discrimination on the
basis of race, color, national origin, or
sex, or have the effect of defeating or sub
stantially impairing accomplishment of
the objectives of the program or activity
with respect to individuals of a particu
lar race, color, national origin, or sex.
(3) A recipient government in deter
mining the site or location of facilities
may not make selections of such site or
location which have the effect o£, exclud
ing individuals from , denying them the
benefits of, or subjecting them to dis
crimination on the grounds of race, color,
national origin, or sex from, the benefits 2000d); or (iii) to take such other action
of an activity or program; or which have as may be authorized by law.
the purpose or effect of defeating or sub
(2) No action to effect compliance with
stantially impairing the accomplishment this section by any other means author
of the objectives of the Act and of this ized by law shall be taken by the De
section.
partment until:
(4)
A recipient government shall not be (i) The Secretary has determined that
prohibited by this section from taking compliance cannot be secured by volun-l
any aetion to ameliorate an imbalance in tary means, and the recipient govem-j
services or facilities provided to any geo ment has been notified of such deter-j
graphic area or specific group of citizens mination; and
within its jurisdiction, where the purpose
(ii) The expiration of at least 10 days!
of such action is to overcome prior dis from the m ailing of such notice to the
criminatory practice or usage.
recipient government. During this period
(c) Assurances required. Pursuant to of at least 10 days, additional efforts may
§ 51.10(b), each Governor of a State or be made to persuade the recipient gov-!
chief executive officer of a unit of local em inent to comply with this regulation
government shall include, in the assur and to take such corrective action as
ances to the Secretary required by that may be appropriate.
(3) An order pursuant to Title VI of
section, a statement that all programs
and activities f unded in whole or in part the Civil Rights Act of 1964 terminating
by entitlement funds will be conducted in or refusing to grant or continue entitle
compliance with the requirements of this ment payments shall become effective
section. Such assurances shall be in a only after the procedures in paragraph
(f) (1) of this section have been complied!
form prescribed by the Secretary.
(d) Complaints and investigations. with and:
(i) The Secretary has advised the re
Any person who believes him self, or any
specific class of persons who believe cipient government of its failure to com
themselves, to be subjected to discrimi ply and has determined that compliance
nation prohibited by this section, may by cannot be secured by voluntary means;
(ii) There has been an express finding
him self or by a representative file with
the Secretary a written report setting on the record, after such notice pre
forth the nature of the discrimination scribed in this section, and after oppor
alleged and the facts upon which the al tunity for hearing, of a failure by the re
legation is based. I f the Secretary has cipient government to comply with a
reason to believe that the report shows requirement imposed by or under this
a recipient government has failed to com part;
(iii) The action has been approved
ply with the provisions of this part, he
will cause an investigation to be made by the Secretary; and
(iv) Thirty days have elapsed after
with respect to the facts and circum
stances alleged in the report and with the Secretary has filed with the Com
respect to the program or activity con mittee on Ways and Means of the House
cerned. Such investigation may be made, of Representatives and the Committee on
if necessary, with the assistance of com Finance of the Senate a fu ll written re
plaints or of the recipient government. port of the circumstances and the
No representative of a recipient govern grounds for such action; and
(v) The "withholding or refusal to pay
ment nor any of its agencies shall in
tim idate, threaten, coerce,-or discrimi or continue the payment of entitlement
nate against any person or class of per funds shall be limited to the particular
sons because of testimony, assistance, or recipient government as to whom a find
participation in an investigation, pro ing of noncompliance with this section
has been made and shall be limited in its
ceeding, or hearing under this section.
effect to the particular program or activ
(e) Compliance reviews. The Secre ity in which such noncompliance has
tary shall monitor and determine com been so found. Such amount of entitle
pliance of recipient governments with ment funds as are withheld by the Sec
the requirements of this section and of retary from future entitlement payments I
the A ct. Compliance reviews will be pursuant to this paragraph shall beI
undertaken from time to time, as appro treated as forfeited by the recipient gov-1
priate, at the discretion of the Secretary. emment, and shall be deposited in the!
(f) Procedure for effecting compli general fund of the Treasury. If the Sec-1
ance. (1) Whenever the Secretary deter retary determines that withholding
mines that a recipient government has from future entitlement payments is to- j
failed to comply with this section, he practicable, he may refer the matter to1
shall notify the Governor of the State in the Attorney General for appropriate |
which such unit is located of the non- civil action to require repayment of such I
compliance and shall request the Gover amount to the United States.
nor to secure compliance. I f within a
Jg ) Delegation. The Secretary may
reasonable time, not to exceed 60 days, from time to time assign to officials ot 1
the Governor fails, or refuses to secure the Department, or to officials of other
compliance, the Secretary is authorized: departments or agencies of the Govern
(i) To refer the matter to the Attorney ment with the consent of such depart
General of the United States with a rec ments or agencies, responsibilities ®
ommendation that an appropriate civil connection with the effectuation of the
action be instituted; (ii) to exercise the purposes of this section (other than the
powers and functions and the adminis review of initial decision of the adm inis
trative remedies provided by Title V I of trative law judge) including the achieve
the Civil Rights Act of 1964 (42 U .S.C . ment of effective coordination within tne
FEDERAL REGISTER. VOL. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
4925
RULES AND REGULATIONS
executive branch in the implementation
of Title V I of the Civil Rights Act of 1964
(42 U .S.C. 2000d).
! (h) Hearing procedure. Whenever a
procedure which requires due notice-and
opportunity for hearing is involved by
the Secretary to effect compliance under
this section, the procedural regulations
promulgated in Subpart P of this part
shall govern.
Subpart E— Fiscal Procedures and Auditing
§ 51.40 Procedures applicable to
use o f funds.
the
this part. Detail audits, reviews and
evaluations will be made on a sample
basis through inspection of records, and
of reports required under subpart B of
this part, and through on-site examina
tions, to determine whether the recipient
governments have properly discharged
their financial responsibilities and to
evaluate compliance with the Act and
the regulations of this part.
(b) Scope of audits. The scope of such
audits will include a review of entitle
ment fund transactions, accounts and
reports. In addition, the scope of such
audits will include, at a minimum, an
examination of the following areas:
(1) Compliance with assurances made
under § 51.10.
(2) Compliance with the requirement
that States must m aintain transfers to
local governments as required by section
107(b) of the Act.
(3) Compliance with the reporting re
quirements and accuracy of the, reports
submitted to the Secretary as set forth
in Subpart B of this part.
(4) Accuracy of responses to ques
tionnaires of the Bureau of the Census.
(5) Accuracy of the public records re
quired under § 51.13 (c).
(c) Reliance on State and local gov
ernment audits. It is the intention of the
Secretary to rely to the maximum extent
possible on audits of recipient govern
ments by State and local government
auditors and independent public ac
countants. The Secretary will accept such
audits when in his judgment this may
reasonably be done consistent with the
provisions of the Act and regulations of
this part, and provided:
(1) Audits are performed in accord
ance with generally accepted auditing
standards. Recipient governments are
encouraged to have such audits per
formed, to the extent practicable, in ac
cordance with standards for the Audit
of Governmental Organizations, Pro
grams, Activities and Functions issued by
the Comptroller General in June 1972.
(2) Audits include coverage as set
forth in paragraph (b) of this section.
(3) Audit workpapers and related
audit reports are retained for 3 years
after the close of the entitlement period
under audit, and are available upon re
quest to the Secretary and the Comp
troller General or to their representa
tives; and
(4) Audit reports shall contain a clear
statement of the auditor’s findings as to
compliance or noncompliance with the
requirements of the Act and the regula
tions of this part. Audit reports which
disclose or otherwise indicate a possible
failure to comply substantially with any
requirements of the Act or the regula
tions of this part will be submitted to the
Secretary by the Governor or chief ex
ecutive officer.
A recipient government which receives
entitlement funds under the Act shall:
(a) Establish a trust fund and deposit
all entitlement funds received and all
interest earned thereon in that trust
fund. The trust fund may be established
on the books and records as a separate
§51.33 Wage rates and labor standards. set of accounts, or a separate bank ac
v (a) Construction laborers and me count may be established.
(b) Use, obligate, or appropriate such
chanics. A recipient government which
receives entitlement funds under the Act funds (including any interest earned
shall require that all laborers and me thereon while in such trust fund) within
chanics employed by contractors or sub 24 months from date of the check unless
contractors in the performance of work permission is obtained from the Secre
on any construction project, 25 percent tary for a longer period within which the
or more of the costs of which project are funds may be utilized. Permission for an
paid out of its entitlement funds : Cl) W ill extension of time in which to utilize the
bepaid wages at rates not less than those funds must be obtained by application to
prevailing on sim ilar construction in the the Secretary. Such application will set
locality as determined by the Secretary forth the facts and circumstances sup
of Labor in accordance with the Davis- porting the need for more time and the
Bacon Act as amended (40 U .S .C . 276a— amount of additional time requested. The
276a^-7) ; and, (2) will be covered by Secretary may grant such extensions of
labor standards specified by the Secretary time as in his judgment appear neces
of Labor pursuant to 29 CFR Parts 1, 3, sary or appropriate.
(c) Provide for the expenditure of en
5,and 7.
(b)
Request for wage determination. titlem ent funds in accordance with the
In situations where the Davis-Bacon laws and procedures applicable to the ex
standards are applicable the recipient penditure of its own revenues.
government must file with the regional
(d) M aintain separate fiscal accounts
office of the U .S . Department of Labor, in such a manner as to :
a Standard Form 308 requesting a wage * (1) Permit the reports required by the
determination for each intended project Secretary to be prepared therefrom,
at least 30 days before the invitation for
(2) Permit the tracing of entitlement
bids, and must ascertain that the wage funds to their final expenditure,
determination issued and the contract
(3) Identify the amounts and sources
clauses required by 29 CFR 5.5 and 29 of nonentitlement funds used for m atch
CFR 5a.3 are incorporated in the con ing Federal grants after January 1,1972,
tract specifications. The recipient gov and the amounts of Federal grants thus
ernment must also satisfy itself that the obtained, and
¡successful bidder is made aware of his
(4) To provide a source of documenta
labor standards responsibilities under
tion sufficient to satisfy a compliance
theDavis-Bacon Act.
! (c) Government employees. A recipient audit performed pursuant to § 51.41.
government which employs individuals Such fiscal accounts shall be supported
whose wages are paid in whole or in part by the use oi fiscal, accounting, and in
from entitlement funds must pay wages ternal reporting procedures relative to
which are not lower than the prevailing entitlement funds as are used with re
rates of pay for persons employed in sim spect to expenditures from revenues de
ilar public occupations by the same em rived from the recipient government’s
ployer. However, this subsection shall own sources.
apply with respect to employees in any
(e) Provide to the Secretary and to the
category only if 25 percent or more of Comptroller General of the United
the wages of all employees of the recip States, on reasonable notice, access to
ient government in such category are and the right to examine such books,
paid from the trust fund established by documents, papers or records as the Sec
retary may reasonably require for the
itunder § 51.40(a).
purpose of reviewing compliance with
§51.34 Restriction on expenditures by the Act and the regulations of this part
Indian tribes and Alaskan native or, in the case of the Comptroller Gen
villages.
eral, as the Comptroller General may
Indian tribes and Alaskan native vil reasonably require for the purpose of re
compliance and operations
lages as defined in § 51.2 are required to viewing
under the Act.
expend entitlement funds only for the
benefit of members of the tribe or village § 51.41 Auditing and evaluation; scope
o f audits.
residing in the county area from which
S u bp art F— Proceedings fo r Reduction in
(a)
In general. The Secretary shall
the allocation of entitlement funds was
Entitlem ent, Withholding, o r R epaym ent
provide
for
such
auditing
and
evalua
o f Funds
originally made. Expenditures which are
tion as may be necessary to insure that
so restricted will not constitute a failure expenditures of entitlement funds by re § 51.50 Scope of subpart.
to comply with the requirement of § 51.- cipient governments comply with the re
The regulations of this subpart govern
32(a). jM
quirements of the Act and regulations o f the procedure and practice requirements
No. 35—-P t. n t —
2
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 2 2, 1973
4926
RULES AND REGULATIONS
Involving adjudications where the Act
requires reasonable notice and oppor
tunity for hearing.
§ 51.51
Liberal construction.
date of service of the complaint. The
complaint shall also contain notice that
a decision by default will be rendered
against the respondent in the event It
fails to file its answer as required.
The regulations in this subpart shall
be liberally construed to secure just, ex § 51.56 Service o f complaint and other
papers.
peditious, and efficient determination of
(a) Complaint. The complaint or a
the issues presented. The Rules of Civil
Procedure for the District Courts of the true copy thereof may be served upon
United States, where applicable, shall be the respondent by first-class m ail or by
a guide in any situation not provided for certified m ail, return receipt requested;
or controlled by this subpart, but shall be or it may be served in any other manner
liberally construed or relaxed when which has been agreed to by the respond
ent. Where the service is by certified
necessary.
§ 51.52 Reasonable notice and oppor m ail, the return Postal Service receipt
duly signed on behalf of the respondenttunity for hearing.
shall be proof of service.
Whenever the Secretary* has reason to
(b) Service of papers other than com
believe that a recipient government has plaint. Any paper other than the com
failed to comply with any section of the plaint may be served upon the respond
Act or of the provisions of this part, and ent or upon its attorney of record by
that repayment, withholding, or reduc first-class m ail. Such m ailing shall con
tion in the amount of an entitlement of stitute complete service.
a recipient government is required, he
(c) Filing of papers. Whenever the
shall give reasonable notice and oppor filing of a paper is required or permitted
tunity of hearing to such government in connection with a proceeding undér
prior to the invocation of any sanction this part, and the place of filing is not
under the Act.
specified in this subpart or by rule or
order of the administrative law judge,
§ 51.53 Opportunity for compliance.
the paper shall be filed with the Director,
Except in proceedings involving will Office of Revenue Sharing, Treasury De
fulness or those in which the public in partment, W ashington, D .C . 20226. A ll
terest requires otherwise, a proceeding papers shall be filed in duplicate.
under this part will not be instituted
(d) Motions and requests. Motions
until such facts or conduct which may and requests may be filed with the desig
warrant such action have been called to nated administrative law judge, except
the attention of the chief executive of that an application to extend the time
ficer of the recipient government in writ for filing an answer shall be filed with
ing and he has been accorded an oppor the Director, Office of Revenue Sharing,
tunity to demonstrate or achieve com pursuant to § 51.57(a).
pliance with the requirements of the Act
and the regulations of this part. I f the §51.57 Answer; referral to administra
tive law judge.
recipient government fails to meet the
requirements of the Act and regulations
(a) Filing. The respondent’s answer
within such reasonable time as may be shall be filed in writing-within the rime
specified by the Secretary, a proceeding specified in the complaint, unless on
shall be initiated. I f the recipient gov application ihe time is extended by the
ernment is a unit of local government, a Secretary. The respondent’s answer shall
copy of all written communications re be fiiéd in duplicate with the Director,
garding the alleged violation shall be Office of Revenue Sharing.
transmitted by the Secretary to the Gov
(b) Contents. The answer shall con
ernor of the State in which the unit of tain a statement of facts which con
local government is located,
stitute the grounds of defense, and it
shall -specifically admit or deny each
§ 51.54 Institution o f proceeding.
allegation set forth in the complaint, ex
A proceeding to require repayment of cept, that the respondent shall not deny
funds to the Secretary, or to withhold a material allegation in the complaint
funds from subsequent entitlement pay which it knows to be true; nor shall a
ments, or to reduce the entitlement of a respondent state that it is without suffi
recipient government, shall be instituted cient inform ation to form a belief when
by the Secretary by a complaint which in fact it possesses such inform ation.
names the recipient government as the The respondent may also state affirma
respondent.
tively special matters of defense.
§ 51.55 Contents o f complaint.
(c) Failure to deny or answer allega
(a) Charges. A complaint shall give a tion in the complaint. Every allegation
plain and concise description of the al in the complaint which is not denied in
legations which constitute the basis for the answer shall be deemed to be ad
the proceeding. A complaint shall be mitted and may be considered as proved,
deemed sufficient if it fairly informs the and no further evidence in respect of
respondent of the charges against it so such allegation need be adduced at a
that it is able to prepare a defense to the hearing.
(d) Failure to file answer. Failure to
charges.
(b) Demand for answer. Notification file an answer within the time prescribed
the complaint, except as the time for
shall be given in the complaint as to the in
answer is extended under paragraph (a)
place and time within which the re of this section, shall constitute an ad
spondent shall file its answer, which time mission of the allegations of the com
shall be not less than 30 days from the plaint and a waiver of hearing, and the
administrative law judge shall make his
findings and decision by default without
a hearing or further procedure.
(e) Reply to answer. No reply to the
respondent’s answer shall be required,
and new matter in the answer shai] y
deemed to be denied, but the Secretary
may file a reply in his discretion and!
shall file one if the administrative law)
judge so requests.
(f) Referral to administrative law\
judge. Upon receipt of the answer by the!
Director, or upon filing a reply if one!
is deemed necessary, or upon failure of)
the respondent to file an answer within!
the time prescribed in the complaint or
as extended under paragraph (a) of this
section, the complaint (and answer, if
one is filed) shall be referred to the ad
ministrative law judge who shall then
proceed to set a time and place for hear
ing and shall serve notice thereof upon
the parties at least 15 days 4n advance
of the hearing date.
§ 51.58
Supplemental charges.
I f it appears that the respondent inj
its answer falsely and in bad faith, denies
a m aterial allegation of fact in the com
plaint or states that it has no knowledge
sufficient to form a belief, when in fact
it does possess such information, or if it
appears that the respondent has know
ingly introduced false testimony during
the proceedings, the Secretary may
thereupon file supplemental charges
against the respondent. Such supple- ]
mental charges may be tried with other!
charges in the case, provided^ the re-i
spondent is given due notice thereof and)
is afforded an opportunity to prepare its)
defense thereto.
§ 51.59 Proof; variance; amendment oil
pleadings.
In the case of a variance between the
allegations in -a pleading and the evi
dence adduced in support of the plead
ing, the administrative law judge may
order or authorize amendment of the
pleading to conform to the evidence:
Provided, The party that would other
wise be prejudiced by the amendment is
given reasonable opportunity to meet the
allegation of the pleading as amended.
The administrative law judge shall make]
findings on any issue presented by the
pleadings as so amended.
.§ 51.60
Representation.
A respondent or proposed respondentj
may appear in person through its chief
executive officer or it may be represented!
by counsel or other duly authorized rep-)
resentative. The Department shall be|
represented by the General Counsel of
the Treasury.
§ 51.61 Administrative
powers.
law
judge;
(a ) Appointment. An adm inistrative
law judge, appointed as provided by sec
tion 11 of the Administrative Procedure
Act (5 U .S .C . 3105), shall conduct pro
ceedings upon complaints filed under
this subpart.
(•b) Powers of administrative law
judge. Among other powers provided by
law, the administrative law judge shall
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 2 2 , 1973
4927
RULES AND REGULATIONS
Itove authority, in connection with any
proceeding under this subpart, to do the
following'things:
(1) Administer oaths' and affirmaftions; I
(2) Make ruling upon motions and
¡requests.
[prior to the close of the hearing no ap
peal shall lie from any such ruling ex
cept, at the discretion of the adminis
trative law judge, in extraordinary
circumstances;
(3) Determine the time and place of
[hearing and regulate its course and con
duct. In determining the place of hear
ing the administrative law judge may
(lake into consideration the requests and
convenience of the respondent or its
[counsel;
(4) Adopt rules of procedure and
[modify the same from time to time as
[occasion requires for ¡the orderly disposi
tion of proceedings;
[ (5) Rule upon offers of proof, re
ceive relevant evidence, and examine
witnesses; :
[ (6) Take or authorize the taking of
depositions;
(7) Receive and consider oral or
written arguments on facts or law;
(8) Hold or provide for the holding
of conferences for the settlement or sim
plification of the issues by consent of the
parties;
(9) Perform such acts and take such
measures as are necessary or appropri
ate to the efficient conduct of any pro
ceeding; and
(10) Make
initial findings and
decision.
§51.62
Hearings.
%
(a) In général. The administrative
law judge shall preside at the hearing
on a complaint. Testimony of witnesses
shall be given under oath or affirmation.
The hearing shall be stenographically
recorded and transcribed. Hearings will
be conducted pursuant to section 7 of
the Administrative Procedure Act (5
Ü.S.C. 556).
(b) Failure to appear. I f a respondent
fails to appear at the hearing, after due
notice thereof has been served upon it or
upon its counsel of record, it shall be
deemed to have waived the right to a
hearing and the administrative law
judge may make his findings and deci
sion against the respondent by default.
(c) Waiver of hearing. A respondent
may waive the hearing by inform ing the
administrative law judge, in writing, on
or before the date set for hearing, that
it desires to waive hearing. In such event
the administrative law judge may make
his findings and decision based upon the
Pleadings before him . The decision shall
Plainly show that the respondent waived
hearing.
jpute. The administrative law judge shall
take sim ilar action, where it appears ap
propriate, throughout the hearing and
shall call and conduct any conferences
which he deems advisable with a view to
the sim plification, clarification, and dis
position of any of the issues involved.
§ 51.64
Evidence.
and places mutually agreed to by the
parties.
(b) Written interrogatories. When a
deposition is taken upon written inter
rogatories, any cross-examination shall
be upon written interrogatories. Copies
of such written interrogatories shall be
served upon the other party with the no
tice, and copies of any written cross
interrogatories shall be mailed by first
class mail or delivered to the opposing
party at least 10 days before the date
of taking the depositions, unless the par
ties mutually agree otherwise. A party
upon whose behalf a deposition is taken
must file it with the administrative law
judge and serve one copy upon the op
posing party. Expenses in the reporting
of depositions shall be borne by the party
at whose instance the deposition is
taken.
(a) In general. Any evidences which
would be admissible under the rules of
,■evidence governing proceedings in m at
ters not involving trial by jury in the
Courts of the United States, shall be ad
missible and controlling as far as pos
sible: Provided that, the administrative
law judge may relax such rules in any
hearing when in his judgment such re
laxation would not impair the rights of
either party and would more speedily
conclude the hearing, or would better
serve the ends of justice. Evidence which §,51.66 Stenographic record; oath o f
is irrelevant, immaterial or unduly repe
reporter; transcript.
titious shall be excluded by the admin
(a)
In general. A stenographic record
istrative law judge.
(b) Depositions. The deposition of any shall be made of the testimony and pro
witness may be taken pursuant to § 51.65 ceedings, including stipulations and ad
missions of fact in all proceedings, but
and the deposition may be admitted.
(c) Proof of documents. Official docu not arguments of counsel unless other
ments, records, and papers of a respond wise ordered by the administrative law
ent shall be admissible as evidence judge. A transcript of the proceedings
without the production of the original (and evidence) at the hearing shall be
provided that such documents, records made in all cases.
(b) Oath of reporter. The reporter
and papers are evidenced as the original
by a copy attested or identified by the making the stenographic record shall
chief executive officer of the respondent subscribe an oath before the adm inistra
or the custodian of the document, and tive law judge, to be filed in the record of
the case, that he (or "she) will truly and
contain the seal of the respondent.
(d) Exhibits. I f any document, record, correctly report the oral testimony and
paper, or other tangible or m aterial thing proceedings at . such hearing and accu
is introduced in evidence as ân exhibit, rately transcribe the same to the best of
the administrative law judge may au his (or her) ability.
(c) Transcript. In cases where the
thorize the withdrawal of the exhibit
subject to any conditions he deems hearing is stenographically reported by
proper. An original document, paper or a Government contract reporter copies
record need not be introduced, and a of the transcript may be obtained from
copy duly certified (pursuant to para the reporter at rates not to exceed the
graph (b) of this section) shall be maximum rates fixed by contract be
tween the Government and the reporter.
deemed sufficient.
the hearing is stenographically
(e) Objections. Objections to evidence Where
by a regular employee of the
shall be in short form , stating the reported
Department of the Treasury, a copy
grounds of objection relied upon, and thereof
be supplied to the respond
the record shall not include argument ent or itswill
counsel at actual cost of dupli
thereon, except as permitted by the ad cation. Copies
exhibits introduced at
ministrative law judge. Rulings on such the hearing or of
at the taking of deposi
objections shall be a part of the record. tions will be supplied
to the parties upon
No exception to the ruling is necessary the payment of a reasonable
fee (31
to preserve the right of either party to U .S .C . 483(a)).
the proceeding.
§ 51.65
Depositions.
(a) In general. Depositions for use at
a hearing may, with the written approval
of the administrative law judge, be taken
by either the Secretary or the respond
ent or their duly authorized representa
tives. Depositions may be taken upon
oral or written interrogatories, upon not
less than 15 days written notice to the
other party, before any officer duly au
§ 51.63 Stipulations.
thorized to administer an oath for gen
The administrative law judge shall eral purposes. Such written notice shall
prior to or at the beginning of the hear State the names of the witnesses and the
ing require that the parties attempt to time and place where the depositions are
arrive at such stipulations as will elimi to be taken. The requirement of 15 days
nate the necessity of taking evidence written notice may be waived by the par
"with respect to allegations of facts con ties in writing, and depositions may then
cerning which there is no'substantial dis- be takën from the persons and at times
§ 51.67 Proposed findings and conclu
sions.
Except in cases where a respondent
has failed to answer the complaint or
has failed to appear at the hearing, or
has waived the hearing, the adm inistra
tive law judge, prior to making his ini
tial decision, shall afford the parties a
reasonable opportunity to submit pro
posed findings and conclusions and sup
porting reasons therefor.
§ 51.68 Initial decision of the adminis
trative law judge.
As soon as practicable after the con
clusion of a hearing and the receipt of
any proposed findings and conclusions
timely submitted by the parties, but in no
event later than 30 days after the sub-
FEDERAL REGISTER, VO L. 38, N O . 35— THURSDAY, FEBRUARY 22, 1973
4928
RULES AND REGULATIONS
mission of proposed findings and con
clusions if they are submitted, the ad
ministrative law judge shall make his
initial decision in the case. The initial
decision shall include a statement of the
findings of fact and the conclusions
therefor, as well as the reasons or basis
therefor, upon all the m aterial issues
of fact, law or discretion presented on
the record, and shall provide for one of
the following orders:
(a) An order that the respondent pay
over to the Secretary an amount equal
to 110 percent of any amount determined
to be improperly expended by the re
spondent in violation of § 51.31 relating
to priority expenditures; or
(b) An order that the respondent pay
over to the Secretary an amount equal
to the amount of entitlement funds deter
mined to be expended in violation of the
Act and the provisions of this part; or
(c) An order that the Secretary with
hold from subsequent entitlement pay
ments to the respondent an amount equal
to the amount of entitlement funds de
termined to be expended in violation of
the Act and the provisions of this part; or
(d) An order that the entitlement of a
recipient government be reduced and
the amount of such reduction to be with
held from subsequent entitlement pay
ments; or
(e) An order dismissing the proceed
ings.
transm itted to the respondent or its
counsel of record. Upon the filing of an
appeal and a reply brief, if any, the Sec
retary shall make the final agency deci
sion on the record of the administrative
law judge submitted to him .
(b) Appeal by the Director of the Office
of Revenue Sharing. In the absence of an
appeal by the respondent, the Director
of the Office of Revenue Sharing may, on
his own motion, within 45 days after the
initial decision, serve on the respondent
by certified m ail a notice that he will ap
peal the decision to the Secretary, for
review. W ithin 30 days from such notice,
the Director of the Office of Revenue
Sharing or his counsel will file with the
Secretary his exceptions to the Initial
decision and his supporting reasons
therefor. A copy of the exceptions shall be
transmitted to the respondent or its
counsel of record, who, within 30 days
after receipt thereof, may file a reply
brief thereto with the Secretary and sub
m it a copy to the Director of the Office
of Revenue Sharing or his counsel. Upon
the filing of a reply brief, if any, the Sec
retary will make the final agency decision
on the record of the administrative law
judge.
(c) Absence of appeal. In the absence
of either exceptions by the respondent
or a notice of appeal by the Director of
the Office of Revenue Sharing within the
time set forth in paragraphs (a) and (b)
of this section, or a review initiated by
§ 51.69 Certification and transmittal of the Secretary on his own motion within
record and decision.
the time allowed to the Director of the
After reaching his initial decision, the Office of Revenue Sharing, the initial de
administrative law judge shall certify to cision of the administrative law judge
the complete record before him and shall shall constitute the final decision of the
immediately forward the certified record, Department.
together with a certified copy of his initial § 51.72 Decision o f the Secretary.
decision, to the Secretary. The adminis
On appeal from or review of the initial
trative law judge shall serve also a copy
of the initial decision by certified m ail to decision of the administrative law judge,
the chief executive officer of the respond the Secretary will make the final agency
decision. In making his decision the Sec
ent or to Its attorney of record.
retary will review the record or such por
§ 51.70 'What constitutes record.
tions thereof as may be cited by the par
The transcript of testimony, pleadings ties to permit lim iting of the issues. The
and exhibits, all papers and requests filed Secretary may affirm, modify, or revoke
in the proceeding, together with all find the findings and initial decision of the
ings, decisions and orders, shall con administrative law judge. A copy o f the
stitute the exclusive record in the matter. Secretary’s decition shall be transmitted
immediately to the chief executive officer
§ 51.71 Procedure on review o f decision of the respondent or its counsel of record.
o f administrative law judge.
Effect o f order o f repayment or
(a) Appeal to the Secretary. W ithin 30 § 51.73
withholding o f funds.
days from the date of the initial decision
In case the final order against the re
and order of the administrative law
judge, the respondent may appeal to the spondent is for repayment of funds to
Secretary and file his exceptions to the the United States, such amount as de
Initial decision and his reasons therefor. termined by the order shall be repaid
The respondent shall transmit a copy of upon request by the Secretary. To the ex
his appeal and reasons therefor to the tent that the respondent fails to do so
Director of the Office of Revenue Shar upon request of the Secretary, the Secre
ing, who may, within 30 days from receipt tary shall withhold from subsequent en
of the respondent’s appeal, file a reply titlement payments to the respondent an
brief in opposition to the appeal. A copy amount equal to the amount not repaid.
of the reply brief, if one is filed, shall be In case the final order against the re
spondent is for the withholding of an
amount of subsequent entitlement payments, such amounts as ordered shall be
withheld by the Director of the Office of
Revenue Sharing after notice to the chiefI
executive officer of the recipient government that if it fails to take corrective
action within 60 days after receipt of
the notice, further entitlement payments
will be withheld until the Secretary is
satisfied that appropriate corrective ac
tion has been taken and there is full
compliance with the Act and regulations
of this part. In every case in which the
respondent is a unit of local government,
a copy of the final order and notice shall
be submitted to the Governor of the
State in. which the respondent is located.
§ 51.74
Publicity o f proceedings.
(a) In general. A proceeding con
ducted under this subpart shall be open
to the public and to elements of the news
media provided that, in the judgment of
the administrative law judge, the pres
ence of the media does not detract from
the decorum and dignity of the proceed
ing.
(b) Availability of record. The record
established in any proceeding conducted
under this subpart shall be made avail
able to inspection by the public as pro
vided for and in accordance with regu
lations of the Department of the Treas
ury pursuant to 31 CFR Part 1.
(c) Decisions of the administrative law
judge. The statement of findings and the
initial decision of the administrative law
judge in any proceedings, whether or not
on appeal or review, shall be indexed and
maintained by the Director of the Office
of Revenue Sharing and made available
for inspection by the public at the public
documents room of the Department. If
practicable, the statement of findings
and the decisions of the administrative
law judge shall be published periodically
by the Department and offered for sale
through the Superintendent of Docu
ments.
§ 51.75
Judicial review.
Actions taken under administrative
proceedings pursuant to this subpart
shall be subject to judicial review pur
suant to section 143 of Subtitle C of the
A ct. I f a respondent desires to appeal a
decision of the administrative law judge
which has become final, or a final order
of the Secretary for review of appeal, to
the U .S . Court of Appeals, as provided by
law, the Secretary, upon prior notifica
tion of the filing of the petition for re
view, shall have prepared in triplicate, a
complete transcript of the record of the
proceeding, and shall certify to the cor
rectness of the record. The original cer
tificate together with the original record
shall then be filed with the Court of Ap
peals which! has jurisdiction.
[FR Doc.73-3355 Filed 2-16-73;2:29 pm]
FEDERAL REGISTER, VO L. 3 8, N O . 35— THURSDAY, FEBRUARY 2 2, 1973
‘TELEPHONE W04-2Q41
1
FOR I M M E D I A T E
February
RELEASE
22,
1973
W I T H H O L D I N G O F A P P R A I S E M E N T OF
DEFORMED CONCRETE REINFORCING BARS
OF NON-A L L O Y STEEL F R O M M E X I C O
A s s i s t a n t S e c r e t a r y of t h e T r e a s u r y E d w a r d L. M o r g a n
a n n o u n c e d t o d a y t h e w i t h h o l d i n g of a p p r a i s e m e n t o f d e f o r m e d
c o n c r e t e r e i n f o r c i n g b a r s of n o n - a l l o y s t e e l f r o m M e x i c o
p e n d i n g a d e t e r m i n a t i o n as to w h e t h e r t h e y a r e b e i n g s o l d at
less t h a n f a i r v a l u e w i t h i n t h e m e a n i n g o f t h e A n t i d u m p i n g A c t ,
1921, as a m e n d e d .
T h e s e b a r s a r e long, r o u n d a n d s o l i d a n d
are e m b e d d e d in c o n c r e t e s t r u c t u r e s , s u c h as h i g h w a y s , r u n w a y s ,
driveways, buildings
a n d p a t i o s to i n c r e a s e r e s i s t a n c e to
tension, c o m p r e s s i o n and ot h e r forces.
The decision will
F e b r u a r y 23, 1973.
appear
in t h e F e d e r a l
Register
of
U n d e r t h e A n t i d u m p i n g A c t , t h e S e c r e t a r y o f t h e T r e a s u r y is
required to w i t h h o l d a p p r a i s e m e n t w h e n e v e r he has r e a s o n a b l e
c a u s e t o b e l i e v e or s u s p e c t t h a t s a l e s at l e s s t h a n f a i r v a l u e
may be tak i n g place.
A f i n a l T r e a s u r y d e c i s i o n in t h i s i n v e s t i g a t i o n w i l l b e
made w i t h i n th r e e months.
A p p r a i s e m e n t w i l l be w i t h h e l d for a
p e r i o d n o t t o e x c e e d s i x m o n t h s f r o m t h e d a t e of p u b l i c a t i o n of
the " W i t h h o l d i n g of A p p r a i s e m e n t N o t i c e " in t h e F e d e r a l R e g i s t e r .
U n d e r t h e A n t i d u m p i n g A c t , a d e t e r m i n a t i o n of s a l e s in t h e
United States at less than fair va l u e requires that the case
be r e f e r r e d to the T a r i f f C o m m i s s i o n , w h i c h w o u l d c o n s i d e r
whether an A m e r i c a n i n dustry was be i n g injured.
B o t h s a l e s at
less t h a n f a i r v a l u e a n d i n j u r y m u s t b e s h o w n to j u s t i f y a
f i n d i n g o f d u m p i n g u n d e r t h e law.
U p o n a f i n d i n g of d u m p i n g ,
a s p e c i a l d u t y is a s s e s s e d .
D u r i n g t h e p e r i o d of c a l e n d a r y e a r 1 972, i m p o r t s of d e f o r m e d
c o n c r e t e r e i n f o r c i n g b a r s of n o n - a l l o y s t e e l f r o m M e x i c o w e r e
v a l u e d a t a p p r o x i m a t e l y $ 1.7 m i l l i o n .
# # #
fP
m'•h m mmsm
Department of theTREASURY
tSHINGTON. 0.C. 20220
TELEPHONE W04-2041
FOR RELEASE AT 2 ;OQ P 0M 0
STATEMENT BY THE HONORABLE JOHN M 0 HENNESSY
ASSISTANT SECRETARY OF THE TREASURY FOR
INTERNATIONAL AFFAIRS, BEFORE THE
SUBCOMMITTEE ON AFRICA AND
THE SUBCOMMITTEE ON INTERNATIONAL ORGANIZATIONS
OF THE HOUSE FOREIGN AFFAIRS COMMITTEE
FEBRUARY 22, 1973, AT 2:00 P oM 0
Mr. Chairmen and Members of the Subcommittees:
I am the Assistant Secretary of the Treasury for
International Affairs.
The Office of Foreign Assets Control
which administers the Rhodesian Sanctions Control Regulations
is under Treasury jurisdiction.
My role in these hearings
concerns the impact of these Regulations on commodities being
imported from Rhodesia under the Byrd Amendment.
The Treasury's Rhodesian Sanctions Regulations imple
ment Executive Orders 11322 and 11419.
These Orders were
issued by the President to carry out U.S. obligations in
connection with the UN Security Council's Resolutions (232
and 253) calling on all UN members to impose sanctions on
Rhodesia.
The Treasury Regulations prohibit, among other things,
the importation of all merchandise of Southern Rhodesian
S-124
2
origin, unless licensed.
As you know, the Congress
enacted §503 of the Military Procurement Act of 1971
(Public Law 92-156) in the fall of 1971.
This section,
the "Byrd Amendment" requires the President to allow
the importation of strategic and critical materials
from non-Communist countries such as Rhodesia, so long
as such commodities are not embargoed from Communist
countries.
A general license (§530.518 of the Treasury Regula
tions) was issued by direction of the President on
January 24, 1972.
Amendment".
Its purpose is to implement the "Byrd
Thus, it authorizes the importation of
chromium ore and concentrates of Southern Rhodesian
origin; ferrochrome produced in any country from such
chromium ore or concentrates ; and any other material of
Southern Rhodesian origin determined to be strategic and
critical pursuant to the provisions of the Strategic and
Critical Materials Stock Piling Act, so long as the
importation of such material from any Communist country is
not prohibited.
The general license contains two conditions.
First,
purchases of Rhodesian commodities may not be made at
prices in excess of the world market price.
The purpose
3
of this condition is to preclude illegal transfers of
funds in the form of excessive purchase-price payments.
The second condition is a requirement for reports to be
filed with the Treasury of the details of imports under
the general license.
The license permits the importation from Southern
Rhodesia of any commodity which has been determined to
be '‘strategic and critical" by the OEP pursuant to the
requirements of the Stock Piling Act.
The most recent
list of "critical and strategic" materials was published
by OEP in the Federal Register of February 26, 1972.
A
copy of this list is attached as Appendix 1.
Any commodity on this list is allowed to be imported
freely, since there is no commodity on the list the
importation of which is prohibited from Communist countries.
For example, there are no existing restrictions in effect
on importations of any commodities from the USSR, the
Communist countries of Eastern Europe, or the PRC.
(Cuba,
North Viet Nam and North Korea are subject to total import
embargos).
There is no restriction in the general license on the
purpose for which a commodity allowed to be imported is to
be used.
Commodities which have been imported from
- 4 -
Southern Rhodesia, under the general license, are the
following:
asbestos and asbestos fiber
beryllium ore
chrome ore
ferrochrome (high carbon)
ferrochrome (low carbon)
ferrochromium silicon
nickel cathodes
A table is attached as Appendix II, which summarizes
each commodity imported under the general license.
The table shows that the total value of all imports
of strategic commodities since the enactment by Congress
of the Byrd Amendment is $13,047,662.
The principal
imports were nickel cathodes ($4,439,067); high carbon
ferrochrome ($2,977,529); and chrome ore ($2,569,654).
Other imports consisted of low carbon ferrochrome, ferro
chrome silicon, beryllium ore and asbestos fibers.
APPENDIX I
4123
NOTICES
OFFICE OF EMERGENCY
PREPAREDNESS
LIST OF STRATEGIC AND CRITICAL
MATERIALS
Pursuant to section 2(a) of the
Strategic and Critical Materials Stock
piling Act, a s amended (Public Law 520,
79th Congress), the Director of O E P is
authorized and directed to determine
from time to time which materials are
strategic and critical under the provi
sions of this Act. Listed below are the
materials that have been determined to
be strategic and critical under the provi
sions of this Act.
1. Aluminum.
2. Aluminum Oxide:
a. Aluminum oxide, fused, crude.
b. Aluminum oxide, abrasive grain.
3. Antimony.
4. Asbestos, Amosite.
5. Asbestos, Chrysotile.
, 6. Bauxite, metal grade, Jamaica type.
7. Bauxite, metal grade, Surinam type.
8. Bauxite, refractory grade.
9. Beryl:
a. Beryl ore.
b. Beryllium copper master alloy.
c. Beryllium metal.
10. Bismuth.
11. Cadmium.
■ 12. Castor oil:
a. Castor oil.
b. Sebacic acid.
13. Chromite, chemical grade.
14. Chromite, metallurgical grade:
à. Chromite, metallurgical grade.
b. Chromium, i'erro. high carbon.
c. Chromium, ferro. low carbon.
d. Chromium, ferro, silicon.
15. Chromite, refractory grade.
16. Chromium, metal.
17. Cobalt.
18. Columbium:
a. Columbium concentrates.
b. Columbium carbide powder.
c. Columbium, ferro.
d. Columbium, metal.
19. Copper :
a. Copper oxygen-free high conductivity.
b. Copper, other.
c. Beryllium copper master alloy.
20. Cordage fibers, Abaca.
21. Cordage fibers, Si3al.
.22. Diamond dies, small :
a. Smaller than 0.0004 inch.
b. From 0.0004 to 0.00059 inch.
c. From O.OOOG to 0.00079 inch.
23. Diamond, industrial: crashing bort.
24. Diamond, industrial : stones.
25. Feathers and Down :
a. Down.
b. Feathers.
26. Fluorspar, acid grade.
27. Fluorspar, metallurgical grade.
28. Graphite, natural—Ceylon, Amorphous
lump,
29. Graphite, natural—Malagasy, crystal
line:
a. Graphite, natural—Malagasy, crystal
line fines.
b. Graphite, natural—Malagasy, crystal
line flakes.
30. Graphite, natural—other than Ceylon
&nd Malagasy crystalline.
31. Iodine.
32. Jewel bearings.
33. Lead.
34. Manganese, battery grade, natural ore.
35. Manganese, battery grade, synthetic
dioxide.
36. Manganese ore, chemical grade, type A.
37. Manganese ore, chemical grade, type B.
38. Manganese ore. metallurgical grade:
a. Manganese ore, metallurgical grade.
b. Manganese, Ferro, high carbon.
c. Manganese, Ferro, low carbon.
d. Manganese. Ferro, medium carbon,
e. Manganese Silicon.
f. Manganese metal, Electrolytic.
39. Mercury.
40. Mica, Muscovite block, stained and
better.
41. Mica, Muscovite, film, first and second
qualities.
42. Mica, Muscovite splittings.
43> Mica. Phlogopite block.
44. Mica. Phlogopite splittings.
45. Molybdenum:
a. Molybdenum disulphide.
b. Molybdenum, ferro.
c. Molybdic oxide.
46. Nickel.
47. Opium:
a. Opium gum.
b. Opium, alkaloids and salts.
48. Platinum group metals, Iridium.
49. Platinum group metals, Palladium.
50. Platinum group metals, Platinum.
51. Pyrethrum.
52. Quartz crystals.
53. Qulnldine.
54. Quinine.
55. Rubber.
56. Rutile.
57. Sapphire and ruby.
58. Shellac.
59. Silicon carbide, crude.
60. Silver.
61. Sperm Oil.
62. Talc, Steatite block and lump.
63. Tantalum:
a. Tantalum minerals.
b. Tantalum carbide powder.
c. Tantalum metal.
64. Thorium oxide.
65. Tin.
66. Titanium sponge.
67. Tungsten:
a. Tungsten ores and concentrates.
b. Tungsten carbide powder.
c. Tungsten, ferro.
d. Tungsten metal powder, carbon re
duced.
e. Tungsten metal powder, hydrogen re
duced.
- 68. Vanadium:
a. Vanadium, ferro.
b. Vanadium pentoxides.
69. Vegetable Tannin extract. Chestnut.
70. Vegetable Tannin extract, Quebracho.
71. Vegetable Tannin extract, Wattle.
72. Zinc.
D a te d : F e b r u a r y 18 1972.
G. A. Lincoln,
Director,
Office of Eviergency Preparedness.
[FR Doc.72-2911 Filed 2-25-72;8:51 am]
SECURITIES AND EXCHANGE
COMMISSION
[812-3058]
E. I. D U P O N T DE N E M O U R S A N D C O .
N o tic e o f F ilin g o f A p p lic a tio n f o r
O r d e r E x e m p tin g P ro p o s e d T ra n s
a c tio n
F e b r u a r y 18, 1972.
N o tic e is h e re b y g iv e n t h a t E . L d u
P o n t d e N em o u rs a n d C o . ( A p p lic a n t ) ,
a Delaware corporation, has filed an ap
plication pursuant to Section 17(b) of
the Investment Company Act of 1940
(Act) for an order exempting from the
provisions of section 17(a), the proposed
grant to M itsui Fluorochemicals Co.,
Ltd. (formerly Nitto Fluorochemicals
Co., Ltd.) (hereinafter M F C ), a Ja p a
nese corporation, of exclusive rights in
Japan to certain technical inform ation
and Japanese patents required for the
m anufacture and sale by M FC of certain
fluorocarbon plastic m aterials.
A l l interested persons are referred to
the application on file with the Com
mission for a fu ll statement of the repre
sentations contained therein, which are
summarized below.
Christiana Securities Co. (Christiana),
a registered closed-end investment com
pany, owns approximately 28.4 percent
of the outstanding common stock of Ap
plicant, which in turn owns 50 percent
of the outstanding common stock of
M FC. Under section 2(a)(9) of the A ct,
Applicant and M FC are presumed to be
controlled by Christiana and under sec
tion 2(a)(3) of the A ct, are also affil
iated persons of Christiana.
M FC was organized in April of 1963
pursuant to a 1962 agreement between
Applicant and Nitto Fluorochemicals Co.,
Ltd. (N itto), whereby each would have a
50 percent interest in M FC . In 1966,
Nitto sold its 50 percent interest in M FC
to M itsui Petrochemical Industries, Ltd.
and M FC assumed its present name.
Under the 1962 agreement between Ap
plicant and Nitto, which became effective
upon M FC ’s formation in 1963. Applicant
provided M FC, exclusively in Jap an , with
certain technical inform ation and an
exclusive license to m anufacture speci
fied types of fluorocarbon plastic m ate
rials including certain polymeric m ate
rials (hereinafter 1963 Polym ers). In
return for the above mentioned inform a
tion and license. M FC agreed to pay to
Applicant a 5 percent royalty on all 1963
Polymers sold by it during a 10 year pe
riod scheduled to end June 30, 1975, but
which m ight be extended to no later than
June 30, 1979. Applicant represents that
because the 1962 agreement was entered,
into prior to the time of any affiliation
between it and M FC, it was not necessary
to file an application pursuant to, nor
were the transactions described above in
violation of, the provisions of section 17
of the A ct.
The proposed transaction for which
Applicant has requested an exemptive
order involves an agreement between Ap
plicant and M FC dated April 21. 1971,
whereby Applicant will provide M FC
with certain additional teclm ical infor
mation required to manufacture high
surface area fluorocarbon polymeric
m aterials (HSA Polymers; and will grant
to M FC and any sublicensee of M FC an
exclusive license in Japan to import,
make, use, and sell U S A Polymers. Ap
plicant will reserve to itself and to its
customers the right to import, use or sell
in Japan any quantity of H SA Polymers
made by Applicant, including any article
or product made using Applicants’ H SA
Polymers as an intermediate.
FEDERAL REGISTER, VOL. 37, N O . 39— SATURDAY, FEBRUARY 2 6 , 1972
APPENDIX II
Table of strategie and critical commodities
imported from Rhodesia under §530.518 of the Rhodesian
Sanctions Regulations between January 24, 1972 and
January 12 1973.
,
Commodity
Weight
Asbestos
360,000
Beryllium Ore
Chrome Ore
Ferrochrome
High Carbon
Ferrochrome
bow Carbon
Ferrochrome
Silicon
Nickel Cathodes
Total
Value
lbs.
53,519 l b s .
$
87,900
7,868
1811,723,992 lbs.
2,822,930
36,1129,610 lbs.
2,990,713
7,224,190 l b s .
1*1,388,493 lbs.
3,471,143 lbs.
246,650,947 l b s .
1 ,339,165
1 ,634,927
4,412,067
$ 13 ,295,570
Departmentof
I# Ü T O N
î D.C
^T
20220
T E L E P H O N E W 04-2041
FOR RELEASE 6:30 P. M.
February 22, 1973
RESULTS OF TREASURY’S MONTHLY BILL OFFERING
Tiie Treasury Department announced that the tenders for $1,800,000,000,
or thereabouts, of 349 -day Treasury bills to be dated February 28, 1973 3 end
to nature February 12, 1974 , which were offered on February "15, 1973 , ftere
opened at the Federal Reserve Banks today.
The details of this issue are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
High
Low
Average
- 94.203
- 94.107
- 94.134
Approx, equiv.
Approx, equiv.
Approx, equiv.
annual rate 5.980$
annual rate 6.079$
annual rate 6.051$
per annum
per annum
per annum
l/
(l9 $ of the amount bid for at the low price was accepted)
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Federal Reserve
District
Boston
New York
Philadelphi a
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
Total
Applied for
$
62,385,000
2,530,485,000
10,880,000
63.075.000
35.225.000
4,410,000
332,505,000
25.780.000
6,355,000
24.505.000
29.590.000
129,225,000
$3,254,420,000
l/ This is on a bank discount basis.
Total
Accepted
$
31,385,000
1,428,430,000
880,000
48.075.000
18.225.000
4.410.000
207,005,000
18.780.000
355,000
18.405.000
6.590.000
18.225.000
$1,800,765,000
2/
The equivalent coupon issue yield is 6.42$.
2J Includes $27,765,000
entered on a noncompetitive basis and accepted in full
at the average price shown above.
PRESS CONFERENCE
WITH
THE H O N O R A B L E PAU L V O L C K E R
U N D E R S E C R E T A R Y OF T H E T R E A S U R Y
AND
MEMBERS
OF THE PRESS
New York City, New York
Friday, February 16, 1973
-n.
i
MODERATOR:
Ladies and gentlemen, I'd like to
welcome you this morning.
I want to pay particular thanks
to Mr. Bill Strieker of the Foreign Press Center, who has
been so kind in making the arrangements,and to that extent
I would like to extend a special welcome to the foreign
members of the Press Corps that are here this morning, and
a special invitation for your questions.
At this point I would like to introduce Undersec
retary Paul Volcker, who has added a few more miles to a
31,000-odd mile visit in a very short period of time, and
you're all familiar with that, I'm sure.
At this point, he
has Indicated he would like to make a few opening, informal
remarks, and then we can go directly to questions.
We are,
obviously, on the record.
Mr. Volcker.
SECRETARY VOLCKER:
I have nothing extensive to say
at the start, other than to say that I am glad to be here
with you and expose myself to your questions.
I think I would just say that, out of the turmoil
in markets in recent weeks, I think we have a constructive
result that is directed toward the needs of the situation;
directed toward, of course, the immediate exchange market
situation but directed toward the underlying problem of the
disequilibrium that has persisted in our payments, the dis
equilibrium in payments of some other important countries
2
1
We've taken an action that certainly doesn't answer
2
all of the problems of the situation, but I think does give
5
a positive thrust —
4.
adjusting our payment situation and restoring a better
.5
equilibrium in the world economy, and provides, I think, a
6
better springboard
7
monetary negotiations and the international trade negotiations,
S
which can go on and we hope,of course, build the structure of
&
world trade and payments consistent with the interests of the
10
world economy, not just the United States economy in a free
n
and open trading and monetary order.
X2
is all about in a sense..
IS
helped push us towards that goal.
an important
positive thrust —
1
2
to
1
5
That's what the game
7
8
9
1
I think the actions we took recently
.v; ;;
<
^
I think that's all I have to say initially, so why
1
1
don't you go ahead with any questions you have.
1
QUESTION:
Secretary Shultz said yesterday that the
1
17
United States was seeking a further depreciation of the dollar,
18
not by a new devaluation, but in the further play of currency
19;
exchange.
20
two devaluations, 8 1/2 percent in December 1971 and 1*0
21
percent now will be enough, will be sufficient to reduce the
22
balance of payments and balance of trade deficits?
23
6
1
16:
I
and atmosphere for both international
1<
14;
15.
4
1
Does this mean that you do not think that those
SECRETARY VOLCKER:
I must say, I didn't understand
24
that story as I read it in the paper this morning, and I was
25
not there during that conversation.
But let me just say.
]
]
3
1
2
.5
this action we took, combined with the earlier Smithso
nian adjustments, we are satisfied provide in the exchange
rate area a very reasonable basis for looking toward a
4
restoration of equilibrium, which is going to take some time
5
It is going to depend upon our domestic performance; it's
6
going to depend upon other factors in the situation.
7
But so far as exchange rates are concerned, I want
8
to express full satisfaction with what has been accomplished.
9
Now, I suspect what may have lain behind some of what seemed
10
to me a somewhat confused story, was the evident fact that a
11
number of currencies are floating
12
exchange rate that we can appraise precisely.
13
may float a little further in one direction or another, and
14
in some cases there could be some further appreciation, but
15
so far as the basic structure is concerned, the basic action
16
that we took, we thought it was what the situation called for.
so we don't have a fixed
Some of those
17
I must say, in that connection, I seem to read as
18
many comments that the dollar is undervalued as overvalued,
19
and perhaps that's the way it should be.
.20
21
22
QUESTION:
Do you see a return to a positive payments
balance in 1973?
SECRETARY VOLCKER:
No.
I think we cannot expect
23
that kind of quick response in the trade position to this kind
24
of action, and in terms of our trade position, in terms of
25
our basic balance, I think we have to anticipate we're going
4
1
to b e in d e f i c i t
2
a deficit position
5
seven billion dollars.
4
the n e i g h b o r h o o d
5
You're
6
period,
and
7
exchange
8
take,
9
the
f or
some period
in t r a d e o f b e t w e e n
We
six
are
and one
We had a basic d e f i c i t
not going
changes,
can only work
to c o r r e c t t h a t
period of time
11
happen.
12
anything we've
and indeed,
seems
13
a t it in a t w o y e a r
14
rate changes.
15
it's
in
long
it's
actions
the
that
that you
system and
time,
as y o u w a i t
can
restore
and
that
f o r i t to
p o p u l a r to l o o k
I think
to t a k e
floats
terribly
perspective j u s t
to have
the
in terms
full
of exch a n g e
effects
f l o w through,
longer t han two years.
QUESTION:
16
and
last year
learned,
most
their way through
X t h i n k i t's
going
half
from
in a t w e l v e m o n t h
flov/s i n a b a l a n c e d w a y o v e r a p e r i o d o f
10
starting
of ten or e l e v e n b i l l i o n dollars.
if t h e r e ' s
rate
ahead.
Do y o u
and do you
favor
17
further
18
international monetary meeting
19
as t h e
floats or
see w i t h i n
the
stopping
the next m o n t h
and will you
of
an
sponsor
it,
such
Smithsonian?
SECRETARY VOLCKER:
20
21
There will
22
less
23
C o m m i t t e e of Twenty,
24
Deputies'
25
which had been
be meetings,
continuing
level
basis,
and
Such
there have
particularly
and there will
the M i n i s t e r i a l
scheduled
in g e n e r a l
as t h e
Smithsonian,
been meetings
in t h e
no.
o n a m o r e or
framework of
be m e e t i n g s
level
of
terms
for
both
that
some
the
at t he
group,
time,
in
5
'
1
the months
1
ah e a d .
This
There's
no q u e s t i o n
is a i m e d p r i m a r i l y
a b o u t it.
at the
longer-term reform
5
effort,
4.
kind of question
I
role
is
6
what
room there
7
temporarily or more
a
for tho s e meetings.
9;
QUESTION:
The
Shultz
story
to g e t o f f
the
floats
and get back
and
for
ro
countries
M
is
that you raised
fixed rates,
what
should be
for
i n i t i a l l y as
the band
to w h a t
should be
the
about
f l o a t i n g of c u r r e n c i e s ,
indefinitely.
These are
all
inferred
on
the
them,
either
the
agenda
that we wanted
into parities,
that correct?
12:
13:
in t h a t e f f o r t o f c o u r s e w e h a v e t o d i s c u s s
SECRETARY VOLCKER:
No,
I don't think
I think we've
15:
realignment,
16.
separate
17
operational question
9
system.
19
of
20 .
think
21
prominently
22
action that we were
j u s t n e g o t i a t e d an e x c h a n g e
an exchange
that
N ow,
rate
short-term —
in o u r
own
certainly
anyway,
in our own
was
taking helping
to
k i n d of
of
the
and in t a k i n g t he
thinking
of some other countries,
thinking,
rate
and you have
longer-term questions
not unrelated,
took,
in the thi n k i n g
c h a n g e here,
shorter-term,
from the
they're
action that we
be
n:
__
a correct reading.
14:
that would
this:
and
I
but certainly
was
or hurting
kind
the k i n d
of
in p u s h i n g
us
<?
23
toward
24
system.
25
constructive
Our
reform on a more
conclusion was
that
permanent basis
this
kind of
of
action,
the
most
6
importantly,
1
2
5
because
is h e l p i n g to
it h e l p s
l ay the b a s i s ,
to p u s h
helping
us
toward equilibrium,
to r e i n f o r c e
the
thrust
!
of
constructive
r e f o r m in t he
N o w a n u m b e r of
4
international monetary
issues
to r e c e i v e v e r y c a r e f u l
arise
there which
system .
are going
5
to h a v e
6
but we have urged one particular approach toward m o netary
7
reform that implies
8
m e n t of d i f f e r e n t c o u n t r i e s ,
9
action
some
d i s c u s s i o n ove r com i n g months,
symmetry,
even-handedness
different responsibilities
in d i f f e r e n t c i r c u m s t a n c e s .
10
k i n d of a b t i o n w e t ook,
11
taking,
12
we have been
13
important
14
to b e d i s c u s s e d v e r y
seems
to m e
saying
of treat
In the b r o a d e s t t e r m s ,
the kin d of ac t i o n the J a p a n e s e
c onsistent w i t h the
for t h e
general
longer term,
thrust
QUESTION:
intensively
There are
field recently,
one
in t h e
two v i llains
too r e s t r i c t i v e
in the
tional
17
wheeling,
18
wo n a great v i c t o r y on behalf of the W e s t e r n wo r l d
19
J a p a n is c o n c e r n e d .
20
curtail
one J apan and one m u l t i n a t i o n a l
the
22
tic,! w o uld
23
w e e k e n d is
24
this was
25
the pa r t i e s
of w h a t
to h a v e
interna
and one too
free
corporations.
as
You
far as
T r e a s u r y i n t e n d to d o to
f r e e - w h e e l i n g of t h e m u l t i n a t i o n a l s ?
SECRETARY VOLCKER:
21
the
are
coming period.
16
What does
the
b u t a n u m b e r of
i s s u e s o b v i o u s l y a r i s e :t h e r e t h a t a r e g o i n g
15
for
l i k e to t h i n k ,
Let me
of t h i s
solution over
that there were no victors
a solution which
seemed
say that the
characteris
the past
and no defeated;
that
to b e s t m e e t t h e n e e d s o f all
c o n c e r n e d a n d it i n v o l v e d v e r y h a r d d e c i s i o n s
by
7
D
most of those parties.
But aqainst the situation that existed,
against the needs of the situation, there was a willingness to
take these decisions because they did fit everybody's needs,
I think, best.
Now, one of the problems of the international
monetary system, quite clearly, has been that there is —
you
put it ^Ln terms of multinational companies , let me put it in
terms of the amount of capital that is free to flow around in
liquid form or otherwise*
This creates certain potentials
for strain, certain instability in the system.
I think this is without question one of the problems
toward which monetary reform must address itself, and I think
it's apparent that there;are no easy answers, or we would have
come to them much earlier.
I shouldn't say only —
I suspect what we can get is only-
we will get a series of partial
answers which in combination, I would be very hopeful, could
deal with the problem adequately.
Some of the partial answers have to be, I think,
in terms of a degree of flexibility in exchange rates, in
terms, let's say, of wider bands around a fixed rate if we're
going to have a parity type system. Certainly part of the
answer has to be in maintaining a better equilibrium in
general so that the incentives for money to move are not so
clear and apparent.
There is discussion of, in some circumstances,
8
1
whether
floating of one c u r r e n c y
2
tempo r a r y or
5
technique.
4
case,
5
deal with
6
whole q u e s t i o n of
longer period,as
Certainly
and that
8
successes
9
monetary
problem,
movements,
12
wTe ' r e n o w l e a r n i n g ,
13
that
and
18
permanent?
19
i n t e n d to
20
v a l u e of
has
capital
been to
I gathered
Is
Does
it int e n d e d
the
United
a totally
from Secretary
one.
of the
international
capital
thing,
but
success,
,
;c
:a
Shultz's
been
of
the
tempora
suspension will
be
in the e x c h a n g e m a r k e t s
attitude
toward
the
external
the dollar?
22
we
are u nder no o b l i g a t i o n to
23
and b a s ically
that
QUESTION:
selective
one
that the operations
passive
SECRETARY VOLCKER:
24
a good
in i t s w a k e .
States
this
is a s e r i o u s
international
this
to
c a p i t a l m o v e m e n t s , and
in s u p p o r t of the d o l l a r h a v e
suspended.
21
flows
that
achieved, the p o s i t i v e
conference on Monday night
take
free
some real problems
Reserve
some degree
to deal with
I think basically that's
having
t h a t t o b e the
is n o q u e s t i o n
a n d to e n l a r g e
QUESTION:
rily
25
thing,
it b r i n g s
17
to
M u c h of the t h r u s t of
11
Federal
found
o f t h e pa s t .
a good
16
but there
for a
isn't a useful
are ha v i n g
that's
press
have
either
In a s e n s e w e
10
15
countries
international
developments
14
1 suggested,
is a t e c h n i q u e w h i c h h e l p s
this
7
some
or another
is
the
Well,
I think w h a t he
intervene
same posture
Treasury
is
surcharge on particular
said
s a i d was,
in exchange markets,
that we
have
been
to b e c o n s i d e r i n g
imports
from certain
in.
a
9
countries.
Is t h i s
true?
SECRETARY VOLCKER:
that question
the
speech
by noting
that
that
Secretary
r e ferred to perhaps
Well,
one
I would,
in o u r m o n e t a r y
Shultz made
two types of
situations,
one where
to u s e d i r e c t m e a s u r e s
of payments/in which case
than some other methods,
might want
to t a k e
some
The question
kind of
ou t of
or
if i t
e m p o w e r e d to t a k e
surcharge,
is w e l l
monetary
reform.
Now,
i n the
to
are m a n y countries
its b a l a n c e
in
desirable
surplus
situation .
f r a m e w o r k of
concern
that operate
sometimes,in
some
that
is p e r s i s t e n t l y
international
s h o u l d n ’t b e
a
T h a t k i n d of
in o u r e a r l i e r p r o p o s a l s
safeguards,
it
liberalize.
community
there are other questions
not of unique
a q u e s t i o n of
that
incorporated
the wh o l e q u e s t i o n of
some point
action,which might be by way of
to deal w i t h
thinking
p o i n t o u t,
rest of the
some
at
found itself
special measures
in his
contemplate
a surcharge might be more
also arises
the
he
to a s s i s t
line w i t h r e s p e c t to the r e s t of the
whether
IMF —
a country might
a s ystem and one country or another
community,
reform proposals ~
he c o u l d
find itself in persis t e n t d e f i c i t and might
feel it neces s a r y
answer
aspect of your question when,
d i s c u s s i o n of t h e a d j u s t m e n t p r o c e s s ,
really
at t h e
I think,
that
which has
arise
been,
t o t he U n i t e d
on
here:
I would
States.
a safeguard
system where
situations,
an
industry
There
it's
being
10
1
faced with very
2
some
5
internationally,
4
down
rapid
approach under
change,
and can there
certain c r i t e r i a , perhaps
where
action
some device,
agreed
c a n be t a k e n t o in e f f e c t
slow
the p a c e of cha n g e .
QUESTION :
5
You
said
s o m e t h i n g in t h e b e g i n n i n g
6
leads me
7
c a n be
8
h a v e s a i d y o u s t i l l h a v e a U.S.
9
consider
to t h i n k y o u d o n ' t b e l i e v e t h e b a l a n c e
altered by r e v a l u a t i o n
or d e v a l u a t i o n
the n e x t m o s t u r g e n t
that
l ine
Well,
broad areas
jà
there
13
abroad
14
effort,
15
system certainly rests
in t h e l a s t a n a l y s i s
16
of d o m e s t i c
and that's
17
as
in the c a s e o f o t h e r s ,
18
we
can never
19
out into
20
has
21
change
22
have had their
23
i nvestment or
24
have
and
are r e l e v a n t in t h a t q u e s t i o n .
are
I don't want
to
lose
stability of
economies,
really
s i g h t of that.
The whole
the international m o n e t a r y
on thé
t r u e in o u r c a s e
forget .
I suppose
to t a k e a d v a n t a g e of t h e e x p o r t o p p o r t u n i t i e s
produces,
and m a y b e
attention diverted elsewhere
t he d o m e s t i c m a r k e t .
incentive
That's one
stability
as w e l l
it gets
the d i m e n s i o n of A m e r i c a n b u s i n e s s , w h i c h
into
and
so t h a t ' s o n e l a r g e d i m e n s i o n that
a f f o r d to
in c u r r e n c y v a l u e s
two
I think
the q u e s t i o n of d o m e s t i c p o l i c y h e r e
thé whole
some
and you
W h a t do y o u
I think there
11
is a l w a y s
of p a y m e n t s
alone,
in mind.
t hat
s t e p a nd by w h o m ?
SECRETARY VOLCKER:
10
25
be
to l o o k
side, o f
to
that a
some of
them
into international
Well,
foreign markets
it.
in the end
they ought
to
as w e l l .
The other side,
I think,
is
y 37 11
basically
exchange
markets
cases
the
trading
rate changes
are
around
framework,
and
it's q uite
don't do you m u c h good
s h u t to y o u by r e s t r i c t i o n s .
the w o r l d ,
as w e
look out
w h e r e t h i s h a s b e e n t r u e in s o m e
markets
in p r i c e b e
markets,
United States,
It's
in p r i c e b u t t h a t
a b l e t o s h o w t h r o u g h in
been
some a r e a s , such
as
where we've been highly competitive
and the r e
in a g r i c u l t u r a l
in t h e p a s t ,
the ma r k e t s
but
a r e protectee,
c o u l d be o t h e r e x a m p l e s ,
QUESTION:
I a m c o n f u s e d b y t h e a r t i c l e i n t h e New,
York Times this morning.
floating rates
for
My question
a n d B onn,
the
is,
does your
the F r e n c h franc and
a n d d i d y o u t r y to p e r s u a d e ,
Paris
if
have been
important areas .
it h a s n ' t b e e n e a s y to e x p o r t b e c a u s e
mark
There
areas
b y o p e n i n g m a r k e t s t o us.
There have
favor
that
in s o m e
from the
i m p o r t a n t t h a t w e n o t o n l y be c o m p e t i t i v e
the c o m p e t i t i v e n e s s
true
country
for the
German
in your r ecent talks
finance ministers
in
of the two count r i e s
to
float their currencies?
SECRETARY VOLCKER:
to
them
float their currencies.
QUESTION:
was
We did not try to p e r s u a d e
the w o r d
is t o c h a n g e
is p r o p e r .
No place
g o l d used.
t he
of g r a m s o f gold.
Secretary's
Officially what we
[inaudible]
But Special
in t h e
into
Drawing
are
statement
trying
special drawing
Rights
to d o
rates,
are expressed
which
in terms
12
1
SECRETARY V°LCKER:
That's
ri g h t .
2
QUESTION:
terms,
the
5
4
of the. m o n e t a r y p r i c e
of g o l d a m o u n t s
SECRETARY VOLCKER:
6
the
7
right.
increase
I t's
9
of t he d o l l a r ,
10
in the
11
that we used —
12
don't mistake
13
here
14
in t he
15
monetary
16
rather than
17
our very
e x p r e s s e d as
it is
he w a n t e d
our action
in a n y w a y
system. ’ T o
—
i t's
the d e c r e a s e
rather
11.1.
of
That's
I think gold was mentioned
to m a k e
clear
that,
in c h a n g i n g r e l a t i v e
favoring restoration
the c o n t r a r y ,
it in t e r m s
in t h e g o l d v a l u e
I don't remember
s y s t e m in w h i c h g o l d
a more
of g o l d
10 p e r c e n t .
statement because
as
we
of
look
is p l a y i n g
i m p o r t a n t role,
t he
exact words
in e f f e c t ,
exchange
the r o l e
forward
r at e s
of g o l d
to a
a reduced
role
and that continues
to be
s t r o n g view.
QUESTION:
18
19
the o n l y w a y
20
and SDR
I only
thought
o u t of the r e c e n t
it w a s
crisis was
paradoxical
to u s e
t he
that
gold
(inaudible)
SECRETARY VOLCKER:
22
is the u n i t of a c c o u n t
23
at p r e s e n t ,
25
revaluation
to 1 1 . 1 p e r c e n t
If y o u m e a s u r e
in the d o l l a r p r i c e
8
24
actual
t h a n a 10 p e r c e n t d e v a l u a t i o n of t h e d o l l a r .
5
21
In t h o s e
in t h e
a l o n g w i t h SDR's.
W ell,
in a f o r m a l
sense,
s y s t e m and the Fun d
gold
articles
13
QUESTION:
States wants
widened
to see
as m u c h as
Am
I right
the m a r g i n b e t w e e n
specifics
that
t he
yen and dollar
United
to be
to 20 p e r c e n t ?
SECRETARY VOLCKER:
on a n y
to u n d e r s t a n d
in
those
Well,
terms.
I'm not going
The yen
is
to c o m m e n t
f l o a t i n g now,
a n d w e ’ll see w h a t h a p p e n s .
QUESTION:
this m o r n i n g
you
w ere
said
Mr.
that
Undersecretary,
—
the N e w Y o r k
quoted M r . Shultz
bringing pressure
on
t he v a r i o u s
as
saying
countries
Times
that
floating
their currencies.
Can you comment on
m i g h t b e ■concerned a n d
15
16
pressure
on any countries.
discussions
over
of w h i c h
t h a t t he y e n
pound
is
sterling
as
to w h i c h
countries
so on?
I don't
SECRETARY VOLCKER
13
14
t hat,
We have engaged
the p a s t w e e k - e n d ,
is g o i n g
think w e ' r e
is
to be
in
with agreed
floating.
bringing
results,
We c o n t e m p l a t e
floating
f or a w h i l e ,
one
the
and
the
1?
18
Italian
lira
is
Now,
I
floating.
that was
^
all understood
as p a r t o f
our
own
will
the
decision.
QUESTION:
Looking
to t h e
trade
field,
r
p
123
United
accept
take e x c e p t i o n s
all
the p r o v i s i o n s
to s o m e o r r e n e g o t i a t e
SECRETARY VOLCKER:
k
25
States
mental
reform,
I think,
of
Weill
the w o r l d
of
GATT,
provisions
we're
or
of
looking at
economic
system,
GATT?
a funda
in a
14
1
■1
2
w a y , «(— /> m o n e t a r y
s y s t e m and
n o t en to r t h o s e discussions",
the
trading
I think,
system,
with
the
a n d w e would
f eling
2
that
5
5
the e x i s t i n g r o l e s
of G A T i c o u l d
n o t be
touched;
t h a t indeed,
4
4
p a r t of
these negotiations
and d i s c u ssions may w e l l
indicate
5
5
that some changes
in G A T T r u l e s
a rc d e s i r a b l e
and needed.
6
6
And
I think we would enter
the d i s c u s s i o n s w i t h
that
feeling.
7
7
QUESTION:
C o u l d y o u be
specific,
which
ones
you
8
8
have
in m i n d ?
9
9
SECRETARY VOLCXER:
Uell,
I'll
just take one
example,
10
10
which
I don't
thin]; is n e c e s s a r i l y
t he m o s t i m p o r t a n t example.
11
11
G A T T n o w says
that
in c e r t a i n b a l a n c e
of p a y m e n t s
12
12
circumstances you
can
take
restrictive
trade action
of a
13
13
certain
type,
l i t e r a l l y ’t h r o u g h q u o t a s
or q u a n t i t a t i v e
re s t r i c
14
14
t i o n s of o n e
s o r t of a n o t h e r .
it w o u l d be o u r i n c l i n a t i o n to
15
15
think,
and
I think a number of
countries
share
this
v i e w both
16
16
by
their
statements
and
their actions,
that w hen
such action
17
17
is
taken,
it is p r o b a b l y b e t t e r
to t a k e
it t h o u g h a k i n d of
18
18
generalized
surcharge or g e n e ralized special
19
than a q u a n t i t a t i v e
tariff,
rather
19
restriction.
20
Now,
20
21
t h a t is o n e
specific
example
of
the w a y
in
21
which
G A T T r u l e s m i g h t be c h a n g e d .
N ow,
there
are other
22
22
questions
23
party
that arise
here,
certain areas of GATT
that one
23
interprets
one way
and another
party
interprets
ano t h e r
24
24
w ay,
would certainly need
review and new clarity
a n d consensus.
25
25
QUESTION:
One que s t i o n
is,
can we
have
s t a b i l i t y in
15
the w o r l d
before
there, is
stable
p a r i t y of the d o l l a r
and
other currencies.
And
institute
tariffs
the o t h e r q u e s t i o n
the p l a n
is,
the P r e s i d e n t h a s
and quotas where
necessary
if we a r e
going
suggested of introducing
to i m p r o v e
our
n o t o t h e r c o u n t r i e s w h o m a y be a f f e c t e d a d v e r s l y
a rumpus,
as y o u m i g h t
say,
upset
S E C R E T A R Y VOLCKjER:
these problems,
as
of w h a t we w o u l d
have
like
to be d e a l t w i t h ,
less
one
is
satisfactory
Now,
But tariff
tariffs
and other barriers
by trading partners
equipped
to
liberalize,
of c o u r s e ,
where
toward
in the
frame
thrust
are going
t h e m in
freer
to
the
t rade,
instruments
supporters
.1 a g r e e .
we w a n t
a g a i n s t us,
is
the p r o b l e m s
and m o v i n g
negotiations,
e c o n o m y c a n go a n d
start,
that are
in t h e i r n a t u r e . .
SECRETARY VOLCKER:
Now,
raise
to d e a l w i t h
t h a t is t he b a s i c
thrown back on other
QUESTION:
down,
will
thereby
a n d if o n e c a n ' t d e a l w i t h
c o n t e x t o f an o p e n e c o n o m y ,
.inevitably,
And
to see.
the b e s t w a y
a t the
w o r k o f an o p e n w o r l d e c o n o m y .
tr a d e ,
the c a r t ?
We l l ,
I said right
to
to d e a l w i t h
we want
go.
a liberalizing direction,
these
to n e g o t i a t e
implies
But,
If w e
agreement
T h a t is o n e w a y
where
are u n f a i r practices,
th o s e .
in
d own.
on that course.
there
And basically
the n e g o t i a t i o n
it s h o u l d
a r e a g a i n s t trade.
there
we
are barriers
have
can't deal with
we w ill have
the w o r l d
to be
t h e m in
to p r o t e c t o u r
own
16
1
1
position.
But,
2
And
I think
5
enough.
4
V7e r e f e r r e d
to
5
nothing new
f or m a n y
6
systems
7
has
8
i n t o an a g r e e d
9
intensive
in
then
there
t his
f orce.
adequate
area"
where,
countries
which
have
in
international
system.
it
violently
t he
12
ation,
a r e s u l t of
as
4
is
5
safeguard
States
t hat can be
fit
t h a t ’s a m a t t e r
stock m a r k e t has
last couple
Do y o u
13
you have
s ee
of days
loss
for
t his
market
is r e a c t i n g
17
a number of domestic
18
playing a role
19
has bee n
confidence
20
reality with
21
people.
I know
22
business
outlook and
23
statements
24
of a f f a i r s .
25
terms
in
to t h i s
devalu
being restored by
this
area.
are
t he
I think we
and
say
of b oth
III
there
the
11
13
any
are
that
the
t h a t has
I think
disturbed
of b o t h
inflation
outlook.
I see
have
justified by
a very
I doubt
that
been
17
there
18
intentions
forecasts
are
this has
and
been
the
t he
some
general
alarminc
t r end
situation
fully
19
20
some
the b a s i c
tight budget
16
probably
varying
think
15
stock
t h a t s e e m to h a v e
I must
to P h a s e
I don't
spending,
I think
considerations
there
8
12
I don't know what
to e n t i r e l y .
respect
7
14
some m i s i n t e r p r e t a t i o n
that
in r e s p o n s e
to say?
16
6
10
reacted rather
of c o n f i d e n c e .
SECRETARY V O L C K E R :
15
5
9
The
11
of
And
problems.
the U n i t e d
and how
2
is c l e a r
again,
such
is w h e t h e r
that respect,
here
of p o t e n t i a l
"safeguard
QUESTION:
thing
are other areas
The question
powers
objective
negotiation.
10
14
the ge n e r a l
in
21
22
23
24
25
17
appreciated,
the
been applied.
intensity
It s e e m s
is r o u g h l y a p p r o p r i a t e
cycle,
of
the
to m e
to
the- c u r r e n t
t h a t has
stage of
the
business
if t h e P r e s i d e n t c a n go a h e a d a n d c a r r y
intentions
omens
are b a s i c a l l y ^ goods.
there
.....
I recognize
a certain degree
as h e m e a n s
that
to do.
ther#. h a s
of u n c e r t a i n t y
We go t h r o u g h these phases,
I ’m
restraint
that the budge t a r y posture
through his
phase
spending
been
about
and we
And
the
some q u e s t i o n i n g
some of these
s e e m to be
of
things#
in a l i t t l e
of . u n c e r t a i n t y n o w w h i c h v e ' 11 w a i t a n d
sure,
I think
get
through
it,
and proceed.
QUESTION:
Secretary Volcker,
in t a l k i n g
m o v e m e n t Of capital/ y A n did-not me n t i o n
about
the p r o b l e m o f
t he
the
dollar overhang.
W h a t is t h e p o s i t i o n o f
the U n i t e d
at this time on thi$ p r o b l e m of the
dollars
available
i t is
thing
I can say a b o u t
Well,
of payments
deal with
position,,
subtracting
balance of pay m e n t s
There
I think
the overall
because
that overhang effectively
it a n d b e g i n
increased amount of
t he m o s t
t h a t p r o b l e m is t h a t
s o i m p o r t a n t to a c h i e v e
balance
Government
internationally?
SECRETARY VOLCKER:
mental
States
is
funda
this
adjustment
the o n l y w a y
to s t o p
is w h y
in o u r
to r e a l l y
adding
to
from it through a stro n g e r A m e r i c a n
position.
is n o a d e q u a t e
answer
in t h e
absence
of t h a t
-
18
1
fundamental.
2
d e a l i n g w i t h this.
o
whether
4
d e p e n d s v e r y m u c h on the s h a p e of the r e s t o f t h e m o n e t a r y
5
s y s t e m t h a t is a g r e e d upon.
6
mature
7
full c o n t e x t of the system.
it n e e d s
steps
s ome r e s i d u a l p r o b l e m in
H o w it g ets d e a l t w ith,
to b e d e a l t w i t h
QUESTION:
taken
So,
I think,
dramatic
12
I t h i n k it is r e a l l y p r e
immediate
I don't
intermediate
see a n y n e e d
Is it t r u e r a t h e r t h a t t h e r e
o v e r h a n g o f the d o llar*
14
b i l l i o n p r o j e c t e d f or t h i s year,
15
an a r r a n g e m e n t t h a t y o u n e e d w o r l d
16
four months,
because the w o r l d trade
17
the t o t a l of w o r l d
and we now have
is n o w $450
a n d a l w a y s the
i d e a w a s for
l i q u i d i t y w h i c h w o u l d be
four months
—
$150 b i l l i o n is
I t h i n k w h e t h e r t his
19
or n o t d e p e n d s p a r t l y o n t h a t k i n d of a p p r a i s a l ,
20
certainly agree that w o r l d reserves have
21
t h e c o n t e x t of the e n o r m o u s
22
w h e t h e r p e o p l e w o r r y a b o u t t h a t o v e r h a n g o r not,
23
depends
24
p r i o r i t y is to m a k e
25
is.
the d o l l a r s t r o n g .
.
to be
is a problen
a n d I would
l o o k e d at in
g r o w t h in t he w o r l d e c onomy .
u p o n h o w s t r o n g the d o l l a r
^ork very well
is n o real
l i q u i d i t y a p p r o x i m a t e l y in t he l a s t 10 daysj
SECRETARY VOLCKER:
'
for
steps.
13
18
in f a v o r o f
in t h a t a r e a ?
QUESTION;
i
and
in a v e r y s p e c i f i c w a y
So y o u a re n o t
SECRETARY VOLCKER:
10
11
there may be
to t r y to a n s w e r t h a t q u e s t i o n w i t h o u t k n o w i n g the
8
9
Now,
. ■■ bm 1 1 1
if t h e d o l l a r is n o t
But
so-called,
A n d again,
t he first
N o t h i n g is g o i n g to
m m
I
in a s t r o n g p o s i t i o n
6
And
I
i
I
the a c t i o n s ,
d e s i g n e d to m a k e
„
again,
t a k e n t his w e e k - e n d w e r e
a very important assist
QUESTION:
taken were Executive
in t h a t d i r e c t i o n .
W h a t w e n e e d to w o r r y ab o u t ,
f i d e n c e or l a c k of it.
understanding,
that we have
Now,
most
acti o n s ,
it s e e m s
initiatives
t he U.S.
and w h a t Europeans
to me,
is t h a t t h e r e
i s n ' t it c o n
has
have trouble
is a d i f f e r e n c e
b e t w e e n p a r l i a m e n t a r y g o v e r n m e n t a n d the k i n d o f p r e s e n t
proposals
—
SECRETARY VOLCKER:
I agree
the p e o p l e h a v e d i f
f i c u l t y in r e c o g n i z i n g that.
QUESTION:
What you talked about —
SECRETARY VOLCKER:
QUESTION:
May we
Do you w a n t
question whether Congress
groups
ple a s e .
to t h©
ready and informed
abroad?
SECRETARY VOLCKER:
to
to a d d r e s s y o u r s e l f
seems prepared,
e n o u g h to i n s p i r e c o n f i d e n c e
actions
j u s t f i n i s h her©,
We l l ,
I think we are
taking
and carrying out now consultations w ith various
in t he A m e r i c a n e c o n o m y a n d w i t h C o n g r e s s
itself
—
t h a t a re a i m e d a t p r o d u c i n g a r e s u l t t h a t w i l l be c o n s t r u c t i v e
in t e r m s o f t h e U n i t e d S t a t e s
Now,
week
I think we
in t h a t r e s p e c t ,
discussions
which
includes,
of the w o r l d .
are b e t t e r o f f t h i s w e e k
frankly.
in the C o n g r e s s ,
every effort to make
a n d in t e r m s
But,
and we
sure that there
we're
than
g o i n g to h a v e
certainly want
la©t
long
to d e v o t #
is a c o n s t r u c t i v e r e s u l t
I t h i n k i n e v i t a b l y , ,t a k i n g c a r e o f s o m e o f
*■
20
their very deeply
felt concerns.
QUESTION:
floating rates
How close
s u c h as Mr.
Reuss
SECRETARY VOLCKER:
a universal
think
in t h e w o r l d
that's
a vision
not going to have
to a u n i v e r s a l
seems
W ell,
whatever
to be
is.
more
it is n o w —
that has m u c h p r a c t i c a l
to b e a —
there are quite
comes out
I don't
think
imp o r t .
there
is a g o o d
a f e w now,
that
obviously.
t o b e o n e of
a right step
d o l l a r b e i n g the m o s t
t h e w a y of d o l l a r a l s o
reform,
SECRETARY VOLCKER:
tnd w h e n
we
the
in the r i g h t d i r e c t i o n .
fl o a t i n g for the
shouldn't be
and
issue.
important currency,
about a general balance.
reason why dollar
the
F o l l o w i n g t h a t v e r y q u e s t i o n now,
floating of the yen was
have
floating
talked about e q u i l i b r i u m and yo u have m e n t i o n e d
by bringing
We're
I think we will
longer-term monetary
I w a n t to p r e - j u d g e
QUESTION:
24
I don't
are a c t u a l l y
is g o i n g to h a v e
of d i s c u s s i o n o f the
N ow,
r ates,
How many countries
centers
have
a vision
twenty-four
floating their currencies,
flexibility of exchange
J u s t h o w this
in?
t h a t k i n d o f a system.
flexibility.
is g o i n g
interested
If y o u h a v e
If y o u t h i n k o f a s y s t e m in w h i c h
deal more
s y s t e m of
I never quite know what
s y s t e m of f l o a t i n g r a t e s
of all one h u n d r e d and —
countries
are we
what
time being,
Is t h e r e
stands
in
and there
a specific
floated?
Well,
you
a n o t h e r couni
see,
every
exchange
|
21
rate against the dollar, it's not possible for us to float,
because that's our exchange rate, top.
So you get a mixture.
I suppose one could say the yen is floating, but the dollar
is also floating with respect to the yen, because it is twosided.
But, if the franc is fixed and the mark is fixed and
the guilder is fixed, the dollar is fixed against those
¡1|1 | ji* ||pP J a
kx&faftfc
currencies because the dollar is the currency against which
they fix.
We have certainly learned in the period after
August 15th that whether the dollar floats or not is not a
decision for the United Statts.
MODERATOR?
QUESTION?
One more question?
ypu said earlier that it would take at
least two years, probably longer to get the U.S. balance of
tradp back into equilibrium,
Does that allow for the possibility
that it might get worse as suggested yesterday by the U.S.Japan Trade group?
SECRETARY VObCKER?
Yes.
of the difficulties in this kind of
One
action which can go
back and raise some of these uncertainty problems is that an
exchange rate action almost inevitably has a perverse impact
in the short run.
It is going to make your imports more
costly particularly, and the trading pattern in the short
ruin is set.
So, I think one of the costs of this kind of
action is that you may go backwards before you go forewards.
22
1
I don't
2
a p e r i o d of
5
h u t in
4
effects.
think
there
time p rovides
the v e r y
5
is a n y d o u b t
Now,
7
been
8
so m u c h w h e t h e r
9
question was whether
10
additional
11
of
12
enough
13
and that
14
necessary
time,
thrust,
trade
this
in t e r m s
rather than balance
B u t to a c h i e v e
20
m e n t in o u r t r a d e p o s i t i o n .
21
trade position
22
that we want.
25
t he opposite
a c t i o n was
should have
in o u r m i n d s ,
to i m p r o v e .
The
enough without
impact,
the e q u i l i b r i u m
to h e l p p r o d u c e
t h a t w e n eed ,
stable
fut u r e .
of t r a d e ?
Well,
I t h i n k w h a t y o u w a n t in
is e q u i l i b r i u m in the o v e r a l l
that we're
to a c h i e v e
T h a n k you.
s y s t e m in t he
D o y o u w a n t to i m p r o v e y o u r b a l a n c e o f
19
24
equilibrium
is d e s i g n e d o v e r a p e r i o d
immediate
of a r e a l l y
the e n d
3
t his
over
I t h i n k o t h e r c o u n t r i e s r e c o g n i z e is b a s i c a l l y
18
2
action
the
SECRETARY V O L C K E R :
17
going
g o i n g to i m p r o v e
to r e s t o r e
QUESTION:
payments
that
trade balance
balance was
it w a s
and
toward
T h e q u e s t i o n w a s not,
looking through
improvement
15
16
the
suggests
the A m e r i c a n
improving anyway.
thrust
of action
it c o u l d h a v e p r e c i s e l y
our own analysis
taken at a time w h e n
this k i n d
substantial
s h o r t run,
6
that
going
balance
of p a y m e n t s .
to n e e d a c o n s i d e r a b l e
We n e e d
t he o v e r a l l
the i m p r o v e m e n t in
improve
the:
equilibrium
;t
Assistant Secretary of the Treasury Edward L. Morgan
announced today actions on four investigations under the
Antidumping Act, 1921, as amended.
Three cases involve initiations of antidumping investiga
tions, and in the fourth case there is a final revocation of
dumping. These decisions will appear in the Federal Register
of February 26, 1973.
In the first case, Mr. Morgan announced the initiation
of an antidumping investigation on imports of manually
operated single^end type metal punching machines from Japan.
These machines are used to punch out round and shaped holes
in metal of various thicknesses. This announcement follows
a summary investigation conducted by the Bureau of Customs
after receipt of a complaint alleging that dumping was taking
place in the United States. During calendar year 1972 imports
of these metal punching machines from Japan were valued at
approximately $100,000.
In the second case, Treasury announced the initiation of
an antidumping investigation on imports of expanded metal of
base metal from Japan. This expanded metal is used primarily
as flooring and platforms for pedestrian traffic. This
announcement follows a summary investigation conducted by the
Bureau of Customs after receipt of a complaint alleging that
dumping was taking place in the United States. During the
period of January 1971 through September 1972 imports of
expanded metal of base metal from Japan were valued at
approximately $1.3 million.
In the third case, Assistant Secretary Morgan announced
the initiation of an antidumping investigation on imports of
natural rubber thread from Italy. This thread is chiefly
used to manufacture elastic fabrics for wearing apparel. This
announcement follows a summary investigation conducted by the
Bureau of Customs after receipt of a complaint alleging that
dumping was taking place in the United States. During the
period of January through October 1972 imports of natural
rubber thread from Italy were valued at approximately $314,000.
OVER
-
2-
In the fourth case, the Department announced a final
revocation of dumping with respect to chromic acid from
Australia. This acid is a commercial inorganic chemical with
several industrial uses, the most important being that of,
chromium plating. The original finding was issued on
March 21, 1964. Since that time there have been no importa
tions of chromic acid from Australia. In addition, the
producer of the acid has given assurances to the Treasury
Department that future sales to the United States will not
be at less than fair value prices. An intent to revoke the
finding of dumping was published on November 22, 1972.
Interested persons were provided an opportunity to present their
views on the decision before Treasury took its final action.
# # #
DepartmentoftheTREASURY
IsHINGTON. D.C. 20220
T E L E P H O N E W Û4-2041
FOR RELEASE UPON DELIVERY
STATEMENT OF THE HONORABLE WILLIAM E. SIMON
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
HOUSE GOVERNMENT OPERATIONS COMMITTEE
SUBCOMMITTEE ON LEGISLATION AND MILITARY OPERATIONS
FEBRUARY 26, 1973 AT 10:00 A.M.
Mr. Chairman and members of the Committee.
My name is William E. Simon, Deputy Secretary of the
Treasury.
This morning, I would like to explain to you
how the Treasury Department and I will carry out the duties
assigned to us under the President’s Reorganization Plan
No. 1.
Under Reorganization Plan No. 1, the President
proposed the abolition of the Office of Emergency Preparedness
(OEP).
As such, a new Chairman of the Oil Policy Committee
is needed to replace the Director of OEP.
Accordingly, the
President stated that he would designate the Deputy Secretary
of the Treasury as Chairman in place of the Director of OEP.
Since the Oil Policy Committee is not a statutory body,
the transfer of the Chairmanship to the Deputy Secretary of
the Treasury Department need not await Reorganization Plan
No. 1 becoming effective.
Therefore, the President on
February 7, 1973, approved Executive Order 11703 which
assigned the policy development direction functions on this
program to the Deputy Secretary of the Treasury.
S-125
2
As the President indicated in his message to the Congress
on January 26, the Oil Policy Committee will continue to
function as in the past.
The specific functions and
responsibilities being assumed by the Deputy Secretary of
the Treasury as Chairman of the Oil Policy Committee are as
follows:
1.
To provide the policy direction, coordination and
surveillance of the oil import program with the advice of
the Oil Policy Committee.
As such, he must maintain constant
surveillance of imports of petroleum and its primary
derivatives in respect to the national security.
2.
After consultation with the Secretaries of State,
Defense, Treasury, Interior, Commerce and Labor, the
Chairman is to inform the President of any circumstances
which, in his opinion, might indicate the need for further
Presidential action to adjust imports.
3.
In the event of price increases of crude oil or its
products or derivatives during the existence of the oil
import program, the surveillance of the program is to
include a determination by the Chairman as to whether the
price increases are necessary to accomplish the national
security objectives of the oil import program and of the
statutory authority on which it is based.
- 3
In a d d i t i o n ,
reviewing
the Oil P o l i c y C o m m i t t e e
Congressional hearings
and any recommended
and
changes
long-term adjustments
ness
and enhance
I think
ship of the
Chair m a n of
tion
and
of
the
t o t he
in o r d e r
coordination
Committee.
serve
This
type of
facilitate
immediate
to
the process
improve
provide
adequate
plementation
to s t r e n g t h e n
We want
public.
problem
We m u s t be
areas,
but
Interior.
the
it is
of Oil
Oil Policy
decisions
and
long-range planning
necessary
to
will
Thus,
be more
responsive
the policy
closely
to the
able not only
to
to
of p o l i c y
supplies.
also
The
Office
Secretary of
t h e g o v e r n m e n t 's p e r f o r m a n c e
to be
the
c o o r d i n a t i o n has b e e n d e s i g n e d
of
functions
of
coordination,
Interior's
implementation
fuel
relation
the government.
remain within
effective
as E x e c u t i v e
the
set p o l i c y d i r e c
role within
a n t i c i p a t e d that the D i r e c t o r of
and Gas will
the e f f e c t i v e
Department
Committee will
to assure
interim
import program.
I m p l e m e n t a t i o n of the p r o g r a m w i l l
However,
increase
to b r i e f l y m e n t i o n
r e s p e c t to the oil
assume
import program
the program.
Committee
the Oil Policy
oil
including both
that will
important
Oil Policy
Interior with
in it,
the e q u i t y
i t is
on the
is c h a r g e d w i t h
needs
and
aligned
in t h i s
in o r d e r
area.
of the A m e r i c a n
to re s p o n d q u i c k l y
anticipate
im
problems.
to
4
We are looking for good ideas.
Only last Thursday
at a hearing before a subcommittee of the Senate Government
Operations Committee, Senator Abraham Ribicoff suggested
something to me which I thought was a very good idea*
He
suggested that we set up a special group to deal with the
energy supply problems of the Northeastern States.
I think
this is a good idea and I intend to implement it; but I also
plan to carry it further and to establish such a subcommittee
not only for the Northeast, but for all of the major regions
of the nation.
One answer to the problem raised by Senator Ribicoff
and his constituents is to provide adequate refinery capacity
in the Northeastern area.
The environmental considerations are
important, but we are going to have to find a solution that
satisfies both our need for energy and environmental protection.
The only real solution to the existing domestic shortages are:
1)
Encourage domestic exploration and production,
2)
Provide stability in planning for our domestic
industry by longer range planning and implementation
and cease the stop-and-go tactics, and thus
3)
Give the necessary incentive for increased refinery
construction and expansion.
Because the Oil Policy Committee is an inter-agency
group, it provides a forum where the differing views and
interests of the several agencies can be coordinated.
I believe that we are in a good position to insure an
even-handed consideration of all the issues and all of the
points of view.
As Chairman, I advise the President through Secretary
George P. Shultz, who also serves as Assistant to the
President.
In this way I am able to assure that the work
of the Oil Policy Committee and my own work are coordinated
with the White House, that the views expressed at the Oil
Policy Committee are effectively presented to the highest
level, and that the Oil Policy Committee will play a central
role in the development of our overall energy policy.
IIENTION:
FINANCIAL EDITOR
OR RELEASE 6:30 P.M.
February 26, 1973
RESULTS OF TREASURY'S
WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
ills, one series to be an additional issue of the bills dated May 31, 1972
, and
he other series to be dated March 1, 1973
, which were invited on February 20, 1973,
ere opened at the Federal Reserve Banks today.
Tenders were invited for $2,400,000,000,
r thereabouts, of
91-day bills and for $1,800,000,000, or thereabouts, of 182 -day
ills. The details of the two series are as follows:
:GE OF ACCEPTED
OMPETITIVE BIDS:
High
Low
Average
91 -day Treasury bills
maturing
May 31, 1973
Approx. Equiv.
Annual Rate
Price
98.545 a/
98.522
98.531
5.756$
5.847$
5.811$
1/
182-day Treasury bills
maturing August 50, 1973
Approx. Equiv.
Price
Annual Rate
96.970
96.927
96.944
b/
5.993$
6.078$
6.045$
1/
a/ Excepting 1 tender of $695,000; b/ Excepting 2 tenders totaling $1,510,000
of the amount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid for at the low price was accepted
MAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
Applied For
Accepted
$
28,625,000 $
12,625,000
2,907,705,000 2,085,205,000
26,635,000
40,635,000
26,815,000
26,815,000
11,900,000
17,900,000
18,185,000
17,385,000
88,525,000
189,525,000
29,270,000
42,270,000
18,405,000
28,765,000
33,100,000
42,450,000
13,960,000
38,760,000
36,400,000
89,200,000
Applied For
$
44,160,000
2,589,080,000
7,390,000
13,875,000
16,070,000
11,865,000
197,590,000
30,805,000
27,745,000
21,265,000
31,125,000
95,635,000
Accepted
$
20,100,000
1,570,980,000
7,390,000
8,875,000
10,070,000
11,865,000
96,480,000
18,805,000
15,545,000
16,115,000
7,125,000
16,635,000
$ 3,470,835,000 $2,400,225,000 c/
$3,086,605,000
$1,800,045,000 d/
jj/ Includes $182,655,000 noncompetitive tenders accepted at the average price of 98.531
-/ Includes $ 92,265,000 noncompetitive tenders accepted at the average price of 96.944
These rates are on a bank discount basis.
The equivalent coupon issue yields are
5.98 $ for the 91 -day bills, and 6.32$ for the 182-day bills.
U
FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE PAUL A. VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
BEFORE THE
SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE
TUESDAY, FEBRUARY 27, 1973, AT 10:00 A.M. (EST)
Mr. Chairman and Members of the Committee:
Two weeks ago, after intensive consultation and negoti
ation, we took action to achieve a needed realignment of
international currency values»
A key to this result was the
announcement of our intention to propose to the Congress
legislation to devalue the dollar.
The Bill before you,
S.929, would authorize a 10-percent reduction in the par
value of the dollar to accomplish that change.
The realignment offers a highly constructive opportun
ity, both for the United States and for the world community.
Augmenting the Smithsonian realignment agreed earlier, it
attacks directly and effectively the major imbalances that
have plagued world payments for too long, and undermined
S-126
2
monetary stability.
I am convinced the size of the adjust
ments is fully commensurate with the need.
As part of
this process, competitive opportunities in world markets
for American workers, farmers and businessmen have been
substantially improved.
By helping reestablish a more
sustainable equilibrium in the world economy, the exchange
rate actions also provide a stronger foundation for build
ing a reformed international monetary and trading system.
Before discussing the realignment in more detail, I
want to recognize and emphasize a part of the larger
setting in which these actions must be placed.
The sub
stantial exchange rate changes involving the dollar over
the past 18 months deal with imbalances that had been per
mitted to build up over a long period of time, stretching
back for nearly two decades*
Inevitably, the corrective
process, however essential, has been painful and temporarily
unsettling.
It is not a process to repeat.
As we look ahead, the strength of the dollar inter
nationally !•- indeed the stability of the monetary system,
itself --must rest on the strength of our domestic economy
and the stability of the dollar at home.
That fundamental
3
truth is reflected in the approach and policies of the
Administration.
Amid all the debate about one aspect or
another of Phase III and food prices, about the budget,
and about monetary policy, let us not lose sight of the
basic facts:
The inflation rate in the United States has
been sharply reduced in the period since mid1971, averaging an annual rate of 2.7 percent
through the end of 1972, as measured by the
comprehensive GNP deflator.
In recent months
when food prices have increased sharply,
largely in response to forces at work worldwide,
industrial prices have remained fairly level.
As shown in the table attached, this record in
combating inflation has been better overall than
that of any other major industrialized nation.
Contributing to that result, and promising to
help maintain that relatively favorable compari
son, we have in being at present a comprehensive
wage-price stabilization program.
The objectives
of that program and its mpde of operation are
supported by both labor and business.
attached material.)
(See
- ■4 -
We recognize the critical nature of the food
price problem to the success of this effort.
Vigorous action has been taken to get at the
root of the problem.
Restrictions on basic
supply, in place for many years, have been
removed.
Some 40 million acres have been
released for production from the Mset aside"
program, and "set aside" acreage may be used
for grazing.
stockpile.
Grains are being sold from CCC
Quotas are gone on meat imports.
The Cost of Living Council and the new Food
Advisory Committee will continue to examine
other measures that may be desirable and
necessary.
Actions to increase supply can
work only with a lag.
powerful.
But their effect can be
The results will show this year.
The President is determined to hold budget
expenditures to $250 billion in Fiscal 1973
and $268.7 billion in Fiscal 1974.
Those
levels can be managed without feeding inflation,
and without requiring new taxes.
Today, in sharp
contrast to widespread skepticism a few months ago,
these figures are accepted as both necessary and
achievable.
5
Obviously, we must not and cannot be satisfied with
our progress until price stability is fully restored.
But,
as we seek to do better, let us not lose sight of the fa
that, comparing U. So performance with that of other
countries, basic price trends are reinforcing the effects
of the exchange rate realignment.
I would also emphasize that changes in the monetary
system must be -- and I am confident will be
by reform of the trading system.
accompanied
Fair exchange rates and
competitive prices are essential to stability.
So are
equitable trading arrangements and access to world markets.
We are dedicated to achieving that objective.
The Congress
will shortly be considering legislation to provide the
President with the tools he needs -- tools that can help
lead the world to more open trade, and tools that can also
assure fairer treatment for American producers.
I would like to trace briefly the specific developments
leading to the Bill before you.
6
In the first year after the Smithsonian Agreement,
there was evidence of a healthier world payments situation.
As I have indicated, the United States record on inflation
improved sharply and compared favorably with that of our
major competitors.
Though there were notable periods of
disturbance, exchange markets were generally calmer.
With
capital flows dramatically reduced, the U.S. official
settlements deficit fell to $10 billion in 1972 from
$30 billion a year earlier.
Nonetheless, serious imbalances in the world economy
continued.
The large trade and current account deficit of
the United States, and the large trade and current account
surplus of Japan, remained disquieting.
Our trade deficit reached more than $6 billion in 1972,
with the balance deteriorating with all major regions of the
world.
In considerable part, the worsening of the trade
balance could be traced to cyclical developments -- the U.S.
economy was expanding more strongly than most of our trading
partners.
We also knew the initial effects of exchange
rate changes may be perverse, until business has time to
7
change established trading patterns in response to the
changes in relative prices.
In early 1973, the prospects, as we saw them., were
definitely for an improving trade balance, partly re
flecting the 1971 exchange rate changes.
But -- given
the size of the deficit -- the anticipated improvement did
not appear vigorous enough to restore overall balance in
a reasonable period.
There were equal or greater doubts that
Japan’s strong trade surplus would be reduced to a size
compatible with international equilibrium.
Against this background, new and severe exchange market
disturbances emerged in late January.
These focused
initially on capital flows out of Italy and into Switzerland.
However, against the large and persistent imbalances in the
U.S., Japanese, and other payments positions, much larger
flows of funds soon developed.
A solution was thus needed to several converging
problems.
There was an underlying need to add a strong,
8
new thrust to the operation of the balance of payments
adjustment process.& There was an immediate need to restore
order to the exchange markets -- and to do so in a way
that did not promise fresh disturbances.in the future.
From the point of view of the United States, we needed to
find solutions which would be equitable to American workers
and businessmen, which would help set the stage for outwardlooking trade negotiations, and would speed and foster
constructive reform of the world monetary and trading
system.
We needed to act, forcefully and promptly, to achieve
these objectives.
We have done so.
We wanted first to consult fully with as many of our
trading partners as we could in the time available -- to see
if we could decide with them on an agreed course0
Our
approach reflected the view that exchange rate questions
cannot and should not be approached as unilateral actions -by the United States or by other nations.
will fail unless others cooperate.
Indeed, they
In the event, the interests of the United States co
incided with those of others in the actions agreed to:
a 10-percent reduction in the par value of the dollar; a
cutting loose of the Japanese yen to allow it to float
upward to a rate consistent with Japanese balance of payments
equilibrium; a continued float by the U. K» and Canada and
initiation of a float by Italy; and agreement by others of
our major trading' partners to maintain then-existing par
values. -
■ 11
In this common search for the best solution to our
common problems, I found;a spirit of realism and cooperation
which is heartening for the future.
The negotiations were
not easy, for hard economic and political decisions were
necessary for all.
But, I believe, other nations welcomed
the U. S. initiative as constructive and responsible.
Our
willingness to crystallize a néèded exchange rage realign
ment through a devaluation of the dollar was seen as a way
to achieve the needed adjustment most promptly and forcibly.
In contrast tb the compromise struck at the Smithsonian,
there was a clear desire on" all sides to achieve changes
fully commensurate to the magnitude of the problem.
10
Accompanying the proposal to devalue, we announced two
other important steps:
First, that present U. S. capital
controls will be phased out by the end of 1974; and second,
that the President will shortly propose comprehensive trade
legislation to enable us to negotiate a reduction of trade
barriers.
These two steps are closely related to and con-
.
sis tent with the proposed devaluation. I would note in that
connection that the realignment of exchange rates, in improving
our competitive position, should make the U 0 S. a more attractive
place for investment by both U. S • and foreign companies.
All three moves
the elimination of capital controls,
the proposed trade legislation, and the devaluation—
directed toward the same general objective:
are
Balance in our
trade and payments not supported by the crutch of controls,
and within a world framework of freer and fairer trade.
We propose to devalue the dollar by 10 percent0 However,
the effective change in our exchange rate vis-a-vis Japan —
our
largest overseas trading partner -- will be greater than 10 percent.
The change is less than 10 percent against, for example,
the lira —
which has floated downward part way with the dollar.
Weighted average realignments are sometimes calculated,
based on a country*s trade pattern»
On that basis, the
constellation of exchange rates negotiated at the Smithsonian
-
11
-
represented a realignment for the dollar of approximately
8 percent against all other OECD currencies; or, if the
Canadian dollar were excluded, 12 percent.
A measure of the new realignment is more difficult,
since a number of currencies are floating and may not remain
at present market levels.
Nonetheless, as a rough approxi1/
mation, and using market rates
for currencies which are
floating, it would appear the new realignment will yield a
weighted average realignment for the dollar in about the
same range as the Smithsonian -- about 7-1/2 percent against
all OECD currencies, or about 11 percent against all OECD
currencies excluding the Canadian dollar.
The Smithsonian realignment has not yet had its full
impact on trade flows, and it is appropriate to measure the
combined effect of the two realignments.
This shows an
average realignment for the dollar of about 15-1/2 percent
against all OECD currencies, or about 23 percent if Canada
is excluded.
As between the dollar and the Japanese yen,
the change has been much greater thus far -- 36 percent.
Changes of this magnitude obviously have a major
competitive impact.
Again, however, we cannot expect a quick
1/ Market rates of February 26 are used in this calculation.
12
turn-around in our trade position; there is simply no way
to blink the fact that it-takes time for trade flows to
be redirected.
The effects in the first months could be
adverse because the same volume of imports costs more.
The
full benefits of the realignment will accrue only over a
period of years.
Nonetheless, it is plain the new realign
ment, building on and augmenting the Smithsonian, has greatly
assisted the competitive position of U.S. producers, both in
the United States and in overseas markets.
The change will
work strongly toward the restoration of a sizable trade
surplus for the United States.
That surplus is essential
to a balance in our overall external payments, and thus to a
stable monetary system.
I have indicated already that the need for this exchange
rate change in no way reflected any falling behind interna
tionally by the United States in the inflationary battle since
the middle of 1971.
Rather, with international disequilibria
having persisted so long and having become so ingrained in the
structure of the world economy -- in particular the Japanese
surpluses and U.S. deficits -- the Smithsonian realignment was
simply not in itself enough to promise the improvement we
need within a reasonable time span.
- 13 -
The devaluation of the dollar reemphasizes the need to
deal effectively with inflation at home.
In that connection,
the direct impact on the U.S. price level is slight overall.
Obviously, certain foreign goods will cost more in the U.S.
market.
The very purpose of the realignment is to make U.S.
products cheaper abroad and foreign goods more expe
@FedFRASER