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LIBRARY
ROOM 503O
SEP?' 1975
TREASURY DEPARTMENT

—

Department ojtneTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

April 1, 1975

FOR IMMEDIATE RELEASE

TREASURY ANNOUNCES MODIFICATION OF
DUMPING FINDING ON TUNERS (OF THE TYPE USED
IN CONSUMER ELECTRONIC PRODUCTS) FROM JAPAN
Assistant Secretary of the Treasury David R. Macdonald
announced today a Modification of Dumping Finding on tuners
(of the type used in consumer electronic products) from
Japan, with respect to Matsushita Electric Industrial Company, Ltd., Matsushita Electric Trading Company, Ltd., and
Victor Company of Japan. Notice of this action will appear
in the Federal Register of Wednesday, April 2, 1975.
For the reasons stated in the "Notice of Tentative
Determination to Modify or Revoke Dumping Finding" published in the Federal Register of December 12, 1974, with
respect to Matsushita Electric Industrial Company, Ltd.
and Matsushita Electric Trading Company, Ltd., and in the
Federal Register of January 22, 1975, with respect to Victor
Company of Japan, tuners from Japan are no longer being,
nor are likely to be, sold in the United States at less
than fair value by these three companies.
During the period January through October 1974,
imports of tuners from Japan were valued at approximately
$6,300,000.
#

FOR IMMEDIATE RELEASE

April 1,
TREASURY'S WEEKLY BILL OFFERING

The Department of the Treasury, by this public notice, invites tenders for
two series of Treasury bills to the aggregate amount of $5,500,000,000 , or
thereabouts, to be issued

April 10, 1975,

as follows:

91-day bills (to maturity date) in the amount of $2,700,000,000, or
thereabouts, representing an additional amount of bills dated January 9, 1975,
and to mature

July 10, 1975,

(CUSIP No. 912793 XD3), originally issued in

the amount of $2,304,625,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $2,800,000,000, or thereabouts, to be dated April 10, 1975
and to mature

October 9, 1975,

(CUSIP No. 912793 XS0).

The bills will be issued for cash and in exchange for Treasury bills maturing
April 10, 1975,

outstanding in the amount of $4,706,940,000, of which

Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,251,350,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, April 7, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000. Tenders over $10,000 must be in
multiples of $5,000.

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(OVER)

Others 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 bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
Public announcement will be made by the Department of the Treasury of the
amount and price range of accepted bids.

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 or Branch on

April 10, 1975,

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing
ment.

April 10, 1975.

Cash and exchange tenders will receive equal treat-

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
bills (other than life insurance companies) issued hereunder must include in his
Federal 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.
Department of the Treasury Circular No. 418 (current revision) and this notice,
prescribe the terms of the Treasury bills and govern the conditions of their
issue.
Branch.

Copies of the circular may be obtained from any Federal Reserve Bank or

U.S. RANKING IN INVESTMENT AND IN REAL ECONOMIC GROWTH
IS AMONG LOWEST OF INDUSTRIALIZED
COUNTRIES, TREASURY STUDY SAYS
The United States ranking in real economic growth
is among the lowest of the industrialized countries because
a relatively low share of its output is being allocated
to investment, according to a study released today by
Treasury Department staff economists H. I. Liebling and
J. Jaakson.
This lag in U.S. investment over the past 13 years,
the economists said, has "contributed to relatively lower
rates of advance of productivity and national output."
Liebling and Jaakson said "this disparity in investment has
effectively lowered rates of advance in living standards
of the average consumer in the United States, created
shortages in basic materials industries during periods of
economic expansion and added substantially to the
inflationary consequences of high employment in recent
years."
The Treasury economists indicated also that the
falling share of U.S. resources allocated to investment
has "limited job opportunities" because "had the growth
of plant and equipment exceeded that of the labor force,
more jobs would have been required to utilize that
increased capacity."
They concluded that the policy implications for the
U.S. point towards encouragement of capital formation by
minimizing tax disincentives, use of accounting methods
which adjust earnings for replacement cost of capital and
elimination of tax barriers to the flow of capital into
productive uses.
0O0

Attachment
Review of Economic and
Financial Developments,
Treasury Department,
March 21, 1975
WS-265

Rtviiw of

ECONOMIC AND FINANCIAL
DEVELOPMENTS
March 21, 1975

INVESTMENT, PRODUCTIVITY AND GROWTH IN
MAJOR INDUSTRIALIZED COUNTRIES
Over the past decade and more, the U.S. share of its output
allocated to investment has been below that of other major industrialized nations and thereby contributed to relatively lower
rates of advance in productivity and national output.
This disparity has effectively lowered rates of advance in
living standards of the average consumer in the U.S., created
shortages in basic materials producing industries during periods of
economic expansion and added substantially to the inflationary
consequences of high employment in recent years.
The disparity also has limited job opportunities in the sense
that had the growth of plant and equipment exceeded that of the
labor force, more jobs would have been required to utilize that
increased capacity.

U.S.

Investment as Percent
of Real National Output
1960-73*
NonresiTotal
dential
Fixed**
Fixed
17.5
13.6

Japan
West Germany
France
Canada
Italy
United Kingdom

35.0
25.8
24.5
21.8
20.5
18.5

29.0
20.0
18.2
17.4
14.4
15.2

11 OECD Countries
24.7
19.4
(1960-72)
* OECD concepts of investment and
national product. 1973 estimated.
** Including residential.

The U.S. share of
total national output
devoted to so-called
fixed investment
averaged 17.5% during
1960-73. This share
was lower than in any of
the 11 major industrialized nations for
which* comparable information was developed
in this analysis. It
compared with Japan's
peak share of 35.0%,
West Germany's 25.8%,
and France's 24.5%.
But, even at the lower
end, the shares of the
United Kingdom at 18.5%
and of Italy at 20.5%
were higher than in
the U.S.
On the average,
the 11 OECD countries allocated

- 2 -

24.7% of their output to fixed investment — seven
percentage points more than in the U.S., as shown
in the table on page 1.
The investment shares noted above include residential buildings,
as well as nonresidential fixed capital. Only the latter might be
considered by some as contributing to productivity, whereas residential purchases might be considered as consumption expenditures.
Figures on both bases are shown in the table.
(In addition, the OECD concept includes nondefense
government outlays on machinery and equipment in
private investment for which a special adjustment
needs to be made in the U.S. national accounts for
comparability. National output is defined in these
computations as "gross domestic product" — a somewhat different output measure than gross national
product but which conforms with OECD useage.)
A ranking of countries with respect to investment ratios to
GDP and real growth rates during 1960-73 is shown in the table on
this page. A strong correlation between high ratios and high
growths is indicated.

Investment Ratios and Growth
Rates of Real Output, 1960-73*
Investment Ratio
Percent
Rank
Japan
W. Germany
France
Canada**
U.K.**
Italy
U.S.

29.0
20.0
18.2
17.4
15.2
14.4
13.6

1
2
3
4
5
6
7

Output Growth Rate
Percent
Rank
10.8
5.5
5.9
5.4
2.9
5.2
4.1

1
3
2
4
7
5
6

*Data estimated for 1973.
**Data applies to 1961-73 and are not strictly
comparable to data presented for other countries.

(The respective
standings of
these countries
should be considered approximations because
prices of investment goods vary
internationally.
Since prices are
used as weights
to value output,
differences in
relative prices
contribute to
differences in
the investment
shares.)

Due in large part
to higher shares of
investment, productivity

- 3 -

increases of these other industrialized countries surpassed those
of the U.S. in recent years.
One such measure of productivity — real output of total goods
and services per employed civilian — shows that productivity
increases from 1960 to 1973 have exceeded that of the U.S. by an
average annual rate of 6.7 percentage points in Japan, 3.2 percentage
points in Italy, and 2.4 percentage points in France.
As a result, the absolute level of superiority of U.S. productivity is rapidly diminishing, relative to other major industrialized
countries. This is shown in the chart.
• Japan has narrowed this superiority from 18% of U.S.
productivity in 1950 to 28% in 1960, and to 65% in 1973.
• Italy has narrowed the gap from 30% in 1950 to 41% in
1960, and to 62% in 1973.
•

Real Output per Employed Civilian
1950-74
Indexes, United States • 100'

^United States

France and West Germany
have improved their
relative performances
by rising to four-fifths
of the U.S. level in
1973, as compared with
three-fifths in I960.

100
Lower rates of productivity
gain in the U.S. relative to
other countries is also registered in the manufacturing.
sectors of these economies.
The rates of gain in manufacturing are larger than for
total national output. But,
here, too, the pattern of
declining superiority of the
U.S. is clearly portrayed.
(See table on next page.)

^Canada

20 - . * — * '

1950

1955

1960

1965

1970 72 74

Other factors than fixed
capital formation, of course,
contribute to productivity

- 4-

and real GDP growth. Among these are the growth in the employed
labor force, age of the stock of capital, enhanced labor and managerial
skills, education, etc. Some studies have given greater importance
to these factors than to rates of investment. Furthermore, high rates .
of growth in capital stock are much easier achieved — and hence
productivity enhanced — where that capital stock is low relative to
output.
Granted that other factors than physical investment
contribute to growth, there would still remain large
benefits to productivity resulting from larger growth
in the capital stock.

Productivity Growth, 1960-1973
(Average Annual Rate)
GDP per Manufacturing
employed output per
person
manhour
United States

2.1

3.3

Japan
W. Germany
France
Canada
Italy
United Kingdom

9.2
5.4
5.2

10.5

11 OECD Nations

5.7
2.8

5.8
6.0
4.3
6.4
4.0

5.2*

6.1

2.4.

The economic policy
implications to attain
greater productivity
growth from this source
would require some alteration in our consumption
and saving patterns. In
one way or another, the
incentives for investment
would need to be encouraged,
The increase in the investment tax credit now under
public consideration is a
step in this direction.

•Average for 6 OECD countries listed.

OFFICE OF THE SECRETARY OF THE TREASURY
OFFICE OF FINANCIAL ANALYSIS

FUR RELEASE WEDNESDAY A.M.

April 2, 1975

BOSTON BANKER NAMED TO DEBT MANAGEMENT POST
Secretary of the Treasury William E. Simon today
announced the appointment of Ralph M. Forbes, a Boston
banker, as Special Assistant to the Secretary for Debt
Management. He will be sworn into his new post in ceremonies in the Secretary's office Friday.
In his new position, Forbes will have a major
responsibility in the formulation of policy for financing
the public debt.
In the capacity of Special Assistant to the Secretary,
Forbes also will serve as Vice President of the Federal
Financing Bank, and as coordinator of Federal agency
financing.
A native of Sherborn, Massachusetts, Forbes joined
the First National Bank of Boston 11 years ago, shortly
after graduating from Harvard College with an A.B. degree.
Beginning as a trainee at the bank, he was subsequently
assigned to the investment division, where he progressed
to investment officer, assistant vice president, and, in
December 1971, vice president.
As vice president, he had responsibilities relating
to money market transactions, with emphasis on U.S. Treasury
and related debt instruments, as well as state and local
government obligations. He participated also in longrange planning, funding and general policy decisions of
the bank.
He is married to the former Tally Saltonstall. The
couple has four children, Suki, James, Heidi and Laura,
and live in Milton, Massachusetts.
oOo
WS-266

DepartmentoftheTREASURY
WASHINGTON. DC. 20220

TELEPHONE W04-2041

FOR RELEASE 6:30 P.M.

April 1, 1975

RESULTS OF AUCTION OF 20-MONTH TREASURY NOTES
The Treasury has accepted $1.5 billion of the $3.8 billion of
tenders received from the public for the 20-month notes auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 6.95% 1/
Highest yield 7.19%
Average yield 7.15%
The interest rate on the notes will be 7-1/8%. At the 7-1/8% rate,
the above yields result in the following prices:
Low-yield price 100.234
High-yield price
Average-yield price

99.865
99.926

The $ 1.5 billion of accepted tenders includes 19% of the amount of
notes bid for at the highest yield and $0.1 billion of noncompetitive
tenders accepted at the average yield.
No tenders were received from Government accounts or from Federal
Reserve Banks for themselves and as agents of foreign and international
monetary authorities.
1/ Excepting 8 tenders totaling $1,160,000.

FOR IMMEDIATE RELEASE

April 1, 1975

ALTERNATE U. S. EXECUTIVE OF IDB IS SWORN IN
Yan M. Ross was sworn in today as Alternate Executive
Director of the Inter-American Development Bank. The oath
was administered by Secretary of the Treasury William E.
Simon at the main Treasury building.
Ross had served since May 1970, as minority counsel
to the House Banking and Currency Committee. Previously,
he spent nearly three years as an Air Force officer trainee,
receiving a 1st Lieutenant commission in May 1970. Earlier,
he was an administrative officer trainee for the Central
Intelligency Agency, from July 1967 to February 1968, and
had done legal research work in Brazil during school vacation
periods in 1964 and 1965.
A native of New York City, Ross graduated from Princeton
University with an A.B. degree in 1964, and from Yale Law
School, LL.B., in 1967. He is married to the former Kathleen
Browne, a national representative of the Girl Scouts of America.
The couple has two children and resides in Bethesda, Maryland.
oOo

WS-267

Hello, I'm delighted to be with you today.

like your city, your sunshine,and your people. I
also like the subjects I've been asked to talk about —
which are women and Savings Bonds and the economy.
That's a nice, wide variety.
Variety is what women are all about. And !'all
about" is where we are these days.
We are mopping kitchen floors, raising families,
living in communes, robbing banks, trying for the
executive suite, and in general being as good, bad,
smart, silly and cantankerous as men.
Fifty percent of women between 18 and 65 are
currently working. We're as well educated as men but,
on the average, we earn only three-fifth's of a man's
salary. There are many reasons for this and one —
the main reason — is that many women work only on a
part-time basis. For many women, jobs are secondary
to their careers as wives and mothers.

Remarks by the Honorable Francine I. Neff, Fort Worth
Women's Club, Fort Worth, Texas on April 2, 1975

B
Politics is one area that attracts women. Mrs.
Ella Grasso is now Connecticut's governor while Mary
Ann Krupsak is the Lieutenant Governor of New York.
Five new women entered Congress this year, to join
the dozen already there. A good friend of mine, Mary
Louise Smith, is the first woman chairman of the Republican National Committee. And a few days ago, I
attended a reception honoring Mrs. Carla Hills, our new
Secretary of Housing and Urban Development, and the
third woman cabinet officer in history.
In other fields, American women are scoring other
gains.

Congress outlawed credit discrimination based

on sex last year.

The Bank of America settled a class

action suit on behalf of its female employees, which
will mean about $10 million in additional income to
women.

And in education, the number of women students

in medical schools is double what it was three years ago.
I've been talking about working women —
automatically think of paid jobs.
put in a good word for volunteers.
important to our society.

and we

But I'd like to
They are terribly

Some 7 0 million people have

volunteer jobs, and they contribute an estimated $50 billion
a year to America's "gross national product."
I am a wife, mother and dedicated believer in the
value of volunteers.

For the first quarter century of

my adult life, I volunteered for everything from the PTA
to the GOP.

I was privileged to learn many techniques

a
and skills this way, because a willing volunteer can
often work with top people. I personally feel my
route to a career was via the way of the volunteer.
Today, I work full time as the United States
Treasurer and as National Director of the Savings
Bonds Division.

I am heartened to know that 99 percent

of the Bond selling program is accomplished by volunteers.
I suspect —
workers

I hope —

that some of you are among those

in our program.

Our National Savings Bonds goal for 1975 is 6.8
billion dollars in bond sales, and at least 2.4 million
new or increased savers.
Here in Tarrant County, the 1974 bond sales total was
$19,255,000 — or 107 percent of your goal.

Congratulations!

I'm happy to tell you that in our United States
Savings Bonds program we have leadership from the top.
I was privileged to visit with President Gerald Ford a
few days ago.

He is a regular Savings Bonds buyer, and

he told me that this year he is increasing his payroll
deduction.
I certainly don't intend to tell you all the advantages of Savings Bonds today.

You probably already

know what they are. Bonds are a safe, convenient,
painless way to save, with a very attractive 6 percent
interest rate. A banker friend of mine has added up
figures which show that over the last 5 years $7 5
invested monthly in bonds is worth more today than the

same amount invested in stocks on the Moody's Incfustrial
Index.
Bonds also have tax advantages which can increase
that 6 percent rate substantially.
Finally, Savings Bonds help the nation. They put
more of the Federal debt into the hands of long term
savers. They remain outstanding, on the average, for
six years, while other marketable instruments turn over
in three years or less. Almost a quarter of our publicly
held national debt is in the form of Savings Bonds.
So, our Bonds are good for America and good for
Americans. Sales of series E and H bonds were at a
29-year high in 1974. And, so far this year, sales are
even higher. In this period of inflation and recession,
the proven performance of these United States Savings
Bonds is very appealing.
Let's talk a little more about inflation and recession,
and some of the other shocks that have hit our economy
this past year.
Since last April -— We have experienced the highest rate of inflation
in our peacetime history.
— Our economy is in the worst slump in years.
— Oil prices have quadrupled.
— And $100 million of the world's wealth has been
transferred to a small bank of developing nations.
These stories all made the headlines. But another
story — equally as important — did not. And that is

the suory of how well our economic system has operated
under conditions of extraordinary stress.
Throughout 1974, the prophets of doom announced
that our Ship of State was halfway under water and
sinking fast.
That isn't true and it won't be true. America is
alive and well, and both America and I will be here to
welcome my as-yet-unborn grandchildren — who, incidentally,
will be Texans as my daughter had the good sense to pick
a super son-in-law for me from your state.
Let's look at the record of what the doubters have
predicted, and then let's see what actually happened.
— Prices on foreign oil jumped in 1974, and it
was said that the international financial system might
collapse, as massive sums of money were transferred.
In fact, the financial institutions responded with
considerable skill. OPEC funds were rather widely
disbursed. And the oil comsuming nations are presently
working on new international agreements for future emergencies. J J

I
Further, new oil discoveries outside of the OPEC
nations, and new production in the United States and
elsewhere will eventually result in lowered prices.
As Treasury Secretary William Simon says, it's a question
of when, not if.
For another example of how the sky didn't fall, let's
look at gold sales. Late last year, Americans were allowed
- to buy gold for the first time in decades. The predictions

were that we were in for a great new gold rush.
This did not occur.

When I checked a few weeks ago,

gold was selling below the quoted prices of December 30.
For a final example, let's consider the fears of
some people that we are heading into another Great
Depression.
Of course, we have a recession, but it does not
come close to the conditions of the 1930's.

Unemploy-

ment figures in 1975 are only about a third of the 1930's
figures, and there are such safety nets as Social Security,
medicare, unemployment payments, and food stamps.
Treasury Secretary William Simon believes the present
economic slide will bottom out during the middle months
of this year.

As he put it the other day, he sees

"patches of blue in a gray, wintry sky."
Our free enterprise system still functions, and the
laws of supply and demand still work.

But, too often

But more fundamentally, we have for years abused our
economic system.

The fact that it still functions so

well is a great tribute to its basic strength.
Our growing Federal government puts enormous
demands on the economy.
The proliferation of government regulations burdens
both business and the consumer.

Federal regulations,

for example, added $320 to the price of a 1974 car.
And, our national habits of encouraging consumption
and federal spending at the cost of savings and investment
is a very serious concern. Capital investment in the
United States in recent years has been the lowest of any
industrial nation in the free world.
Secretary Simon and other government officials are
working to turn some of these trends around.

They feel,

and I agree, that
— We must restore greater discipline to our
financial affairs.
— We must lighten the hand of government in many
areas.
— And we must encourage savings, investment and
capital formation.
Finally, we must turn away from the doomsayers.
Despite our problems, we have an incredibly strong nation,
both in spirit and in-material goods.
speak to the good in each other.

Now we need to

y
But we need to do more than speak — we need to
act.
As parents, we need to instruct our children in
economics.

We must transfer to them our knowledge

of the supply and demand system; our belief in the free
marketplace, and the legitimacy of profit.
As business people, it is incumbent on us to take
our knowledge and expertise into the classrooms, by
actually serving as speakers and lecturers, and by
seeing that our elected school board members transmit
the need for sound economic education to the teachers.
As citizens, we must demand that the news media
make some effort to understand our economic system.
As voters, we must make certain that our elected
officials understand that good economics is good politics.
As Americans, we must build on our strengths once
more.

Let us look back at our 200 years of history.

, Then let us look forward with confidence as we go about
doing our jobs, raising our families and helping society.
Thank you.

I am delighted to be here today.

I love being back

•In the Southwest and I always enjoy meeting members of the
Federal family, even though I joined that family rather
recently.
I have worked most of my adult life -- although I
never received a paycheck until last year. However, after
25 years as a volunteer for many, many causes, I began a
new career as a payroll relation of Uncle Sam when I became
Treasurer of the United States last summer.
During my 9 and 1/2 months on the job, I have met
hundreds of Civil Service people in Washington and across
the country. And I am genuinely impressed by most of you.
You work hard, you work smart, and you have an enormous
impact on this Nation. I'm honored to be one of you.
As the United States Treasurer, and the National Director
of the Savings Bonds Division, I have a number of jobs to
fill my 10-hour day. Today, I'd like to discuss two of
them: the Bicentennial and the "buy bonds" programs.
As Chairman of the Treasury Department's Bicentennial
Programs, I am involved in some exciting projects to celebrate
our Nation's birthday.
Remarks by the Honorable Francine I. Neff, United States
Treasurer, to the Federal Business Association, Fort Worth,
Texas, April 3, 19 75.

As you may know, our Main Treasury Building in Washington,
D. C., is itself a designated National Historic Landmark.
Within this lovely old building, the 3rd oldest office
building in the city, we are planning a moveable "Museum
without .walls" that will line the second fioor halls with
an exhibit of rare and unique historical materials.
Each division within Treasury is currently reviewing
its own materials of historic value and interest, and we
plan to trace the development of our Federal Government
via Treasury and its role past and present.
In addition, we plan to change the present "Cash Room"
of Main Treasury from its very drab role as a place to cash
checks back into its original, Cinderella costume as a
lovely, ceremonial-type room for receptions and other
occasions.
The so-called "Cash Room" is really a beautiful
marble- room with wrought iron balconies that was built
around the time of the Civil War. At the time it was
built it was considered the most expensive and beautiful
public room in Washington. We're going to make a mighty
try to recall old glories and to create the much-needed
formal receiving room.
Of course, most Bicentennial activities will take
place outside of the Treasury Building. We will be
issuing coins, medals,, philatelic cards and so on, and
the newly designed quarters, half dollars and dollars will
be circulating by mid-summer.

) 7

K
In addition, the Treasury Department will commemorate
a number of historic customhouses throughout the country
with appropriate ceremonies. And we will join other agencies
in sponsoring a number of projects. I'll mention two of
them:

the Bicentennial Youth Debates and the American

Freedom Train.
The Youth Debates are a nationwide project supported
by the National Endowment for the Humanities and the Speech
Communication Association.

They will begin this Fall and

plans are to involve high schools, junior colleges, and
four-year colleges.

Treasury will assist in awarding

Bicentennial coins or specially designed Savings Bonds to
the winners.
The American Freedom Train is a major project of the
American Freedom Train, Incorporated.

The present plans

call for a 2 4-car, steam powered train to visit all 48
states during 19 75 and 19 76.

It will carry hundreds of

exhibits to make American history come alive -- complete
with the sights, sounds and smells that are evocative of
our 20 0 years as a Nation.
The Treasury Department is the nation's second oldest
Federal department and we have a number of exhibits on loan
to the Freedom Train, including old forms of currency, old
World War I & II Bond posters and so on.

Present plans call

for the Freedom Train to visit your area next February.

d
Texas has a long and rich history, and I know you must
be planning many exciting state and regional projects for
the Bicentennial. I hope to find out more about a few of
them during my stay in Fort Worth.
My,duties as Chairman of the Treasury Bicentennial
Program will intensify later this year.

Right now, I'm

spending much of my time fulfilling my duties as National
Director of the United States Savings Bonds Division.

let me tell you a little about that.
Most of us grew up with Savings Bonds —
—

or Defense Bonds —

or War Bonds

or even with their predecessor, the

Baby Bonds of the late 19 30's.

I sold War Bonds as a

youngster during World War II, and I imagine some of you
did too.
Most of us very well know the personal advantages of
buying bonds.
Savings Bonds are a safe, secure, and very convenient
way to save —

especially when your yearnings exceed your

earnings, and you find it hard to put something away for
a rainy day.
With their 6 percent interest rate, bonds are attractive
financially.

A banker friend of mine has added up some

figures and discovered that if you put $75 monthly into
United States Savings Bonds for the past six years, you
would be further aheacj today than if you invested the same
amount in over the counter stocks listed on the Moody's
Industrial Index.

Furthermore, bonds have attractive tax aspects.

You

pay no state and local taxes and you pay federal taxes on
the interest only when you redeem the bonds — in other words,
you can defer federal taxes on Savings Bonds until its
advantageous for you to cash them in.
Beyond the financial aspect, Bonds are a vote for America's
future — a way to say "yes" to America. Most of us find it hard
to say, "I love America". But we can buy bonds — "Take
Stock In America" — and that says it all right there.
In addition to these reasons, I am now beginning to
appreciate the important role Savings Bonds play in our
nation's debt structure.
Almost a quarter of the publicly-held portion of the
national debt is in the form of Series E and H Bonds. And
this 2 4 percent is far and away the most stable part of
our debt. In fact, E and H Bonds remain outstanding, on
the average, for more than six years, as compared to less
than 3 years for other marketable instruments.
A quick turnover in the Federal debt is unsatisfactory
for at least two reasons.
First, when the debt becomes too liquid, or "spendable",
it can be inflationary.
And second, the cost of refinancing a rapidly maturing
debt is difficult and expensive.
So you can see why Savings Bonds -- which remain
outstanding for so long -- are the sturdy backbone of the
government's long-term debt. This is true no matter what

you hear about "X" number of bonds being cashed in quickly.
Besides holding bonds, our buyers are buying more.
1974 was the best sales year in 29 years, and 1975 is starting
off even better.
As we go into our "Take Stock in America" Savings bondsselling campaign, we are counting on the almost 2,900,000
men and women in the Federal family to lead the way. And
your leadership is coming right from the top.
I was privileged to visit the White House and chat
briefly with President Ford a few days ago. He has been
a bond buyer for years , but' he told me that this year he
is increasing his regular payroll deduction.
I'm pleased at this, and I hope many of you follow
his example. 1^ would like to, but I'm one of only two
people in the entire country who are forbidden, by law,
to buy Savings Bonds. My boss, Secretary of the Treasury
William Simon, is the other person. But legislation is
going forward to change this. Very soon now I should be
able to join you at the payroll savings counter.
In the meantime, I will continue urging groups like
yourselves to do two things for the bond program:
— to buy bonds yourself
— And to volunteer your time and talents
to the bond program.
Do you know, 99 percent of the people who work for
Savings Bonds are volunteers? We couldn't move without you.

0
We have a true grassroots program and its succeeds only
because of all of the thousands of willing, wonderful
volunteers who say "yes" to America in this way.
We can't offer our Savings Bonds volunteers money.
We can't offer you fame, or advancement or other tangible
awards.
you.

All we can say we, need you.

Your country needs

And it is the glory of America that you, and thousands

like you, respond.
I am pleased that, today, I can personally thank you
on behalf of President Gerald Ford and Treasury Secretary
William Simon —

and the American people -- for your work

in support of United States Savings Bonds.
—

To Peggy Huffman

who is the Federal Employees Savings Bonds coordinator,

to S. J. Stovall, Program Director of the Federal Business
Association, and to Darwin Wilder, President of the Federal
Business Association —

our special thanks.

Now I'd like to end on a lighter, Springtime note.

I'd

like to be the first United States Treasurer to speak about
money in words that are not only understandable but
positively lyrical.
So — a salute to money.

Workers earn it,
Spendthrifts burn it,
Our bonds enlarge it,
Housewives charge it,
Bankers lend it,

Congress spends it,
Gamblers love it,
And all of us could use more of it.

April is spring, and spring, from Nature's viewpoint, begins the new year.
During the past year — the past 12 months — we
have all seen enormous changes in our country.
— We have — for the first time — an American
President, and Vice President, appointed to office.
— We have had the highest rate of inflation in
our peacetime history.
— We have had the worst economic slump in a quarter
of a century.
— And $100 billion of the world's wealth has been
transferred to a small band of developing nations.
The past year has brought personal and economic
changes to all of us. But one of the major stories
of 1974 has escaped the headlines. To me, that story
is how well our economic and political system operated
under conditions of extraordinary stress.

Remarks for the Top Management Meeting, San Antonio, Texas
on April 4, 1975 at 12 noon.

-2-

After every major change, the Calamity Janes —
and Joes — in our midst renamed our Ship of State
the Titanic, and announced that we were already halfway under water and sinking fast.
That isn't true, and it won't be true. America
is alive, and, going and growing, and both America and
I will be here to welcome my as-yet-unborn granchildren —
who, incidentally, will be Texans as my daughter had the
good sense to pick a super son-in-law from your state.
Besides inflation, recession, and oil problems, last
year was memorable to me personally because that was when
I became Treasurer of the United States. This was an
event of considerable less cosmic significance, which
occurred last June 21st, and which occasioned my transfer
from New Mexico to Washington, D.C. This was the beginning
of a whole new lifestyle which is, for me, mind-expanding
and — unfortunately — waistline expanding as well, since
I now give several speeches a week to the accompaniment of
delicious food like this.
At the Main Treasury Department in D.C, my boss,
Treasury Secretary William Simon, and his staff, are very
concerned and involved with the problems of money, oil,
inflation and recession. They are concerned — but they
are not Calamity Janes, and they most certainly do not
see the end of the world Thursday at 10 o'clock as some
pundits like to predict.

Let's look at the record of what has been predicted
and what actually has happened.
The prices of foreign oil have quadrupled, and some
prophets of doom said the international financial system
would collapse as massive sums of money were transferred
within world markets.
What really happened was a little different.
Financial institutions responded with considerable
skill.

OPEC funds were rather widely disbursed.

And

the oil consuming nations are making progress in establishing new international agreements for future
emergencies.
Furthermore, new oil discoveries outside of the
OPEC nations, in recent years, and new production in the
U.S. and elsewhere will mean an eventual lowering of
these inflated prices. As Secretary Simon says, it's a
question of when, not if.
As another example where the sky didn't fall, let's
look at gold sales. Late last year, American citizens
were allowed to buy gold for the first time in decades.
Many critics predicted that we would join with international
speculators in a great new gold rush.
In fact, no hysteria —
occurred.

no great gold speculation —

When I checked a few weeks ago, gold was selling

at about $20 below the quoted prices of December 30.

For a final brief example, let's look at inflation
and recession and the fears of some critics that we are
right on target for another Great Depression like the
1930's.
Of course, we have real inflation —

and a recession.

But government officials, and economists in and out of
government, believe the present economic slide will bottom
out during the middle months of this year and that by
the end of 197 5, we will be on the road to recovery.
The end of recession is not just around the corner.
But, as my boss Secretary Simon put it the other day,
he sees "patches of blue in a gray, wintry sky."
For example: Wholesale prices have fallen for
3

months in a row —

the first decline in 8 years.

The prime lending rate has fallen from 12% last
July to 7.75%, and funds are returning to the thrift
institutions.

Automobile makers are reducing inventories, and some
employees have been recalled to work.
And on the stock market, the Dow Jones Averages have
/

risen considerably over their low of last year.
Our free enterprise economic system still functions,
and the laws of supply and demand still apply.

These are

facts, and they do not cease to be facts because they are
ignored, twisted, or misunderstood.

Too often, it seems

to me, we apologize for ourselves and our institutions
and do not think to doubt the doubters.

It reminds me

u
of the aphorism that Americans are free to say what they
think even when they don't bother to think.
Our countrymen have the greatest mass prosperity
ever known —

yet we, and they, have strangely little

faith in the free enterprise system that makes it possible.
Perhaps it's not faith we lack, but the "push", or the
will, to learn more about our economic system and to make
sure that our children's generation also understand the
basic principles behind the system.
Take, for example, the matter of profits.

In some

circles this is almost a dirty word, synonymous with
greed or dishonesty.
Yet, if it weren't for profits, we wouldn't have
businesses —

we wouldn't have healthy companies to

make our goods and provide jobs for people.
It is not healthy, profitable businesses that —
in the vernacular —

"rip off" society.

It is the

unprofitable business that harms society, that must be
propped up by someone else's money, and that results
in heavy social costs and the loss of jobs.
As Britain's Sir Winston Churchill said, "It is
a socialist idea that making profits is a vice. I
consider the real vice is making losses."
Churchill would be delighted with our United States
Savings Bonds program because it benefits everyone —
the individual who buys and the government which promotes.
Savings Bonds are part of America.

As a teenager,

I sold war bonds on Saturday mornings in my little
hometown of Mountainair, New Mexico. Over the years
I gave, and received, bonds as presents. I know, and
so do you, that Savings Bonds are a safe, convenient,
painless way to save.
At 6 percent interest, bonds are also very competitive.
One banker friend has added up some figures which show
that $75 invested in bonds monthly in the last 6 years
are worth more today than the same amount of money invested in stocks on the Moody's Industrial Index.
More recently, I discovered the tax advantages of
bonds — advantages which under certain circumstances
can raise your after-tax income substantially.
As United States Treasurer, I am now aware of the
ways that bonds help our nation.
They are a noninflationary way to put more of the
Federal debt into the hands of long-term savers. Savings
Bonds remain outstanding for an average of 6 years, while
other marketable instruments turn over in 3 years or less.
i

Almost a quarter of our publicly held national debt is in
the form of Savings Bonds.
Finally, bonds are a tangible expression of faith in
America and her future. Perhaps that's why, in these
difficult times, the sale of Savings Bonds is rising.
A record 6.9 billion were sold last year — the highest
figure in 29 years. This year, we are exceeding even
that record. Americans know a good thing when they see
it — and "good things" include United States Savings Bonds.

V
\3

Savings Bonds go a long way in encouraging Americans
to be thrifty and in teaching us the virtues of financial
independence.
Since I am a strong advocate of personal independence via the free enterprise system, people sometimes
ask me:

"If free enterprise works so well, why is there

such a high rate of inflation and unemployment?"
Well, we all know there are several reasons.
We fought a war in Viet Nam and charged it.
We recently sustained

world-wide crop failure.

We suffered an oil embargo, and prices on oil
today are high.
But more fundamentally, we have, for years, abused
our economic system.

The fact that it still functions

so well is a great tribute to the basic strength of a
marketplace economy.
—

Our ever-growing Federal government puts enormous

demands on the economy.

This year our national budget

is past the $300 billion mark.And for the first time, the
t

Treasury Department is borrowing money that will not be
repaid until the 21st century.
—
heavy

Our monetary policies, with their huge deficits,
borrowing and increasing money supply have increas

our problems.
—

The proliferation of government regulations adds

many costs to business and eventually consumers. For
example, federal regulations added $320 to the price of
a 1974 car.

—

Finally our national habit of encouraging con-

sumption and federal spending at the cost of savings and
investments is a very serious concern.

Capital invest-

ment in the United States in recent years has been the
lowest of any major industrial nation in the free world.
These trends place enormous strains on the economy.
Secretary Simon and other government officials are trying
to make some changes. And, as I indicated, there are
recent signs of improvement.
But we must still restore greater discipline to
our financial affairs. We must lighten the hand of
government in many areas. And we must encourage savings,
investment , and capital formation.
Finally, we must turn away from the doomsayers who
see only the dark side of things. Despite our problems,
we have an incredibly strong nation, both in spirit and
in material goods. Now we need to speak to the good in
•/

, each other.
But we need to do more than speak —

we need to act.

As parents,we need to instruct our children in
economics.

We must transfer to them our knowledge of

the supply and demand system; our belief in the free
marketplace; and the legitimacy of profit.
As business people, it is incumbent on us to take
our knowledge and expertise into the classrooms, by
actually serving as speakers and lecturers, and by seeing
that our elected school board members transmit the need
for sound economic education to the teachers.

As citizens, we must demand that the news media
make some effort to understand our economic system.

As voters, we must make certain that our elected
officials — from D.C. to City Hall — understand that
good economics is good politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years as a going,
growing nation. Then let us look forward with confidence
as we go about doing our jobs, raising our families and
helping our society.
Thank you.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR IMMEDIATE RELEASE
Tuesday, April 1, 1975

FOR INFORMATION CALL:
(202) 456-6757

COUNCIL ON WAGE AND PRICE STABILITY
FILES BEFORE THE
CIVIL AERONAUTICS BOARD
Attached is a copy of the Council on Wage and Price Stability's
filing to the Civil Aeronautics Board supporting the request
for suspension and investigation of the Youth, Senior Citizen
and Family Fares filed by Trans World Airlines for an
"experimental period of 9-1/2 months" to begin April 13, 1975.

o 0 o

CWPS-35

ft
Before the
CIVIL AERONAUTICS BOARD
Washington, D.C.

In the Matter of

)

TRANS WORLD AIRLINES, INC. ) Docket Nos. 27657,
) 27658,
Proposed 1975 Youth, Senior ) 27661,
Citizen, and Family Fares ) and 27685

Answer of the
Council on Wage and Price Stability
in Support of Petitions for
Suspension and Investigation
The Council on Wage and Price Stability (the
"Council") hereby submits its answer in support of the
petitions of Eastern Air Lines, United Air Lines, the
American Society of Travel Agents, and the Department of
Transportation insofar as they request suspension and
investigation of the Youth, Senior Citizen and Family Fares
filed by Trans World Airlines (TWA) for an "experimental
period of 9-1/2 months" to begin April 13, 1975.
The promotional fares filed by TWA provide for
reduced cost travel for selected segments of the population — family members, youths, and senior citizens —
willing to comply with their terms. Specifically, the

- 2 Family Plan offers normal reserved seat coach service
at a 33-1/3 percent reduction from normal coach fares
for the spouse and/or children, 2 to 21 years old,
accompanying a head of family who pays the full fare.
The fare is not available during the peak summer period
or during certain holiday blackout periods. The fare
is available only on a round-trip basis and travel must
be completed within six days.
The youth and senior citizen fares are for
no-reservation or standby service.

The two plans are

identical except for the ages of the passengers in the
two favored groups. __/ Each offers a 33-1/3 percent
reduction from the normal coach fare.

Each is available

year round, except for certain holiday blackouts.

order to quality a passenger must make a one-time purchase
of an I.D. card for $5.
In support of its proposal, TWA states that
a limited offering of these fares will provide increased
revenues (and decrease excess capacity) and thereby reduce
the losses which the carrier expects in the near future.

*/ The youth fare is available for travelers between
the ages of 12 and 21, while the senior citizen fare is
available to passengers 65 years of age or over.

((

Thus, the carrier contends that the fares will benefit
not only those who use them but all travelers by "reducing
the level of further fare level increases in the near
future."

TWA acknowledges that the fares are of the general

type that were found unjustly discriminatory by the Board
in Phase 5 of the recent Domestic Passenger Fare Investigation (DPFI).

However, it argues that the industry is

experiencing unusual economic problems today —

namely,

unprecedented inflationary cost increases (particularly
fuel) and a recent sharp decline in traffic.

Under these

circumstances TWA urges that the Board permit the use of
every promotional tool available including the fares at
issue.
Petitions seeking suspension and investigation
of TWA's tariffs have been filed by Eastern Air Lines,
United Air Lines, the American Society of Travel Agents
(ASTA), the National Association of Motor Bus Owners
(NAMBO), and the Department of Transportation.
The Council on Wage and Price Stability hereby
answers in support of those petitions insofar as they seek
suspension and investigation of TWA's fares. __/

V In supporting the requests for suspension and
investigation, we do not necessarily endorse all of
the arguments made by each of the petitioners.

- 4 The Council has a direct interest in the
fares in question.

The Council was created by the

Council on Wage and Pr5 Se Stability Act of 1974 (Public
Law No. 93-387) on August 24, 1974. The Council's purposes under the Act are, generally summarized, to monitor
the inflationary impact of activities in both the public
and private sectors of the economy.

Section 3(a)(7)

of the Act expressly directs the Council to
review and appraise the various programs,
policies and activities of the departments
and agencies of the United States for the
purposes of determining the extent to which
those programs and activities are contributing to inflation.
Further, Section 5 of the Act requires the Council to
report its findings and recommendations for the^ containment of inflation to the President and Congress.
With respect to air transportation, we are
particularly concerned with the sharp rise in scheduled
air fares, amounting to nearly 20 percent over the last
18 months. Understandably some of this increase has been
attributable to substantially higher fuel costs over this
period which have been passed through in higher fares.
At the same time, however, the national economy, already
suffering from prolonged inflation, entered a major recession.

The result of these forces —

substantial fare

increases and a deteriorating economic situation —

has

been the stagnation of air carrier traffic and, for
some carriers, significant traffic declines. Indeed,
the industry as a whole has reported a substantial traffic
decline so far in calendar 1975.
Moreover, for most carriers, the economic
effects of these declines in traffic have been exacerbated by substantial increases in capacity in recent
months as carrier operations have returned to "normal"
following the easing of the fuel situation. As a result,
load factors have declined even more sharply than traffic.
The industry and the Board seem to be unanimous in recognizing that steps must be taken to reverse
these trends. The question which divides the industry
concerns the exact steps which should be taken.
We believe that a substantial reduction in
airline fares is necessary to correct the industry's
economic problems and that fare reductions would be a
desirable step in curing the broader national problem of
inflation. Thus, we have urged the Board to permit the
price mechanism to work by granting to each carrier a
great degree of flexibility in establishing promotional

- 6 fares responsive to its own system needs. */
At the same time, however, we urge the Board
to adhere to its conclusion in Phase 5 of the DPFI that
fares designed to favor a particular social group are
unjustly discriminatory and unlawful. Less than a
month ago the Board reaffirmed that conclusion in rejecting a senior citizen standby fare proposed by
Hawaiian Airlines.
"The question of fare discrimination
was addressed at length in Phase 5 (Discount
Fares) of the Domestic Passenger Fare Investigation. The Board noted that the courts have
held that factors related to the status of
traffic and unrelated to transportation may
not be considered in justification of a discriminatory fare, nor is the Board empowered
to take into consideration matters involving
broad social policies, such as special treatment for any particular age group, whatever
its personal views may be on such policies.
The Board went on to state that discrimination in favor of young persons could only be
justified by substantial overriding considerations involving the sound development of the
air transportation system, but that the
evidence before it in this regard was insufficient to justify the discrimination inherent
in youth and family fares.
__/ See the Council's Answer to Complaints in Dockets
27607 and 27610.

"Hawaiian has failed to put forth facts
here which would justify a departure from the
fare-discrimination criteria enunciated in our
Phase 5 decision as it relates to fares available to a defined age group, nor is there any
reason to believe that there are developmental
benefits flowing from the senior citizen fare
which would justify their discriminatory
aspects. Accordingly, in view of decisions by
the Board and the courts, the fares here proposed must be considered to be prima facie
unjustly discriminatory." Order 75-3-36 at
1-2 (March 12, 1975) (footnotes omitted).
In our view, the same findings should be made
with respect to each of TVA's fare proposals. In fact,
TWA does not contend that the three fare plans are consistent with the Phase 5 standards on discrimination.
Rather, it argues "special circumstances," contending
that the airline industry's current economic condition
warrants the temporary suspension of those standards.
The facts related by TWA justify price reductions. They do not justify discrimination. In our view,
there are many alternatives, such as overall fare reductions, excursion fares, and off-peak pricing, which
will meet the industry's problems without re-introducing
the invidious discrimination so recently abandoned. The
'*no-frills" fare proposed by National Airlines, which the
Board has permitted to become effective pending investigation, is an example of the sort of creative fare proposal
which can be designed to meet the current problem without
resort to discrimination. */

__/ See Order 75-3-102 (March 27, 1975).

- 8 -

For these reasons, we support the petitions
of Eastern, United, ASTA, NAMBO, and the Department of
Transportation and urge the Board to suspend and investigate TWA's fare proposals.
Respectfully submitted,

George C. Eads
Assistant Director for
Government Operations
and Research

UIIMA" C Ulis^Cc*^*^
Vaughn C. Williams
General Counsel

/ J . Michael Roach
Assistant General Counsel

FOR RELEASE APRIL 3. 1975
TREASURY, EPA AGREE TO ABATE EMISSIONS FROM
BUREAU OF ENGRAVING AND PRINTING INCINERATOR
The Department of the Treasury and the Environmental
Protection Agency have agreed on a plan to abate air
pollution emissions from the incinerator operated by
Treasuryfs Bureau of Engraving and Printing at 14th and C
Streets, S.W., Washington, D.C.
The incinerator now is being used to burn various
security items, including "old money." Although the
incinerator has a maximum capacity of 17,160 pounds per
day, the Bureau during the past several years has gradually
lessened the emissions by reducing the load to 4,500 pounds
per day.
The agreement formalizes Treasury's air compliance plan,
which includes the construction of mechanical destruction
systems to replace the incinerator by June 1, 1976. Meanwhile,
the Department will restrict use of the incinerator to three
or four days per week and will continue to study alternative
methods for disposing of various types of materials. The
Department is also exploring changes in the regulations
governing the destruction of security paper in order to expedite
the adoption of methods of disposal other than incineration.
The agreement was signed for Treasury by Warren F. Brecht,
Assistant Secretary (Administration).

oOo

WS-268

Department of theTREASURY
VASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE

April 2, 1975

RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $1,280 million of 52-week Treasury bills to be issued to
the public, to be dated
April 8, 1975,
and to mature April 6, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS: (Excepting 5 tenders totaling $1,420,000)

High
Low
Average

Price

Discount Rate

93.610
93.358
93.454

6.319% _
6.569%
6.475%

Investment Rate
(Equivalent Coupon-Issue Yield)
6.75%
7.03%
6.92%

TOTAL TENDERS FROM THE PUBLIC RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS,
District

Received

Accepted

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago .
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

$
20,800,000
1,784,305,000
21,265,000
23,735,000
1,760,000
3,670,000
203,170,000
14,525,000
10,585,000
6,350,000
1,545,000
113,140,000

$
10,800,000
1,021,625,000
1,265,000
23,735,000
1,760,000
8,670,000
126,170,000
12,355,000
10,585,000
6,350,000
1,545,000
55,140,000

TOTAL

$2,209,850,000

$1,280,000,000

The $1,2^0,000,000 of accepted tenders includes 83 % of the amount of
bills bid for at the low price and $30,735,000 of noncompetitive tenders
from the public accepted at the average price.
In addition, $924,980,000 of tenders were accepted at the average price
from Government accounts and from Federal Reserve Banks for themselves and as
agents of foreign and international monetary authorities.

EDITORS:
The attached testimony being presented
before a Congressional subcommittee today by
Treasury Secretary William E. Simon is called
to your attention less because of its current
news value than because of its emphasis on
long-range economic trends and the need it
expresses to determine priorities in terms of
claims against future national output. As
Mr. Simon states, it is vital that this process
begin "not when the recession is over, not
when inflation is under control, and not when
the next election is over, but now."

OFFICE OF PUBLIC AFFAIRS

STATEMENT OF THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON PRIORITIES
AND ECONOMY IN GOVERNMENT
OF THE JOINT ECONOMIC COMMITTEE
Washington, D.C, April 3, 1975, 10:00 A.M., EDST
Mr. Chairman and Members of this Subcommittee:
These hearings provide a timely and important
recognition of the need to carefully consider national
economic priorities, and I welcome this opportunity to
appear before you. A more thoughtful consideration is
certainly required to avoid repetition of the severe
economic distortions of the past decade. Your leadership
in the Joint Economic Committee has provided a unique
forum for such discussions for many years. But the sharp
cyclical swings, unprecedented double-digit inflation,
unacceptable levels of unemployment and increasing
uncertainties about the future adequacy of raw materials
and productive capacity have created a real sense of
urgency. Any immediate relief resulting from the economic
recovery, that now appears to be getting underway, will
be only temporary if fiscal and monetary abuses are built
into the system causing even more violent booms and busts.
The American people must understand the competing
demands in making priority decisions as well as the
remarkable creativity and productivity of the U.S. economic
system when it is allowed to function properly. Your
series of thirteen major papers presented to Congress on
such diverse subjects as Education, Women's Rights and
Opportunities, Civil Rights, Health, Social Security, the
Media, Defense, the Environment, Consumer Protection,
Government Productivity, Agriculture, Foreign Affairs and
Federal Disaster Relief Programs is an impressive effort
and I commend you for it. I particularly admire your call
for elimination of many obsolete regulatory functions of
WS-269
government which are unnecessarily restricting the efficiency
of the U.S. economy. But the entire Congress, every
Executive agency and the general public must recognize that

2
the ranking of claims against the potential output is
now one of our most important economic challenges.
We cannot do everything immediately and we must consider
the proper allocation of resources and functions between
the public and private sectors. I am confident that we
can cooperate to make these decisions but we need more
effective analysis and planning.
My testimony will not focus on the improving
prospects for near-term recovery beyond repeating my
fundamental concern about avoiding fiscal and monetary
excesses during the current transition which would inevitably
lead to even more serious economic distortions within a
relatively brief period of time. Nor will I discuss current
budget and tax issues. Instead, I will limit my brief
remarks to three specific points which will affect future
national economic priorities: (1) my skepticism about the
economic assumptions used in the five-year estimates
presented in the President's Fiscal Year 1976 budget, either
as a description of the probable economic results or as a
proper guideline for national policy; (2) the productive
capacity of the U.S. economy which will ultimately determine
which priority goals can be met; and (3) the Federal
I. role
THE FIVE-YEAR
BUDGET
ESTIMATES
Government's
in identifying
national
priorities and
necessary
policies.
The Congressional Budget and Impoundment Control Act
of 1974 requires a five-year projection of Federal budget
outlays and receipts that would result from the continuation
of existing and currently proposed programs with adjustments
for anticipated population trends and economic conditions.
Additional spending programs beyond the existing commitments
are not included. Reasonable assumptions about demographic
patterns are usually possible but anticipating changing
economic conditions has proven to be extremely difficult,
if not impossible. Unfortunately, the five-year budget
projections are dependent upon several key assumptions about
the economy because the budget results are increasingly
affected by economic developments. Retirement and other
social insurance benefit payments are linked to consumer
price changes. Medicare, Medicaid and other transfer
payments are also affected by price developments. Numerous
entitlement programs, such as unemployment compensation
claims, are directly tied to the status of the economy.

(••]

Federal construction and federally assisted programs
respond to economic conditions. Interest on the
national debt depends upon the general financial markets.
Tax receipts obviously are determined by individual and
business incomes.
The key economic assumptions underlying the FY 1976
to 1980 estimates have received widespread attention,
particularly the pessimistic inflation and unemployment
figures. For calendar year 1976 the Consumer Price Index
increase was estimated to be 7.8 percent and the
unemployment raie forecast remains close to 8 percent.
ECONOMIC ASSUMPTIONS
(Calendar years, dollar amounts in billions]
Assumed for purposes of budget estimates
1973
actual

Item

Gross national product:
Current dollars
Constant (1958) dollars:

1974 actual

1975

. $1,295 $1, 397 $1,498

Prices (percent change):
G N P deflator...
Consumer Price Index
Unemployment rat • (percent).

$839
5.9

$821
-1.2

5.6
6.2
4.9

10.2
11.0
5.6

$794
-3.3
10.8
11.3
8. 1

1976

1977

$1, 686 $1,896

1980

$2,606

$832
4.8

$879
5.6

$1,061
6.5

7.5
7.8
7.9

6.5
6.6
7.5

4.0
4.0
5.5

Sluggish improvement in both measures was assumed but
at a very unsatisfactory rate. It is important to note
that the figures for calendar years 1975 and 1976 are
forecasts of probable economic developments but the
longer-term figures for 1977 through 1980 are projections
of trends that would be consistent with the general goals
of gradually returning to lower levels of inflation and
improved employment conditions.
I do not believe that the economic assumptions used
in preparing the five-year budget estimates are a sound
indicator of the likely pattern of inflation and unemployment
in the near term or that precise projections can be made
for later years. In such a volatile period it is important
to maintain perspective rather than frequently shifting
policies in response to each new econometric forecast,
particularly when the underlying assumptions for such
predictions are so uncertain. The record in recent years
clearly demonstrates the uncertainties of economic fortcasting
using the somewhat mechanical models available. Even
short-term forecasts covering only a few months are often
wrong and econcmists have difficulty even describing current
economic conditions as multiple statistics are reported and

subsequently revised. Unfortunately, the methodology
of computer forecasts often creates a false impression
of accuracy and certainty. I sometimes think that
economists use decimal points in their forecasts to
prove they have a sense of humor. But the forecasting
errors of the past few years have been anything but
humorous. The sharp increase in the unemployment rate
and the rapid erosion of inflation pressures in recent
months indicate that these two key assumptions may already
be far off the mark and the figures for subsequent years
are even more questionable. Like any other management
tool, the questioning process required for preparing an
economic forecast is probably more valuable than the
resulting estimates. Public officials should never
accept such tenuous forecasts as a firm basis for policy
decisions, particularly during periods of sharp cyclical
swings.
Another serious limitation of the economic assumptions
presented in the FY 1976 and 1980 budget figures involves
the unfortunate tendency of forecasters to give only one
estimate. For example, an unemployment rate of 8.1 percent
is the forecast for 1975 but no indication of the possible
range of results is indicated. It is obvious that the
actual figure could fall somewhere within a broad or narrow
range on either side of the published estimate. For many
policy decisions it is more important to know the range
of possible results and their probabilities than it is to
have a single estimate. In even the most simple economic
forecast a series of estimates about investment and savings
decisions in each sector of our $1-1/2 trillion economy
must be made. In estimating unemployment figures additional
decisions about the growth of the labor force, job mobility
and other demographic variables are required. We too often
receive false signals because only the single estimates
are presented and a misleading consensus is implied because
the range of possible results and their probabilities are
not discussed. There is also the familiar problem that where
there are two economists there will be three opinions
expressed and the rate increases geometrically for other
groupings.
But even if the budget's economic estimates are a
reasonable approximation of the future economy we should not
passively accept those results. As Secretary of the Treasury
and Chairman of the Economic Policy Board, I am not satisfied
with the projected levels of inflation or unemployment.

(t
The challenge of economic leadership is to provide a
more stable economic environment in which the private
sector recovery can accelerate. Such improvement requires
a restoration of consumer and business confidence.
Expedient actions designed for short-term political
benefit will not restore that confidence. Therefore,
there is an important role for the government in identifying
national goals and establishing more stable fiscal and
monetary policies.
I believe we can do better than the economic
assumptions suggest. But we must first demonstrate that
government decisions will emphasize economic goals that
stretch beyond the next scheduled election; that our future
productivity and employment opportunities require
increased rates of capital investment; and, that vigorous
competition within the framework of a free enterprise
economy is still the best approach to maintaining the
strength and creativity of the United States.
II.

NATIONAL ECONOMIC PRIORITIES

We still have the premier economy of the world and
rapid, though somewhat erratic, economic growth continues
to occur. But Americans recognize that output gains and
high per capita incomes do not instantaneously solve all
of our national problems. When we apply too much pressure
on our system to produce goods and services, the inevitable
result is inflation and shortages. If increased government
spending exceeds the resources available and the monetary
system finances the resulting deficits, the economy
eventually becomes overheated. The underlying growth
trends of the U.S. economy will provide sustained progress
but we cannot realistically expect to satisfy every new claim.
While the need for responsible demand management is
generally accepted, each special interest group assumes
that its claim is unique and deserves satisfaction.
Unfortunately, we have clearly forced the level of government
spending beyond the willingness of society to pay for the
programs provided. At the conclusion of FY 1975 we will
record our fourteenth Federal budget deficit in the past
fifteen years and the fortieth deficit in the past fortyeight years. And the budget outlook over the next few years
is clearly a matter of great concern. In trying to respond
to so many diverse interest groups the Federal Government
has frequently distorted the efficiency and stability of
the entire economic system and has created an accelerating
momentum of outlays which has eroded our fiscal flexibility
in responding to changing priorities and current problems.

The Federal Government obviously has a fundamental
role in decisions about the uses of the national output.
Unfortunately, it is widely believed that the government's
role is limited to simply balancing the Federal budget
over time. In reality, Federal decisions influence the
entire economy through direct purchases, taxes, transfer
payments and a variety of research and grant programs
which serve as seed capital for determining private sector
activities. Total government spending now comprises over
one-third of the total economy and the upward trend may
accelerate if the growth of transfer payments continues
to increase rapidly (see Chart 1). In describing the
pervasive influence of Federal decisions in allocating
available resources among competing claims I am not suggesting
that we should have a controlled economic system. To the
contrary, I am strongly committed to the private sector as
the superior source of economic progress and my experiences
in government have reinforced those beliefs. But we must
recognize the major impact of government decisions on
every sector of our economy.
Unfortunately, debates about setting national economic
policies are too often limited to arguments about the
allocation of functions between the public and private
sectors. In considering national economic priorities a
much broader perspective is required. The total productive
capability of the entire economy must be first identified
before attempting to rank and select specific claims against
that potential output. Estimating the total economic
capacity of the system avoids the simplistic arguments that
additional government programs can be continuously created
to meet every claim by simply shifting resources from the
private to the public sector. Adding new government
commitments is not feasible if the total production capacity
of the economy is exceeded. This guideline has been
frequently violated as total demand has increased too rapidly
for the economic system to absorb. When this happens the
economy begins a boom and bust sequence with severe inflation,
and unemployment distortions, such as occurred in the
late 1960's and again during the last three years.
The inflation and unemployment caused by these wide swings
disrupts the entire U.S. economy and international stability.
Unfortunately, the overheating process has often been caused
by excessive rates of increase in government spending.
The results of such excesses persist long after economic
conditions change because spending programs are rarely
eliminated.

y
A study of total capacity was prepared in 1969 by the
Council of Economic Advisers and published in the Economic
Report of the President for 1970. The pattern of real
increases in Gross National Product was projected for 1976
using trend estimates of the growth of the labor force,
national productivity gains, expected unemployment and the
annual average number of hours worked per person.
The existing claims against the projected GNP were then
identified, including personal consumption, business
investment, housing and government spending. All of these
claims were adjusted to reflect demographic and economic
assumptions. Federal spending was projected to include
only existing programs plus new proposals for revenue
sharing, welfare reform and pollution abatement outlays.
As summarized in Table 1, the fulfillment of the total
claims already identified in 1969 required a relatively
rapid expansion of output to keep pace:
"...the existing, visible, and strongly supported
claims already exhaust the national output for
some years ahead. This is not to say that no
other claims included in these calculations should
have preference over claims not recognized here.
The basic point is that if other claims are to be
satisfied some of those recognized here will have
to be sacrificed." Economic Report of the President,
1970, p. 80.
These projections in the Council of Economic Advisers
analysis are hypothetical estimates based on somewhat
arbitrary assumptions, and actual results have varied during
the intervening years since the study was completed.
Nevertheless, a crucial point is evident: decisions on
national economic priorities must reflect total output
potential and all existing claims rather than focusing only
on Federal budget outlays. Whenever resources are limited
recommmendations to add new government programs must consider
the prospective impact on the private sector. In short,
the creation of new priorities, or expansion of existing
commitments at an accelerated rate, will require giving up
or curtailing some existing claim. Once it is recognized
that the potential GNP has already been committed to
existing claims the consideration of new outlay requests should
become more realistic. Spending decisions should then
concentrate on realigning claims rather than merely adding
additional commitments to satisfy diverse interest groups.
This point is particularly important in considering the
massive amounts of private capital investments required to

meet future capacity and employment needs. Instead of
reducing capital investment to release resources for
government social programs, the amount of private outlays
must be accelerated. This basic requirement means
that government spending and tax policies should be
directed toward creating a more balanced budget so that
the future flow of savings is not diverted away from
private investment into the financing of large government
deficits.
III. GOVERNMENT POLICIES AND PRIORITIES
Although the projections of potential output and
claims summarized in Table 1 are necessarily based on many
arbitrary assumptions, the framework of analysis suggested
is useful in considering national economic priorities
for at least three important reasons:
1. Existing claims on the potential national
output, even assuming rapid growth, tend to
exhaust the probable national output into
the future. If new commitments are to be made,
then existing claims must be eliminated or
curtailed.
2. The Federal Government's fiscal policies will
directly affect which claims are satisfied
through the influence of its spending and tax
policies.
3. The prospective level of private capital
investment will be directly affected by the
pattern of government spending and deficits.
The traditional view of the government's role has
been that a balanced budget is a symbol of fiscal
responsibility. Accordingly, when deficits occurred, the
government was expected to restrict outlays and/or increase
taxes. However, it is obvious that as a result of economic
fluctuations the surplus or deficit for any specific year
will inevitably be different from the arbitrary target.
The "annual balance" rule eventually was replaced by the
concept that balance should occur over the course of the
business cycle so that fiscal policies could be used to
stimulate the economy despite any resulting deficits.
The relatively unknown corollary of this "pump-priming"
policy, of course, is that budget surpluses should occur
during periods of above-average economic activity to create
the desired balance over time. Unfortunately, the actual
pattern has been completely asymmetrical with deficits
occurring almost every year (see Table 2). While some

economists have tried to justify this pattern, I believe
that by concentrating on short-term economic stabilization
goals rather than long-term allocation of resources our
fiscal policies have become a disruptive force. Too often
fiscal policies have lagged economic developments so that the
desired stimulus or restraint typically arrives long after
the business cycle changes. The "emergency" spending
programs created to pull the economy out of a recession
often add to the subsequent overheating of the economy
and create additional commitments that last far into
the future. A corresponding reduction of these programs
during periods of economic expansion is unusual. The result
is an escalating pattern of government programs, which are
oriented toward the problems of the past and restrict the
government's ability to respond to new national priorities
or current problems. Finally, the "full employment" budget
was introduced to correct the asymmetrical pattern of
deficits, but this tool has not provided the necessary
discipline. All of these approaches have failed because
the Executive Office and Congress have been unwilling to
shift their attention to longer-term goals or to face up
to the agonizing experience of saying no.
The most recent effort to regain control of the fiscal
process is the creation of the Congressional Budget
Committees. This action properly recognizes that the only
meaningful budget control consists of self-discipline.
Quantitative guidelines have never survived the pressures
of political elections or powerful pressure groups.
It is ironic that we have waited two hundred years to
adopt a Congressional procedure for considering individual
spending programs as parts of a total budget only to begin
the process during an unusually chaotic period of economic
change. But this approach offers the only real promise of
developing Congressional discipline in considering the total
economic importance of the Federal budget. The next step
is to expand the process to consider longer-term goals and
finally to relate the government spending actions to the
total capacity of the economic system as suggested earlier
in my testimony. When this entire cycle is completed we
will recognize that individual pieces of legislation cannot
be simply added without considering what existing claims
need to be eliminated or curtailed. The economic discipline
of allocating scarce resources to different claims according
to national priorities can be ignored for brief periods,
but the economic distortions of the past decade indicate
that this is a costly decision.

IV.

SUMMARY

My experiences in government service convince me that
we must become much more rigorous in evaluating new
claims against our future national output. The economy
will continue to grow and meet many of our needs, but we
cannot realistically expect to satisfy every competing
claim. Some will have to be eliminated or restrained.
Accordingly, in assessing the growth of Federal spending,
we must recognize the realistic growth capabilities ot
the total economy. In recent years, we have lacked the
discipline to maintain the necessary balance. £ro"L
. nl
calendar year 1966 through calendar year 1975 the GNP w i n
have increased from $749.9 billion to approximately $1.^
trillion, a gain of 100 percent. From fiscal year 1966
through fiscal year 1976 Federal budget outlays will jump
from $134.7 billion to at least $349-0 billion, an increase
of 160 percent. Some would welcome this acceleration ot
Federal spending because they favor a different approach
to allocating functions between the private and public
sectors. I strongly disagree because I believe the private
enterprise system is the world's most efficient approach
to increasing output and preserving personal freedoms.
But whichever course our mixed economy takes in the coming
years, the need for a more rigorous consideration of
national economic priorities is necessary.
It is vital that the process of sorting out of national
economic priorities begin now -- not when the recession is
over, not when inflation is under control, and not when the
next election is over, but now.
Twenty years ago it was apparent in this country that
we were heading for an energy crisis. One report after another
confirmed it, but instead of providing wisely for the future,
we insisted upon living-foolishly for the moment. Now we are
beginning to pay the price, and we will go on paying for
some time to come.
In the same way, we have seriously abused the private
enterprise system and have so encouraged the enormous growth
of government that we are heading toward another serious
crisis. The United States is rapidly coming to a crossroads
where we must decide what type of economic system we want.
I hope that we will continue to emphasize the free enterprise
system in America and roll back the forces of restrictive
government. The choice is oOo
one that our generation is called
upon to make. Unless we act soon, the decision will be made
Thank
for us you.
by default.

CHART

Government as a Percent
of GNP, 1929-2000

Percent
60

56%

/
/

50
/

45%

/
y
y

s
y

1929-1974 growth rate.
Based on 1955-75 trends
of expenditure components.

10
cal

I I I tI t I I I f I > If I I I I I 1I I I i I I I I I I I t t I I . fi t I I t i I I I i I i I , i , ,J , j >

•25

Office of the Secretary of the Treasury
Office of Financial Analvsis

•45

'50

'55

'60

'65

'70

'75

'80

I , I , "i I , , f f | ,

'85

'90

*S5

. . |

,. ,

2000

1TABLE 1

REAL GROSS NATIONAL PRODUCT, 1955, 1966, and 1969 - PROJECTIONS FOR 1975-76,

Actuals
T9T^

1966

T9~69

Projections
j 1973"

Gross national product available,

Billions of dollars, 1969 prices
931.4
1,199
845.5
569.0

Claims on available GNP

569.0

845.5

931.4

1,188

69.8
53.8
344.3
96.9

88.3
94.4
519.2
137.5

101.3
110.8
577.5
139.8

83
140
788
192

55.1
34.5
7.3

92.0
29.4
16.1

99.3
32.0
8.5

128
52
12

Net exports of goods and services,

4.2

6.1

1.9

Unallocated resources

5.6

-.2

9.3

2,637

2,842

3,529

Federal Government purchases
State and local government purchases..
Personal consumption expenditures
Gross Private domestic investment
Business fixed investment
,
Residential structures
,
Change in business inventories.

Addendum: Federal surplus or deficit (-),
national income accounts basis
Per capita personal consumption
expenditures
,

2,083

Percent of total GNP available
Gross national product available,

100.0

100

Claims on available GNP

100.0

Federal Government purchases
State and local government purchases.
Personal consumption expenditures....
Gross private domestic investment..

12.3
9.5
60.5
17.0

10.4
11.2
61.4
16.3

10.9
11.9
62.0
15.0

7
12
34
16

7
12
64
16

Business fixed investment
Residential structures
Change in business inventories,

9.7
6.1
1.3

10.9
3.5
1.9

10.7
3.4
.9

11
4
1

11
* 4
1

Net exports of goods and services,
Unallocated resources..

.8
.0

.7
.0

.2
.0

(1)
1

(1)
2

1.0

Addendum: Federal surplus or deficit (-),
national income accounts basis..

__/ Less than 0.5 percent. Note- - p r o i „ f
expenditures (See Table 27) an* ^ 1 ? e . c t _ 1 l o n s a r e based on projected Federal
<bee lable 27) and their influence on various components of GNP.

TABLE

FEDERAL BUDGETS
CHANGES IN THE UNIFIED BUDGET OUTLAYS
'

' '

• •

r '

•

—

BY FISCAL YEAR, 1961-1976
(dollars in billions)
Fiscal Year Over "
Preceding Year

Federal
Outlays

Dollar
Increase

Percentage
Increase

Surplus
or Deficit

1961

$ 97.8

$ 5.6

6.1

-3.4

1962

106.8

9.0

9.2

-7.1

1963

111.3

4.5

4.2

-4.8

1964

118.6

7.3

6.1

-5.9

1965

118.4

-0.2

—

-1.6

1966

134.7

16.3

13.8

-3.8

1967

158.3

23.6

17.5

-8.7

1968

178.8

20.5

13.0

-25.2

1969

184.5

5.7

3.2

+3.2

1970

196.6

12.1

6.6

-2.8

1971

211.4

14.8

7.5

-23.0

1972

231.9

20.5

9.7

-23.2

1973

246.5

14.6

6.3

-14.3

1974

268.4

21.9

8.8

-3.5

1975 (est.)*

313.4

45.0

16.8

-34.7 '

1976 (est.)*

349.4

36.0

11.5

-51.9

Last official budget estimates published February 3, 1975.
Subsequent decisions have increased the probable level of
outlays and the size of the deficit.

DepartmentoftheTREASURY
ICE OF REVENUE SHARING

TELEPHONE 634-5248

WASHINGTON, D.C. 20226

9
FOR IMMEDIATE RELEASE
Friday, April 4, 1975
Fifty states, the District of Columbia and 37,199 local
governments were sent checks totalling $1,523,731,779 by the
Treasury Department's Office of Revenue Sharing today, in the
eleventh regular distribution of revenue sharing funds since
the first payments were made in December 1972.
Today's payment brings to $18.9 billion the amount of
money that has been returned to states and local governments
since general revenue sharing was authorized by the State and
Local Fiscal Assistance Act of 1972 (P.L. 92-512).
The Act provides for the distribution of $30.2 billion to
states, counties, cities, towns, townships, Indian tribes and
Alaskan native villages over a five year period that ends with
December 1976. President Ford has announced his intention to
seek extension of the program past 1976.
Funds totalling $39,891,289 were not paid to 605 governments today for a variety of reasons. A few small places elected
to waive participation in the program. Because of adjustments
resulting from recent data improvements, some governments were
found already to have received as much as or more money than they
were entitled to receive in the fiscal current year. Some govern-

ments still have not filed two simple report forms that were requi
-more-

-2-

to be returned to the Office of Revenue Sharing in the summer
of 1974.
Of the funds being held, by far the largest single amount
is due the City of Chicago.

Chicago's funds are being withheld

pursuant to an order issued by the U. S. District Court in
Washington, D. C. in December 1974.

The City of Chicago was

found to have been using discriminatory procedures to hire and
promote members of the city Police Department, where general
revenue sharing funds have been spent.

The Office of Revenue

Sharing is holding two quarterly payments due Chicago: January 1975:
$19.2 million; and April 1975:
$38.4 million.

$19.2 million; for a total of

Chicago is the only government whose shared

revenues are being withheld pursuant to court order.
General revenue sharing funds are distributed quarterly,
in October, January, April and July of each year.

The money is

allocated by formula, using data supplied primarily by the U. S.
Bureau of the Census that has been reviewed by the recipient
governments themselves.
Later this month, the Office of Revenue Sharing will
announce allocations of funds for federal fiscal year 1976.

###

^kWaWamSSkWkWkW

DepartmentoftheTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE

April 3, 1975

BRADFIELD PRESENTED AWARD BY SECRETARY SIMON '
ON RESIGNATION AS ASSISTANT GENERAL COUNSEL
Secretary of the Treasury William E.' Simon last night, expressing deep
regret at the resignation of Michael Bradfield' from
Treasury after more than 13 years of service, presented him
the Department's Exceptional Service Award in recognition of
"brilliant accomplishments and extraordinary legal skills."
Bradfield had been Assistant General Counsel for International
Affairs since 1968.
In presenting the award, Secretary Simon said Bradfield's
energy and creative talent would be sorely missed in Treasury.
The Assistant General Counsel is leaving Treasury to enter
private practice with the law firm of Cole, Corette and
Bradfield.
Bradfield participated in a major way in such important
developments as the establishment of the International Monetary
Fund's Special Drawing Rights, the readjustment of exchange
rates during 1971-1973, the development of the Trade Act of
1974, reform of international monetary rules, the settlement
of difficult investment dispute matters, and the U.S. participation in the international development lending institutions.
Most recently, he had a major responsibility in the
drafting of the Financial Support Fund Agreement of the OECD
cooperating nations that will be signed April 9 in Paris.
Bradfield came to the Treasury in 1962 as an AttorneyAdviser. In July 1968, he was promoted to Assistant General
Counsel for International Affairs. In this capacity, he was
responsible for advising the Under Secretary for Monetary
Affairs, and the Assistant Secretaries of the Treasury on
international monetary problems, balance of payments, trade
matters and development assistance, including United States
participation in the international development banks.
He participated in many international negotiations and
meetings, such as the annual meetings of the World Bank, International Monetary Fund, Asian Development Bank, and InterAmerican Development Bank.
WS-270

(Over)

- 2A graduate of Union College, and Columbia University
School of Law, Bradfield was the recipient of Treasury s
Meritorious Service Award in 1966, and, in 1974, received
a Special Citation from Secretary Shultz for "extraordinary
competence" in the successful conclusion of the negotiations
with the Government of Peru on investment disputes. He also
received the General Counsel's award in recognition of
"innovative and brilliant" legal achievements.
Bradfield and his wife, the former Inai Yuh, have two
sons, and resides at Castlegate, Woodbine Street, Chevy
Chase, Maryland.

oOo

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE. N.W.
WASHINGTON, D.C. 20506

/ y

A n

P 'l 2, 1975

MEMORANDUM FOR CORRESPONDENTS:
For information call:
(202) 456-6757

Attached is a copy of a letter sent to the Federal Trade Commissioners
from Albert Rees, Director of the Council on Wage and Price Stability
expressing concern about the Federal Trade Commission's clarification
of the legality of backhaul allowances under the Robinson-Patman Act.

o 0 o

Attachment

CWPS-36

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
WASHINGTON, D.C. 20506

E
Z

April 1, 1975

Dear
I am writing to express my concern about the Federal
Trade Commission's clarification, in a letter to the Consumers' Union issued on March 19, 197 5, and publicly
released on March 28, of the legality under Section 2(a) of
the Robinson-Patman Act of backhaul allowances offered by a
seller, who otherwise offers a uniform zone-delivered price,
to customers who provide their own transportation for goods
purchased at the seller's warehouse. In my view, it is
important that the Commission develop a clear policy to
encourage backhaul practices, in order to alleviate the fuel
waste and other costs that result from unused backhaul
capacity. However, the Commission's March 19 clarification
is not such a policy, and may indeed further discourage
backhaul.
The March 19 letter requires that the f.o.b. price
offered to all backhauling customers be "uniform" -- that
is, be the same dollar amount in each case. It does not
permit a seller to offer backhaul allowances that vary in
accordance with the cost of transportation to each customer.
This requirement of uniformity places a substantial restraint
upon the development of backhauling - - a restraint not mandated by the Robinson-Patman Act, which permits a seller to
offer different prices where justified by different costs.
Under the Commission's March 19 letter, the uniform
f.o.b. price offered to customers who backhaul is not likely
to be lower than the seller's uniform zone-delivered price
minus his average transportation cost for that zone. Sellers,
at least those with substantial dominance in their product
markets, cannot be expected to offer a uniform allowance in
excess of their average costs. This allowance, however,
will only permit backhauling by customers who can provide
their own transportation at less than or equal to the
seller's average cost. Customers far away enough to incur
greater transportation costs will not be able to afford to
make use of their empty backhaul capacity. In my view, this
status will persist over time.

2
„ iv ,--- KV a filer's more distant customers can
Backhauling by a seller s more
allowmost simply be encouraged by a seller s otte
n t0
^partLular^u t mer.* ^thluch5an allowance, any customer who'can ship as efficiently as these er would be
encouraged to use his empty truck capacity to do so. wniie
different customers would be paying different prices for the
same goods, the difference would only " f J « c ! * ^ £ ^ ? " ! r £ n
the seller's actual transportation costs to those customers.
While Section 2(a) of the Robinson-Patman Act generally
prohibits price differentials for a single product, it
expressly permits "differentials which make only due allowance for differences in the cost of manufacture, sale, or
delivery . . . ." This language can certainly be mterpreted to refer to such price differentials as would result
from a backhaul allowance measured by actual transportation
costs. Additional discriminations may be inherent in the
uniform zone-delivered price from which such a backhaul
allowance would be deducted. However, that fact makes it no
less true that the price differentials resulting from an
actual cost allowance would be justified by the differences
in the seller's transportation costs to different customers.
Uncertainty about the legality of actual-cost backhaul
allowances has significantly impeded the negotiation of
backhaul agreements. The Commission's disapproval of actual
cost allowances in its March 19 letter will of course further discourage backhaul practices by customers far enough
away from a supplier to exceed his average transportation
costs. The encouragement of backhaul, on the other hand,
would not only save fuel and other costs as noted above, but
would also increase competition among suppliers and customers
with respect to the transportation of purchased goods. I
therefore recommend that the Commission issue a statement
that Section 2(a) of the Robinson-Patman Act permits actual
cost backhaul allowances.
Sincerely,
Albert Rees
Director

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NBC Nightly News, "Brinkley's Journal"

Date:

1975-04-02

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Federal Reserve Bank of St. Louis

https://fraser.stlouisfed.org

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1975-04-02

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Page(s):
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NBC Nightly News Interview with Secretary Simon

Date:

1975-04-03

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CBS Evening News Quotes Secretary Simon

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1975-04-03

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Federal Reserve Bank of St. Louis

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EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY

726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR IMMEDIATE RELEASE
Thursday, April 3, 1975

FOR INFORMATION CALL:
(202) 456-6757

COUNCIL ON WAGE AND PRICE STABILITY TO
HOLD CONFERENCE ON CONCENTRATION,
ADMINISTERED PRICES, AND INFLATION
Albert Rees, Director of the Council on Wage and Price Stability,
announced today that the Council will examine "Concentration,
Administered Prices, and Inflation" in a conference with an
outside group of economists to be held on April 14 from 9:30 a.m.
to 4:00 p.m. in Room 2010, New Executive Office Building.
The meeting, which is the first in a possible series of such
meetings on various topics of interest, will be an examination
and discussion of current empirical research and theories
regarding the effect, if any, of administered pricing in
concentrated industries on inflation. In announcing the
conference, Mr, Rees said, "There have been a lot of allegations about administered prices in the past few months.
Therefore, we think it will be useful to pull together the
current research on this topic so that we can offer a more
informed analysis of various proposals, ideas, and opinions
on the subject."
The meeting will be open. Seating capacity is limited, however,
and anyone wishing to attend the conference as an observer should
call the Council at 456-6757 by Thursday, April 10 for clearance.
Attached is a list of participants and an agenda for the meeting.
o 0 o
Attachments: 2
CWPS-37

CONFERENCE ON CONCENTRATION,
ADMINISTERED PRICES, AND INFLATION

^X^
/

Participants*

Barrett, Nancy - American University
Blair, John - University of South Florida
Cagan, Philip - National Bureau of Economic Research
Collery, Arnold - Council on Wage and Price Stability
Fischer, Stanley - Massachusetts Institute of Technology
Hay, George - Department of Justice
Lanzilotti, Robert - University of Florida
Licari, Joseph A, - Occidental College
Means, Gardiner
Mueller, W.F. - University of Wisconsin
Quails, PT David - Federal Trade Commission
Rees, Albert - Council on Wage and Price Stability
Scherer, Frederic M., - Federal Trade Commission
Thorp, Willard
Weston, J. Fred - UCLA

*Acceptances as of April 3

CONFERENCE ON CONCENTRATION,
ADMINISTERED PRICES, AND INFLATION
Tentative Agenda

9:30 a.m.

Welcoming Remarks by Albert Rees,
Director of the Council on Wage
and Price Stability

9:40 a.m.

Opening Remarks

10:00 a.m. Presentation of Previously Unpublished
Empirical Research
11:30 a.m.

Break for Lunch

1:00 p.m.

General Discussion

4:00 p.m.

End of Conference

Contact:

Linda Potts
964-2951

FOR IMMEDIATE RELEASE April 4, 1975
TREASURY ANNOUNCES LOCK-IN AMPLIFIERS
AND PARTS THEREOF FROM THE UNITED KINGDOM
ARE BEING SOLD AT LESS THAN FAIR VALUE
The Treasury Department announced today that lock-in
amplifiers and parts thereof from the United Kingdom are
being, or are likely to be, sold at less than fair value
within the meaning of the Antidumping Act of 1921, as
amended. Notice of the determination will be published
in the Federal Register of April 7, 1975.
The case will now be referred to the International
Trade Commission for a determination as to whether an
American industry is being, or is likely to be, injured.
In the event of an affirmative determination, dumping
duties will be assessed on all entries of lock-in amplifiers
and parts thereof from the United Kingdom which have not
been appraised and on which dumping margins exist.
A notice of "Withholding of Appraisement", published in the Federal Register of January 6, 1975, stated
that there was reasonable cause to believe or suspect
that there were sales at less than fair value. Pursuant
to this notice, interested persons were afforded the
opportunity to present oral and written views prior to
the final determination in this case.
During the period January 1973 through December 1974,
imports of the subject merchandise from the United Kingdom
were valued at approximately $40,000.
#

DtpartmtntolthtTREASURV
WASHINGTON, D.C. 20220

TELEPHONE WO4-2041

99
> i

Jack Plum
964-2615
April 4, 1975
SECRETARY SIMON HEADS U. S. DELEGATION TO FRANCE,
U.S.S.R., INDIA, SRI LANKA, PHILIPPINES

FOR IMMEDIATE RELEASE

Contact:

Secretary of the Treasury William E. Simon will head a
United States delegation to France, the U.S.S.R., India, Sri
Lanka (Ceylon), and the Philippines, beginning in Paris April 8
and 9 for the signing of the OECD Financial Support Agreement,
and ending April 25 at the Eighth Annual Meeting of the Asian
Development Bank in Manila.
The Financial Support Agreement will establish a financial
"safety net" among the industrial member nations of OECD cooperating in energy and general economic policies.
Following signing of the agreement by Secretary Simon,
he will leave for Moscow for the Fifth Session of the Joint
U.S.-U.S.S.R. Commercial Commission. The Session, which takes
place April 10 and 11, will review recent developments in
United States-Soviet trade relations, and exchange views on
prospects for further development of trade and economic
cooperation.
Secretary Simon and Nik
olay
S. Patolichev,
of Foreign
Trade, are Soviet
Co-Cha Minister
members of the U.S. delegati irmen of the Commission. Other
John K. Tabor, Acting Secret on taking part in the meeting are
Under Secretary of the Treas ary of Commerce; Jack F. Bennett,
Leigh, Legal Adviser of the
Worthington, Deputy Assistan ury for Monetary Affairs; Monroe
Trade and Raw Materials Poli Department of State; Howard L.
Assistant Secretary of Comme t Secretary of the Treasury for
Biller, Deputy Assistant Sec cy; Arthur T. Downey, Deputy
Affairs and Business Activit rce for East-West Trade, and Joel W.
retary of State for Commercial
ies.
The Joint Commission, founded at the Moscow Summit Meeting
of May 1972, meets at least once yearly, alternately in Washington
and Moscow. The Fourth Session took place last May in Washington.
The Simon delegation, as guests of Minister Patolichev,
will visit other parts of the Soviet Union, including Kiev,
Tashkent, and Samarkand, after which representatives of the
State and Commerce Departments will return to the United States,
(OVER)
WS-271
and the Treasury group continue to New Delhi, departing the
U.S.S.R. April 15.

- 2Secretary Simon's visit to India and Sri Lanka is at the
invitation of the Finance Ministers of those two countries, and
in his capacity as U.S. Governor to the various international
financial institutions, including the World Bank Group and the
International Monetary Fund. He is also one of 20 representatives
of the Ministerial Development Committee, associated with the
World Bank and the International Monetary Fund.
The Development Committee has decided to give priority to
the poorer countries most seriously affected by the quadrupling
of oil prices. This committee also is concerned with access to
capital markets and certain aspects of the world food supply.
India is the largest of such countries, with a population
of 600 million and per capita income of about $100. Sri Lanka
is one of the smaller of the poor countries most seriously
affected by the oil crisis.
While in these countries, the Secretary will review and
inspect projects being financed or under study for financing by
the international financial institutions, including the Asian
Development Bank, to which the United States is a large contributor. He also will have the opportunity to discuss economic
matters with the finance ministers of the two countries.
The Simon party leaves New Delhi for Bombay April 18, where
the Secretary will address the Indo-U.S. Chamber of Commerce.
The following day the delegation goes to Madras to see first
hand another important segment of the varied Indian economy.
The Secretary, spending one day in Colombo (Sri Lanka)
April 21, with senior government finance officials, leaves
there for Manila to take part April 24 and 25 in the Eighth
Annual Meeting oi the Asian Development Bank.
In addition to reviewing the Bank's activities and policies,
and becoming better acquainted with the problems of the 27
developing Asian countries to be represented at the meeting,
the secretary will discuss development issues with financial
rn«i C -K%°5 2 ^ ? r ??° r c o u n t r i e s The United States has already
contributed $291 million to the Asian Development Bank, and the
U.S. Congress recently appropriated another $74 million

lading opa:raStions?eSSi0nal U°W
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Department of theTREASURY
D.C. 20220

TELEPHONE W04-2041

April 7, 1975
EDITORS:
The enclosed speech delivered today
by Treasury Secretary William E. Simon may
be of extra press interest.
In addressing the American Newspaper
Publishers Association in New Orleans,
Mr. Simon discusses current economic issues
in relationship to the reporting of these
developments to the public.

OFFICE OF PUBLIC AFFAIRS

WS-272

FOR RELEASE ON DELIVERY
ADDRESS OF THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE AMERICAN NEWSPAPER PUBLISHERS
NEW ORLEANS, LOUISIANA, APRIL 7, 1975
I certainly welcome this opportunity to speak before
such a distinguished gathering of American newspaper
publishers.
Over the past two years, I have had the pleasure of
working closely with many of your reporters and editors -first on the energy crisis and now on our economic problems -and I have gained a much keener appreciation of the influence
that your publications have upon our national life. I might
add that through my associations with you and members of
your staffs, I have also had the good fortune of establishing
many new friendships -- one of the greatest rewards of my
career in public office.
I came to Washington with the general notion that newspapers tell their readers what policy decisions have been made
and then report on the impact of those decisions. As I have
learned, however, news reports also play a major role in forming
the policies themselves. Every public official soon finds that
what he says is often less important than what the newspapers
say that he says. Policies are often shaped so that they can be
clearly communicated and will receive maximum attention in the
press. And the heavy pressures of press deadlines often determine
the timing and manner of policy announcements.
In view of this influence and the valuable educational role
that the press can play, I thought it might be helpful today to
turn the magnifying glass around for a few moments. For the last
several months, your newspapers have had it trained on the nation's
economy, probing to see how much life it has left. This afternoon,
I would like to devote part of my talk to the press itself,
addressing in broad terms the state of reporting on the economy
and suggesting ways that all of us might help to strengthen public
understanding of the crucial issues now at stake.
WS -273

- 2This is an incendiary subject, and I want to avoid
lighting any fuses. I have no intention of infringing
upon your freedoms nor in casting stones. We have had
enough of that already. For over a decade, we have witnessed a perilous decline in public confidence in all ot
our major institutions, including the press. America cannot
be a happy, prosperous nation nor can we be an effective torce
for world peace if we are torn by bitter, internal divisions.
In trying to improve public understanding of the economy, then,
let us not try to tear each other down but to build up this
great country again. Let us respect each other's independence,
but let us also find ways of working together to achieve our
goals.
I am often frustrated, and I think you are often frustrated
in the effort to enlighten the public about the true nature of
our economic difficulties and the choices we face for the future.
You want to do your job right, just as I do, in a way that avoids
public confusion and mistaken policies. Yet your reporters and
editorial writers must necessarily jump from crisis to crisis,
from one complex subject to the next with little time or space
for deep analysis and often, with little prior knowledge of the
subject. The inevitable result is that a subject like the
economy, which is inherently complex and can be dull, is frequently sensationalized. And too often, as Senator Fulbright
remarked, reporters show more interest in the singer than in
the song.
How, then, can we do better justice to the problems of
economic reporting?
An initial point upon which all of us would agree, I think,
is that the major economics writers have become much better
acquainted with their subject. There was a time not long ago
when Gardner Ackley, Chairman of the Council of Economic Advisers
under President Johnson, wished that every economics reporter
could measure up to two standards:
-- First, that he had taken an introductory course in
economics; and,
-- Second, that he had passed it.
Reviewing the work of the major writers who cover the
h ^ T C S v T - l n W a s h i n g t o n > I can tell you that there has
n
k
d
improvement in the past year. The good journalists
Ta?" f
a
ry g00d
" ! I! ^Y?. .
' P^sessing a solid grasp of economic issues
ana suDLiety

37
Television networks are also making notable progress in
their economic coverage, especially public television.
Economic developments often lend themselves more easily to
print than to electronic journalism, but the improvements
that the networks have made by bolstering their economic
staffs make it clear that television converagecan become more
effective.
Indeed, while the path of economic journalism in newspapers,
radio and television has been steadily upwards, I \think all of
us would also agree that we are still far from the peak. Time
Magazine, in a recent assessment, said that: "since events pushed
inflation and recession to Page One and the top of TV news
programs, it has become painfully apparent that American journalism,
by and large, provides dismal coverage of the Dismal Science."
That judgment is rather harsh, but it has a ring of truth that
should jar us all.
The steps that might be taken to improve the quality of
your writing staffs are obviously a matter for you to decide.
You might want to consider additional schooling for some of your
writers. In my home state, for instance, Princeton University
with the help of the Alfred Sloan Foundation has just set up a
fellowship program for economic journalists. You also might
want to consider setting up special training sessions for journalists,
similar to those now held by the Washington Journalism Center in
Washington. You might want to open up the "op-ed" pages of your
newspaper to more economics writers or to guest columnists, in
the way that Newsweek and the Wall Street Journal have done so
successfully. Or you might want to consider ways that the wire
services -- the AP the UPI, Dow Jones and Reuters -- can supplement their present news stories on the economy with more in-depth
analysis of the economy.
Whatever you decide, I want to make it clear that we at the
Treasury Department and elsewhere in government are anxious to
be as helpful to you as possible. We would welcome your suggestions
on how we might assist you so that you can do a better job. We
have a firm policy at the Treasury Department that everyone -from the top down -- should be fully responsive to requests from
the press, and I pledge to you that we will continue to follow
that policy to the hilt.

- 4 Evaluating Economic News
Another question you face is how to improve your
evaluation of the news itself.
One concern shared by many men and women in public
life is that economic reporters are highly accurate in
reporting the latest economic statistics -- wholesale price*,
unemployment, and the like -- but they have considerable
difficulty in exploring beneath the surface and explaining
their real meaning.
Let me give you one example: corporate profits. Almost
every time a major corporation reports high profit levels,
the story hits the front page. If profits drop, that s a
story for the financial section. And because of inflation,
many corporations do show higher profits even though their
real earnings are declining. The result is that over time the
American public has gained a very distorted view of the corporate
profit picture. A few years ago, a poll showed that most people
thought corporations reaped a profit of 28 cents on every dollar
of sales; in actuality, profits are only about 5 cents on the
dollar.
Looking at the past decade, in fact, there has been a
dramatic decline in corporate profits, and the implications
of this for the future capital investment is one of the most
under-reported stories of our time. The high profits we often
read about are an optical illusion created by the interplay of
outmoded accounting practices and inflation. When those effects
arc removed, the facts show that after-tax profits have dropped
by 50 percent since 1965. Last year, undistributed corporate
profits -- the money left for investment in expanded plant and
equipment and the creation of new jobs -- wa.s a minus $16 billion.
Earnings fell that far short of covering normal depreciation of
plant and equipment.
It is not unfair to say that this country has been and is
today in a serious profits depression. Yet the American people
do not understand this, and until they do understand it, we face
the prospect of still more anii-business legislation, and we will
find it increasingly difficult to rebuild the foundations of
our private enterprise system.
There are many other examples of statistics which are not
well understood. For instance, the declining value of the dollar
relative to the German mark and the Swiss fra^c h^ s shaken s^me
observers, when in reality, measured on a trade weighted average
basis against all OECD currencies, the dollar stands approximately
where it did two years ago. Or consider our balance of payments.

Three weeks ago, considerable attention was given to a government press release indicating that the deficit in our balance
on current and long-term capital transactions had risen to
$10.6 billion in 1974 from a $1 billion deficit in 1973. But
this is a highly misleading interpretation of the true balance,
because this particular statistic excludes most of the identified
investments in the U.S. by the oil-exporting nations -- investments which totaled about $11 billion in 1974. By including
those investments, you can see that our balance of payments
picture would not appear to be so bleak and would not have
attracted such dire headlines.
What this suggests is that all of us -- reporters and
public officials alike -- have a responsibility not just to
report the statistics but to explain them carefully and honestly.
Within the government, we are trying to improve our statistical
reporting services so that the numbers are more meaningful.
We have also taken steps to insulate the professional statisticians,
freeing them from political pressures and giving the public greater
confidence in the integrity of our measurements. We are mindful
of the fact that in the past the government has been frequently
accused of applying a liberal dose of optimism to every set of
new statistics. George Meany once said that if the government
were reporting the sinking of the Titanic, the announcement would
read something like this: "The Titanic has stopped in midocean
to take on a new supply of ice." Today all major economic
statistics are reported straight forwardly, and they are so well
protected from leaks to favored newspapers that not even a
Cabinet member is allowed to see them before they are given to
all members of the press.
While I agree with the need for honesty and candor, there
is also such a thing as carrying statistics too far in the other
direction. Earlier this year the Administration published some
bleak economic projections for the next five years which were
simple arithmetic extrapolations but were taken more seriously
than they were intended and as a result, caused a certain amount
of alarm across the country as well as in Congress. Since that
time, I have consistently argued that those numbers should be
regarded with a high degree of skepticism --no one can
accurately predict where our economy will be three to four years
from now -- and they do not provide a sound basis for legislative
policy-making.
Reporting Long-Term Economic Trends
Still a more serious problem than interpreting statistics
arises, I think, in evaluating the long-range trends within
understand
press
our economy.
has done
how Ia
our
must
particularly
economy
tell you
hasgood
that
fallen
job
I dointo
in
not
helping
our
think
current
that
the public
mess.
the

- 6 I am not sure whv. Perhaps the economy has been regarded
as hopelessly complex or dull for newspaper readers, so
that economic analysis has been ignored by many newspapers.
Perhaps the anti-business bias that undeniably exists among
some journalists has steered them away from a hard look at
what's been happening within our private enterprise system.
Whatever the reason, it is clear that many Americans do not
understand how they were suddenly caught in an economic storm.
To them, as Churchill once said of Russia, the economy has
become a "riddle wrapped inside a mystery inside an enigma."
To me, there is no real mystery about how we got here
nor is there any secret about the cure. I appreciate the
fact that other people have different opinions, but I would
suggest that there are four long-range trends in our society
which deserve much closer scrutiny:
-- One has been the enormous growth of government spending
and the accompanying growth in Federal deficits. It took this
country 186 years for the Federal budget to break $100 billion,
only nine more years to break $200 billion, and only four more
years to reach $300 billion -- a line we are crossing this
year. The government's share of our Gross National Product
has nearly tripled in the past four decades -- and unless we
arrest the recent spurt in transfer payments, it will near the
601 mark by the end of this century. In 14 of the past 15 years,
the Federal budget has been in the red, and our national debt
is growing so fast that interest payments on it have reached
$36 billion a year. We are in effect living off our inheritance
and mortgaging our future at one and the same time. Neither
man nor government can continue to live beyond its means for
very long -- and if we continue this way, we will lose not only
our prosperity but our freedom as well.
-- Secondly, we should recognize that monetary policy has
been equally at fault over the past decade. From 1955 to 1965,
the money supply grew at the rate of 2\ percent a year, and we
enjoyed reasonable price stability. In the decade that has
followed, the money supply has been growing at an annual rate
of 6 percent a year -- more than double the earlier rate. It
L V ! I J
i t h S t d U r i n g a l 0 n g P e r i °d of excessive fiscal
e
* " £ Policies as we have had, inflation has become a
n
e
°
/
J- ,1JlJaCt^ l f y°u w i l 1 l0 °k beneath the surface,
you will f m d that the inflation stemming from our fiscal a-d
monetary excesses has been the single most destructive for*e
q u a d r u n l i n / o r 0 ^ " - h u r t i n g « far more thin the rlcen?
quadrupling of oil prices, the explosion of food prices, and

If
-- Thirdly, in a subtle but insidious way, there has
been an enormous proliferation in Government regulations in
recent years so that they now encumber almost every phase of
our business life and cost consumers untold billions of dollars.
To rid ourselves of countless rules that cause inefficiencies
and drive up prices in transportation, energy and other fields,
we must undertake a massive overhaul of our regulatory practices.
-- Finally, we should recognize that by discouraging
profits and by encouraging consumption and government spending
at the sacrifice of saving and capital investment, we are
seriously weakening the foundations of our private enterprise
system. The record of capital investment in the United States
since the early 1960s has been the worst of any major industrialized
nation in the Free World. As a consequence, our productivity is
also growing more slowly than elsewhere and our economy has failed
to match the growth rate of many other countries.
We simply must reverse these trends if we want to regain
our prosperity and retain the premiere economy of the world.
In all of the hand-wringing that is popular today, it may
sound strange to hear someone talk of our "premier economy".
But it's true, and in tackling our problems, we should never
forget it. America is still incredibly strong, powered by the
largest and most dynamic free market in the world. In the past
15 years, per capita income in this country has risen by 50 percent.
We are still the wealthiest nation the world has ever known, and
our citizens are the most affluent. Moreover, even though the
problems of unemployment and inflation are especially painful,
evidence is gathering on every side that the economy is shifting
gears from recession to recovery. We are confident that the
recession will bottom out during the middle months of the year,
and by the end of 1975, we will definitely be on the road to
recovery.
As you can see, I deeply believe that we face both a
short-term and a long-term economic challenge. I am confident
about our prospects in the short-term: we have the resources,
we have the economic strength, and we are moving swiftly in
the right direction to correct our problems. But to meet the
long-term challenge, we must wake up to the fact that dangerous
forces are quietly but busily eating away at the foundations of
our economy and could eventually destroy it unless we take
effective action. That is why it is so vitally important to
avoid steps now - - a n even greater budget deficit, for instance,
or excessive monetary policies -- that might propel us out of
the recession but would only catapult us into a new round of
spiraling inflation and still higher unemployment.

- 8My greatest concern about the press today is that it
fails to convey a greater sense of perspective to the American
people about the choices we face. As George Ferguson, former
editor-in-chief of the Montreal Star, has observed about modern
reporting: "The sense of continuity, of the steady, implacable
flow of history from the past into the immediate present, is
largely forgotten.. .The result is a kind of breathlessness, a
panting sense of excitement which we build up almost subcunsciously, because LhaL is the way, and the only way. . .we have
been taught to play our roles."
When the press focuses almost entirely on immediate
economic news, when in effect it exploits anxiety, it contributes
to a process that is potentially lethal for a free society.
Time and again over the past few months, those who were so quick
to foresee economic disaster -- the preachers of gloom and doom were able to grab a headline in our daily newspapers. Think
back over predictions for the collapse of the international
monetary system as well as predictions of a dollar a gallon for
gas, a dollar a loaf for bread, and a dollar a pound for sugar.
All of those forecasts were given far more currency than they
deserved. And all of them were wrong. More thoughtful analysis,
I believe, would have given the American people an understanding
of how very unlikely it was that those things would happen,
but unfortunately, very little of that analysis was presented.
With prices rising, jobs threatened, and the voices of
despair crying out in the press, it is hardly surprising that
SS?1JL*?«fiance crumbled. Inevitably, when the public demands
explanations, they are told to blame people, not conditions.
th« n n M ? ^ 5 p r o 5 e s s * s Personalized, not analyzed. And when
Washington d ^ n d s p s o l u t l ° n s > everyone points in one direction:
Washington, D.C. Pressures build for "action" by the Federal

actiorwouid brbSES-e-t?inJ!

V6ry carefllll

im5S7«ti?lal,Abut a l m ° S t
& reSUlt

X abouVwhatlfnd of

ever

?hey wan? it
>' o n e wants action and
We tend t0 m a k e the same
policy 2isJak^?hJ? Si?" / J
'
e
that hel ed t0
hlir7
_\lt* r
P
get us into this mess in the first

I»M J«f™.;f K.ps"a,'f,irx,r -xu ""'•«~ —"
good politics. Some of »!,»»§
9hat g 0 0 d economics is not
spend°and-spend
I c a
!i !' adopted a philosophy of
each other in c u t t i n f t ^ ; ^ ' a S t h e y s " a m b l e to outdo
They also have the mistaken nolio^thaf thSv" 6 " S ? e ? d i n S Programs.
notion that they can raise revenues

painlessly by taxing corporations instead of people -- as
though businesses are not owned, managed and staffed by people
and as though their taxes are not paid for in prices charged
to people. They fail to recognize that a healthy, growing
private economy -- which still supplies 85 percent of all jobs
in this country -- does more to help people than anything that
government can ever hope to do. I think that the public -with your help --is gradually learning the truth behind the
hollow promises of Big Government and getting "something for
nothing." And if reporting continues to be fair and accurate,
the day may come when voting for sound economic policies will
be considered politically attractive.
Ladies and Gentlemen: Let me stress once again that my
comments today about the press are intended to be constructive.
I believe that the coverage of economic events in this country
is steadily improving. News stories that preceded the sale
of gold to American citizens were truly masterful, giving the
public a much better understanding of both the advantages and
disadvantages of owning gold. Indeed, I am convinced that the
quality of journalism in this country is higher than anywhere
else in the world. But let us recognize that in reporting on
the economy, reforms and improvements are still very much needed.
We are still far short of the goal once set forth for newsmen
by Walter Lippmann: "...to bring to light the hidden facts, to
set them into relation with each other, and make a picture of
reality on which men can act."
And let us recognize one more thing: we are all in the
same boat together. The freedom that you cherish for your
newspaper -- the freedom of the press that must always be
protected in America --is indivisible from the freedom of our
enterprise system and the freedom of each of us as individuals.
Those precious freedoms are in jeopardy today. In our desire
for instant solutions, instant prosperity, and instant relief
from the cares of the world, we are tending more and more to
choose the false security offered by big government in exchange
for small pieces of our freedoms. It is up to all of us here
today -- publishers, reporters, and public servants alike -to stand up and fight for those freedoms for ourselves and for
our children.
0O0
Thank you.

d
FOR IMMEDIATE RELEASE

April 7, 1975

STATEMENT OF
THE HONORABLE WILLIAM E. SIMON,
SECRETARY OF THE TREASURY
It is with a great sense of personal sorrow that
I learned of Howard Worthington's death this morning.
Howard had a distinguished career, spanning two
decades of federal service. The wide range of his
experience in international trade brought an added
dimension to the Administration's efforts to move
towards a new era of trade in a world marked with
a growing measure of economic interdependence. This
was the task Howard was most committed to, and it
was one which he worked at tirelessly. As a valued
colleague, but most of all as a friend, he will be
missed by everyone who knew him.
On behalf of the Treasury Department, Mrs. Simon
and I wish to extend our condolences to Mrs. Worthington
and the Worthington family.
0O0

FOR RELEASE ON DELIVERY

REMARKS OF
THE HONORABLE CHARLES A. COOPER
ASSISTANT SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE
BANKERS ASSOCIATION FOR FOREIGN TRADE CONVENTION
AT
THE GREENBRIER, WHITE SULPHUR SPRINGS, WEST VIRGINIA
9:00 A.M., Monday, April 7, 1975
A Perspective on Current International Financial Problems
I am very pleased to have this opportunity to offer
some observations on current international financial
problems before such a distinguished audience, we have
seen remarkable changes recently in international monetary
relationships, and this convention provides a welcome
occasion for a useful exchange of views between those who
view these relationships from a private perspective and
those who see them from a public perspective. I am sure
that in such an exchange bankers and government officials
alike will learn more about the nature of the world — in
the old fable, adding to the number of blind men examining
the elephant did make a contribution to human knowledge
even though the disagreements were passionate.
The experience of the past year gives us basis for
confidence that our financial problems are manageable.
There has been a notably successful adjustment to a
radically altered situation due in no small measure to the
flexibility and creativity shown by private financial
institutions. But our mutual challenges remain demanding.
All of us who are players in the arena of international
finance realize how essential it is that we continue to
respond effectively to the problems arising from the
enormous increase in world petroleum prices. These price
increases have occasioned abrupt and massive shifts in the
pattern
of international
trade
and
payments.toThey
have
WS-2
placed73industrial
countries
long
accustomed
current

-4the oil exporters and others, and in doing so tends to
encumber the Fund's regular lending resources. This
problem is further exacerbated by the facts that the oil
facility pays a higher interest rate on these guaranteed
borrowings than the IMF pays on the use of its regular currency
subscriptions, and that a number of major oil facility
lenders currently refuse to allow their regular subscriptions
to be used by the Fund.
Happily, these shortcomings are now generally
recognized. It has been agreed that the oil facility's
operations will be improved somewhat this year and that
its transitional role will be completed by the end of 19 75,
by which time it will be phased out.
Yet another imaginative idea sometimes put forward is
that the oil consuming countries should seek to reach agreement on their current account objectives in general and on
sharing the "oil deficit" in particular. The idea appears
to be that industrial countries should devise a formula that
would distribute these deficits in an acceptable and
equitable fashion. It is argued that without such agreement
some countries may not accept the self-discipline necessary
to prevent runaway inflation, while others may move so
rapidly and insistently to reduce their deficits that they
create intolerable adjustment problems for their trading
partners. Since the latter would be likely to react in
kind, so the argument goes, the world could be plunged into
a spiral of escalating trade restrictions and artificial
subsidies to exports.
This sort of proposal is intellectually seductive —
but is it really intellectually sound? One difficulty in
such approaches is the technical but inescapable problem
of defining both the current account position and the oil
deficit to be shared. In seeking to measure current
account positions, it is difficult to isolate the influence
of transitory factors, such as differences in cyclical
situations among countries, in order to determine the
underlying position. Measuring the oil deficit raises
other questions: should the oil deficit be regarded as
simply the increase in a country's oil bill, or should it
include related new exports to the oil producers, the
investments of the oil producers, the interest payments
thereon, and so forth?
^
More fundamentally, this focus on sharing current
account deficits as a policy objective ignores the fact
c o n s i ^ t ^ i ^ h ^ ^ ^ - - - f - P a y - n t s lectures arf
consistent with a satisfactory adaptation to the oil

price increases. For example, a relatively strong current
account position in an oil importing country need not
raise consistency problems so long as that country is
willing to provide financing for the consequently enlarged
deficits of other consuming countries. Given the range of
policy alternatives to achieve consistency, the emphasis
inevitably must be on whether countries' policies as a
whole are appropriate, rather than on some concept of what
countries positions should be, arrived at by mechanistic
formulas.
It also must be recognized that to be meaningful, an
international agreement on an appropriate sharing of
current account and oil deficits would also have to embody
agreement on a program of action to correct imbalances.
The acknowledged limits on the willingness of countries to
adapt fiscal and monetary policies to achieve external
objectives, combined with the unacceptability of extensive
recourse to direct measures affecting external transactions,
would inevitably imply actions by countries to influence
artificially the underlying trend of their exchange rates.
It seems to me highly unrealistic to suppose that a world
which suspended attempts to fix exchange rates even before
the onslaught of the oil crisis is now ready to undertake
the effort again.
Ideas of the kind I have just been discussing all
reflect a concern that something more must be done. Other
commentators, however, seek to minimize the problem itself.
Their argument is that it is easily within the capability
of the industrial countries, if they resume historical
rates of economic growth, to transfer real resources, in
the form of exports of goods and services, to the OPEC
countries to liquidate oil bills. The transfers to be
made to OPEC — estimated at some 2 percent of the industrial
countries' GNP — are said to be relatively no greater than
those that would have been required had Marshall Plan aid
to Europe been all in the form of loans. On the basis of
this reasoning, it is concluded that the consuming countries
should accept high oil prices, minimize the structural
adjustments implied by these prices, borrow to finance
current oil bills, and pay later in real resources.
One pitfall in this approach is that it does not
take into account the problems which arise from differences
in countries' willingness and ability to borrow. Some
countries will be able to borrow but reluctant to do so,
while
by
In assertions
the others
real world,
will
as to
be
these
what
anxious
differences
countries
to borrow
ought
cannot
but
tounable
do.
be eliminated
to do so.

-6But the major shortcoming of this line of reasoning
is that it seriously underestimates the economic costs
which the oil price increases levy on the rest of the
world. It ignores the inflation and unemployment costs
imposed on oil importing countries as they adjust their
industrial structures to a major change in the relative
price of their inputs. The losses incurred in the process
of an abrupt, forced structural adjustment of the entire
industrial world should not be minimized. Anyone in
Detroit can testify to what high oil prices mean for
employment on an auto assembly line. Even when the
short-run effects are dissipated, levels of real income
in the oil importing nations at any point in time will
be substantially lower, not only because of the continuing
costs of high oil prices, but also because of the reduced
capital stock caused by the transitional adjustment to the
high oil prices. Moreover, the potential diversion of
real output from domestic consumption to foreign markets
can by no means be termed minimal — last year alone
increased oil payments were on the order of 15 percent
of world trade.
It is thus important to guard against thinking of
costs of 2 percent of GNP as small. If the oil price
increases were to be maintainable for a number of years,
the result would be the greatest economic misallocation
of resources that the world has ever seen. Locking up one
of the world's cheapest forms of energy inevitably imposes
a worldwide burden of massive dimensions.
While it is important in this troubled period not to
chase down blind alleys, it is even more important to take
decisive actions to meet real problems.
In the international financial sphere, additional
safeguards against the continuing uncertainties inherent ,
in the present dramatically changed situation are desirable.
While OPEC's surplus funds can't leave the system in the
aggregate, there is some danger that individual oil importing
countries might be unable, or fear that they will be unable,
to obtain on reasonable terms the financing they need even
when their own policies are prudent and appropriate.
Insurance against such a risk would help to ensure that
national and international policies will be based on
confidence not on fear.
Tonight I will be leaving with Secretary Simon for
Paris, where on Wednesday he and other ministers of the
Organization for Economic Cooperation and Development will

-7initial an agreement which, when approved by the Congress
and other legislatures, will establish a financial safety
ret to provide such insurance. That is the $25 billion
mutual support fund, proposed by the United States last
November, agreed to in principle at high level monetary
meetings in January, and subsequently worked out in detail.
This agreement constitutes a key element in the
evolution of governmental strategy to protect against the
uncertainties now generated by the oil crisis. Having
participated in the negotiation of this agreement, I know
there is a feeling among prospective adherents that it
represents a significant achievement in cooperative
international financial arrangements. It is also an
important complement to the cooperation in energy policy
which is central to resolution of the fundamental problems
resulting from the changed energy balance. For countries
committed to cooperation in energy, it will provide
assurances that financing will be available in case of need.
And, by strengthening the confidence of private lenders and
investors in the integrity of the system as a whole and in
the ultimate strength of individual countries' positions,
the fund will make a major contribution to the operation of
the world economic system.
We hope that the safety net will not have to be used.
If that turns out to be the case, it will have been a
costless precaution. If it is utilized, the contribution
to world financial stability will be well worth the cost.
Whatever new intergovernmental arrangements are
developed, the private financial system will inevitably
be called upon to play the major role in .channeling OPEC
monies to their ultimate employment. To do so will require
more of the flexibility and innovation on the part of
private institutions which they demonstrated not only last
year buL earlier. For example, liabilities management,
which changed so greatly in the 1960's with the growth of
the Eurodollar market ard the rapid expansion of new forms
of debt instruments, must continue to be adapted to new
realities. Asset management also must be adapted to
importantly altered circumstances. This is perhaps the
more difficult challenge, because some of the familiar
yardsticks are no longer applicable. In particular,
analysis of country risk has become almost a new ball game.
Traditional risk analysis has related a country's
repayment
to
balance-of-payments
trends,
external
were
debt,
rigidly
and ability
reserve
applied,
levels.
without
If due
these
regard
traditional
to the yardsticks
consequences

-8of the existence of a new group of surplus countries, it
would be difficult to justify anything beyond a bare
minimum of foreign lending. With the increase m oil
prices, the trade and current account positions ot oil
importing countries as a group have turned sharply adverse.
Until the time when the OPEC countries are able to absorb
imports from consuming countries at the same rate they
themselves export, there will inevitably be an increase in
the external indebtedness of the oil consuming countries
as a group. What must be cranked into credit analysis in
these circumstances is that the creditors — the OPEC
countries in the final analysis — can only call their loans
from the oil importing countries as a group by accepting
goods and services in payment. The very demand for payment
creates the conditions that allow payment to be made.
Certainly, they can shift funds from one oil importing
country to another — if it were in their interest to do
so — but this need not cause intolerable strains so long
as financing arrangements among the oil importing countries
are adequate.
Widespread floating of exchange rates introduces still
other variables into the analysis of the risks of foreign
lending. Heretofore, the level of a country's reserves,
often measured in relation to imports or other such norms,
was an important guide to a country's debt service capacity.
Individual countries now, however, have the choice of taking
the consequences of a deteriorating position "on the rate,"
rather than by drawing down reserves. There are no "pat"
answers as to what any given country will do, and net
borrowing by the oil consuming countries as a group remains
inevitable, but it is clear that every country has available
and useable an additional policy alternative. This greater
flexibility means that neither the level of a country's
reserves nor changes in that level provide the same guide
to a country's credit-worthiness that they once did.
The diminished relevance of these traditional criteria
makes it more important than ever to take a fresh look at
the risks of international lending.
Of course, commercial risk is always present when
lending to business firms or banks. Such normal risks are
certainly present in the current difficult situation. The
oil embargo, high oil prices, and uncertainty about future
energy sources have contributed importantly to the downturn
in economic activity and to the pace of structural changes
m national economies. In this climate, certain sectors will
experience greater difficulties, while others will profit.

-9None of this, however, has anything particular to do
with the over-all external position of a country. It is
•both interesting and relevant that three of the most highly
publicized bank collapses which have occurred in the past
year were in Germany, Switzerland, and the United States —
countries which could hardly be regarded as devastated by
the oil related events. This merely reinforces the point
that bankers, like governments, must pay attention to the
fundamentals.
There is a natural resistance to the rather major
revisions in our thinking and our practices which are
required by the marked changes we have witnessed in our
economic order. There is a certain comfort in familiar
doctrines and habits no matter how circumstances may have
been altered. But I am confident that we can and will make
the necessary adjustments, for they are really imposed
by external developments.
Governments have had their own problems in adjusting —
most notably to floating exchange rates. You are all aware
of the concern that was being expressed recently in Europe
about what is described as weakness of the dollar. The
dollar, not surprisingly, has significantly strengthened in
recent weeks. Despite a good deal of educational effort,
far too many still have apparently not yet recognized that
there are two sides to every exchange rate and that what
is called a weakening of the dollar may more aptly be described
as a strengthening of the German mark or the Swiss franc.
Even the widespread use of trade weighted exchange rate
computations does not seem to have enabled some observers
to broaden their vistas from bilateral rates to more
representative measures.
Let me conclude my remarks today by briefly rounding
out the long agenda of actions needed to cope with the
multiple challenges ahead.
The basic challenge is as much domestic as international.
Nothing is more fundamental to future domestic prosperity
and the stability of international financial relations than
bringing the major world economies out of recession without
exacerbating a still dangerous inflationery situation. We
will find it infinitely more difficult to solve the present
complex of economic problems in the context of high
unemployment and negative growth. Yet if we can restore
growth only at the cost of another inflationary spiral, we
will
have in
but
substituted
one
set of
problems
for another,
we
andseek.
find
the
end we have
choked
off
the economic
recovery

-10For developing countries, the challenge is similar.
Effective assistance to developing countries hard hit by
the increase in oil prices requires a solid foundation.
The answer will not be found in oratory about a New Economic
Order. The basic requirement remains unchanged: sound
domestic economic policies on the part of these countries
themselves, to adjust to changed economic conditions, and
to promote investment and the increased productivity
essential to the realization of their aspirations. But
others also must recognize their responsibilities. For
the OPEC countries, this means accepting the full implications
of their new role. For the world's former creditor
countries this means we must not, whatever our own problems,
turn inward and backward. We have established a new
Development Committee under the aegis of the International
Monetary Fund and the World Bank as a major new forum for
organizing the needed response. We have high hopes that
the work of this new committee will be effective and practical
More action and less rhetoric is the order of the day. We
must find concrete solutions to concrete problems.
Finally, we must continue our efforts to conform our
international financial system to the realities of the
present. The OECD Financial Support Agreement will not
replace the International Monetary Fund at the center of our
financial system; indeed the job of that institution has
never been more demanding or more important. We are
seeking to move ahead to reach full agreement on expansion
of its resources through a major quota increase. Such an
expansion has been agreed in principle, and we hope that
the remaining difficult problems of the distribution of
individual quotas can be resolved by summer. But, in order
to make such an expansion possible, we must move in parallel
to reach consensus on a number of key amendments to the
present Fund articles of agreement: to establish a
permanent council of ministers for the organization to
reflect the fact that only in such a forum can the vital
decisions of an interdependent world be taken; to eliminate
outmoded provisions with respect to the role of gold in
the system; to incorporate in the rules provisions which
recognize and correspond to the reality of floating exchange
rates; and to make the present currency resources of the IMF
more useable. Stated so simply, the needed amendments might
r S ^ f n n * ^ I o b t a i r ? a ble. B u t "hat is really at issue is the
revision of basic elements of the constitution of the world's
most important international financial institution. This is
what I mean by governments getting down to fundamentals.

-11As we approach the agenda ahead, we must always bear
in mind that the real challenge is not simply to muddle
through the difficulties of this year or next. It is to
proceed with a clear vision of our long-run objectives.
We must make adjustments in our policies while maintaining
the liberal and expanding trade and payments system which
has so contributed to the prosperity of the post World War II
period. We must avoid indulging our nostalgia for an
earlier era by returning to practices and rules which
proved inadequate and unsustainable in the past and are
incompatible with the demands and realities of the present.
And we must resist the temptation in a time of stress to
turn to government intervention as the solution to all
our problems. The argument for continuing to rely on
the liberal market system which has served us so well is
like the argument for democracy — it may not be the best
system that is conceivable, but it is far superior to the
alternatives.
Thank you.

DepartmentoftheTREASURY
TELEPHONE W04-2041

WASHINGTON, D.C. 20220

r
FOR IMMEDIATE RELEASE

April 7, 1975

RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.7 billion of 13-week Treasury bills and for $2.8 billion
of 26-week Treasury bills, both series to be issued on April 10, 1975,
were opened at the Federal Reserve Banks today. The details are as follows:
26-week
RANGE OF bills
ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing
July 10, 1975
Price
High
Low
Average
a/ Excepting
b_/ Excepting

Discount
Rate

98.492 a/5.966%
98.471
6.049%
98.478
6.021%

maturing

October 9. 1975
Discount
Rate

Investment
Rate 1/

Price

6.16%
6.25%
6.22%

96.842 b/ 6.247%
96.755
6.419%
96.789
6.351%

Investment
Rate 1/
6.56% ^
6.74%
6.67%

tenders totaling $1,205,000
tenders totaling $1,390,000

Tenders at the low price for the 13-week bills were allotted 89%.
Tenders at the low price for the 26-week bills were allotted 20%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

Accepted

Boston
57,685,000 $
$
27,520,000
New York
1,909,155,000
2,154,450,000
Philadelphia
83,930,000
29,855,000
Cleveland
128,940,000
82,440,000
Richmond
35,760,000
26,990,000
Atlanta
45,875,000
44,110,000
Chicago
381,870,000
136,325,000
St. Louis
46,930,000
29,275,000
Minneapolis
16,055,000
15,605,000
Kansas City
57,660,000
44,230,000
Dallas
31,270,000
25,160,000
San Francisco 249,305,000
84,715,000
TOTALS$5»044»435,000

Received
$
19,375,000
3,224,780,000
42,385,000
41,055,000
22,270,D00
26,975,000
239,725,000
31,795,000
6,565,000
17,515,000
9,785,000
677,745,000

$2,700,675,000 c/ $4,359,970,000

Accepted
$
9,375,000
1,979,780,000
7,385,000
16,055,000
12,020,000
24,975,000
61,725,000
15,795,000
4,565,000
16,515,000
9,785,000
642,245,000
$2,800,220,000 d/

H' Includes $463,815,000 noncompetitive tenders from the public.
-\l Includes $154,560,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

_ ^
- **

federal financing bank

.E vo

WASHINGTON, D.C. 20220

a> o
n" eg

FOR IMMEDIATE RELEASE

Contact: Jack Plum
964-2615
April 8, 1975

SUMMARY OF LENDING ACTIVITY
March 18 - April 3, 1975
Federal Financing Bank lending activitiy for the period
March 18 through April 3, 1975 was announced as follows by
Roland H. Cook, Secretary:
On March 19, the Bank purchased $3.6 million of Small
Business Investment Company 10-year debentures at an interest
rate of 8%.
On March 21, the Bank entered into a loan agreement with
the National Railroad Passenger Corporation (AMTRAK) and the
Ford Motor Credit Company under which the Bank loaned AMTRAK
$11.2 million for 15 years to finance the purchase of four
(4) French turbine-powered trains by Ford for leasing to
AMTRAK. The loan is guaranteed by the Department of Transportation at an interest rate of 7.801.
The Bank also signed a loan agreement with the Government of Brazil, in accordance with the February 3 agreement
between the Bank and the Department of Defense, whereby the
Bank agreed to a two year commitment to lend $27.5 million
to Brazil at a rate of 8.05% with a final maturity of 1984.
The first advance against this commitment was made March 31
in the amount of approximately $2.3 million.
On March 25, in .accordance with the February 3 agreement between the Bank and the Department of Defense, the
Bank signed a loan agreement with the Republic of China where
by the Bank agreed to a commitment to purchase an 8-year
promissory note of $45,200,000 with repayment guaranteed by
the Department of Defense. An initial drawing of $13,205,000
was made against this commitment on April 1, 1975 at an
interest rate of 7.90%.
(OVER)

- 2On March 26, the Bank purchased $500 million of 5-year
Certificates of Beneficial Ownership from the Farmers Home
Administration at an interest, rate of 7.90%, on an annual
basis.
On March 27, the Tennessee Valley Authority borrowed
$440 million from the FFB; $100 million at 5.76% maturing
May 29, 1975, $240 million at 6.02% maturing July 31, 1975,
and $100 million at 8.70% maturing March 31, 2000.
On March 31, the Bank advanced $3,064,000 to the
Oglethorpe Electric Membership Corporation at 7.00% interest
on a quarterly basis. The loan is guaranteed by the Rural
Electrification Administration, and matures March 31, 1977.
On March 31, AMTRAK, the National Railroad Passenger
Corporation, made a $15 million drawing against the $100
million line of credit signed October 11, 1974 at an
interest rate of 6.005%.
For the first quarter of 1975, the Bank made loans
totalling over $3.1 billion. Federal Financing Bank loans
outstanding as of April 3, 1975 total $6.7 billion: unfilled
commitments total $4.3 billion.
oOo

April 4, 1975

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR RELEASE ON DELIVERY

,4
9

THE DEPARTMENT OP THE TREASURY
STATEMENT OF WARREN F. BRECHT
ASSISTANT SECRETARY (ADMINISTRATION)
BEFORE
GOVERNMENT INFORMATION AND INDIVIDUAL RIGHTS SUBCOMMITTEE
OF THE
COMMITTEE ON GOVERNMENT OPERATIONS
HOUSE OF REPRESENTATIVES
APRIL 8, 1975
Madam Chairwoman and Members of this Committee:
I am pleased to represent the Department of the Treasury
in responding to your March 20, 1975, invitation to Secretary
Simon to receive testimony on our Department's policies and
practices relating to assignment of personnel by us or our
contractors to overseas areas or countries. Before presenting
my opening statement, I would like to introduce my associates
who are with me today: Mrs. Esther C. Lawton, the Department's
Deputy Director of Personnel; Mr. Thomas P. O'Malley, Assistant
Director (Procurement and Personal Property Management);
Mr. Theodore A. Wahl, Deputy Director, Office of Middle East
Affairs; and Mrs. Bonnie Pounds, Deputy Director, Office of
Saudi Arabian Affairs.
In preparing for this hearing, we have reviewed all of
the Department's policies, practices and regulations pertaining

WS-274

- 2 to employment and contracting'for overseas personnel. In
this process, we have canvassed each of our Treasury Bureaus
and Offices in the Office of the Secretary who have personnel
assigned overseas or who engage contractors for personnel
overseas. The following responses to the specific questions
in your March 20 letter, therefore, represent a composite of
departmental and bureau practices:
1. No constraints regarding an individual's racial
origin, color, sex, religion or country of birth are included
in the Department's policies or practices relating to the
assignment of individuals to overseas locations.
2. No consideration is given to any one or a composite
of such factors in determining whether or not a particular
individual will be assigned to an overseas area, country or
international organization. Furthermore, such factors do not
influence the total numbers of such categories of individuals
given such assignments.
3. The Department imposes no employment constraints in
response to requests of foreign host nations or international
organizations. Furthermore, to the best of our knowledge, we
have not been requested by any foreign nation to restrict the
assignment of personnel in their country based on race, color,
sex, religion or country of birth.

Kf
- 34. Question four, regarding legal or administrative
authority, is not applicable, since none of the above answers
is affirmative.
5. The Department has no written or oral working
agreements with overseas contractors which impose any such
employment or assignment constraints on the Treasury
Department.
To supplement our response to the specific questions
raised by the Subcommittee, I would like to make the following
additional comments:
First, the Treasury Department feels a strong commitment
to its policy of equal employment opportunity. This policy
applies to all bureaus and organizational elements and to all
employees who are U. S. citizens, whether located in the continental United States, its territories, or in foreign countries.
In reviewing the criteria furnished by our bureaus and offices
for selection of personnel for overseas assignment, the only
additional factors either required or highly desired include,
in some instances, language skills for the particular country
and medical examinations to determine physical fitness. Otherwise, the selection criteria are limited strictly to technical
skills, professional capability, job knowledge, and satisfactory
performance evaluations—the very factors which are at the heart

- 4 of the Civil Service Commission's merit selection and promotion
system.
Second, Secretary Simon personally has taken an active
interest in the equal employment opportunity program. In a
recent statement he reaffirmed his support and reminded
Department officials of their continuing obligation to promote
the implementation of Treasury's EEO objectives within their
respective organizations. The Treasury Department currently
has some 134 Affirmative Action Plans in place, not only in
Washington, but throughout our field structure. In fact, the
Treasury Department engages in a vigorous effort under its
Affirmative Action Plan to promote equal employment opportunity
and to insure that all of our employment practices are in
strict conformance with applicable laws, executive orders,
regulations and the spirit of EEO.
Third, in putting Treasury's overseas employment practices
in perspective, this Committee should be aware that as of
February 28, 1975, we had approximately 900 employees working
in U. S. Territories and foreign nations. Of this total, 586
were U. S. citizens working in U. S. Territories. Of the
remainder, 46 were foreign nationals and only 27 4 were U. S.
citizens employed in foreign nations. Practically all of these
are in either the U. S. Customs Service, the Internal Revenue

SI
- 5 Service, or the Office of the Secretary (primarily Treasury
Attaches assigned to foreign embassies).

So, overseas personnel

in general are a relatively small factor in a department of over
100,000 employees.
Fourth, one area receiving increasing attention in recent
months is the Joint Economic Commissions between the United
States and various foreign countries, mostly in the Middle East.
These Joint Commissions provide a government-to-government
relationship across a broad spectrum and relate to the socioeconomic development needs of the particular country.

Areas

of emphasis include industrialization, manpower and education,
agriculture, and science and technology.

The Treasury Depart-

ment has either a lead role or a major support role on each
of these Joint Commissions, but other relevant government
agencies are represented.

These include the Departments of

State, Commerce, Labor, Agriculture, Interior, HEW and the
National Science Foundation.

To date, Treasury has not

physically assigned individuals to these countries. Plans
are underway,, however, to open a six or seven person office
in Riyadh, Saudi Arabia, to be known as the United States
Representation to the Joint Economic Cooperation Commission
Office.

As you know, these Joint Economic Commissions are a

relatively new venture for the United States.

In assembling

the staff for these Commissions, the Treasury Department

- 6 intends to work diligently to avoid any of the discriminatory
practices outlined in your March 20 letter to us.
Finally, this opening statement has concentrated almost
entirely on Treasury's own personnel. As a general rule,
Treasury bureaus do not contract with commercial organizations
for services to be performed at overseas locations. There
»

have been some occasions for Treasury to obtain contract
services on a reimbursable basis through the State Department;
however, no personnel assignment restraints or conditions have
been established by Treasury in these cases. Contractual
services by the Bureau of Government Financial Operations and
the Internal Revenue Service have been nominal. In any event,
Treasury does not impose policies or procedures relating to
contractor assignment of personnel with respect to an
individual's race, sex, religion or national origin. In fact,
Treasury's procurement offices must include in their formal
contract documents the appropriate equal opportunity clauses
to assure contractor compliance with Executive Orders 11246
and 11375.
Madam Chairwoman, I am prepared to discuss in more detail
the policies and practices of our various bureaus and offices.
This concludes my opening statement. I will be pleased to
answer any questions that you or the members of your Subcommittee
may have.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR IMMEDIATE RELEASE
Monday, April 7, 1975

FOR INFORMATION CALL:
(202) 456-6757

COUNCIL ON WAGE AND PRICE STABILITY
FILES BEFORE
FEDERAL AVIATION ADMINISTRATION
Attached for your information is a filing by the Council on
Wage and Price Stability before the Federal Aviation Administration recommending that the proposed regulations regarding aircraft noise retrofit requirements should not proceed.
The Environmental Protection Agency, acting under the Federal
Aviation Act of 1958 as amended by the Noise Control Act of
1972, has proposed to the Federal Aviation Administration
that the existing noise standards of Part 36 of the Federal
Aviation Regulations ("Noise Standards" Aircraft Type Certification") be amended to apply, after June 30, 1978, to existing subsonic turboject aircraft, which do not now meet the
standard.
After careful review of the proposed regulations and all supporting economic analysis, the Council has concluded that the
proposal does not appear to be justified on economic grounds.
In particular, the staff analysis points out that in return
for an estimated expenditure of over $800 million, all that
will be achieved is a moving forward in time of benefits that
otherwise will be achieved under existing standards.
o 0 o
Attachment
CWPS-38

BEFORE THE
FEDERAL AVIATION ADMINISTRATION

OFFICE OF THE CHIEF COUNSEL
ATTENTION: RULES DOCKET, AGC-24

COMMENTS OF THE COUNCIL ON WAGE AND PRICE STABILITY
Regarding Proposed Aircraft Noise
Retrofit Requirements

The Council on Wage and Price Stability (the
"Council") hereby submits its comments to the Federal
Aviation Administration ("FAA") regarding the proposed
regulations submitted to the FAA by the Environmental
Protection Agency ("EPA") on noise retrofit requirements
for civil subsonic turbojet engine powered airplanes.
These regulations and the FAA's request for comments
thereon were published in the Federal Register on
February 26, 1975. See 40 Federal Register 9218.
EPA, acting under the Federal Aviation Act
of 1958 as amended by the Noise Control Act of 1972,
has proposed that the existing noise standards of
Part 36 of the Federal Aviation Regulations ("Noise
Standards: Aircraft Type Certification") be amended

- 2 -

to apply, after June 30, 1978, to existing subsonic
turbojet aircraft, including aircraft that weighs less
than 75,000 pounds and foreign aircraft landing and
taking off within the United States.
The aircraft noise level reductions required
by the proposed regulations would be implemented by
the retrofit of airplane engine/nacelles with special
sound absorbing materials ("SAM"). One-half of the
engine/nacelles of aircraft weighing 75,000 pounds or
more would be required to be retrofitted by June 30,
1976. By that same date the remaining engine/nacelles
would be required to be scheduled for retrofit installation. Complete compliance by all subsonic turbojet
aircraft would be required by June 30, 19 78.
The staff of the Council has reviewed EPA's
proposed FAA regulations, EPA's supporting economic
analysis, and several outside studies of the benefits
of aircraft noise abatement and has concluded (i) that
the economic benefits are not commensurate with the
costs that the proposal would incur and (ii) that,
absent substantial as yet unspecified non-economic
benefits, the proposal would be unduly inflationary.

- 3 -

A. The Council has a Statutory Interest
in the Rulemaking
The Council on Wage and Price Stability was
created by the Council on Wage and Price Stability
Act of 1974 (Public Law 93-387) on August 24, 1974.
The Council's purpose under the Act is, generally summarized, to monitor the inflationary impact of activities in both the private and public sectors of the
economy. In regard to the public sector, section 3(a)
(7) of the Act expressly directs the Council to:
"review and appraise the various programs,
policies and activities of the departments
and agencies of the United States for the
purpose of determining the extent to which
those programs and activities are contributing to inflation."
Moreover, in Executive Order 11821, issued
November 27, 1974, the President required that all
major proposed rules and regulations issued by Executive Branch agencies be accompanied by a statement
which certifies that the inflationary impact of the
proposal has been evaluated. OMB Circular No. A-107
assigned the Council a major role in reviewing the
supporting economic analysis for these statenents.
B. Only Limited Benefits Would
Result from the EPA Proposal
The proposed regulations would produce both

- 4 -

benefits and costs to the public.

It is the Council's

concern that the benefits, both tangible and intangible, be sufficient to justify the costs that the
regulations would impose upon that portion of the public
that travels by air. As set forth above, it is our view
that adequate benefits have not to date been identified
to justify the EPA proposal.
The benefits generated by EPA's proposed
standard differ significantly in character from those
normally sought as a result of the agency's regulatory
activities. First, in contrast to certain substances
such as sulfur dioxide or pesticides, or even in contrast to noise levels of the type experienced continuously by workers in certain occupations, aircraft noise
at the levels and durations under consideration here
is not a hazard to public health. Instead, it is most

V
accurately classified as an annoyance.
Second, it is an annoyance affecting a relatively limited number of people — those living in the

V One study found that the single activity most
often mentioned as being disturbed by aircraft noise
was TV and radio listening. Tracor, Community Reaction to Aircraft Noise, Vol. 1, Austin, Texas, Tr~ic~or,

9J9^
immediate vicinity of certain high traffic volume airports. Only approximately 2 1/2 percent of the population presently lies within the NEFdB 30 noise contours,
the point established by the Department of Housing and
Urban Development as the border between a normally
acceptable and normally unacceptable outdoor and indoor
living environment.
Third, again, unlike certain other types of
pollutants and public health hazards, noise pollution
at the levels being considered here does not accumulate in its effects over time to some danger point.
Instead it is a completely transitory phenomenon.
Fourth, and perhaps most important, all the
projected benefits that would be achieved under the proposed rule would eventually be achieved under existing
regulations. The retrofit program merely moves these
benefits forward in time. Since December 1, 1969,
all newly certificated subsonic transport aircraft
categories and subsonic turbojet aircraft have had
to meet the noise requirement of Part 36. Since October 26, 19 73, all newly produced subsonic transport and
subsonic turbojet aircraft have had to meet this standard
regardless of when the aircraft category was certified.

- 6 -

Thus, by the end of 1974, all DC-10's, all L-1011's
and certain Boeing 747's, 727's and DC-9's already
met the standard.
As the aircraft not now required to comply
with Part 36 are retired, the benefits that EPA proposes at a high cost will be realized automatically
with no additional costs.

Thus, the relevant benefits

are not the benefits of having quieter aircraft per se,
but instead the benefits of having quieter aircraft
sooner than we otherwise would have them.
Some idea of the advantages that may be
expected can be obtained from the EPA Project Report:
Noise Standards for Civil Subsonic Turbojet EnginePowered Airplanes (December 16, 1974).

According to

Figure 13, at pages 10-20 of that Report, the noise
reduction level expected as of January, 1978 with the
SAM retrofit will be exceeded without the proposed
retrofit by January 1, 1980, provided currently planned
other programs are carried out.

In short, under the

EPA proposal the public will be buying less than a two
year advance in benefits.
This difference is illustrated by Figure 1.
The situation portrayed here is admittedly simplified.

- 7-

The vertical axis measures the level of aircraft
noise; the horizontal axis measures time. Assuming
no regulations, aircraft noise would be at some
level. We have assumed for the purposes of this
illustration that this level would be constant and
have labeled this "Baseline Noise Level." As noted
above, under regulations already promulgated, noise
is scheduled to drop over time. This time path is
labeled "Normal Fleet Replacement with FAR 36 Aircraft." The proposed regulations would accelerate the
achieving of this level as illustrated by the line
labeled "Retrofit Program." (To simplify the presentation we have ignored other proposed programs such as
refanning and the two-segment approach.)
The relevant benefits of the retrofit program are not measured by the entire area between the
"Baseline Noise Level" and the "Retrofit Program,"
but merely the shaded area between the lines labeled
"Normal Fleet Replacement with FAR 36 Aircraft" and
"Retrofit Program."
C. No Adequate Cost-Benefit Analysis
of the Proposal has been Undertaken
These caveats are not meant to imply that

- 8 -

Figure 1

The Baseline Nois_e _Level _ _ __ - - >

Normal Fleet Replacement
With FAR 36 Aircraft

Aircraft
Noise
Levels

Present

June 30, 1978

Date last
Non-FAR 36
Aircraft is
Retired

Alternative Measures of the Benefits
of Aircraft Noise Abatement

Time

- 9 -

aircraft noise abatement would not produce significant benefits. Indeed, most of the studies we have
examined have found statistically significant and
measurable benefits to aircraft noise abatement. Our
concern with the EPA proposal and supporting analysis
is that EPA has failed to attempt to assess these benefits of aircraft noise abatement in any meaningful
way. EPA's economic analysis is confined to a costeffectiveness study where "effectiveness" is measured
by the number of people removed from within various
noise contours. Costs are not compared to benefits;
only the least cost method of attaining certain benefit levels is examined. EPA, of course, recognizes
their omission but states:
Consequently, as in many environmental
situations, not having quantitative estimates of the benefits of noise reduction
precludes analysis of the amount of noise
environment reduction that is justified
on a cost-benefit basis; therefore, the
subsequent analysis will use a costeffectiveness analytic framework."
EPA Project Report, p. 6-3
This is surprising, for of all the different
types of pollution, the measurement of the cost of
noise pollution is one of the most highly developed.
The intrinsic characteristics of aircraft noise

- 10 -

abatement mentioned above (that it is not a significant public health hazard, that it is transitory in
the environment, that it is localized in effect, and
that it is decreasing over time) lend themselves to
cost-benefit analysis. Indeed, there is an extensive

V
literature on the subject.
In order to show what such a cost-benefit
comparison might indicate for the case at hand, we
performed our own analysis using the EPA Project Report
and the sources cited in the previous footnote. Our
results are preliminary, but we believe indicative of
what a more extensive analysis might find.
The four studies cited were performed independently, at different times, for four different airports (San Francisco, Minneapolis, Washington, D.C. and
Boston) and employed slightly differing methodologies.
However, all arrived at their results through multiple
V
The literature on the quantitative benefits of aircraft noise abatement is quite extensive. Recent studies
include F.C. Emerson, The Determinants of Residential
Value With Special Reference to the Effects of Aircraft
Nuisance and other Environmental Features, Ph.D. dissertation, Univ. of Minnesota, iy6y; P.K. Dygert, Estimation of the Cost of Aircraft Noise to Residential Activities, Ph.D. dissertation, Univ. of M1VhigaT1t 1973;
I. Price, The Social Cost of Airport Noise as Measured
by Rental Changes: The Case ot Logan Airport, PhTp":
dissertation, Boston university, 1974; and J.P. Nelson,
The Effects of Mobile-Source Air and Noise Pollution on
Residential Property Values, Office of th* sPnrPtaryr
Dept. of Transportation, 1975.

M
regression techniques and employed the hedonic price
equation approach to measure the disbenefit of aircraft noise as capitalized in property values. These
studies found that property values for single family
homes were adversely affected by aircraft noise, and
that this affect expressed itself in the form of a 0.4
to 0.5 percent reduction in property value per NEF dB.
By extrapolating from the EPA data, we were
able to determine that if nothing is done except to
implement the proposed two-segment landing approach,
approximately 5.8 million people will be living within
the 30 NEF or higher noise contours by 1978. Retrofitting the entire non-Part 36 fleet by 1978 would result in
a 2 to 3 NEF dB reduction in noise exposure for these
people as compared to the exposure they would otherwise
experience.

Assuming an average of three persons per

household, an average 1973 property value per household of $21,300, and using the consensus estimate of
0.5 percent property value loss per NEF dB, the marginal
benefit of retrofit would be a maximum of $617.6

V
million.

Since EPA estimates the cost in 1973 dollars of

*/ The $21,300 property value estimate was calculated
By taking the 1970 average homeowners property value
for metropolitan suburbs of $20,800 and the 1970 average rent for metropolitan suburbs of $130, multiplying
(Footnote continued on following page)

- 12 -

retrofitting with quiet nacelles to be $800 million
dollars, the benefit-cost ratio is .772.
It should be clear that this estimate is
biased upward. First, we have used the upper estimate
for property loss per dB increase. Second, the upper
NEF dB estimate has been used. Third, the above analysis assumes that the 3 dB improvement continues indefinitely where as in fact, because aircraft not subject
to Part 36 are being phased out, the marginal noise
improvement due to retrofit would continuously decline
and eventually be eliminated as illustrated in Figure 1
above.
We hasten to add that the mere fact .that the
calculated monetary benefit-cost ratio is less than
(Footnote continued from previous page
the rent figure by the real estate rule of 100 times
monthly rent equal property value, inflating the two
estimates by six percent per year (the average rate
of property value inflation between 1967 and 1972)
to bring the estimates to 1973, and finally by taking the average of the two property value estimates
weighted by the percentage of homeowners and renters
in the U.S. population in 19 70 (62.9 percent and
37.1 percent, respectively). The $617.6 million
dollar benefit figure was then estimated by multiplying the property value figure by the number of households within the NEF contours (the 5.8 million EPA
population impact figure divided by the three persons
per household average for suburban metropolitan areas)
and then multiplying this figure by the 1.5% expected
property value reduction that would be expected with
a 3 dB NEF reduction.

- 13 -

unity does not prove conclusively that the proposed
retrofit program should not be implemented.
However, it does mean that intangible benefits worth a minimum of $180 million (and probably
much more) in the mind of the decision maker must be
found somewhere in order to justify t.ie program. To
our knowledge, this point has not been addressed by
EPA.
Several additional issues need to be addressed.
First, EPA's cost-effectiveness analysis does not
separate out the marginal cost and marginal benefit
effects of the two-segment landing approach and the
quiet nacelles retrofit. In some cases, even the noise
abatement due to the continuing phase-out of non-Part 36
aircraft is counted by EPA as part of the benefits.
For example, the EPA states (40 F.R. 8221) that "the
EPA estimates that the equivalent number of persons
exposed to a Day-Night level (ldn) of 75 dB (40 NEF)
will be over 80 0,000 fewer people nationally. This
estimate includes, in addition to Quiet Nacelles, the
combined effects of the introduction of new quieter
aircraft into the fleet and the use of a two-segment
approach procedure." One cannot effectively analyze

- 14 -

the cost-effectiveness of the quiet nacelles program
when benefits of this program are confounded with
the benefits of other programs.
Second, although it is true as the EPA
Project Report states that aircraft noise is a "technological externality" and that economic efficiency
would be improved if the users of aircraft paid the
full costs of the service including the noise pollution costs to third parties, in fact, this is not
feasible. Indeed, the proposal, if adopted, might
generate major distributional inequities. The people
who have suffered because of aircraft noise include those
property owners whose property has declined in value.
However, many affected property owners have already
sold their property and borne the resulting loss in
value. The retrofit program the EPA is proposing would

V
not benefit these people.
Instead, it would create
a windfall gain for those who happened to purchase

__/ According to Goodman, after only five years as
much as one-half of the residents of a neighborhood
may have moved. John Goodman, "Local Residential
Mobility and Family Housing Adjustment" unpublished
paper, University of Michigan.

9
- 15 -

v
these properties at their reduced values. Furthermore, the costs of the retrofit program likely will
be borne by all air passengers, not merely by those
traveling on the diminishing portion of the jet fleet
that fails to meet the requirements of FAR Part 36.
In short, the entire flying population, many of whom
are not responsible for the damage, will be "taxed"
through higher air fares to compensate a relatively
small part of the total population, a large proportion
of whom already have been compensated in the form of
a reduction in the price they paid for their property.
A further concern of ours is that EPA has
not considered the separate effects of their proposal
that the retrofit program be applied to jet aircraft
of under 75,000 pounds and to the aircraft of foreign
air carriers that land at U.S. airports. Both of

V
The principle that airports are not liable for
property damage to owners who acquired their property
after the noise impact became apparent has been upheld
in inverse condemnation suits filed against the City
and County of Denver, Colorado. For a discussion of
easement costs and court litigation due to aircraft
noise, see P. McClure, "Indicators of the Effect of
Jet Noise on the Value of Real Estate" Rand Corporation, Santa Monica, p. 4117, 1969.

- 16 -

these proposals would have differential impacts which
deserve a separate analysis on both the cost and benefit side.
We therefore conclude that, based upon the
weight of the evidence, the retrofit program to be
implemented by the proposed EPA amendment to Part 36
would be inflationary and should not proceed. We
recommend that, if EPA disagrees with this conclusion,
it should be prepared to support its argument with the
sort of analysis that it has thus far failed to perform.
Respectfully submitted,

George C. Eads
Assistant Director for
Government Operations
and Research
Council on Wage and
Price Stability

Vaughn C. Williams
General Counsel
Council on Wage and
Price Stability

April 4, 1975

rtmentoftluTREASURr
, D.C. 20220

TELEPHONE WO4-2041

IHu

FOR IMMEDIATE RELEASE April 8, 1975
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites tenders for
two series of Treasury bills to the aggregate amount of $5,400,000,000 , or
thereabouts, to be issued

April 17, 1975,

as follows:

91-day bills (to maturity date) in the amount of $2,700,000,000, or
thereabouts, representing an additional amount of bills dated January 16, 1975,
and to mature

July 17, 1975

(CUSIP No. 912793 XE1), originally issued in

the amount of $2,205,700,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $2,700,000,000, or thereabouts, to be dated April 17, 1975,
and to mature October 16, 1975

(CUSIP No. 912793 XT8).

The bills will be issued for cash and in exchange for Treasury bills maturing
April 17, 1975,

outstanding in the amount of $4,606,995,000, of which

Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,624,630,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, April 14, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
multiples of $5,000.

Tenders over $10,000 must be in

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(OVER)

Others 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

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 or Branch on

April 17, 1975,

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing
ment.

April 17, 1975.

Cash and exchange tenders will receive equal treat-

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

bills (other than life insurance companies) issued hereunder must include in his
Federal 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.
Department of the Treasury Circular No. 418 (current revision) and this notice*
prescribe the terms of the Treasury bills and govern the conditions of their
issue.
Branch.

Copies of the circular may be obtained from any Federal Reserve Bank or

FOR IMMEDIATE RELEASE

April 8, 1975

TREASURY ANNOUNCES INITIATION OF
COUNTERVAILING DUTY INVESTIGATION
Assistant Secretary of the Treasury David R.
Macdonald announced today the issuance of a "Notice of
Receipt of Countervailing Duty Petition and Initiation
of Investigation," on glazed ceramic wall tile from the
Philippines. The Notice will appear in the Federal
Register of Wednesday, April 9, 1975.
The Notice states that on February 26, 1975, a
petition in satisfactory form was received alleging that
payments or bestowals, conferred by the Government of
the Philippines upon the manufacture, production or
exportation of glazed ceramic wall tile from the Philippines constitute the payment or bestowal of a bounty or
grant within the meaning of the Countervailing Duty Law
(19 U.S.C. 1303). Under the statute, the Treasury has
six months from the date of receipt, until August 26,
1975, to make a preliminary determination, and 12 months,
until February 26, 1976, to make a final determination.
If Treasury finds that a bounty or grant has been paid or
bestowed, the imports in question would be subject to an
additional "countervailing" duty equivalent to the net
amount of the bounty or grant.
During the period of January through September 1974,
imports of glazed ceramic wall tile from the Philippines
# million.
#
were valued at approximately# $1.1

Contact Point JG Wallar
X-2951

FOR IMMEDIATE RELEASE

Contact:

John Plum
964-2615
April 8, 1975

PRESIDENT NAMES SIMON CHAIRMAN OF NEWLY
CREATED EAST-WEST FOREIGN TRADE BOARD
President Ford today designated Treasury Secretary
William E. Simon as chairman of the newly created EastWest Foreign Trade Board. The Board was established by
Executive Order March 27 under authority of the Trade Act
of 1974.
The new Board replaces the President's Committee on EastWest Trade Policy, which had been in existence since June 25,
1974, and of which Mr. Simon was co-vice chairman.
In addition to Secretary Simon, the new Board's membership
includes the Secretaries of State, Agriculture, Commerce; the
Special Representative for Trade Negotiations; the Director of
the Office of Management and Budget; the Executive Director
of the Council on International Economic Policy; the President
of the Export-Import Bank of the United States, and the
Assistant to the President for Economic Affairs, L. William
Seidman, who was designated today as Deputy Chairman of the
Board.
The new Board is authorized to promulgate "such rules
and regulations as are necessary or appropriate to carry out
its responsibilities" under the Trade Act and the President's
Executive Order on the Administration of the Trade Agreements
Program. The Program includes all activities consisting of,
or related to, the negotiation or administration of international
agreements primarily concerning trade and which are concluded
pursuant to the authority vested in the President by the Constitution, the Tariff Act of 1930, as amended, and the Trade
Expansion Act of 1962, as amended, and the 1974 Trade Act.
Secretary Simon, in addition to being chairman of the
new Board, is co-chairman of the Joint U.S.-U.S.S.R. Commercial
Commission, which will hold its Fifth Annual Session Thursday
and Friday of this week in Moscow.
The Secretary heads the U.S. delegation participating in
the meeting, being held to review recent developments in U.S.Soviet economic relations, and to exchange views on prospects
for further trade development and economic cooperation.
(OVER)
WS-?7<;

- 2The Fifth Session will take up the status of major
projects under negotiation between U.S. firms and Soviet
foreign trade organizations; facilitation of trade missions,
trade fairs, and exhibitions organized in the two countries;
exchange of economic and financial data helpful to business
transactions, and other subjects which either the U.S.S.R.
or the U.S. may raise to encourage improvements in economic
relations.
As chairman of the President's Economic Policy Board
and chief financial officer of the United States,
Secretary Simon plays a major role in formulating, recommending
and coordinating the nation's international and domestic
economic policies. He also has major responsibility for
coordinating international energy policies.
Secretary Simon is chairman of the Joint U.S.-Saudi
Commission on Economic Cooperation and the U.S.-Israeli
Commission on Economic Development; he is the U.S. Governor
of the International Monetary Fund, the International Bank
for Reconstruction and Development, the Inter-American
Development Bank and the Asian Development Bank. He is
also a member of the U.S.-Egyptian Commission on Economic
Development.
In his capacity as U.S. Governor to the Asian Development
Bank Secretary Simon will lead the U.S. Delegation to the
Bank's 8th annual meeting at its headquarters in Manila
from April 24-26.
oOo

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE

April 8, 1975

RESULTS OF TREASURY'S 292-DAY BILL AUCTION
Tenders for $ 1,500 million of 292-day Treasury bills to be issued to
the public, to be dated April 14, 1975, and to mature January 31, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS: (Excepting 3 tenders totaling $30,000)
Investment Rate
Price

Discount Rate

High - 94.699 6.535% 6.93%
Low
94.656
Average 94.679

(Equivalent Coupon-Issue Yield)

6.588%
6.560%

6.99%
6.95%

TOTAL TENDERS FROM THE PUBLIC RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL

13,155,000
2,547,205,000
26,555,000
91,485,000
61,085,000
12,830,000
376,840,000
31,580,000
36,335,000
16,225,000
9,815,000
372,155,000

$3,595,265,000

Accepted
$

1,155,000
1,270,305,000
6,055,000
44,465,000
12,735,000
12,830,000
80,300,000
11,020,000
1,235,000
5,225,000
5,035,000
50,075,000

$1,500,435,000

The $1,500,435,000 of accepted tenders includes 22 % of the amount of
bills bid for at the low price and $30,070,000 of noncompetitive tenders
from the public accepted at the average price.
In addition, $85,000,000 of tenders were accepted at the average price from
Government accounts and from Federal Reserve Banks for themselves and as
agents of foreign and international monetary authorities.

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CBS Morning News Interview with Secretary Parsky

Date:

1975-04-07

Journal:

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Federal Reserve Bank of St. Louis

https://fraser.stlouisfed.org

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The Ten O'Clock News, "The Next Decade"

Date:

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FOR RELEASE 1:00 P.M. EST

y\ /

STATEMENT OF
THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
*
UPON SIGNING
THE OECD FINANCIAL SUPPORT AGREEMENT
PARIS, FRANCE, APRIL 9, 1975
Mr. Chairman, Mr. Secretary General, Fellow Representatives:
I am sure that the historic significance of this
occasion escapes none of us. At a time of great challenge,
creation of a major instrument of international financial
cooperation, in which all share both the risks and the
benefits, evidences vividly our recognition of our mutual
interdependence. It testifies also to our determination
to take those steps necessary to ensure that we remain masters
of our own fate in the face of economic uncertainties of a
dimension and complexity not seen for a quarter century.
This agreement is an important complement to cooperation in energy which is central to resolution of the fundamental.
problems in that area. For countries committed to economic
cooperation, it will provide assurance that financing will be
available in case of need. And, by strengthening the confidence
of private lenders and investors in the integrity of the system
as a whole and in the ultimate strength of individual countries1
positions, the Financial Support Agreement will make a major
contribution to the operation of the world economic system.
It is our belief that the very existence of the
Financial Support Agreement will contribute to this objective
and that the assurance provided by this arrangement will
itself serve to reduce the likelihood of developments which
would require it to be brought into play. Lite an insurance
policy, it provides protection against unlikely but nonetheless
possible contingencies.
This is not a time for complacency or self-satisfaction.
We must continue to strive to adapt the basic rules which
govern our economic relations to the realities of today amidst
the urgent press of day-to-day problems. Our ability to
WS-277
maintain and invigorate our basic commitment (over)
to a liberal

- 2 trade and payments system, despite temptations to deviate,
will be the true test of our resolve.
It is often said that in every crisis there is
opportunity. The energy crisis led to the intensified
cooperation which we are consolidating here today. Now,
the challenge is to continue together to forge a response
which permits us not merely to get through this difficult
period but to build a better world, and in so doing, to
preserve the basic values which bind us together.
By our presence here, and our signatures, we testify
again to our determination to find common solutions to
common problems. I am happy to affix my name to this
historic document.
The 24-nation Organization for Economic Co-operation
and Development (OECD) was established in 1961. Its
purposes are (a) to promote economic growth and employment
while maintaining financial stability; (b) to contribute to
sound economic expansion in member as well as non-member
countries in the process of development; and (c) to contribute
to expansion of world trade on a multilateral, non-discriminatory basis0

oOo

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR IMMEDIATE RELEASE
Tuesday, April 8, 1975

FOR INFORMATION CALL:
(202) 456-6757

COUNCIL ON WAGE AND PRICE STABILITY
STUDIES PRICES IN THE
BAKED GOODS AND CEREAL INDUSTRIES
Albert Rees, Director of the Council on Wage and Price
Stability, announced today that the Council staff has
initiated a study of prices in the baked goods and
cereal industries.
In making the announcement, Mr, Rees said, "Prices of the
ingredients for these products have been falling for the
past few months, but this has not yet been reflected in
retail prices. We want to know why this is the case and
when we can expect retail prices to reflect these lower
costs."
In doing the study, the Council has hired David Schwartzman,
a professor of economics at the New School for Social
Research in New York City as a consultant.
o 0 o
CWPS-39

Hello, I'm delighted to be here tonight.

I don't

think I've ever seen so many men and women bankers in
one room before, and I never may again, so I'll take
this opportunity to express my admiration for you and
your profession.
I do have enormous respect for your work, because
you bankroll the improvements in America. Bankers help
to finance many of the good changes occuring in our cities.
You help young couples and young businesses get started
in life — help farmers survive the bad years and grow
in the good times — and you respond generously to community and charitable causes.
Banks and bankers have been part of America's life
since the beginning. When the early pioneers moved to
my homestate of New Mexico, and elsewhere, the cast of
characters that won the West always included the cowboy,
the local drygoods merchant, and the town banker. Your
predecessors were a part of America's early life, and you

Remarks by the Honorable Francine I, Neff before the St.
Louis Chapter, American Institute of Bank Women, St. Louis,
Missouri on April 10, 1975
/

remain a vital part of the Nation today, because your
services are basic to society. You finance the future.
I suspect women bankers are particularly interested
in the future because your numbers will increase in the
next decade. Women, in fact, are on the move in many
fields.
A few years ago we used to call the 20th century,
the "century of the comman man." We might better call
it the "century of the common woman"; because for the
first time in history, fairly ordinary women -- not
geniuses, or saints, or Joan of Arc's, but women like
you and me, in sizable numbers, have a real opportunity
to play important roles in our community and national
life. The token woman is disappearing — and today
tokens are for subways.
Since I live in Washington, D.C, I am particularly aware of women in government. Connecticut, for
example, has a woman governor, and New York state has
a woman Lieutenant Governor. There are 17 Congresswomen, and one new cabinet officer, Mrs. Carla Hills
of Housing and Urban Development. A good friend of
mine, Mary Louise Smith, is the first woman chairman
of the Republican National Committee, while Mrs. Mary
Brooks is the director of the Treasury's Bureau of the
Mint, and I am the United States Treasurer and the first
woman director of the United States Savings Bonds Division.

Women are moving up in the banking field as well.
As you know, the Bank of America has settled a class^
action suit on behalf of its female employees, which
will mean about $10 million in additional income to
the women. The Bank also agreed to increase its total
proportion of women officers, at all levels, to 40
percent by the end of 1978, with 5 percent of this
number to be at the highest levels of management.
In addition, the first bank organized and staffed
by women will soon be opened in New York City. The
First Women's Bank — that's the name — hopes to
make a profit, of course, and beyond that, to establish
equal opportunities for women in credit and employment.
Women-managed banks are also being considered in
Chicago, Connecticut, and California.
Today's ambitious young woman is not looking for
a job. She is looking for a career. And the doors to
the executive suite are open to her.
We women, of course, must do our part. We must
be prepared by training and attitude. We must truly
accept the idea of both equal rights and equal responsibilities in whatever we do. And I think we must all
acknowledge the fact that women are the mothers and men
the fathers of our next generation — and obviously that
influences our lifestyles.

I am strongly in favor of all women using their
abilities to the fullest.
outside of the home.

This can be done inside and

I personally feel that full time

motherhood is an important job that requires as much
"smarts", in many ways, as any other important job.
Our choices, as women, of how we invest our time and
energy may very well be different at different periods
in our life.
My own life is the example with which I am most
familiar.

For years I was a housewife, mother, and dedi-

cated volunteer•for everything from the PTA to the GOP. I
worked hard both inside and outside of the home, although
neither was a salaried job. After my children were grown,
I had the opportunity to turn soiae of my skills and knowledge learned over the years into a fulltime position.
So today, I'm still working 10 hours a day, but this
time for my favorite government as the United States
Treasurer and the Director of the Savings Bonds Program.
Savings Bonds have been part of my life for years.
As a teenager, I sold War Bonds. And as a young wife
and mother, I bought bonds. Like you, I've known for
a long time that it was a convenient, patriotic way
for millions of people to put money aside for their
future.
Today, as National Director of the Bond Program,
I am learning more about another aspect of Bonds, and
that is their role in the management of the nation's
debt.

United States Savings Bonds provide our government
with a stable and efficient way to meet a sizable percentage of our borrowing needs, at a relatively low
cost to the Treasury, and consequently to the taxpayer.
To the extent that the Treasury is able to finance
through nonmarketable securities, the borrowing is kept
out of the marketplace, and thus it does not compete
directly with corporate and state local borrowers. And
in view of the huge sums currently needed, this part of
the bond program takes on added significance.
Let's take a closer look at our public debt.
The public debt outstanding for the nation, at
the end of February, had risen to $499.8 billion —
almost $500 billion. Some $200.8 billion of this is held
by the Federal Reserve and various government trust
accounts, and these do not pose marketing or refunding
problems.
Of the remaining $279 billion of the public debt
in private hands, about 23 percent — or 64.8 billion —
is in the form of United States Savings Bonds.
This sizable percentage is far and away the most
stable part of our debt structure. Series E and H
bonds remain outstanding, on the average, for six years,
while other marketable instruments turn over in three
years or less. This is important because the cost of
borrowing money is one of the key debt management
questions we face at Treasury.

-6-

So, Savings Bonds are good for America and good
,y^\

for the individual American.
Sometimes I'm asked, "Francine, how can you be so
enthusiastic about these six percent interest bonds,
when inflation today is over 10 percent?"
Well, that's a fair question, but I'm not sure it's
the most important question.
Savings Bonds help to promote thrift, and this is
important because the first and basic choice anyone must
make is to save or not to save. I think more and more
people are realizing that thrift must be part of their
general thinking. They must put aside for personal
contingencies. They must take some personal responsibility for their future financial security. In other
words, they must save.
Viewed this way, six percent of something is clearly
better than eight percent of nothing. Any kind of savings
is good. I just happen to believe that United States
Savings Bonds are one of the best, safest and most convenient ways to set money aside on a regular basis.
Further, the old reliable six percent interest is
competitive. A Portland banker, Mr. Tom Prideaux, has
added up figures which show that $7 5 invested monthly
in Savings Bonds over the past six years is worth more
today than the same amount of money invested in stocks
on the Moody's Industrial Index.

Finally, Bonds are a tangible expression of faith in
America.

That's one reason Bond sales are on the rise.

A record 6.9 billion were sold last year —
dollar figure in 29 years.

the highest

So far this year, we are

exceeding even that, with sales of almost 1.9 billion*
in the first three months.
I»m very grateful for the support of banks and
bankers.

You redeem bonds —

support bond drives —

and often head up bond programs. We are very appreciative of this kind of expert help.
Savings Bonds are an optimistic, thriving program —
and I like that. Those of us in Washington are sometimes
accused of viewing the world through
glasses.

mud-colored

And it's true that politicians and journalists..

tend to believe that the end of the world will arrive
tomorrow night.
A recent cover of Newsweek magazine proclaims that
we live in —

I quote —

"A world of woes."

A Time

magazine cover features "America and the World:
Moment of Danger."

And the daily headlines and nightly

newscasts are replete with phrases like "retreat";
"shock"; "economic collapse"; and so on.
Certainly it's true that America has had enormous
problems these past few years.

•1,890,000,000

We fought a war in Viet Nam and charged it.
We sustained

world-wide crop failures.

We have had an oil embargo and steeply rising oil
prices.
We have had the highest rate of inflation in our
peacetime history, and the worst economic slump in a
generation.
And this year,for the first time, the Treasury
Department is borrowing money that will not be repaid
until the 21st century.
These problems are well publicized.
story

But another

escaped the front page headlines.

And that

story is how well our political and economic system
functioned during a period of extraordinary stress.
Let's look at two major economic problems and see
what was predicted and what has happened.
As we all know, the price of foreign oil shot
skyward this past year.

There were widespread pre-

dictions of heatless winters, and gasless cars, and
a collapse of the international financial system as
vast sums of money moved from oil-consuming to oilproducing nations.
What happened to these predictions?
Well, banks and other financial institutions
recycled their so-called petro dollars with considerable skill. The oil-consuming nations began making
progress in establishing new international agreements.
And new oil discoveries outside of the OPEC nations,

and increased production inside the United States and
elsewhere will mean an eventual lowering of prices.
Further, few of us turned blue this winter,
and most of our gas tanks were full — for a price.
Our economic system shivered — but it remained
alive.
Let's look now briefly at two more economic
problems — inflation and recession.
Some critics have feared that we were on target
for another Great Depression of the 1930's.
Of course, we have a very real inflation and a
real recession. But the economic slide is_ halting;
factory orders are up; there has been a decline in
the rate of inflation; and the prime lending rate has
fallen.
As my super boss, Treasury Secretary William Simon
recently said, "Our economic recovery is on schedule."
The free enterprise system still functions and the laws
of supply and demand still apply.
I am concerned, however, that our basic economic
system is not very well understood by most Americans.
I am concerned that some critics of our system go
beyond attacking specific flaws to claiming that the
entire system is unworkable, despite the fact that it
has promoted the greatest mass prosperity — and the
highest standard of living — in the world.

Take the question of profits. To some writers,
the concept that businessmen should make a profit is
greedy at best and immoral at worst.
Yet it's elementary that if it weren't for profits,
we wouldn't have businesses or healthy companies to
make our goods and provide.our jobs.
healthy business that —
society.

It is not a

in the vernacular —"rips off"

It is the unprofitable business that harms us.

It is the unprofitable business that must be propped
up with someone else!s money and that means fewer jobs
and other social costs.
The real vice is not making profits but making
losses. And perhaps one of our real problems is a lack
of knowledge of the basic concepts of the free enterprise system.
Your organization, the American Institute of Bank
Women, is orientated towards education, and I applaud
you for this.

If I could leave you with one major

thought, it is this.
We Americans have an incredibly strong nation, both
in spirit and in material goods. We have looked long
enough on the dark side of our world.

Now it is time

to speak to the good in each other.
But we need to do more than speak —
act.

we need to

As parents, we need to instruct our children in
economics. We must transfer to them our knowledge JQ
of the supply and demand system; our belief in the free
marketplace, and the legitimacy of profit.
As bankers and business people, it is incumbent
on us to take our knowledge and expertise into the
classrooms, by actually serving as speakers and lecturers, and by seeing that our elected school board
members transmit the need for sound economic education
to the teachers.
As citizens, we must demand that the news media
make some effort to understand our economic system and
to report the whole free-enterprise story.
As voters, we must make certain that our elected
officials — from D.C. to City Hall — understand that
good economics is good politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years as a growing
nation. Then let us look forward with confidence as
we go about doing our jobs, raising our families and
helping our society.
Thank you.

FOR RELEASE UPON DELIVERY
STATEMENT BY THE HONORABLE STEPHEN S. GARDNER
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS,
SUPERVISION, REGULATION AND INSURANCE
HOUSE COMMITTEE ON BANKING, CURRENCY AND HOUSING
THURSDAY, APRIL 10, 1975, 10:00 A.M.
MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE:
I appreciate the opportunity to appear before you to
present the views of the Treasury Department on the subject
of variable rate mortgages and the proposal of the Federal
Home Loan Bank Board to regulate such mortgages.
I think it is wise to provide equitable regulation
setting focth uniform terms and provisions of variable
rate mortgages as the FHLBB proposes. It would be very
unwise to prohibit by law the natural development of a
new variety of ways to finance the purchase of homes. In
addition, in view of the recent experience of all of us
with inflation and the rising costs of money, utilities, fuel,
propoerty taxes and all goods and services, I do not believe

WS-276

- 2 -

variable rate mortgages will be very popular for some time.
And I am convinced that the homebuyer will not be denied
the alternative of selecting a fixed rate mortgage.
Let me expand each of these introductory statements
briefly. The high incidence of private home ownership is
a unique strength of our economy that has been long recognized
and encouraged by Government. It is consistent to expect
that equitable regulation of new methods of mortgage financing
will be developed by our regulatory agencies.
These agencies must be responsive to changing economic
conditions. Consider the variety of consumer financial
services that have evolved since World War II. Savings were
once almost entirely of the passbook type. Today there are
an expanding number of plans and instruments, certificates
Of deposit in various maturities, passbook savings, payroll
savings, and even such experiments as NOW accounts. Similarly,
consumer loans and credit systems of all varieties and types
have evolved from the simple fixed installment note plan of
yesterday.
Financial instruments and plans change as societies'
needs change, and it is a great, although understandable, mistake not to recognize that in serving an infinite variety of
consumers there exists many specialized markets for individuals
with differing financial needs. To prohibit a way to finance
homes that has already been useful in commercial finance
and may have value in satisfying the needs of some people,
seems to me to be wrong. I think market forces will eventually

determine the place of variable rate mortgages.
The developments I have cited in financial services are
the result of competition. Our financial intermediary
structure in the United States is just as unique as the
incident of home ownership. There are 5,600 savings and loan
institutions and mutual savings banks, 14,000 commercial banks
and 23,000 credit unions in the country, most of them small.
There are many other buyers of home mortgages ranging from
insurance companies to government agencies. In this competitive
climate, fixed rate mortgages will continue to be readily
available as long as there is any consumer demand.
Under the Board's proposed regulations, mortgage lenders
will be permitted to use variable rate instruments -in which
the initial mortgage contract rate may be changed to reflect
changes in market rates of interest. Increases in the contract
rate could not exceed one-half of one percent in any six month
period nor exceed a maximum of two and one-half percent over
the life of the mortgage. There would be no limitations on
rate decreases. Interest rate adjustments may be effected
through any combination of monthly payment and term. The
variable rate would be tied to a FHLBB-approved index of
market rates. Borrowers would receive 45 days notice of an

- 4 -

increase, including full disclosure as to terms and rates,
and would be able to prepay without penalty.
The VRM proposal and the Financial Institutions Act each
seek to promote increased stability in the financial system
during periods of high interest rates. In both cases the
desire is to help assure a large and constant flow of mortgage
credit which will be less sensitive to variations in interest
rates. A constant flow of mortgage credit requires equivalent
stability of savings flows which will only be assured when
financial institutions are able to complete effectively for
savings deposit dollars.
The inability of mortgage-oriented thrift institutions to
maintain their competitive strength during periods -of high
interest rates is a familiar story most recently demonstrated
by the events of 1974. The basic structural weakness of these
institutions results from portfolio restrictions and resulting
inflexibility in the face of changing economic conditions.
Mortgage assets which dominate their portfolios are long lived,
although not as long as generally assumed, and as a result
adapt too slowly to changing interest rates. In contrast,
savings deposits represent a pool of highly liquid funds
responsive to what are primarily short-term market yields.
During periods of high interest rates, short -term market
yields rise to levels substantially above deposit rates, and

savings are attracted to liquid, short -term investments outside the banking and thrift industries. Because the income
of mortgage-oriented institutions is comparatively fixed, they
cannot raise deposits rates sufficiently to offer a competitive
response to alternative investments. The result is severe
deposit outflows and a contraction of the amount of mortgage
credit available to the home buyer.
Ceilings on deposit rates were initially intended to
assure adequate funds for housing by protecting thrift
institutions from competition for savings deposits with
commercial banks. The ceilings provide no protection from
competition outside the banking system. The increasing ease
and convenience of investing in money market instruments,
coupled with a greater rate spread between savings deposits
and alternative investments during periods of high interest rates,
has resulted in the failure of rate ceilings to assure the
availability of mortgage credit. Artificial rate regulation
will not solve the disintermediation problem. Rather, financial
institutions must be able to compete effectively with
alternative investments for savings dollars. The expanded
range of services concept in the Financial Institutions Act
will provide a more constant-flow of deposits and will permit
payment of more competitive rates to savers.

- 6 -

A related approach is advocated by the Federal Home
Loan Bank Board in their VRM proposal which will also act
to increase the income available for interest payments on
savings during periods of high rates. As I have said, I
don't think the VRM proposal should be viewed as either a
dramatic boon or threat to. housing.
From a consumer standpoint, there must be adequate disclosure of the conditions of the variable rate mortgage. This
is already provided for by the Truth-in-Lending Act and the
regulations proposed by the Federal Home Loan Bank Board.
Further, no borrower should be forced to accept a variable
rate morgage. Consumers should have the option of a fixed
or a variable rate, and many people will be reluctant to give
up the degree of certainty provided by a fixed rate mortgage.
The major supply of new mortgages will continue to be on
fixed terms and with fixed interest rates. When interest rates
are high, some borrowers may well prefer variable rate mortgages
in expectation of rate decreases and a lower initial rate.
When rates are low and mortgage money is plentiful, competition
among the thousands of financial institutions in this country
will assure a wide choice of mortgage options for the consumer.
This choice is further guaranteed by a number of continuting
Federal programs for the direct purchase of mortgages by the

Federal National Mortgage Association, the Government
National Mortgage Association, the Federal Home Loan Mortgage
Corporation, and the guarantee of mortgage backed securities
for sale to the public debt market.
The VRM proposal would simply broaden the range of
choices available to borrowers. However, the fundamental
solutions can only come from appropriate fiscal and monetary
policies, which will assure greater interest rate stability,
and from the kind of restructuring of financial institutions
that is proposed in the Financial Institutions Act.
As long as interest rates can vary in reference to changing
economic circumstances, the risk or gain inherent in long-term
financing will exist. In the past the savings depositor in
specialized mortgage lending institutions has assumed much of
this risk. The failure of the sytem has required massive
amounts of emergency Federal aid,and this has not been an
effective remedy.
I believe that the VRM proposal of the Federal Home Loan
Bank Board strikes a reasonable balance between two objectives,
that of providing a constant flow of mortgage funds and of
helping avoid sharply varying payments by borrowers.
There are many types of variable rate mortgages which use
different formulas or methods. One or more of these may in
time prove superior to the recommendations of the Federal Home

- 8 -

Loan Bank Board.

Yet, I see no reason why the proposed

regulations should not be implemented as an interim measure.
Variable rate mortgages have not been incorporated in
our own reform program because such instruments are generally
legal and require no new statutory authority.

The FHLBB

proposal is a regulatory action and is consistent with present
statutory authority and limitations.
Summarizing then, the Treasury Department has no objection
to the variable rate mortgage proposal of the Federal Home
Loan Bank Board.

However, while providing a desirable option

for some consumers, it will not make a major contribution to
the solution of the twin problems of disintermediation and
adequate flows of funds for housing.
more basic

To meet these objectives

structural reform is required.

I believe that

the broader service base provided by the Financial Institutions
Act will in time prove the most effective way to stabilize
savings deposit flows.

The concept of full service family

banking where a single institution holds the mortgage, makes
consumer loans, and offers checking account services, NOW
account services, and a full range of financial services geared
to meet the needs of the individual family, is the best hope
for the future.

FOR IMMEDIATE RELEASE

April 9, 1975

TREASURY TO AUCTION $1-5 BILLION OF NOTES
The Treasury will auction to the public under competitive and noncompetitive
bidding up to $1.5 billion of 2-year notes. The coupon rate for the notes will
be determined after tenders are allotted. Additional amounts of the notes may be
issued at the average price of accepted tenders to Government accounts and to
Federal Reserve Banks for themselves and as agents of foreign and international
monetary authorities.
The notes will be Treasury Notes of Series H-1977 dated April 30, 1975,
due April 30, 1977 (CUSIP No. 912827 EK 4) with interest payable semiannually on
October 31, 1975, and thereafter on April 30 and October 31. They will be issued
in registered and bearer form in denominations of $5,000, $10,000, $100,000 and
$1,000,000, and they will be available for issue in book-entry form. Delivery of
bearer notes will be made on April 30, 1975. Payment for the notes may not be
made through tax and loan accounts.
Tenders will be received up to 1:30 p.m., Eastern Daylight Saving time,
Tuesday, April 15, at any Federal Reserve Bank or Branch and at the Bureau of the
Public Debt, Washington, D. C. 20226; provided, however, that noncompetitive tenders
will be considered timely received if they are mailed to any such agency under a
postmark no later than Monday, April 14. Each tender must be in the amount of
$5,000 or a multiple thereof, and all tenders must state the yield desired, if a
competitive tender, or the term "noncompetitive", if a noncompetitive tender.
Fractions may not be used in tenders. The notation "TENDER FOR TREASURY NOTES"
should be printed at the bottom of envelopes in which tenders are submitted.
Competitive tenders must be expressed in terms of annual yield in two decimal
places, e.g., 6.45, and not in terms of a price. Tenders at the lowest yields,
and noncompetitive tenders, will be accepted to the extent required to attain the
amount offered. After a determination is made as to which tenders are accepted, a
coupon yield will be determined to the nearest 1/8 of 1 percent necessary to make
the average accepted price 100.000 or less. That will be the rate of interest that
will be paid on all of the notes. Based on such interest rate, the price on each
competitive tender allotted will be determined and each successful competitive
bidder will pay the price corresponding to the yield he bid. Price calculations
will be carried to three decimal places on the basis of price per hundred, e.g.,
99.923, and the determinations of the Secretary of the Treasury shall be final.
Tenders at a yield that will produce a price less than 99.501 will not be accepted.
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 $500,000
or less will be accepted in full at the average price of accepted competitive
tenders, which price will be 100.000 or less.

(OVER)

-2Commercial banks, which for this purpose are defined as banks accepting demand
deposits, and dealers who make primary markets in Government securities and report
daily to the Federal Reserve Bank of New York their positions with respect to
Government securities and borrowings thereon, may submit tenders for the account of
customers, provided the names of the customers are set forth in such tenders.
Others will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from commercial and other banks for
their own account, Federally-insured savings and loan associations, States, political
subdividions or instrumentalities thereof, public pension and retirement and other
public funds, international organizations in which the United States holds
membership, foreign central banks and foreign States, dealers who make primary
markets in Government securities and report daily to the Federal Reserve Bank of
New York their positions with respect to Government securities and borrowings thereon
Federal Reserve Banks, and Government accounts. Tenders from others must be
accompanied by payment of 5 percent of the face amount of securities applied for.
However, bidders who submit checks in payment on tenders submitted directly to a
Federal Reserve Bank or the Treasury may find it necessary to submit full payment
for the securities with their tenders in order to meet the time limits pertaining
to checks as hereinafter set forth. Allotment notices will not be sent to bidders
who submit noncompetitive tenders.
Payment for accepted tenders must be completed on or before Wednesday, April 30,
1975, at the Federal Reserve Bank or Branch or at the Bureau of the Public Debt in
cash, in other funds immediately available to the Treasury by April 30, or by check
drawn to the order of the Federal Reserve Bank to which the tender is submitted,
or the United States Treasury if the tender is submitted to it, which must be
received at such bank or at the Treasury no later than: (1) Friday, April 25, 1975,
if the check is drawn on a bank in the Federal Reserve District of the Bank to which
the check is submitted, or the Fifth Federal Reserve District in case of the Treasury,
or (2) Wednesday, April 23, 1975, if the check is drawn on a bank in another district.
Checks received after the dates set forth in the preceding sentence will not be
accepted unless they are payable at a Federal Reserve Bank. Where full payment
is not completed on time, the allotment will be canceled and the deposit with the
tender up to 5 percent of the amount of securities allotted will be subject to
forfeiture to the United States.

Departmental theTREASURY
WASHINGTON. D.C. 20220

TELEPHONE W04-2041

Contact: Robert E.Harper
964-5775
FOR RELEASE MONDAY, APRIL 14, 197 5
TREASURY SECRETARY SIMON NAMES ROBERT L. PARMELEE
AS NEW SAVINGS BOND CHAIRMAN FOR WYOMING
Robert L. Parmelee, Vice President and Wyoming General
Manager, Mountain Bell, Cheyenne, is appointed Volunteer
State Chairman for the Savings Bonds Program in Wyoming by
Secretary of the Treasury William E. Simon, effective immediately.
He will head a committee of business, banking, labor,
government and media leaders who -- in cooperation with the
U. S. Savings Bonds Division -- assist in promoting Bond
sales throughout the state. He succeeds A. Edward Kendig,
President, First National Bank in Wheatland, who has served
as Chairman since March 1966. Kendig will receive the
Treasury Department "Award of Merit".
Parmelee was born in Denver on August 30, 1918. He was
graduated from the University of Denver in 1940. He joined
Mountain Bell that same year. During World War Two, he saw
service in the European Theater of Operations. Returning to
Mountain Bell after the war, Parmelee held various positions
in the Plant Department before becoming Denver Employment
Manager in 1952. In 1954, he was promoted to General Personnel Supervisor in Denver.
After a year as District Plant Manager in Helena, Mont.,
he moved to Phoenix in 1957, as District Commercial Manager.
From 1961 to 1963, Parmelee worked for parent company American
Telephone and Telegraph in New York in Personnel Administration. He returned to Denver in 1963, as General Manager of
the Commercial and Marketing Departments, later assuming the
same responsibility for the Plant Department. In February
1967, he was appointed Colorado-Wyoming Accounting Manager.
He assumed his present post in September 1970.
( over )

- 2 Parmelee is active in a number of business, civic and
professional organizations, including -- Director, Wyoming
Industrial Development Corp.; Director, Wyoming Medical Service; Director, Wyoming Eancorporation; Vice President,
Wyoming Taxpayers Association; Board of Governors, Goodwill
Industries of Wyoming, Inc., and Chairman of the Board, United Way.
He and his wife, the former Margaret Richardson, have
two married daughters -- Mrs. Janice Elaine Groom of Denver,
and Mrs. Carolyn Ruth Lawrence of Arlington, Tex.

0O0

CONTACT: L.F. POTTS
964-2951
April 11, 1975

FOR IMMEDIATE RELEASE
DETERMINATION OF SALES AT NOT LESS
THAN FAIR VALUE ON CHICKEN EGGS IN THE SHELL
FROM CANADA
Assistant Secretary of the Treasury David R. Macdonald
announced today a determination that chicken eggs in the
shell from Canada are not being, nor are likely to be,
sold at less than fair value within the meaning of the
Antidumping Act, 1921, as amended. Notice of this decision will appear in the Federal Register of April 14, 1975.
A Notice of Tentative Negative Determination was published in the Federal Register of January 13, 1975.
Comparisons between purchase price and home market
price revealed that purchase price was equal to or higher
than the home market price of such or similar merchandise.
During the period January through November 1974,
imports of the subject merchandise from Canada were valued
at approximately $4.5 million.

FOR IMMEDIATE RELEASE

APRIL 11, 1975

PLANS ANNOUNCED FOR SPECIAL PAYMENTS TO
SOCIAL SECURITY AND RAILROAD RETIREMENT BENEFICIARIES
The Treasury Department today announced that planning
has been completed for the special, one-time payments of $50
authorized for recipients of social security, supplemental
security income, and railroad retirement benefits under the
Tax Reduction Act of 1975, Public Law 94-12. The Social
Security Administration and the Railroad Retirement Board are
cooperating with the Department in the special payment program.
The $50 payments will be issued to the more than 34 million
individuals under the above programs who are paid a regular
benefit for the month of March 19 75. Those individuals who
receive benefits under two or more of the programs will be
entitled to only one $50 payment. The conventional green
Treasury checks will be used for these payments.
Treasury disbursing offices will begin issuing the special
payments in early May 1975, subject to enactment of appropriations by the Congress as required by the Act, but.due to heavy
workloads resulting from tax rebates to individual taxpayers
authorized under the same Act, will not complete the mailing
until about June 20. Recipients should not be concerned,
therefore, if their checks do not arrive during the latter part
of May or early June. However, if a payment does not arrive
by June 30 individuals entitled to the special payments should
contact their regular benefit office.
Attached are questions and answers containing additional
information.
oOo
Attachment
Note to Correspondents
Press contacts:
Disbursing Matters (Tsy) - James Abbott, tel: 202/964-2601
Benefit Matters (SSA)
- Michael Naver, tel: 301/594-2200

WS-278

- 2QUESTIONS AND ANSWERS ON SPECIAL $50 PAYMENT

QUESTION:

Is the special $50 payment a social security
benefit?

ANSWER: No. Under the Tax Reduction Act of 1975, Congress
emphasized that the $50 payments to people who
get social security, supplemental security income,
and railroad retirement benefits are not social
security benefits. Rather, they are intended to
give aged, blind, and disabled people a payment
comparable in nature to the tax rebates which the
new law provides to those who are working.
QUESTION:.,. Why did Congress vote this payment?
ANSWER: Congress has stated that the purpose of the special
$50 payment is the same as that of the tax rebates—
to inject new spending money into the economy to
help the nation's economic recovery.
QUESTION: Where does the money for the special payment come
from?
ANSWER: The payments are financed from general, revenues of
the U.S. Treasury. They do not come from social security trust funds.
QUESTION: Can I receive both the special $50 payment and a
1974 tax rebate?
ANSWER: Yes, as long as you meet the eligibility requirements
for each.
QUESTION: When will my $50 special payment come?
ANSWER: Assuming enactment of the necessary appropriation,
the majority of the payments will be mailed out
by the Treasury Department beginning in early May
and continuing to about June 20. The payment will
come automatically. You don't need to apply.
QUESTION: What do I do if I haven't received my check by about
June 20?
ANSWER: Please wait until the end of June before you do
anything. Your check may be on its way to you.
If you get social security or SSI, and the special
$50 payment has not arrived by the end of June,
call your local social security office. Railroad
retirement
should get
touch with
the nearest beneficiaries
Railroad Retirement
BoardinOffice.

- 3 -

QUESTION:

How will I recognize my special $50 payment?

ANSWER:

The $50 special payment will be paid in a green
U.S. Treasury check mailed in a brown envelope.
A notice inside the envelope will tell you what
the check is for.

The questions and answers given below apply to railroad
retirement benefits as well as social security benefits.
QUESTION: My husband and I both get social security. Do
we each get $50.
ANSWER:

Yes.

9. QUESTION:

I'm a widow with eight children and we get social
security. Do I get a separate $50 payment for
myself and $50 for each child?

ANSWER:

Yes. You will get a $50 check for yourself and
another check which will include a $50 payment for
each of the children.

10. QUESTION

Will my $50 payment be included with my social
security check?

ANSWER:

No. The $50 payment will come in a separate check.

11. QUESTION

Will the payment count as income to reduce my SSI,
food stamps, Medicaid, or any other assistance I
may be getting?

ANSWER:

No. The Tax Reduction Act expressly provides that
the payments will not be counted as income or
resource for calendar year 1975'for purposes of
such assistance programs. Also, the payments will
not count as taxable income.
I applied in March for social security, but they
told me that I wouldn't get my check until June.
Do I get the $50 special payment?

12.

QUESTION

ANSWER:

13 . QUESTION

Yes. As long as you applied for social security
before April 1, and you receive a check for the
month of March issued no later than August 31,
you will get a $50 special payment.
I received my first social security check April 3.
Does this mean that I missed the March eligibility
deadline for the $50 special payment?

- 4ANSWER:

14.

QUESTION
ANSWER:

15.

QUESTION

ANSWER:

No. The social security check you received in April
is payment for March. Under social security your
April 3 check is payment for the previous month.
I received my first SSI check in April for the month
of April. Does this entitle me to the $50 payment?
No. Since entitlement to SSI benefits is based on
need, the check comes in the same month as the month
of eligibility to meet current needs. You would
have had to get an SSI check for March, issued by
August 31, 1975, to be eligible for the $50 special
payment.
I receive both social security and SSI. Does this
mean I will get two $50 payments?
,
No. Each eligible person gets only one $50 payment.

16. QUESTION

I get a special age 72 payment from social security
each month. Do I get a $50 payment too?

ANSWER:

Yes.

17. QUESTION

I'm eligible for social security but I didn't.get
a check for March because I was working. Am I
eligible?
ANSWER:
No. People whose social security check for March
was withheld because of work do not get the $50
special payment.
18. QUESTION- I get social security, but I didn't get a check
for March because I owed the Government for a
previous month's overpayment. Am I eligible?
ANSWER :
Yes. Although you did not. receive a check,
you were, in effect, paid for March.
19. QUESTION: I am eligible for social security because I am a
widow with minor children in my care. However,
the children were not in my care in March. Am
I eligible?
If you did not receive a check for the month of
ANSWER:
March because the children were not in your care,
you will not receive the $50 special payment.
I think I am eligible for social security, but my
20. QUESTION
case is being appealed. Will I get the special
payment?

- 5 -

ANSWER:

Only if you receive a check for the month of March
issued by August 31-

21. QUESTION

I applied, for social security in March because I
was eligible, but I decided not to take my first
check until May. Will I get the special payment?

ANSWER:

If you change the month in which you elect your
benefits to start from May to March you can get
the special payment. See your social security
office.

24.

25.

QUESTION

I got a social security payment for March but it
was reduced because of my work. Do I still get
the $50 special payment?

ANSWER

As long as you received a social security check
for March, no matter how small, you are eligible
for the $50 special payment.

QUESTION

As of March, I am entitled to social security
father's benefits based on the Supreme Court
decision in March. Will I also get the special
payment?

ANSWER:

Yes, if you applied before April 1 and if your March
check is issued by August 31. Even if you applied
before April 1 only for lump sum death benefits, that
application holds for all social security benefits
clue you, including the new court-ordered father's
benefits.
You said the special payments will be mailed out
by June 20. How do I get mine if my eligibility
is not established until July or August?

QUESTION

ANSWER

After June 20, the special, payments will be sent
out monthly as the lists are updated. If you
^ i V V S A u P S t a S o c l a l se curity check for the
month of^March, chances are your special payment
the
middle
will
arrive by the end of Aaugust
i ^ " ^ or
— ^
~ A
A, - -of
September.

QUESTION

How will the special payment affect the benefit

tSCgertMryear?eCUrlty
ANSWER:

beneflcl

«ieB are supposed

The special payment will have no effect
on any
future benefit increases.

E^ E
EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY

WASHINGTON, D.C. 70506

FOR IMMEDIATE RELEASE
Thursday, April 10, 1975

FOR INFOPMATION CALL:
(202) 456-6757

COUNCIL ON WAGE AND PRICE STABILITY
FILES BEFORE THE
CIVIL AERONAUTICS BOARD

Attached is a copy of the Council on Wage and Price Stability's
answer in support of World Airways' motion for an expedited
hearing on its application for a certificate of public convenience and necessity authorizing it to engage in scheduled
transcontinental service.
While the Council takes no position at this time on the
question of whether this application should be granted, we
believe that World Airways' proposal deserves an immediate
hearing because they have presented a convincing case that
its low fare proposal will attract new passengers without
eroding the traffic of existing transcontinental carriers.
The Council supports the concept that carriers should, be
encouraged to be innovative in providing high density, no
frills services and the Council strongly urges the Civil
Aeronautic Board to grant World's proposal a prompt hearing.
o

CWPS-40

Before the
CIVIL AERONAUTICS BOARD
WASHINGTON, D. C.

Application ot
WORLD AIRWAYS, INC.

Docket 27693

for a certificate of public
convenience and necessity
(transcontinental scheduled
service).

Answer of the
Council on Wage and Price Stability
In Support of Motion for an Expedited Hearing
Tursuant to Rule 18(a-2) of the Board's Rules
of Practice, the Council on Wage and Price Stability
(the "Council") hereby submits its answer in support of
the motion of World Airways for an expedited hearing on
its application for a certificate of public convenience
and necessity authorizing it to engage in scheduled
transcontinental service. */

V
The Council takes no position at this time on the
ultimate question of whether World's application should
be granted. As noted hereafter, that question turns on
the resolution of a nurv.bi.-r of subsidiary factual questions through the hearing process as required bv the
Federal Aviation Act. Rather, the Council's present
position is sin.ply that that application should be set
down for hearing as soon as possible so that the important issues which it raises may be given the consideration by all affected parties which thev deserve.

- 2 On April 2, 1975, World Airways filed the
subject application for a certificate together with a
motion for expedited hearing. The carrier proposes to
operate daily scheduled services between the New York
and Baltimore-Washington metropolitan areas, on the one
hand, and the Los Angeles and San Francisco Bay areas,
en the other hand. It would utilize so-called satellite
airports on the West Coast (Ontario International in
the Los Angeles area and Oakland International in the
Bay area) and two relatively uncongested airports on
the East Coast (Newark International in the New York ,ilt
area and Baltimore-Washington International).
World proposes daily nonstou round-trip
service between New York and both West Coast cities
and a daily nonstop round trip between Baltimore and
Los Angeles. Baltimore-San Francisco service would be
on a one-stop basis through a continuation of the
Baltimore-Los Angeles service. */

*/ Although World proposes an initial pattern of three
cFaily transcontinental round trips, the certificate it
seeks would permit an unlimited expansion of service in
the markets. Indeed, section 401(e)(4) of the Federal
Aviation Act prohibits the Board from so conditioning
a carrier's certificate as to restrict the carrier's
right to schedule "as the development of the business
and the demands of the public shall require."

- 3 The most intriguing feature of World's
application is its proposal to break ranks with the
existing transcontinental carriers (American, TWA, and
United) by offering £• genuine pricd*break to persons
willing to forego the frills (such as expensive meals
and costly reservation systems) usually associated with
transcontinental air travel and to accept the loss of
comfort and the inconvenience associated with a service
operated at a relatively high average load factor of
75 percent.
The price break which World proposes is substantial.

World's proposed one-way fare of $89, exclu-

sive of taxes and security charges, is naif the existing
$180 coach fare, the lowest fare available at all times
to all travelers.

It is $17 less than the lowest adult

promotional fare, the winter weekday demand scheduled
fare.

Unlike the latter fare, World's fare would be

available seven days a week, year 'round and, subject
to space availability, requires neither advance reservations nor advance ticketing.

Like demand scheduled

fares, World's proposal includes a penalty for canceled
reservations.
World projects that the new low fare will
bring transcontinental air travel within the reach of

- 4 millions of persons who cannot now afford it. __/ The
carrier anticipates that the introduction of its
service would increase the total pool of passengers ^
available to all transcontinental carriers in much the
same way in which transatlantic travel has been stimulated over the years by the availability of low cost
charter flights. Not all of the stimulated traffic
would be carried by World. It projects an increase
in the transcontinental traffic of the Big Three carriers, assuming they match its fares. - * -• •
At the same time, World forecasts a $2.7

million after-tax profit for its operations, equal to
the 12 percent return on investment prescribed by the
Board for ratemaking purposes in the Domestic Passenger
Fare Investigation. However, World proposes to accept
certificate conditions which will place the risk
squarely on it, and not the public, if it has miscalculated. It states its willingness to have a load
factor standard of 7 5 percent imposed upon it for

*/ The carrier contends that, at present fares,
transcontinental air travel is within reach of only
30 percent of the East and West Coast households while
its service would be affordable by two-thirds of those
households.

- 5 ratemaking purposes, and its willingness to have the
reasonableness of its fares judged on a strict fully
allocated cost basis. Its services would not be
eligible for subsidy. The authority would be limited
to a five-year experimental period. On the other hand,
the authority would be permissive, allowing World to
withdraw from service if the financial results so
require.
We believe this innovative proposal deserves
an immediate hearing. In a recent series of pleadings, __/
we have told the Board of our statutory duties to monitor the inflationary impact of activities in both the
public and private sectors of the economy; to review
and appraise the programs and policies of the agencies
of the United States for the purpose of determining the
extent to which they contribute to inflation; and to
report our findings and recommendations to the President
and Congress. **/

*/ See the Council's answer to complaints in Dockets
27607 et al and 27657 et al.
**/ See the Council on Wage and Price Stabilitv Act
oT 1974 (Public Law No. 93-387) .

Pursuant to that mandate we have advised the
Board and the Congress of our concern with the sharp
rise in scheduled air fares, amounting to nearly 20
percent over the last 18 months and have recommended a
substantial reduction in airline fares as a small but
important step in curing inflation.
At the same time, we understand the concern
shared by the Board and the industry over the recent
decline in air carrier traffic and the resulting
deterioration in carrier profitability.

We believe

that, while some of the traffic problems can be traced
to the major recession being experienced by the economy
generally, much of the problem rests closer to home and
is tied directly to the recent increases in airline fares.
Accordingly, we believe that a substantial
reduction in airline fares is necessary to correct the
industry's economic problems by bringing back the discretionary traveler.

Thus, we have urged the Board to

permit the price mechanism to work by granting to each
carrier a great degree of flexibility in establishing
noa-discriminatory promotional faies, oir-peak pricing,
and the like.

World has made a strong initial showing that
its low fare proposal will attract new passengers to
its services without eroding the traffic of the existing
transcontinental carriers. The immediate public benefit
of the lower airline fares it would offer is obvious.
Over the longer term, the competitive spur which would
be provided by its entry into markets closed to outside
competition for twenty years can only improve the
efficiency of all who serve the markets. For these
reasons, we urge the Board to set World's application
for hearing as soon as possible.
We believe it deserves a hearing for yet
another important reason. The airline industry is
presently offering far too narrow a range of services.
Its "product mix" is aimed, unfortunately, at the high
income traveler. In our view, there are many travelers
who would be willing to accept a lower level or quality
of service at a lower fare were such a service available.
Indeed, as World points out, such has been the experience
in low-cost charters across the North Atlantic. Thus, we
believe that the carriers should be encouraged to innovate
in providing high density, no-frills services and urge
the Board to grant World's proposal a prompt hearing.
World's proposal also holds out the promise of
providing more fuel-efficient service. By operating at

an average load factor of 75 percent, World estimates
that it will consume 46 percent less fuel per passenger
than conventional operations at a 55 percent load factor.
In view of the national policy to reduce overall fuel
consumption by increasing fuel-efficiency, this aspect
of World's proposal provides yet another reason for
giving the carrier's application immediate consideration.
Finally, as World notes in i ;s motion, its
application meets the standards for deterrining hearing
priorities set down in section 399.60 of the Board's
regulations and is consistent with the mandates of section 102 of the Federal Aviation Act. In any event,
World is entitled to a speedy hearing on its application
pursuit <o the provisions of section 401(c) of the Act.
. We recognize that the proposal is controversial
and will engender heated dispute over a wide variety of
factual matters — World's traffic -forecast, its costs,
the amount of traffic which will be diverted from other
carriers, and so forth. Those issues are not ripe for
resolution in the present posture of this-proceeding.
Thus, for example, allegations that Worl 's traffic
forecasts are inflated cannot form the basis for a
denial of its motion. The very purpose of the hearing
which World seeks is to provide a forum for the presentation of evidence leading to the resolution of the factual
questions in dispute.

- 9 -

World's application and the accompanying
motion contain the supporting material required by the
Board's regulations and establish a prima facie case
justifying the grant of its application. No more can
be required in order for the carrier to obtain a hearing.
WHEREFORE, The Council urges the Board to
grant World's motion for expedited hearing and to set
its application for hearing as speedily as possible.
Respectively submitted,

Georg4 C. Eads
Assistant Director for
Government Operations
and Research
t- UAUwAyrXyO
(/#4ijJ**i
Vaughn C. Williams
General Counsel

lyyyyiX^
J. Michael Roach
Assistant General Counsel

April 10, 1975

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Citation Information
Document Type: Article

Number of Pages Removed: 8

Author(s):
Title:

Interview with William E. Simon

Date:

1975-05-01

Journal:

Playboy Magazine

Volume:
Page(s):
URL:

Federal Reserve Bank of St. Louis

https://fraser.stlouisfed.org

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.7 billion of 13-week Treasury bills and for $2.7 billion
of 26-week Treasury bills, both series to be issued on April 17, 1975,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF bills
ACCEPTED
13-week bills
26-week
COMPETITIVE BIDS: maturing July 17, 1975

High
Low
Average

maturing

Discount Investment
Price
Rate 1/
Rate
98.627 a/ 5.432%
5.60%
98.591
5.574%
5.75%
98.600
5.538%
5.71%

October 16, 1975

Price

Discount
Rate

Investment
Rate 1/

97.092
97.024
97.046

5.752%
5.887%
5.843%

6.02%
6.17%
6.12%

a/ Excepting 1 tender of $10,000
Tenders at the low price for the 13-week bills were allotted 48%.
Tenders at the low price for the 26-week bills were allotted 29%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS
District

Received

Accepted

Received

Accepted

Boston
$
52,760,000
New York
'. ,882,115,000
Philadelphia
33,620,000
Cleveland
76,460,000
Richmond
42,475,000
Atlanta
58,910,000
Chicago
338,315,000
St. Louis
60,030,000
Minneapolis
23,240,000
Kansas City
71,070,000
Dallas
40,690,000
San Francisco 198,175,000

$
40,460,000 $
22,335,000
2,061,475,000 4,018,800,000
31,070,000
7,465,000
56,460,000
52,410,000
33,965,000
40,960,000
54,985,000
31,760,000
117,965,000
217,240,000
50,470,000
50,620,000
23,240,000
19,160,000
64,670,000
29,570,000
35,690,000
23,430,000
130,175,000
213,490,000

$
12,335,000
2,328,380,000
7,165,000
20,110,000
24,460,000
30,660,000
56,885,000
24,620,000
19,160,000
26,870,000
23,430,000
126,350,000

TOTALS $4>877,860,000

$2,700,625,000 b/$4,727,240,000

$2,700,425,000 __l

b/ Includes $547,755,000 noncompetitive tenders from the public.
c/ Includes $195,210,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites tenders for
two series of Treasury bills to the aggregate amount of $5,400,000,000 » ° r
thereabouts, to be issued

April 24, 1975,

as follows:

91-day bills (to maturity date) in the amount of $2,700,000,000, or
thereabouts, representing an additional amount of bills dated January 23, 1975,
and to mature

July 24, 1975

(CUSIP No. 912793 XF8), originally issued in

the amount of $2,201,755,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $2,700,000,000, or thereabouts, to be dated
and to mature October 23, 1975

April 24, 1975,

(CUSIP No. 912793 XU5).

The bills will be issued for cash and in exchange for Treasury bills maturing
April 24, 1975,

outstanding in the amount of $4,605,595,000, of which

Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,469,505,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, April 21, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
multiples of $5,000.

Tenders over $10,000 must be in

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(OVER)

-2securities and report daily to the Federal Reserve Bank of New York their positions
with respect to Government securities and borrowings thereon may submit tenders
for account of customers provided the names of the customers are set forth in
such tenders. Others 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 bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
Public announcement will be made by the Department of the Treasury of the
amount and price range of accepted bids.

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 or Branch on April 24, 1975,

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing
ment.

April 24, 1975.

Cash and exchange tenders will receive equal treat-

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
bills (other than life insurance companies) issued hereunder must include in his
Federal income tax

return, as ordinary gain or loss, the difference between

DepartmentoftheTREASURY
WASHINGTON, D.C. 20221

TELEPHONE W04-2041

bH
FOR IMMEDIATE RELEASE

April 15, 1975

RESULTS OF AUCTION OF 2-YEAR TREASURY NOTES
The Treasury has accepted $1.5 billion of the $4.1 billion of
tenders received from the public for the 2-year notes auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield
Highest yield
Average yield

7.37%
7.45%
7.43%

The interest rate on the notes will be 7-3/8%. At the 7-3/8% rate,
the above yields result in the following prices:
Low-yield price 100.009
High-yield price
Average-yield price

99.863
99.900

The $1.5 billion of accepted tenders includes 74 % of the amount of
notes bid for at the highest yield and $0.3 billion of noncompetitive
tenders accepted at the average yield.
In addition, $0.1 billion of tenders were accepted at the average-yield
price from Government accounts and from Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities.

1/ Excepting 6 tenders totaling $315,000

The Bond Between Us

A friend of mine once said that 10 minutes was
enough for anyone to tell what he or she knows; after
that, you tell what you don't know.
I agree, so I'll take only 10 minutes of your
time to tell you what I know about United States
Savings Bonds and why I'm sold on them — and why I
hope you are too.
I am so sold on the Savings Bonds program that
I accepted my second appointment, as National Director
of the Program, even though it came without a penny
of salary. And I remain so convinced of its value
that I have traveled over 78,000 miles to 26 states,
during the past nine months, to talk about bonds.
These many miles of travel stretch all the way
from the beaches of Hawaii to the blizzards of Minnesota
to the dining rooms of Dayton. On these trips I have
met hundreds of wonderful volunteers like yourselves.
And I have had the chance to see again that the real
wealth of America is not inanimate money, but our
living land, our terrifically alive people, and the

Remarks by the Honorable Francine I. Neff, TSIA, Dayton,
Ohio on April 16, 1975

/0L
extra-ordinary ideas and attitudes that shaped our
laws and institutions and propelled us so far in our .
200 years as a Nation.
In these travels outside of Washington, D.C,
I realize again that America is much more than rising
unemployment and sinking Dow-Jones averages. It is
212 million people working, making homes, going to
school, building and holding together a great Nation.
And we are a great Nation. We set world standards in
education, in per-capita income, and in pioneering new
fields. We are a country where the medium income of
our families has doubled in the past 25 years, even
taking inflation into account; a country where 60 percent
of American families own their own homes; where even
our taxes of all kinds -- compared to our income —
are still the second lowest among the 13 top industrial nations of the world.
United States Savings Bonds are a part of this
going and growing America. I suspect they do more
to promote the habit of regular saving among Americans
than all of the family lectures on thrift ever given.
The Oklahoma farmer and the Ohio housewife may have
little concept of a Treasury note or a mutual fund
»

investment, but they do know about Savings Bonds.
And they do save. In 1974, we had the largest bond
sales since World War Two — almost $6.9 billion.

hi
Savings Bonds are. a trusted part of everyone's life —
of America's life —

and they have been ever since

most of us were earning our first quarter.
Bonds belong in America.

But now and then we

need to look again at this old friend of ours and
rediscover the "what" and "why" of them.
that right now.

Let's do

Let's look at 3 main reasons why we

can urge people to say "yes" to Savings Bonds.
First they are a sound personal investment. They
are secure in a troubled world.

The payroll savings

plan is a painless way to receive six percent interest
on your savings. And this can equal a higher rate of
interest when you consider the tax advantages — which
most of us are doing with special vigor this tax-paying
season.
By the way, I've discovered that some people still
don't know about our 6 percent interest, and other people
don't understand that you pay no state or local tax on
bonds and that you can defer the federal tax until you
cash them in.
Bonds are a great way to save, but they can also
be an investment.

Banker Tom Prideaux of the National

Bank of Oregon notes that $7 5 invested in Savings Bonds
monthly since December of 1968 is worth more than $75
invested monthly in stocks making up Moody's Industrial
Index.

That old reliable 6 percent comes through!

(d ?
Savings Bonds also help our government in its
debt management, by providing an efficient way to meet
a sizable percentage'Of borrowing needs at a relatively
low cost to the nation.
When the Treasury is able to finance through nonmarketable securities, the borrowing is kept out of the
marketplace and thus does not directly compete with
corporate and state and local borrowers.

It's comforting

to know that about 23 percent of the public debt in
private hands is in the form of United States Savings
Bonds.
Further, Savings Bonds have a long maturation period.
Series E and H bonds remain outstanding, on the average,
for six years, while other marketable instruments turn
over, on the average, in three years or less.

The cost

of borrowing money is sizable, so you can see why
holding bonds a long time is important to the government,
and hence to us as taxpayers.
Finally, these bonds are a tangible expression of
faith in America and her future.
of us to say, "I love America."

It is hard for most
It is easier to buy bonds

or to work for the program and to show our love that way.
Perhaps that's why, in these difficult times, the sale
of bonds is rising.
I grew up in the little town of Mountainair, New
Mexico, where my parents provided me with a diet of
pinto beans and patriotism.

The pinto beans were

r 69
/

sometimes scarce, but never the patriotism.

During

And, from my Washington office as the United

States Treasurer and National Director, I see more fully
their debt reduction aspect.
Most of us have seen bonds from these 3 viewpoints
of the patriotic, the personal benefits, and the boost
that bonds give to the country's debt management.
From every standpoint, Savings Bonds make sense —
and dollars.

They are good for the individual, good

for the country, and good for the future.

But selling bonds by the billions doesn't just
happen.

It takes a small handful of Treasury people

and a very large handful of volunteers.

Easily ninety-

five percent of the people working for our program are
volunteers like yourselves.
I know that we ask a lot of our Bond volunteers.
We ask busy, important people to take time to become
personally concerned and involved.

The only reason

we can do this is because we feel our product is so great.
Our national goal in 1975 is to sell at least 6.8
billion in bonds and to enroll 2.4 million new or increased
savers.

We are starting out very well, with sales of

almost $1.9 billion in bonds for the first 3 months.
That's the greatest bond sales for this period in 3 0 years.
As Savings Bonds volunteers, you have an excellent
message.

You have a ready market.

You have some very

good Savings Bonds people here in Ohio and you will have
the help of a nationwide series of public service ads
featuring our Bicentennial slogan "Take Stock in America
200 years at the same location."
But the Savings Bonds job can never be done in
Washington or New York alone.

It is a grass roots

program, and the results depend on your personal involvement and the involvement of others like you across
the country.
record —

Let's roll up our sleeves and roll up a

we can do it this year.

—

197 5 is the beginning of our third century as a
Nation. It's a super time to join the program. Let's
make the bicentennial year a "buy bonds" year as well,
by reminding people what we are selling and why we are
selling. Let's look up from our desks and out the windows at America — at her green hills and brown prairies
and industrial might — her ideas and institutions and
people — and remember why it is that the word "America"
is such a special word everywhere on earth. And then —
let's get up from those desks and go out and do the
job.
Thank you.

1(1
FOR RELEASE ON DELIVERY
Statement of Under Secretary of the Treasury
Edward C. Schmults
Before the Subcommittee on Revenue Sharing
Senate Committee on Finance
Wednesday, April 16, 1975
at 10:00 A. M.
Mr. Chairman, I very much appreciate this opportunity
to offer to you and the members of the Subcommittee some
reflections based on the Administration's review of the
first years of the General Revenue Sharing program.

determine whether, and in what form, the program should be
extended past its present expiration in December 197 6, the
Treasury Department, Office of Management and Budget and
the Domestic Council have since last summer all been
actively involved in a joint effort to assess this relatively new and unique form of Federal financial assistance.
It has been my privilege to serve as chairman of the steering group directing this study.

Our review has considered

issues raised by interested groups,- by members of Congress,
by various privately and governmentally-sponsored evaluations
of General Revenue Sharing, and by our own staff. We have
also taken a look at a large number of approaches offered
to strengthen the program.
WS-279

- 2I note, Mr. Chairman, that the press release announcing
these hearings indicates interest in how this program is
being monitored. The Administration, of course, is also
vitally concerned that we have sufficient information to
know whether the American people are receiving benefits
from General Revenue Sharing in proportion to its cost to
them. This interest prompted the President to provide for
the internal Administration review which I have just described. When one considers the full range of attention
being focused on revenue sharing, it could be argued that
this is the most closely examined program in the history
of Federal assistance. At least four Congressional committees
have held hearings on GRS since its enactment, and further
hearings in the future are likely. Examinations of various
aspects of the program have been or are being pursued by
the General Accounting Office, the Advisory Commission on
Intergovernmental Relations, the National Science Foundation,
the Brookings Institution, the National Revenue Sharing
Clearinghouse, as well as a number of other private groups.
We in the Administration have tried to take account of
the findings of those studies which are currently available
in putting together our proposal to renew revenue sharing.
We realize that additional important information may yet
appear and are fully willing to take it into account. However, it has been our conclusion that we should proceed to

y
seek early renewal of the General Revenue Sharing program.
We are doing so, first, because we are convinced that the
program has been largely successful in meeting its original
objectives.

Secondly, State and local governments, in

order to make wise use of funds provided through the program,
must know about its future by the early fall of this year.
Decision-making on the 1977 fiscal year budgets of many
States and localities begins early this fall when agencies
submit their requests to their budget offices.

If no

action is taken on renewal of the program by then, States
and localities could only rely on the GRS funding that is
provided in the present law for the first half of fiscal
year 1977.
This need

of States, cities, towns, and counties to

know about their future revenue sharing entitlements is
greater than their need for advance information about categorical aids.

Shared revenues usually become a part of the

general fund of recipient governments, which is not normally
the case with other aids.

These funds support essential

day-to-day services which would in many cases be eliminated
or paid for with higher taxes, were revenue sharing terminated.
Dependence on the program to provide vital services is
especially great in the Nation's cities where General Revenue
Sharing accounts for over a third of all Federal aid and
where there is often the most financial pressure.

- 4 There is no intention to suggest here that there are
only negative arguments, such as the dependency of
recipients, to justify renewal of the program. I only
make these points to explain our desire for action now.
On the whole, the Administration is satisfied that the
General Revenue Sharing program has been a major success
in accomplishing what it sought to do. We are, of course,
aware that there is criticim of the program for not solving
serious problems of special concern to some. Our view is
that General Revenue Sharing cannot be expected to fill too
many roles. In fact, if it'is excessively weighted down
with various restrictions and incentives to target its impact toward specific problems and groups, the program will
lose its ability to fulfill its basic mission.
Its basic objective is to provide a form of Federal
financial assistance to State and local governments which
can be used flexibly to meet needs which they themselves
identify by means of their own choosing. It is obvious
how extensive restrictions on the uses to which States and
communities put shared funds would .limit the ability of the
program to play this role. There are hundreds of other
categorical and bloc grants which can be used to deal with
specific problems or to help specific groups of people.
General Revenue Sharing is designed as part of an effort to

- 5 provide a more balanced array of Federal aid to States and
communities. The Administration does not feel that GRS
competes with or replaces other aids. Rather, it serves
different and equally important functions.
An example of one of those functions involves Revenue
Sharing's interaction with those categorical grants which,
along with providing assistance, create additional needs
which they do not provide the means for meeting- For instance,
a program might support the development of science courses
in schools without providing the necessary textbooks. Shared
revenues can be used to fili in such gaps in need. Further,
the incentive of available Federal grant money and the
matching requirements often associated with this money, has
at times distorted State and local budgetary decision-making
so that the real priority needs of their citizens are not
being met.
The implementation of the revenue sharing concept of
assistance has meant greatly increased Federal help for our
cities and counties and for many small communities, as well.
Many places with small population in the past have either
not been eligible for, or aware of, Federal programs or have
been unable to cope with the expensive and burdensome application requirements often associated with them. General
Revenue Sharing provides aid free of much of this red tape.

- 6 While categorical aids are clearly a necessary part of a
balanced system of aid, they tend to be an expensive way
to provide aid because of administrative burdens on both
the Federal Government and the recipient.

By the same

token, the Congress and the Federal Executive have rightly
been concerned about the often unnecessary costs and
uncoordinated effects of grants which overlap and duplicate
one another.
A balanced system of Federal intergovernmental aid has
become essential to a vital Federal system of decentralized
government, with its ability to respond to the diversity of
our Nation and to protect our freedoms from the threat of
overly centralized power.

The enactment of General Revenue

Sharing has meant an infusion of funds —

drawn from the

generally more efficient, equitable, and economically
responsible Federal tax system —
closest to the people.

to those governments

These funds have helped enable such

jurisdictions to perform those public tasks demanded by
Americans which they can do best.
I have already mentioned several times the role of
shared revenues in meeting "needs"!

Most of the issues which

have surfaced during the Administration's review of this
program relate to the degree to which it fulfills various
views of what the priority needs of today's America are.

- 7 -

Basically, the response of GRS to serious needs can be
evaluated in terms of three considerations (1) Federal as
opposed to State and local needs, (2) the uses to which the
funds are put, and (3) the pattern in which the funds are
distributed among States and communities.
The point is sometimes made that in light of the huge
current Federal deficits there are no Federal revenues to
be shared. The Administration is, of course, fully aware
of and concerned about the state of the national budget.
We, however, do not view General Revenue Sharing as a nonessential program, justifiable only when there are Federal
budgetary surpluses. In fact, the Administration definitely
considers it a critical use of funds since a strong Federal
system is clearly a national priority of the first order.
Further, when elected State and local officials, who are
close to public problems, allocate resources to solve these
problems, we feel that there is normally a good return on
the money spent.
State and local governments on the whole are currently,
and will in the foreseeable future continue to be, faced
with deficits. Many surpluses in State and local accounts
which we heard so much about a couple of years ago were of
a very temporary nature and have since disappeared. These
governments have felt the negative impacts of inflation and

- 8 higher energy costs on their expenditures.

Further, the

budgets of State governments have suffered from the effects
of several longer-run developments in State-local finances.
Were the revenue sharing program to be terminated or reduced,
they would be forced to cut vital services, raise taxes to
provide these services or both.

Greater deficits, more

borrowing, unemployment in the public and private sectors
would also likely result.

It is clear that these unhappy

events would not contribute to national economic recovery,
since State and local expenditures usually supply a major
stimulus for the economy.

To withdraw GRS would exacerbate

the stagnation in these expenditures which has already
taken place.
A second way in which one can reasonably assess the
degree to which revenue sharing funds are meeting important
needs is to look at the problem areas and population groups
on which they are being spent.
State governments have reported to the Office of
Revenue Sharing that during FY 1974, 82% of shared revenues
allocated to them had been utilized for operations and
maintenance purposes, while 18% had been expended for
capital purposes. Local recipients classified 52% of their
expenditures of revenue sharing funds as meeting operation
or maintenance needs and 48% going for capital commitments.

- 9As a group, States reported spending over half (52%)
of GRS funds in educational uses in the form of assistance
for primary and secondary education at the local level.
Otherwise, States reported allocation of their GRS monies
fairly evenly for public transportation services (8%),
health (7%) , multi-purpose general government (7%), and
social services for poor and aged (6%).
Local governments stated in their use reports to the
Office of Revenue Sharing that the largest portion of their
entitlements (36%) were for public safety services. Public
transportation service (19%)' , general government capital
expenditures (11%), environmental protection services,
health (7%), and recreation (7%) accounted for most of the
remainder of the funds covered by the Entitlement Period 4
(FY 1974) use reports.
We are all aware of how difficult a task it is to
really identify the functional uses to which revenue sharing
money is put due to the fact that it usually mingles with
the other resources of the jurisdiction. The Administration
has considerable confidence in the .ability of elected State
and local officials to target money onto the real problems
which they must face on a day-to-day basis. We are hesitant
to slow achievement of this basic GRS role through the
application of restrictive guidelines. As I suggested earlier

- 10 there are other programs to meet specific nationallyidentified goals.
The Administration believes that revenue sharing is
being successfuly used by the great majority of State and
local governments to meet needs of concern to all Americans.
The General Accounting Office reports, findings by the
Brookings Institution and Office of Revenue Sharing actual
use reports all show a considerable amount of shared revenue
being devoted to new spending.

The program was intended to

allow, along with other things, hard-pressed jurisdictions
to maintain essential existing services, to reduce taxes,
or to prevent tax increases.

It has worked to do so.

The

Brookings study suggests that GRS funds are most likely to
be used to substitute for other funds where fiscal pressure
is greatest —

at the local as opposed to the State level,

among urban as opposed to rural States; and among older,
larger, more densely populated jurisdictions, as opposed to
those with contrasting characteristics.

This illustrates

that many States and communities are using GRS to maintain
vital services which they might not otherwise be able to
do.
We believe that revenue sharing has had a significant
benefit for the poor and minorities, and has contributed in
an.important way to meeting social goals in general.

Those

funds reported to the Office of Revenue Sharing as spent on

poor and

the aged

are not an accurate reflection of the

total social impact of the program. For example, States
report using over one-half of their shared funds for
education — an expenditure which certainly must be considered of great social importance for all Americans.
Funds reported as spent on health, transportation, public
safety, environment, recreation, are often of assistance
to the underprivileged. For instance, there are cases of
GRS money being used under the public transportation
category to subsidize transportation for the elderly or
expenditures identified as for public safety being devoted
to drug abuse programs.
Capital expenditures for hospitals, schools, low-cost
housing or for equipment also are often of great benefit
to those who are especially needy. Construction projects
may be badly needed by citizens of States and communities,
since they are often the first items set aside in times of
fiscal crisis, and may be also delayed by legal debt limits
placed on local governments.
To the degree that there is any hesitance on the part
of revenue sharing recipients to spend funds derived from
the program on social purpose, this results from a number
of circumstances, some of which are: the legal placement
of such responsibility at other levels of government;
restriction against the use of shared funds for direct

- 12 welfare payments to individuals by the terms of the State
and Local Fiscal Assistance Act itself; confusion about
the meaning of the Act's restriction against matching of
Federal funds; and uncertainty about the continuation of
the program, which steers recipients away from recurring
social expenditures. Renewal of the program, along with
continuing experience with it should lessen the frequency
of the latter two concerns. Finally, it is important to
note that regardless of any present hesitance to direct
GRS monies into programs to aid the poor and minorities,
there is little doubt that the presence of these funds
releases other recipient funds for these uses.
It is true that revenue sharing entitlements have been
widely used for tax reduction and stabilization, debt
avoidance, and for public safety needs. If the Brookings
finding are generally applicable, it does not seem that GRS,
as once feared, has been widely used for increases in
employee pay benefits thus far. it would also seem difficult
to argue that public safety expenditures made from revenue
sharing entitlements are not usually justifiable and of
benefit to all citizens in most places.
State and local jurisdictions are justified in using
GRS to reduce excessively high taxes, which are often
highly regressive and harmful to the economic life of the
community and Nation as a whole. They can, for instance,

- 13 -

cities, thereby seriously eroding the tax base of the
jurisdiction and placing an even greater burden of taxation
on the remaining poorer population. Thus, in many cases,
tax reduction can be tax reform.
Another important way in which General Revenue Sharing
responds to serious needs is the manner in which it distributes funds among our States and communities. The existing
formulas, designed in the Congress as a product of
competing philosophical, geographic, and jurisdictional
interests, are essentially equitable and appear to work
reasonably well. The Brookings Institution, the Advisory
Commission on Intergovernmental Relations, and the General
Accounting Office found that generally greater pex capita
entitlements go to poorer, as compared to richer, States.
For instance, Brookings calculated that for 1972, Mississippi
received $39.90 per capita as compared to $28.05 for
California. Our hard-pressed center cities, according
to ACIR and Brookings, also fare better on a per capita
basis than their wealthier suburbs and other surrounding
areas. Brookings also reports that the current formulas
further take into account the high costs of government
in urban areas by directing higher than average (as
compared to other county areas) per capita amounts of
shared revenues into the most densely populated county
areas and into the county areas with over one million

- 14 population.

Similarly incorporated areas receive much more

per capita than unincorporated areas, and county areas containing the largest city in each State receive higher than
the average per capita entitlements for local governments
in their State outside of these principal counties. In
fact, during 1972 counties falling within standard metropolitan statistical areas received over 7 0% of local shared
revenue. The needs of black Americans are addressed by the
formulas' allocation to county areas with the largest nonwhite population of much higher than average per capita
entitlements.
The Administration feels that these descriptions about
the distribution of funds among States and localities
supports a conclusion that the basic allocation formulas
are performing reasonably well ir responding to need. This
is especially true in light of the difficulty of designing
a nationwide formula which meets the varying governmental and
fiscal situations across the country, as well as the demands
of conflicting interests.
Before concluding my testimony, Mr. Chairman, I would
like to comment on the impact which General Revenue Sharing
is having on the political process in States, cities, counties,
and towns. The first Brookings Institution report found
some increase in citizen involvement among a sizable fraction
of the jurisdictions included in its sample. A similarly
./-»-.ui^

J_.-_

nore public participation in the making of revenue sharingrelated decisions than on other local issues.
It must be admitted that such data provides a less than
:omplete or convincing picture of the impact of revenue
sharing on the process of government. However, in a broader
sense the State and Local Fiscal Assistance Act of 1972 has
helped to revitalize democratic government in the States
and communities. The hands of elected officials who are
responsible to the voters and who are concerned with a
variety of issues have been strengthened in comparison to
appointive, single program oriented* often distant Federal,
State, and local administrators. After all, it is these
sleeted executives who have the most to say about use of
shared funds. Increased public concern about the knowledge
of the way decisions are made locally has often resulted
from the responsibility of allocating shared revenues among
various uses. National interest groups, newly concerned
about State and local affairs due to GRS, have helped
generate some of this State and local activity, as have the
public discussions surrounding publication of various studies
Df revenue sharing, the original enactment of the bill, and
its upcoming renewal. The Administration is hopeful that
bhe extent and effectiveness of citizens involvement will

- 16 increase with time as citizens and the groups who represent
them better learn how, when and where to make their weight
felt.
In conclusion, Mr. Chairman and members of the Subcommittee, President Ford and the Administration are generally
satisfied with the way in which the General Revenue Sharing
program has met its original objectives. It has provided
flexible aid within a balanced system of Federal intergovernmental assistance, provided States and localities the means
to meet the vital needs of their citizens, strengthened the
political process at the governmental levels closest to the
people and helped to revitalize our Federal form of
government. There is, of course, room for improvement in
any program as well as a need to continue to review its
effectiveness. The President's proposal to renew General
Revenue Sharing soon to be presented to the Congress will
address both of these concerns.

0O0

DepartmentoftheTREASURY
OFFICE OF REVENUE SHARING

TELEPHONE 634-5248

WASHINGTON, D.C. 20226

u
Statement of
GRAHAM W. WATT
Director, Office of Revenue Sharing
U.S. Treasury Department
before the
Subcommittee on General Revenue Sharing
of the
Senate Finance Committee
April 16, 1975

Mr.

Chairman and members of the Committee:

It is a pleasure for me to report to this Committee,
and through you to the American people, on how General Revenue
Sharing is meeting the goals and objectives that were set for
it in 1972.
Although our program has been in existence less than three

years, General Revenue Sharing already has provided substantial
fiscal assistance to nearly 39,000 states and localities in the
United States. Indirectly, but no less importantly, it has
provided important services and public facilities which are
of benefit to all American citizens.

-2With suggestions from members of Congress and assistance
from the Administration, the Treasury Department has administered
General Revenue Sharing with fidelity to the intent of Congress,
with dedication to achieving the purposes of the Act, and with
understanding of the diverse needs and capabilities of the nearly
39,000 governments that receive the funds. Table I is a summary
of the numbers and types of recipient governments.
Federal Fiscal Assistance
When the State and Local Fiscal Assistance Act of 1972
(P.L. 92-512) established General Revenue Sharing, the staff
of the Joint Committee on Internal Revenue Taxation reported
that the Act "...intended to help assure the financial soundness of our State and local governments which is essential to
our Federal system." (See General Explanation of the State
and Local Fiscal Assistance Act and the Federal-State Tax
Collection Act of 1972, February 12, 1973.) The Joint Committee
report went on to say that "...the presence of large deficits
in the Federal budget should (not) in itself preclude Federal
aid to State and local governments in view of the vital need
for such aid. To preclude such aid would imply that State and
local fiscal assistance has a lower priority than all other present expenditures, a position the Congress does not accept."
Accordingly, at a time when Americans were staggering under
the mounting burden of regressive state and local property sales,
and other taxes, it was thought by Congress and the Administration
that the more progressiva c0jorni .
P ogressive Federal tax system should be used as
a source of relief.

TABLE 1
OFFICE

OP REVENUE

SHAR|N«

NUMBER OF GENERAL REVENUE SHARING RECIPIENTS

*T*

STATE NAME

ALABAMA

ALASKA

AHIIONA

ARKANSAS

CALIFORNIA

COLORADO

CONNECTICUT

DELAWARE

DIST Of COLUMBIA

COUNTIES

MUNICIPALITIES

399

487
92

*S8

411

523

247

312

149

183
58

366
MO

FLORIDA

GEORGIA

158

HAWAII

(69
5

191

102

1.766

1.435

INDIANA

«56

ltOOO

I OVA

942

KANSAS

105

610

KENTUCKY

120

394

295

241

455

ILLINOIS

LOUISIANA

219

534

IDAHO

TOTALS

126

33
»

TOWNSHIPS

INDIAN TRIPES 1
ALASKAN NATIVE
VILLAGES

2.804
1.648

1*150

1.6*3

1.870
515

474

359

516

MAINE

MARYLAND

ISO

174
364

MASSACHUSETTS

312

NICHI6AN

533

1*246

1.868

MINNESOTA

P51

1.786

2.737

«2

?77

MISSISSIPPI

MISSOURI

114

P71

MONTANA

125

NEBRASKA

120

NEVADA

467

222

NEW JERSEY

333

232

NEW MEXICO

NEW YORK

NORTH CAROLINA

100

M 9

930

458

NORTH DAKOTA

147

1*360

OHIO

934

1*320

OKLAHOMA

0HE6ON

PENNSYLVANIA

7T
36
66

"MODE ISLtNO
SOUTH CAROLINA

189

1.084

NEW HAMPSHIRE

P32
1.013

1*548

51
246
56 7

1*5

1.613

560

1.766
P.343

«3l

361
1.326

340

61*

273

2i6?9
*0
303

»56

SOUTH OAKOTA"

101

UNNESSEE

121

957

1.335

1.250

2S1

*lb
TEXAS

25*

993

216

VERMONT

VIRS1NIA

228

WASHINGTON

?66 '

« S T VIH6INIA

227

UTAH

307

237
2

327

331

1.268

l.«?«.

112

?83

"ISCONSlN

NAIIflyu

*QTALS

J 1

. 72

3.039

4.74

18**51

|6**6T

Stating that "...it is essential that the amount of
new aid should be set at a specific figure so that the cost
of the program will be definite and ascertainable beforehand,"
( o£. cit.)

Congress appropriated $30.2 billion to be distri-

buted to all units of general government in the United States
over five years extending from January 1972 through December 1976.
The money was to be allocated according to formulas set forth
in the State and Local Fiscal Assistance Act of 1972 using data
supplied principally by the U. S. Bureau of the Census.
Since the first checks were mailed, in December 1972, the
Treasury Department's Office of Revenue Sharing has distributed
$18.9 billion.

To allocate and distribute the money, we have

developed a simple procedure that follows the law's requirements
for accurate data, regular quarterly issuance of checks, and
reporting requirements for recipient jurisdictions.
The normal revenue sharing cycle is related to the Federal
fiscal year.

In February of each year, the Office of Revenue

Sharing obtains, principally from the Bureau of the Census, the
updated data that is to be used to calculate each government's
share of the revenue sharing appropriation for the forthcoming
year.

We then review these data elements with each State and

local government and, in cooperation with the Census Bureau,
make any corrections needed to insure the data's accuracy. In
April, we compute the amounts to be paid during the coming year
and we notify each government of its expected amount: at the
same time, we provide them with their Planned Use Report forms
to complete, publish in a local newspaper and return to the Office
of Revenue Sharing.

At the end of June, each government is sent

-4the form on which to report its expenditures and appropriations
of revenue sharing funds during the fiscal year ending June 30th.
After the Planned and Actual Use reports have been received, the
Office of Revenue Sharing makes the first quarterly payment for
the new fiscal year, in the first week of October.
The formula that allocates General Revenue Sharing among
all general governments has been judged satisfactory by most
recipients.
The amount to be distributed for each entitlement period
first is allocated among the states according to the three factor
Senate formula (population, tax effort and income) , and then is
again allocated among the states according to the five factor
House formula (population, urbanized population, per capita income, state income tax collections, and tax effort).
of the two amounts is selected for each state.

The higher

Since the sum is

greater than the entitlement period total appropriation, each
amount is scaled down proportionately.

If the three factor

formula is used for either Alaska or Hawaii,- a cost of living
adjustment is then applied.
After this interstate allocation, one third of each state
area amount is paid to the state government, and the remaining
two-thirds is apportioned among units of local government within
the state.

The amount to be allocated to units of local govern-

ment is divided by the population of the state to establish the
per capita entitlement for all governments within the state.

The local government amount is first allocated to county
areas.

If this calculation allocates to any county area an

amount which, on a per capita basis, exceeds 145% of the statewide local per capita entitlement, the county area amount is
reduced to the 1451 level and the resulting surplus amount is
shared proportionately by all the remaining unconstrained county
areas within the state.

Similarly, if any county area is allocated

less than 20% of the statewide local per capita amount, its
allocation is increased to the 201 level and the resulting
deficit is taken proportionately from all the remaining unconstrained county areas within the state.
Each county area allocation is then divided into four parts:
First, an amount for Indian tribal governments or Alaskan native
villages is determined according to the ratio of tribal or village
population to the total population of the county area.
Then from the remainder, a township allocation is determined
on the basis of the ratio of all township adjusted taxes to the
total of adjusted taxes in the county.
Next, a county government share is determined similarly,
on the basis of county government adjusted taxes.
The remaining amount is for the other units of local government.

The allocations for cities, towns, and townships are

calculated using similar procedures and applying the 145% maximum
and 20% minimum constraints.
This intrastate allocation process is illustrated in the
following Figure I.

-6Although the allocation procedure has been found generally
effective, equity would be improved if the maximum constraint
were raised.

This would permit more money to flow to some larger

urban areas, where needs for services far outstrip the ability
of local governments to meet the resulting costs.
The allocation and payment system outlined in our Act is
objective and predictable.

It replaces with published formulas

and data and multi-year appropriations the personal discretion
and fluctuating funding found in some federal assistance programs.
General Revenue Sharing relies upon locally-established
priorities responsive to individual communities' real needs instead
of on Federal prescriptions developed for universal application.
It encourages orderly state and local planning, for officials know
in advance, how much money they are to receive and when it will
be paid to them.

Its procedures are so easy to understand and

follow that recipient governments do not need to employ additional,
expensive staff to cope with Federally-designed paperwork.
Universal Eligibility
Another objective of General Revenue Sharing is to provide
Federal fiscal assistance to all units of general government in
the United States.
Most other Federal aid programs are targeted at one or
another specific level of government or at independent agencies
having limited areas of functional responsibility.

Each of the

hundreds of categorical aid programs addresses a particular need
that may exist in only a few jurisdictions.

It is difficult for

many states and for local governments to identify sources of

General Revenue Sharing

Intrastate Allocation Process

State Area
Pot

State
Government
Allocation

All Local
Governments

County Area

population of the county area
X its general tax effort factor
X its relative income factor"

2. allocation to the county
area

County Area
BPot

A Pot

1. 1/3 to state governments—2/3 to all other governments.

County Area
CPot

Indian
Government
Allocation
County
• H Government
Allocation

allocation to all local
governments in state

the sum of the above products
for all local governments in
the slate

3. allocation to the individual
Indian government

resident Indian
population in the county area

allocation to the county
area

total county area
population
adjusted taxes of the county
government

4. allocation to the county
government

= adjusted taxes of all units of
local government in the county
allocation to the county
area including the county
area
government
aggregate adjusted taxes of all
townships in the county area
5. allocation to all
townships in the county area = adjusted taxes of all municipalities,

All
Townships

allocation to the county
area

Township
Government A

Township
Government B

Township
Government C

allocation to an individual
township

all townships, and the county
government in the s a m e county area

allocation to all townships
in the county area

All other units
of Local
Governments
Local
Government
A

T
Local
Government
B

"* ~"

Local
Government
C

Local
Government
D

population of the township
X its general tax effort
X its relative income factor
the sum of the above product*
for all townships in the
county area

allocation to an Individual
municipality
allocation to all municipalities
In the county area

population of the municipality X
its general tax effort factor X
its relative income factor
the s u m of tho above products for
all municipalities In the county
aron

grants, to prepare and cope with the applications and to comply
with the diversity of Federal regulations and procedures that apply
to all of these programs.

Too often, only the more affluent,

sophisticated, larger states, counties and cities can compete
successfully.
General Revenue Sharing, on the other hand, was conceived with
the idea that since Americans in all communities have needs which
require public service and since relatively few of these communities
can participate in categorical aid programs for reasons I have just
cited, then, some basic assistance should be provided to all.
General Revenue Sharing is the only program that provides
Federally-collected revenues to all units of general government:
large and small, urban and rural, and in all geographical areas.
Nearly 39,000 states, counties, cities, towns, townships, Indian
tribes and Alaskan native villages are the beneficiaries of shared
revenues.

Table 2 summarizes payments through April 7, 1975,

by type of government.

-8The Locus of Decision-Making
When the State and Local Fiscal Assistance Act was enacted,
it was understood that decisions about how shared revenues should
be used were to be made by the recipient governments and not by
the Treasury Department.

Subject only to the specific restric-

tions that protect the rights of all persons and with the exception
of operating and maintenance expenditures in a few areas of local
government activity, the money distributed through General
Revenue Sharing is to be spent as the responsible officials of
recipient governments see the needs for which to spend it.
Priorities for uses of the money are set locally; and the
citizens of each community will hold their own officials accountable for the decisions made.
It is axiomatic to say that a democratic system cannot
survive for long when citizens do not control those who manage
the public's business.

Since public business is largely influenced

by the purposes for which funds are available, voters tend to
become disenfranchised when the locus of financial decisionmaking is removed from their control.
Over the past several decades, as more and more Federal aid
programs were developed to meet more and different needs, power
and authority have been accumulated in Washington at an everincreasing rate.

General Revenue Sharing was intended to help

to reverse this trend.

TABLb z

orrtce or REVENUE SHARINS

AMOUNTS PAID RECIPIENTS
from Jan 1, 1972 thru April 7, 1975
STATE
S

$TATC NAME

AtARANA

COUNTIES

HON1CTPALITIES .

106*595,657

79.811.9*2

62,7*6,495

AHIIONA

SO.361.909

320.121,436

502,614

2*.26»,5*8

69*635*925

5.473*525

188*217.85*

639,280

2.012,444,684

125.967

197*870*036

6<»«510.107

70.833.*35

55*?38.9*«

809*818*7*3

531*332*619

COLORADO

6S.92b.982

•6.565.115

85,?51,97?

CONNECTICUT

79«662.S3S

DELAWARE

21.S13.093

OIST OF COLUMBIA

ft*.3*6*400

195,582,486

85.046.335
,

1***10.TS7

670.65*.0*2

ARKANSAS
CALIFOBMA

TOTALS
t

133*713.837

8*151,177

ALASKA

TOWNSHIPS
S

INDUN TRIBES I
-» ALASKAN NATIVE
VILLAGES

20*7*6.117

1*.32B.S55

74,404,145

239.113,015
56.567,765
8**3*6*800

riORiOA

182*9*0,956

162.485,967

204.P66.115

6E0RGIA

67.526

5*9,562.56*

131.235.067

151.975.678

110.V6.599

HAWAII

27*769.366

13.785.221

41.753.506

IDAHO1

25**09.18*

29.286.689

21.750.024

ILLINOIS

321<«90,*73

1*5.128**16

37S.ft71.021

84,200,590

925,890,500

INOUNA

]33«*29.?7*

91.027.087

1*«,?6B,*0?

31,538,816

400*263*579

IOWA

88,919,*82

103*446.06*

74*369,178

KANSAS

60,5*3,7*3

61.612.16?

52*727.466

KINTUCKY

liy.366.ft7R

87.677.671

lftl.33?«B?*

LOUISIANA

1*6.682.050

117.231.8*3

169.r81.739

38*310.773

5.08?.94?

31.f31.??8

MARYLAND

12*,631«23»

1*5*159.5*6

10*.15*.181

22.853.11?

223.*28.876

1S1.235.999

MAINf

393.537*3**
83.308,093
281.613

39.024
6,677,819

24.620

76,227,510

286*773*7*8
181*585,810
308,376,573

19,977
1*7,619

39,760.365

•33,015,609
ll*.93?,9?7
373,9**.957

MASSACHUSETTS

198»*83.33fi

.MICHIGAN

266.437.86S

15S.*59.9?7

32O.T65.203

•8.A91.318

87,832

461,162*1*5

NINNFSOTA

1?*«*50.206

132,688.2*9

100.636.?U

15,347,576

722,*32

37«*l*4,*6r4

MISSISSIPPI

107*730.187

129,71?.527

72.631.500

^139,963

310,21*, I'T7

MISSOURI

117*788*18?

77.955.69*

lS2.ft2*.3*T

MONTANA

2**795.577

32.917,719

1*.067.791

NEBRASKA

45*2*2.176

4**9*?«3*2

42.449.611

NEVADA

13.808.081

17,260,681

10*133*099

NEK HAMPSHIRE

20.06b.455

5*2*1,933

19.ft23.S27

15.994*890

60.325,805

197,30*.585

139,5*6,268

175.520.213

79,616,8*8

591,987,914

NEK JERSEY
NEW MEXICO

135,711.559

21*,000

41.415,861

UB,9?*,?56
2*102*932,94?

351.2*2

*R*,201.4S0

16.P06.213

6,565,389

1.030.470

159.056.8*9

293.MS.356

•8,927,5*9

70.365.9*9

51.98*.173

87,46*,599

1,258,880

77,1*7,921

203.64?

1A7.076.863

369**8*,186

10*.552,5*7

400

990,797,5*4

40*?9**723

16,3*6,3*1

952.037,060

NORTH CAROLINA

161.1*5,301

173.513.583

1*9*191*32*

25.086**36

25.78*.1?7

250.822.997

OREGON

74.380.4fll

1*8,852

376.761

40**12.093

300.*26.090

OKLAHOMA

2.888.578

1,799,39*

5.262,231

32*313*628

7A1.017.9R?

OHIO

353,1*3.67*

5.375.451

1*8.175,0*9

•0.936.30*

NEW YORK

NORTH DAKOTA

596,001,325

75,27?,635
75?.*?*,751
2ll.073.SAl

62.368.*??

*7.356.878

PENNSYLVANIA

330*060*56?

186.699.8*9

«HOO» ISLAND

28.3?*,916

SOUTH CAROLINA

88.30h.116

90.005.513

80.«05.0?2

SOUTH DAKOTA

27*9*0.838

32.593.7*7

17,??0.150

TENNESSEE

U8.63..7S3

103*267,9?3

136,4*5,761

TtXAS

29R.2?9,9?6

220.569,873

374*361,656

6 1.583

"93.223.03A

37. Hi".350

36.921.263

36*672.985

572,73*

111*279,33?

17.661.991

43*.410

1?.1»6.5?7

UTAH
VERMONT

12*.558,263

92.153.679

15T.*19.TfcO

«ASMJN6T0N

90.HT3.1H2

81.461.633

99.^35.101

•EST VIRGINIA

8|.12<?«395

•8.335.893

56*006.36?

158,038.83*

156,134,78*

13*<7<.J.49*

VIRGINIA

WISCONSIN
WYOH.NG
*«*»10NAL TOTAIS

6 •*10.9i7.3SA

*.806.616,IS*

258,316,651
1.920.825

*.024,127

9,167,503

83,799,687
358.3*A,43T

*;3.0*7.9f.S

22,765,017
5.6*9

3T4,\3».3S1

3,401

773.299

272,6*0,616

25.19^.870

483.197

474,606. I'M

lfl5.466.6bft

6.M1.61*

16.985.238

1 1*669,6*5

A*.965,980

Vi>.487,6«5

?«.A.7<;7

J4.9?S,?4S

?2,*3},908

< 1A,»1T1 ,92?»6ft«

Our program is succeeding in its objective of attracting
public interest and involvement back into the mainstream of
local government decision-making.

In the past two years, members

of my staff have participated in conferences and workshops in
nearly every state -- meetings that have been organized by public
and private interest groups anxious to inform their communities
about this new program and its new approach to local decisionmaking.

In many communities, specially appointed advisory boards

and committees are soliciting citizens' views on priorities for
uses of revenue sharing dollars.

Where citizen participation is

encouraged vis-a-vis General Revenue Sharing, it also affects
other aspects of state and local business.
Citizen Participation
Revenue Sharing law requires that the two reports which
recipients must file with the Office of Revenue Sharing each year
be published locally in newspapers of general circulation.

adopting this provision, Congress provided citizens with basic
information about their state and local governments' plans for
and actual uses of shared revenues.

Since plans may be changed

before the funds are committed, citizens have the opportunity to
express their opinions before the money is spent.
The Act also requires that shared revenues be spent in
accordance with the laws and procedures that apply to the
expenditure of each state and local government's own funds.

-10Accordingly, if state or local law requires public hearings
or other forms of public involvement in appropriating public
funds, then the same procedures are required when General Revenue
Sharing dollars are used.

This provision of the law assures at

least the same degree of public participation in priority-setting
for uses of shared revenues as is the case for recipients' ownsource revenues.
The publication requirement and the requirement that funds
be spent by recipients in accordance with existing laws and
procedures, when taken together, have helped to bring the revenue
sharing program to the attention of the general public.
More needs to be done.
Whenever possible, we in the Office of Revenue Sharing
have encouraged officials to involve their constituents in their
decision-making regarding shared revenues, using procedures which
are appropriate to the individual jurisdictions.

We seek to

encourage news reporters and columnists to take more interest in
state and local budgeting and to report the impact our program
has had on uses of public funds at all levels of government.
We concur in the broadly-felt need to stimulate more effective
public interest in government.
Uses of Funds
The Act permits State governments to spend their shared
revenues for any purpose that is a legally permissable use of
the State's own funds.

Local governments may spend their money

for any capital purpose (capital, as defined by local law) or

for current expenses in any one or more of eight priority
categories: public safety, environmental protection, public
transportation, health, recreation, libraries, social services
for the poor or aged, and financial administration.
Recipient governments are required to report to the Office
of Revenue Sharing for each entitlement period on their plans
for use of the money they expect to receive, and at the end of
each fiscal year on their actual expenditures of shared revenues.
The reports made to the Office of Revenue Sharing are
intentionally concise and simple, in keeping with the desire
of Congress that our program not be a generator of additional
red tape, confusion and expensive paperwork for any level of
government. We require that use information be reported in the
same functional categories that Congress established as priorities
when the State and Local Fiscal Assistance Act was passed in 1972.
Any analysis of the ultimate impact of general revenue
sharing on services at the State and local levels of American
government is beyond the scope of our mission. It should be
noted, however, that intensive efforts to measure the impacts
of revenue sharing dollars on recipients' budgets are underway
by a number of research organizations. The National Science
Foundation, the Brookings Institution and others have undertaken
research that will provide useful information about the ultimate
impact of General Revenue Sharing funds on the provision of
services by States and local governments.

-12Our reports to the Congress indicate those categories of
activity in which shared revenues have been spent initially.
We cannot measure whether or to what extent funds within State
and local budgets have been freed up to be used elsewhere.

The

substitution effect is difficult and costly to assess and is the
objective of research by others.
An analysis of the reported uses of General Revenue Sharing
during 1973-74 indicates that more money was spent to support
public safety services than for any other function.

These expendi-

tures, mainly by local governments, account for 23$ of every
General Revenue Sharing dollar spent.

The second highest use of

General Revenue Sharing funds by all State and local governments
was to fund educational services and facilities.

This use

represented 21$ of every General Revenue Sharing dollar, and dominated State government spending.

The third highest expenditure

of General Revenue Sharing funds was to provide a variety of
public transportation services at both the State and local levels.
These services accounted for 15$ of the average General Revenue
Sharing dollar spent in F.Y. 1974.
These three uses of General Revenue Sharing funds -- public
safety, education, and public transportation -- accounted for
almost 60% of all revenue sharing expenditures during 1973-74.
It is relevant to note that a public opinion survey sponsored
by the Advisory Commission on Intergovernmental Relations last
year found that respondent citizens' top priorities for uses
of revenue sharing dollars were education, public safety and
public transportation.

-13-

Other uses of shared revenues by States and local governments,
in order of magnitude of total amounts spent, have been: multipurpose and general government, health services, environmental
protection, recreation and cultural programs, social services
for the poor or aged, financial administration, libraries,
housing and community development, and corrections, economic
development and social development. By combining State and local
government reported expenditures during the period July 1, 1973June 30, 1974, we can obtain an overview of how the average General
Revenue Sharing dollar was spent by these governments. Table 3
summarizes these reported uses of funds.

TABLE 3
REPORTED USE OF GENERAL REVENUE SHARING FUNDS
BY STATES AND ALL LOCAL GOVERNMENTS
1973-1974
Public Safety
23$
Education
21$
15$
Public Transport.
Multi-purpose § Gen.
10$
Government
7$
Health
Environmental
7$
Protection
5$
Recreation
Social Services for 4$
Poor or Aged

Other Uses
Financial Admin.
Libraries
Housing/Community
Development
Corrections
Less than
Economic
Devel. Less than
Social
Devel. Less than

4$
2$
1$
1$
1$
1$
1$

-14Although these statutory categories are useful to summarize
expenditures of General Revenue Sharing funds, they are inadequate
to describe the broad range of services encompassed.

For

example, expenditures for environmental protection, such as
improved sanitary waste disposal facilities may represent a major
community health benefit.

Some governments may report an expendi-

ture for mini-bus services as a social service for the aged or
poor, others may report it as a public transportation expenditure,
and in a third jurisdiction it may be categorized as a health
program.

In reality, most local and State government services

ultimately contribute to a better quality of life for all citizens
and thus could be considered as social services.
Surveys and inquiries made strongly suggest that the original
limitation to five years as authorization for this program constitutes a substantial inhibition on local decisions about the use
of the funds.

Many officials have limited their expenditures

to capital purposes so as to avoid a future dependence upon funds
which conceivably could be terminated after 1976.
This factor has undoubtedly skewed expenditure patterns in
a way not anticipated by the Congress when it authorized the
program for a limited life ending in 1976.
Compliance
Revenue sharing law prohibits the use of shared revenues
in any activity in which there is discrimination based on race,
color, national origin or sex; if shared revenues are used to pay
25 percent or more of the cost of a capital construction project,

-15-

I So
Davis-Bacon Act wage requirements must be met; General Revenue
Sharing funds may not be used as local match to secure Federal
grant money; for local governments, funds may be used for ordinary
and necessary capital expenditures authorized by law or for operating and maintenance expenditures for public safety, enviromental
protection, public transportation, health, recreation, libraries,
social services for the poor or aged, and financial administration.
To assure that the funds are used in compliance with these
civil rights and other requirements of revenue sharing law, an
innovative audit and compliance program has been developed which
utilizes existing resources wherever possible.

The Office of

Revenue Sharing Compliance program includes these basic elements:
1.

Cooperative State Audit Program:

State audit

agencies willing to do so will perform regular
audits of the local governments within their
States and of State agencies for revenue sharing
purposes, using audit standards published by the
Office of Revenue Sharing.

All but eight states

are now participants in this effort.

We expect

to achieve total coverage this year.
2. Cooperative Private Audit Program: Many accounting firms have agreed to include revenue sharing
audits as part of their regular contractual audits
of States and local governments.

The quality of

these and State-directed audits will be assured by
periodic Office of Revenue Sharing review.

-163.

Staff Audits: performed by Office of Revenue
Sharing staff and by other federal auditors to
adequately cover those governments not subject
to audit under a cooperative program and to assure
quality control.

4. Cooperation with other Federal agencies: includes
exchange of information and jointly-conducted
investigations and problem-resolution.

In October

1974, the Office of Revenue Sharing and the Equal
Employment Opportunity Commission concluded an
agreement providing for cooperation to assure
nondiscrimination in public employment where
revenue sharing funds are involved.

Our

agreement with the EEOC affords access to.
confidential employment data reported to
EEOC by public employers.

This information

is used in our investigations and analyses
of reports of discrimination in the use of
shared revenues.
5

* Complaint Investigation: In addition to our own
efforts to seek out evidence of noncompliance,
the Office of Revenue Sharing staff continues to
investigate reports and complaints of noncompliance
with the civil rights and other provisions of our
law, whenever these are brought to us by others.

E/
Our procedure by which citizens may file complaints is
intentionally simple, in order to encourage any person who
believes that the law is not being observed to initiate a
proper investigation.

Any person may file a complaint by

writing us a letter or card indicating the location and nature
of the problem.

The complainant is not required to identify

himself, although most are willing to do so.

Names of complain-

ants are kept confidential to protect against possible local
retribution.
Since the revenue sharing program began, we have been
generally successful in our effort to investigate all complaints
promptly as they are reported.
Where evidence of noncompliance with the provisions of
the Act is found by the Office of Revenue Sharing, or bought
to our attention through audit or by report, the Office of
Revenue Sharing determines the facts, advises the affected
government of its findings, and seeks prompt, voluntary action
to correct.

In cases involving local governments, the Governor

of the state is advised and his assistance to achieve corrective
action is sought.

When these efforts are unavailing, the

Office of Revenue Sharing proceeds with the administrative
remedies provided in the State and Local Fiscal Assistance Act
and regulations or we refer the case to the U.S. Department of
Justice for appropriate action, depending on the circumstances
of each case.

-18Where we find evidence of fraud, the attorney general of
the appropriate state is requested to take necessary action.
Should he fail or decline to act, the matter is then referred
to the U.S. Justice Department for action.
As General Revenue Sharing has become better known and
citizen interest increases, we have received more reports of
noncompliance with revenue sharing law. Although we have a
good record of prompt response to these, our very small audit
and compliance staff must be expanded. We have asked the
Congress to allow us for Fiscal Year 1976 the 21 added audit
and compliance positions that were denied in Fiscal Year 1975.
Thus far, the Office of Revenue Sharing has handled 412
cases of which 172 have been resolved. A summary of our current
compliance workload:
TABLE 4
COMPLIANCE CASES HANDLED BY
THE OFFICE OF REVENUE SHARING*
TO APRIL 4, 1975
Resolved

Active

Special
Status

Total

Civil Rights/Discrimin.

136

Financial/Accounting

Legal/Compliance with
Applicable Provisions

Miscellaneous (publication,
n,
matching funds, etc.)
51

108

223

412

Nature of Case

Totals

172

These figures do not include Davis-Bacon cases. Department
of Labor regional offices make compliance status determinations with respect to minimum wages required to be paid.

/3a
Other allegations of misuse of revenue sharing funds
brought to our attention have been investigated and found to
lack jurisdiction or merit.
Enforcement of Civil Rights and Other Provisions
of Revenue Sharing Law
When a compliance problem cannot be resolved through
negotiation or mediation, the law provides that the Secretary
of the Treasury may "...refer the matter to the Attorney General
with a recommendation that an appropriate civil action be instituted; ...exercise the powers and functions provided by Title VI
of the Civil Rights Act of 1964 (42 U.S.C. 2000d); or ...take
such other action as may be provided by law."
Thus far, the Treasury Department has initiated formal
legal action against two recipient governments: the City of
Chicago and the State of Michigan.

Both causes involve discri-

mination in the use of General Revenue Sharing funds.

As to

the City of Chicago case, funds have been deferred pursuant to
Court order.
The City of Chicago did not receive revenue sharing checks
for the second and third quarters of the 5th Entitlement Period
(January and April 19 75 payments).
totals $38.4 million.

The amount withheld to date

The United States District Court in the

District of Columbia has ordered that the funds be withheld,
based on a finding that hiring and promotion practices in the
Chicago Police Department are discriminatory.

General Revenue

Sharing funds have been used to pay operating expenses of Chicago's
Police Department.

The case of U.S. et al vs. City of Chicago

-20et al went to trial in the U. S. District Court for the Northern
District of Illinois on March 10, 1975 and is continuing at this
time.
On February 19, 1975, the Office of Revenue Sharing requested
the Department of Justice to initiate a civil action against the
State of Michigan.

Michigan has applied General Revenue Sharing

funds to help fund the State Public School Employees' Retirement
System.

The Retirement System provides benefits to retired public

school employees from Michigan school districts, including the
segregated Ferndale, Michigan district.
segregated in 1972.

(Ferndale was ruled

Appeal of the ruling was denied by the

U. S. Supreme Court.)
The Justice Department is engaged in direct proceedings
with the Ferndale School District to bring it into compliance
with other Federal anti-discrimination laws.

Accordingly, the

Office of Revenue Sharing's action permits the Federal government
to take a unified approach to resolving the problem.
Administration
The Treasury Department's administration of General
Revenue Sharing is performed by a small and dedicated staff,
all located in Washington, D. C.

For Fiscal Year 1975, the

Office of Revenue Sharing has been authorized a total of 85
positions.

Our request for next year, including additions

to our audit and compliance staff, would provide a total personnel complement of 116 positions.

GENERAL REVENUE SHARING ORGANIZATION
with presently-authorized positions in parentheses

Secretary of
the Treasury

Deputy Secretary

1
Under Secretary

General
Counsel

Director,
Office of Revenue Sharing

(2)
Admin.
-

(5)
Prog. Planning
& Coordination

Chief
Counsel

(2)
Public
Affairs

(2)
Deputy Director

(3)
Data&
Demography
Division

(9)

Compliance
Division

(30)

Systems
& Operations
Division

Intergovernmental
Re ations Division

(20)

(12)

-21-

The Fiscal Year 1975 appropriation to operate the Office
is $2,133,000.

Administration of the program including data

services by the Census Bureau and the Internal Revenue Service
currently costs approximately 12/100ths of one percent of
the funds being distributed.
Summary
The legislative history of the State and Local Fiscal
Assistance Act of 1972 shows clearly that the Congress intended
to establish a new form of Federal financial assistance to State
and local governments.

The Congress carefully distinguished

General Revenue Sharing from all "grant" programs.
With General Revenue Sharing, States and local governments
receive funds to which they are by law entitled - - a n important
distinction from grants for which governments may apply.
Payment amounts are determined not by administrative
discretion but by objective formulas which divide a national
appropriation among the States and local governments according
to published data which measures their relative population,
tax effort, per capita income and similar factors.
General Revenue Sharing is bringing about better and more
responsive government at all levels.

As a program, it responds

to the unique needs of states and local governments.

As a new

system, it offers opportunity to serve the American public with
dependability, yet flexibility, in such a way as to recognize
and encourage the combination of national unity and local diversity that has made ours the strongest of nations for nearly two
hundred years.

The Bond Between Us

My husband once said that 10 minutes was enough
for anyone to tell what he or she knows; after that, you
tell what you don't know. ,
I agree, so I'll take only 10 minutes of your
time to tell you what I know about United States Savings
Bonds and why I'm sold on them — and why I hope you are
too.
I am so sold on the program that I accepted
my second appointment, as National Director of the
Savings Bonds Division, even though it came without a
penny of salary. And I remain so convinced of its value
that I have traveled over 78,000 miles, to 26 states
during the past nine months, to talk about bonds.
These miles of travel stretch from the beaches
of Hawaii to the blizzards of Minnesota to progressive
Peoria. In this time, I have met hundreds of wonderful
volunteers. And I have had the chance to see again that
the real wealth of America is not the money made by our
Department of the Treasury, but our living American land,
our people, and the

Remarks by the Honorable Francine I. Neff, TSIA, Peoria,
Illinois on April 17, 1975.

j *> <
extra-ordinary ideas and attitudes that shaped our
laws and institutions and propelled us so far in our
200 years as a Nation..
In these travels outside of Washington, D.C,
I realize again that America is much more than rising
unemployment and sinking Dow-Jones averages.

It is

212 million people working, making homes, going to
school., building and holding together a great Nation.
And we are a great Nation. We set world standards in
education, in per-capita income, and in pioneering new
fields.

We are a country where the medium income of

our families has doubled in the past 25 years, even
taking inflation into account; a country where 60 percent
of American families own their own homes; where even
our taxes of all kinds -- compared to our income —
are still the second lowest among the 13 top industrial nations of the world.
United States Savings Bonds are a part of this
going and growing America.

I suspect they do more

to promote the habit of regular saving among Americans
than all of the family lectures on thrift ever given.
The Oklahoma farmer and the Ohio housewife may have
little concept of a Treasury note or a mutual fund
investment, but they do know about Savings Bonds.
And they do save.

In 1974, we had the largest bond

sales since World War Two —

almost $6.9 billion.

\y
Savings Bonds are a trusted part of everyone's life —
of America's life —

and they have been ever since

most of us were earning our first quarter.
Bonds belong in America.

But now and then we

need to look again at this old friend of ours and
rediscover the "what" and "why" of them.
that right now.

Let's do

Let's look at 3 main reasons why we

can urge people to say "yes" to Savings Bonds.
First they are a sound personal investment. They
are secure in a troubled world.

The payroll savings

Banker Tom Prideaux of the National

Bank of Oregon notes that $75 invested in Savings Bonds
monthly since December of 1968 is worth more than $75
invested monthly in stocks making up Moody's Industrial
Index.

That old reliable 6 percent comes through.

f >f\
Savings Bonds also help our government in its
debt management, by providing an efficient way to meet
a sizable percentage of borrowing needs at a relatively
low cost to the nation.
When the Treasury is able to finance through nonmarketable securities, the borrowing is kept out of the
marketplace and thus does^not directly compete with
corporate and state and local borrowers.

It's comforting

The cost

It is hard for most
It is easier to buy bonds

The pinto beans were

sometimes scarce, but never the patriotism.

During

World War Two, the American Legion asked several of
us young girls to sell bonds in front of the Mountainair
Post Office on Saturday mornings. We young girls tried
very hard to see which of us could sell the most bonds,
and my proud father would often round up his cronies and
direct them to my table.
I usually sold the most bonds and I thought at
the time it was my scintilating smile. Years later I
realized that my father was head of the local draft
board and this just might have made a difference.1
After the war ended and I graduated from college
and became a young wife and mother, I cashed in the bonds
my father had bought me so that my husband Ed and I could
buy our first home. This was in the booming postwar
economy years of the 1950's and 60's.
Now today, in my middlessence, I'm selling bonds
again. And, from my Washington office as the United
States Treasurer and National Director, I see more fully
their debt reduction aspect.
Most of us have seen bonds from these 3 viewpoints
of the patriotic, the personal benefits, and the boost
that bonds give to the country's debt management.
From every standpoint, Savings Bonds make sense —
and dollars. They are good for the individual, good
for the country, and good for the future.

\l<f
But.selling bonds by the billions doesn't just
happen.

It takes a small handful of Treasury people

and a very large handful of volunteers.

Easily ninety-

The only reason

we can do this is because we feel our product is so great.
Our national goal in 197 5 is to sell at least 6.8
billion in bonds and to enroll 2.4 million new or increased
savers.

We are starting out very well, with sales of

almost $1.9 billion in bonds for the first 3 months.
That's the greatest bond sales for this period in 30 years.
As Savings Bonds volunteers, you have an excellent
message.

You have a ready market. You have some very

good Savings Bonds people here in Illinois and you will have
the help of a nationwide series of public service ads
featuring our Bicentennial slogan "Take Stock in America -200 years at the same location."
But the Savings Bonds job can never be done in
Washington or New York alone.

It is a grass roots

program, and the results depend on your personal involvement and the involvement of others
the country.

like you across

Let's roll up our sleeves and roll up a

record -- we can do it this year.

197 5 is the beginning of our third century as a
Nation.

It's a super time to join the program.

Let's

make the bicentennial year a "buy bonds" year as well,
by reminding people what we are selling and why we are
selling.

Let's look up from our desks and out the win-

dows at America —

at her green hills and brown prairies

and industrial might —
people —

her ideas and institutions and

and remember why it is that the word "America"

is such a special word everywhere on earth.

And then —

let's get up from those desks and go out and do the
job.
Thank you.

UNITED STATES SAVINGS BONDS ISSUED AND REDEEMED THROUGH

/7/

(Dollar amounts in millions - rounded and will not necessarily odd to totals)
DESCRIPTION

A M O U N T ISSUED-^/

AMOUNT
REDEEMED—/

AMOUNT
OUTSTANDING—/

% OUTSTANDING
OF A M O U N T ISSUED

MATURED
Series A-1935 thru D-1941
Series F and G-1941 thru 1952
Series J and K-1952 thru 1957

5003
29521
3754

4999
29502
3749

4
19
5

1941
8568
13777
16095
12680
5796
5537
5747
5712
5019
4341
4556
5226
5344
5574
5384
5083
4979
4679
4711
4816
4697
5296
5161
5050
5479
5434
5123
4820
5066
5844
6453
6385
6402
366
848
207989

1764
7770
12511
14540
11320
5030
4680
4784
4679
4060
3511
3659
4124
4158
4294
4123
3850
3686
3429
3368
3333
3176
3409
3337
3243
3395
3325
3087
2818
2731
2775
2690
2404
1514
845"
151422

176
798
1266
1556
1360
766
857
964
1033
960
830
898
1102
1186
1280
1261
1233
1293
1249
1343
1483
1521
1887
1825
1805
2084
2109
2036
2003
2335
3069
3762
3981
4888
366
3
56568

9.07
9.31
9.19
9.67
10.73
13.22
15.48
16.77
18.08
19.13
19.12
19.71
21-09
22.19
22.96
23.42
24.26
25.97
26.69
28.51
30.79
32.38
35.63
35.36
35.74
38.04
38.81
39.74
41.56
46-09
52.52
58.30
62.35
76.35
100.00
.35
27.20

.08 .
.06
.13

UNMATURED
Series E - ^ :
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
I960
197fl
1971

1972
1973
1974
1975

Unclassified
Total Series E

5484
10199

4171
3704

1313
6494

23.94
63.67

15683

7875

7807

49.77

Total K P H P S F a p H H

223672

159296

64375

28.78

T<">tal matured
. All Serjps Total unmatured
Hranri f ntal

38278
223672
261950

38250
159296
197546

28
64375
64403

.07
28.78
24.59

SeriPs H (1952 thru M a y 1959) -^
M (Jnn** 1959 thru 1974)
Total Series H

include accrued discount.
3urr«nf redemption value.
*' option ol owner bonds may be held and will earn interest tor additional periods alter original maturity dates.
Form P D 3812 (Rev. Nov. 1974)- Depl. of the Treasury - Bureau of the Public Dehi

Hv
FOR IMMEDIATE RELEASE

CONTACT: Stanley Sommerfield
964-2394
April 18, 1975

CAMBODIA ACCOUNTS BLOCKED
UNDER TREASURY'S FOREIGN ASSETS CONTROL
REGULATIONS
The Treasury Department announced today that under
Foreign Assets Control Regulations it has blocked all financial
and commercial transactions with Cambodia by persons subject to
the jurisdiction of the United States unless first licensed by
the Treasury's Office of Foreign Assets Control.
The Treasury action was approved by the National Security
Council.
The Treasury said it had instructed domestic banks to
block all Cambodian accounts immediately.
The Treasury said the value of Cambodia short term assets
in the United States as of December, 1974, was $4 million.
The value of other assets owned by Cambodians -- real estate,
securities, etc — is not known.
The action placed Cambodian assets under licensing control
along with assets of other blocked countries which include
North Vietnam, North Korea, and Cuba. Foreign subsidiaries of
American firms may not trade with Cambodia without a license,
the Treasury said.
Humanitarian relief sent by Americans to Cambodia requires
a license, regardless of what country it is being shipped from,
the Treasury said.
Policy with respect to this kind of relief has not been
determined, the Treasury announced.
WS-281

oOo

DepartmentoftheJREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE

April 18, 1975

ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
INDO-US CHAMBER OF COMMERCE
BOMBAY, INDIA, FRIDAY, APRIL 18, 1975

A visit to India is a rare experience for most Americans,
and the opportunity to address a distinguished audience of
Indian and American businessmen is rarer still. So as I come
before you tonight, I am deeply grateful to you and to the
Indian Government for the kind invitations that bring me to
this podium.
*-1
1 C

1 3

CL JL.ZHJ

President of the United States. Before I left Washington,
President Ford asked that in my travels here I extend his
warmest personal regards and convey to you his hope that during
his Presidency we may strengthen the bonds of friendship between
our two nations.
This is my first visit to India. During the six days
that I .shall be here — traveling to New Delhi, Agra, Bombay
and Madras--I obviously can see only a small part of your vast
and diverse country. Yet through first hand observation, I
hope it will be possible for me to gain a better knowledge of
the problems you face as a developing country.
My chief purpose in coming here is to find answers to
a single question: How can our countries cooperate more
closely so that each of us can benefit? The United States is
very interested in finding ways that we can help you to help
yourselves, but we are not unaware that in the process we will
also be helping ourselves. The benefits of cooperation can and
WS-280

- 2do run both ways. This approach, I believe, is entirely
fitting for two great nations who respect each other and
also respect themselves. It is our belief that in seeking
mutual gains, both the United States and India have far more
to gain from a pattern of closer friendship and cooperation
than from a relationship characterized by suspicion and
distrust.
Much has been said in the past about the differences
between us--the issues that drive us apart and tend to plant
the seeds of discord. Those items are so familiar that they
bear no recitation tonight.
What I would like to address instead are some areas in
which we share a common interest--the issues which should
pull us together and give us a common bond. Too often that
which united us has been obscured by that which divides. By
recognizing more clearly the issues in which we share a common
interest, we can'find the best means of building a sound constructive relationship.
THE CHALLENGE OF EXPANDING TRADE
A central issue in which India and the United States share
a common interest is in expanding trade between our two nations.
I know this matter is of particular importance here in Bombay,
the traditional gateway to India for foreign .commerce.
From 1971 to 1973, average annual Indian exports to the United
States were about $400 million, or about l"5 percent, of total
Indian exports. During the same period, annual India ^imports
from the United States averaged about $500 million, about 18
percent of India's total imports. Thus, to highlight the obvious,
the United States is the most important trading partner for India,
even.when excluding the substantial shipments of grain that
occurred in the mid 1960s and again in the 1974-75 period.
For the United States, however, India was not a major trading
partner, even when compared with other developing countries. To
provide some perspective, Taiwan, with a population of 15 million
people and a GNP of just over $9 billion (one eighth the size of
India's GNP), in 1973 exported more than $4 billion of which $1.7
billion went to the United States. In the same year Taiwan
imported goods totalling $4 billion, including $950 million from the
United States. Singapore, with
$1.5 billion, exported $613
million of its products to the U.S. and imported $765 million worth
from the U.S. in 1973 thus, total U.S. trade with Taiwan was three
times the amount of our trade with India, while American trade with
Singapore was substantially more than our trade with India.
Surely there is vast room for an increase in the trade
between our two countries which would be mutually beneficial.

if
For India, even a relatively small increase in its share
of the U.S. market would be substantial in absolute terms.
If for example, India's share of U.S. imports increased by as
little as four-tenths of one percent, this would mean an increase in Indian exports of approximately $400 million. This
sum would be more than the total debt relief India received
last year from the Aid-To-India consortium, and it could be
repeated and increased every year.
Given the need, the desirability and the potential for
increasing trade between our countries, we must ask ourselves
how that goal may be achieved. One part of the answer, I
would suggest, is the same answer that I carried to the Soviet
Union, and with all other nations, we should work to lower the
many barriers which now clog our trading lanes.
Let me assure you that the United States will not seek to
restrict your access to our markets. With perhaps the notable
exception of our sugar policy, which for many years granted
preferences to our own hemisphere, we have tried to avoid discrimination against or among developing countries. Indeed in
the Trade Act of 1974, which President Ford signed early this
year, the United States has moved toward preferential treatment
for developing countries by enabling the President to provide
those nations with duty free treatment for their eligible exports. The President has already identified India as a prospective beneficiary. While this trade measure will provide
preferential access to U.S. markets for developing countries,
I should point out that it will not provide an advantage for
any single less developed country in competition with other
less developed countries. In short our trade preferences will
provide an opportunity for all developing countries to expand
their exports to the United States but they will not automatically
guarantee a share to any particular exporting country.
To look at the other side of our trade for a moment, it
is no secret to anyone in this audience that American businessmen trying to sell their products here in India often report
a sense of frustration and discouragement. In seeking ways to
bolster the ties between United States and India, the sources
of those frustrations must inevitably be one of the subjects
that we address.
One of the forums in which we are hopeful that progress
can be made on economic cooperation is the Indo-U.S. Joint
Commission. That Commission was established last October
during Secretary Kissinger's trip to New Delhi. As you know,
one of the three subcommissions set up under that umbrella is
the Economic and Commercial Subcommission which held its first
meeting in Washington in January.

- 4 With the help of the Federation of the Indian Chamber of
Commerce and industry as well as the United States Chamber of
Commerce a Joint Business Council is now being formed in order
to improve ties between the two business communities. The
first meeting of the council is tentatively scheduled for late
this year. Other activities taking place under the leadership
of the Indo-U.S. Joint Commission are the formation of a joint
working group on Agricultural inputs, negotiations on a tax
treaty, and the promotion of trade missions. We are looking
forward to the visit to Washington of an Indian export promotion
council trade mission to explore possibilities of selling Indian
engineering products in American markets. All of these are
positive steps forward.
At the January meeting of the Economic and Commercial
Subcommission, we were advised that the Government of India
considers foreign investment an important mechanism for acquiring
needed industrial technology and for expanding high technology
exports. We agree. Yet both of us must face the fact that over
the years American
firms have not eagerly
sought to invest their funds in India. U.S. investments in
developing countries around the world now total some $25 billion.
Of that amount, U.S. investments in India have a book value of
only $325 million--less than 2 percent of the total.
With the context of the Joint Commission we are eager£to
work with you in finding ways to improve the investment picture.
The United States Government can offer "good offices" for
specific proposals and can help to establish a liaison with
private investors in the United States. I must emphasize,
however, that my Government does not play a major direct role
in the transfer of industrial technology to India.
Technology is the property of private U.S. firms and as
such it must be enticed to come to India through your efforts
to create a favorable climate for investment. Our Government
is prepared to discuss with you our own ideas about the way
that climate could be improved, but the basic decisions on what
should be done remain, of course, in your hands.
To summarize, the United States Government would like to
work with you in a joint, cooperative effort to remove as many
trade impediments as possible. We believe that the expansion
of trade which should result would provide economic benefits
to each of us and at the same time would also help to deepen
and strengthen our friendship.
MEETING THE ENERGY CHALLENGE
A second interest which we share together is to overcome
the challenge posed by quadrupling of international oil prices
in the past year and a half. Last year the United States paid
out $25 billion for foreign oil--more than eight times what we

were paying in 1970. Here in India, the costs of foreign oil
last year were double their level of a year earlier, and you
were forced to place more severe importation limits on a product
that is vitally needed for your industries. While our oil bills
are different in size, it is clear that neither of us can long
tolerate a heavy dependence upon foreign oil that is so highly
priced.
In both of our countries the high cost of oil has also
had a major impact upon the cost of fertilizer. In the United
States the higher cost of fertilizer has driven up farm costs
and, in turn, consumers have been forced to pay a higher price
for food. In India, we recognize that the availability and
cost of fertilizer is virtually a matter of life and death
because the need for increased food production is so vital to
feeding the Indian population. We have actively encouraged
the World Bank to assist the expansion of the Indian fertilizer
industry, and several major loans for that purpose have been
made* during the past year.
The adjustment to higher energy prices has been eased by
borrowing. But we recognize that such borrowing is not a
complete answer. It will help you cope with problems today,
but the problems themselves will still be there tomorrow. In
the United States, we believe that the ultimate solution lies
in a two-pronged effort by consumer nations: an ambitious
program of energy conservation and a major effort to become
more self sufficient in energy.
I might point out that the countries that have been most
successful at conserving energy are those that have allowed
the free market to do its job. Germany, for example, by relying
upon the price mechanism, cut its oil consumption by about
10 percent last year. Meanwhile, the United States, depending
largely on non-price approaches, reduced consumption by only
3 percent. The Administration now has legislation pending in
our Congress which would use the price mechanism as a means of
encouraging further conservation. Of course, no one relishes
the prospect of higher prices for oil or anything else, but
attempts to avoid or suppress the economic realities reflected
in the market place merely postpone the inevitable. Even worse,
such attempts usually make the adjustment process more difficult.
The present oil cartel, like all other cartels in the past,
is
subject to the laws of supply and demand. When demand
falls, the cartel has no choice but to lower its price or to
reduce its production. As worldwide consumption has been reduced
in recent months through conservation and through the effects
of worldwide recession, we are already seeing this process at
Within
years,
work.
15-16
12 million
million
OPEC
a
significant
matter
barrels
has
barrels
now
of months,
discoveries
ashut
day
a day.
in
--OPEC's
a
inFurthermore,
third
of
order
oil
shut-in
of
to
have
its
hold
capacity
been
during
capacity
themade
line
the
may
--in
of
last
over
rise
some
prices.
three
to

- 6 25-30 areas of the world outside of OPEC -- uncovering reserves esti
mated at roughly 35 billion barrels.
These new fields could produce
some 8 million additional barrels a day by the late 1970s, and
this does not include new production coming from the U.S., the
Soviet Union, and the People's Republic of China.
India is one of the countries which has greatly intensified
its oil exploration and has already found considerable additional
resources, although there is still much potential for further
exploration. Your recent progress in locating oil on the Bombay
High is a good example of successful Indian cooperation with
the American private sector in developing your energy potential.
o
As the pressures of conservation and development have built
up, some of the members of the cartel have begun shaving prices,
and we have seen the first cracks in what many erroneously claimed
was an impregnable price wall. I have said many times before,
and I believe even more strongly now that it is no longer a question
of whether oil prices will come down but when they will come down.
Nonetheless, neither we nor other consumer nations such T
as India can afford to sit idly by, waiting for a change in
price. We must all take affirmative action both to conserve and
5C
to develop alternative energy sources.
ii

One alternative source that both of us have in abundance
is coal. I am told that Indian coal reserves are close to
90 billion tons, which is about 1,000 times current annual
production. Identifiable coal reserves in the United States are
1 trillion, 500 billion tons, compared to an output last year
of 600 million tons.
The dramatic increase in the price of oil makes it vital
that both of our countries step up the development and use of
this alternative fuel. The price incentives provided us by
today's market certainly encourage the rapid expansion of coal
production, and in the United States that process is already
underway. We believe there is also potential for cooperative
efforts by our two countries in developing this resource.
DEVELOPMENT ASSISTANCE
As I have noted, the United States believes that our own
country benefits when nations such as India are able to improve
the living conditions of their people. Such development expands
potential markets for us and generally contributes to a higher
standard of living around the world.

- 7 -

Moreover, even though few of us have ever had the privilege
of visiting India, Americans are not blind to the economic
problems which affect many of the people in this country. Nothing
would please us more than to see your nation overcome these
problems and to believe that we have played a helpful role in the
process. Americans believe now, as they have in the past, that
all of the people on this planet should have access to adequate
diets and at least minimal health and educational facilities.
Since the end of World War II, official development assistance
to India from the United States has totaled $9 billion in concessional loans and grants, quite apart from our assistance which
was channelled through international agencies. India has been
the rlargest single recipient of bilateral aid from the United
States — and far more than half of all bilateral foreign aid
received by India since independence has originated in the United
States.
I have the impression, however, that some people feel
assistance by the United States is a matter of the distant past.
In fact, during 1975 the United States will again be the largest
source of bilateral assistance for India, contributing over a
quarter of a billion dollars.
, Misunderstandings about the level of U.S. aid may stem
in part from the fact that in recent years the bulk of our
assistance to India has been channeled through international institutions, especially the World Bank and the International
Monetary Fund. India has received $3 billion in credits from
the International Development Association (IDA)--a part of the
World Bank family. This over 40 percent of IDA'S lending, and,
I might add, the United States has provided over one-third of
all of IDA's funds. In January of this year, during the meeting
of the development committee, I delivered to the World Bank our
undertaking to provide an additional $1.5 billion to IDA.
As part of the international effort to ease the strain of
higher oil prices for developing countries, India last year was
also a major beneficiary of the IMF oil facility. Under that
program, the IMF borrows largely on the basis of guarantees
provided to it by the United States and other industrialized
countries. In our view, the emergency fund should be phased out
this year. We also believe, however, that the IMF should be
equipped to provide even more resources in future years if they are
needed by member nations. We have reached agreement in principle on a
one-third increase in IMF quotas, and negotiations are well advanced
toward making IMF resources much more fully useable.
In addition, the United States has proposed a special trust
fund to be administered by the IMF to assist those developing
nations which may continue to face reduced growth rates because
of increases in the prices of energy and other products. Funds
for this purpose would be raised in part by sale of some of the

- 8 gold now sitting idle in the IMF. India ^ f ^ t well be the
largest beneficiary of highly concessional l o a * % £ r ° ™ " " • i f
trust fund, if there is international agreement to establish it.
Still another vehicle for easing the adjustment to higher
oil prices should be the development committee recently set
up under the aegis of the International Monetary Fun <* f ^
^
World Bank. That committee was designed to address all ot the
problems of the developing nations, but in its first meeting
last October, it decided to give highest priority to their
problems relating to energy. That development committee will
meet again this June to consider the nature and dimensions of
such economic strains. By coming here to India, I hope that 1
will be better prepared to fulfill my responsibilities as head
of the U.S. Delegation to that June meeting.
I might note that within the development committee, +;
Finance Minister Subramaniam, with whom I have been meeting
in New Delhi this week, represents India as well as several of
your neighbors. My meetings with the Minister have been highly
fruitful, and I look forward to working closely with him on .energy
as well as other critical matters.
In short, I hope that it is clear to all of you in this
audience tonight that the United States is continuing to bet
an active partner in providing economic assistance to developing
countries.
^
But let us not mislead each other. In the final analysis,
foreign assistance can make only a marginal contribution to
economic development. The ultimate success will depend upon
the energy and initiative of each nation's own people and the
wisdom shown by governments in freeing those energies for full
realization of their creative potential. In our view, there
can be no doubt that a free and growing international market
economy offers a powerful vehicle by which the energies of the
people in all nations can be mobilized.
MAINTAIN PEACE AND FREEDOM
A fourth cause which binds our nations together--and the
last one that I shall address tonight--is our mutual and lasting
interest in preserving peace and freedom.
Both of our countries were born in a struggle for independence. Both of us have known the yoke of foreign rule. And
both of us are committed to the proposition that only by maintaining our independence and freedom can we fulfill our dreams
for the future.

y
- 9 In the last five years, we believe that considerable progress
has been made toward building a structure of peace in which that
freedom can survive. The two most powerful nations in the world,
the United States and Soviet Union, are both firmly committed to a
policy of detente. Before coming to India, I visited the Soviet
Union where I met with General Secretary Brezhnev. He made it very
clear to me that his nation remains dedicated to detente, and I
assured him that our nation is equally committed.
Improvements in American and Soviet relations is but one
example of progress toward a more peaceful world in recent years.
In Europe, a treaty has been signed which protects the future of
Berlin, once the powderkeg of the world. In the Middle East, the
past year and one half witnessed the first tangible progress toward
a just and lasting peace in over a quarter of a century. Despite
recent setbacks, President Ford has reaffirmed America's determination
to continue to play an active role in the search for peace in that
troubled region. And in Asia, the United States and People's
Republic of China have dismantled the wall that divided them for a
quarter of a century.
Some observers have concluded that because of events in
South East Asia in recent weeks, the United States is in the process
of withdrawing from Asia and turning our backs on our allies.
There are, indeed, those in the United States today who would have
us return to a policy of neo-isolationism. But let me tell you
tonight that they are a distinct minority. The vast majority of
Americans want America to remain involved in world affairs because
they believe--as I hope you believe--that active American participation in world affairs is our best guarantee for peace.
Eight days ago, President Ford addressed the American Congress
in a way that expresses our policy well:
"Let no potential adversary believe that our difficulties or
our debates mean a slackening of our will," he said.
"We will stand by our friends."
"We will honor our commitments."
"We will uphold our country's principles."
I trust that message was clearly received in every capital
in the world because it is the cornerstone of American foreign
policy.
Ladies and gentlemen: let me close with this thought. I
know that from your perspective you have heard a great deal of
rhetoric in years past about relations between India and the
United States. You are more interested now in action than in
words. We in America feel much the same way. We want action,
and we would like concrete progress.

- 10 Yet in recent years, too much has been said to poison the
friendship between us. We have allowed our differences to
overshadow our common interests. Let us have action--let us
move ahead, as swiftly as we can--but at the same time, as I
have stressed tonight, let us also remember that we share many
of the same goals--expanding trade, overcoming the challenge of
higher energy prices, ensuring adequate levels of economic
assistance, and preserving peace and freedom. In the days
and years ahead, let us never lose sight of these mutual
interests but instead make them the foundation of a common
effort to give our children a world that is secure from hunger
and war.
Thank you.

OoO

DepartmentoftheTREASURY
OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20226

FOR IMMEDIATE RELEASE
Tuesday, April 22, 1975
Contact: Priscilla R. Crane
(202) 634-5248

The distribution of $6.4 billion in General Revenue
Sharing money to be paid each of nearly 39,000 states and
local governments for Federal fiscal year 1976 (Entitlement
Period 6) was announced by the U.S. Treasury Department's
Office of Revenue Sharing today.

The money will be distri-

buted to all general governments in the United States in
four quarterly payments, in October 1975 and January, April
and July 1976.
The 1976 allocations of shared revenues reflect new
population and per capita income estimates.

The U.S. Bureau

of the Census and the Bureau of Indian Affairs have provided
estimated 1973 population and 1972 per capita income figures
for use in calculating fiscal year 1976 amounts.

For all

previous entitlement periods, the most current data available were based on the 1970 decennial census.
Allocations of shared revenues are made by formulas
contained in the State and Local Fiscal Assistance Act of
1972,

using estimates of population, per capita income and

tax effort.
-more-

-2-

The individual fiscal year 1976 allocations also
reflect adjustments to fiscal year 1975 amounts, based on
recently-made final calculations using verified and improved
data developed during the current year.
The amounts that states and local governments may expect
to receive have been printed on Planned Use Report forms
mailed today to each State, county, city, town, township,
Indian tribe and Alaskan native village in the United States.
On the Planned Use Report form, due to be returned to
the Office of Revenue Sharing by June 24, 1975, the Chief
Executive Officer of each recipient government must report
that government's plans for uses of its 1976 revenue sharing
money.

The Planned Use Reports must be published locally

in newspapers of general circulation.

In addition, the news

media in each area -- including bi-lingual news media -must be informed about the report.

A copy of the report and

supporting documentation must be made available for public
inspection at a location announced on the published report
form.
The publication requirement in the revenue sharing law
was intended to provide citizens with information about the
General Revenue Sharing program as it affects their communities.

Citizens may suggest changes in proposed uses of

the money before it has been spent.
-more-

\y
Governments that fail to file Planned Use Reports with
the Office of Revenue Sharing will not receive their quarterly
checks on schedule.

The funds will be held by the Office of

Revenue Sharing until the forms have been properly published
and filed.
Title I of the State and Local Fiscal Assistance Act of
1972 authorized and appropriated $30.2 billion to be distributed to all units of general government in the United States
over a five year period, from January 1972 through December
1976.

Thus far, the Office of Revenue Sharing has made

payments totaling $18.9 billion.
President Ford has announced his intention to seek
renewal of General Revenue Sharing past its present deadline
of December 1976.

In his address of April 4, 1975 to the

San Francisco Bay Area Council, the President said, "Our
economy no longer can afford the waste, duplication, and
misunderstandings that occur when a Federal Government tries
to do for the local people what they can best achieve for
themselves...

I happen to deeply believe in the concept of

decentralization of government power in providing wider
discretionary accountability to locally elected officials
and their constituencies.

An example, of course, is ...

general revenue sharing."
-more-

-4-

The President mentioned some specific uses of shared
revenues by Bay Area governments.

He reported that some

San Francisco General Revenue Sharing money had been used
to provide kitchens to feed school children.

The city of

Santa Rosa has used shared revenues to buy gasoline to
transport handicapped citizens to their doctors.

San Mateo

County provides a health care demonstration project, a
rehabilitation program for drug users, and other health
care services.
The President's request to Congress that General
Revenue Sharing be renewed is expected to be made shortly.

0O0

Attachment

CNTITltMfNf PERIOD 6
REVENUE SHAPING SUMMARY
NAME

RFVENUE S H A P E O

EP1 - EPS

ALABAMA

345.769,?**

PEVfNUE TO BE
SHARED EP6

101.663,455

447,652.699

ALASKA

26,365,919

9,138,410

35,504,329

ARIZONA

203.983,457

65.250.599

269,234,056

ARKANSAS

311.734.166

65,918,463

277,652,649'

CALIFORNIA

2.174.475.481

659,210.794

2,633,666.275

COLORADO

214.271,358

69,153,951

283.425.309

CONNECTICUT

259.044,280

85,529,127

344,573,407

DELAWARE

61.247,378

19,1*0.674

60,386,05?

OIST OF COLUMBIA

91,015,007

26.646,966

117,663,975

FLORIDA

597.289,935

200.669,336

797,959.271

GEORGIA

426.347,672

133,397,968

559,745,640

HAWAII

69,984,345

27,629,635

117,813,980

IDAHO

82,163,518

25,289,112

107,452,630

ILLINOIS

1,042,349.983

321,729,268

1,364.079,251

INOIANA

432,198,469

128,859,267

561.057.756

IOWA

288.306.564

62,851,506

371,158.070

KANSAS

195,768,479

58,220,986

254,009,465

KENTUCKY

332,855,237

102,896,596

435,753.835

LOUISIANA

467.807,273

136,853,100

604,660,373

MAINE

124,387,044

40,715,263

165,102.307

MARYLAND*

403,979,969

126,176,694

530,156,663

HASSACHUETTS

644.779.S44

206.460.614

851.240.358

MICHIGAN

666,490,654

267,102,625

1.133.593.279

MINNFSOTA

404,836,r2n

132.849,806

537.685.834

MISSISSIPPI

334,504,MA

94,872,326

429,376,844

MISSOURI
MONTANA

3fl?,5??.'»7T

*n4.7H?.?CA

80,70?,.03

1??.?^9.B79
23,713,490

NLKWA'jKA

146,140,00.1

42.159.6HH

lHM.299,691

NEVADA

44,766,933

14.705,591

59,492,524

NEK HAMPSHIRE

65.362,840

20,001,162

85,364,002

NEW JERSEY

640.537,213

198,475,091

839.012.304

NEW MEXICO

128,594,442

39,611,289

168,205.731

NEW YORK

2.275.630,683

719,208,213

2,994,838,896

NORTH CAROLINA

523.366,343

155.257,732

678,624,075

NORTH DAKOTA

80.&20.T09

19.264,724

99,784,733

OHIO

814,153,791

259,449,222

1,073,603,013

OKLAHOMA

228,537,093

70.392,755

298,929,646

OREGON

202,571,534

66,671,611

269,243,145

PENNSYLVANIA

1,072,510,927

336,766,093

1.409,277.020

RHODE ISLAND

91,778,114

27,423.531

119,201,645

SOUTH CAROLINA

279,705.180

89,328,908

369,034,088

SOUTH DAKOTA

90.240,403

25,280,605

115.521.008

TENNESSEE

388,326,616

117,421,041

505,747,657

TEXAS

966.735,390

309,036,475

1,275.771,865

UTAH

120,340,751

37,252,451

157,593,202

VERHONT

57.406,739

19,664,412

77,071.151

VIRGINIA

404.620,487

128,277,580

532,898,067

WASHINGTON

294,339,834

92,606,685

366,946.519

WEST VIRGINIA

200.850.356

57,280,277

258,130.633

WISCONSIN

513,358,169

160.549.S06

673.907,675

WYOMING

37,676,954

10,025,746

47,702,700

•NATIONAL TOTALS*

?0,453.311.S06

6,350,714.542

26,804,026,048

104,416.793

Contact:

Herbert C. Shelley
964-8256

FOR IMMEDIATE RELEASE April 21, 1975
TREASURY ANNOUNCES ACTION ON
COUNTERVAILING DUTY INVESTIGATION
Assistant Secretary of the Treasury, David R. Macdonald,
announced today that an amendment to a prior "Notice of
Receipt of Countervailing Duty Petitions" is being issued
to end the investigation of leather products from Argentina.
Notice of this action will be published in the Federal
Register of April 22, 1975.
On January 15, 1975, the Treasury Department issued a
"Notice of Receipt of Countervailing Duty Petitions" in the
Federal Register listing 30 commodities from various countries
including leather products from Argentina. Mr. Macdonald
explained in a January 9 press release that the Trade Act
of 1974 established a new procedure that required Treasury
to publish countervailing duty petitions without delay and
as received. The Act further provided that petitions
that had been received before enactment of the Trade Act
were to be handled as if they were received on the day after
enactment.
Subsequent to the publication of the leather products
petition on January 15, the petitioner informed Treasury
that for purposes of the petition, leather products was
meant to be defined only as leather footwear. Non-rubber
footwear from Argentina is included in an ongoing investigation, in which a "Notice of Preliminary Countervailing Duty
Determination" was published in the Federal Register of
February 18, 1975. Accordingly, the leather products
investigation will be incorporated into the investigation
of non-rubber footwear from Argentina.

DepartmentoftheTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

W ^
FOR IMMEDIATE RELEASE

April 21, 1975

RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.7 billion of 13-week Treasury bills and for $2.7 billion
of 26-week Treasury bills, both series to be issued on April 24, 1975,
were opened at the Federal Reserve Banks today. The details are as follows:
26-week bills
maturingOctober 23, 1975

RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing July 24, 1975

High
Low
Average

Price
98.597
98.560
98.571

Discount
Rate
5.550%
5.697%
5.653%

Investment
Rate _J
5.72%
5.88%
5.83%

Discount
Rate
5.980%
6.120%
6.067%

Price
96.977
96.906
96.933

Investment
Rate 1/
6.27%
6.42%
6.36%

Tenders at the low price for the 13-week bills were allotted "0%.
Tenders at the low price for the 26-week bills were allotted 37%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

Boston
$
26,465,000
New York
3 ,352,150,000
Philadelphia
28,880,000
Cleveland
60,665,000
Richmond
41,700,000
Atlanta
34,665,000
Chicago
172,105,000
St. Louis
51,990,000
24,965,000
Minneapolis
42,895,000
Kansas City
32,220,000
Dallas
San Francisco 223,260,000
'

TOTALS$4,091,960,000

Accepted
$
26,465,000
2,093,350,000
28,880,000
55,665,000
40,155,000
33,665,000
168,605,000
42,190,000
24,965,000
37,895,000
31,220,000
117,260,000

Received

Accepted

$
7,015,000 $
7,015,000
3,297,565,000
2,109,665,000
6,565,000
6,565,000
72,610,000
62,610,000
33,155,000
27,155,000
47,410,000
40,410,000
286,135,000
266,485,000
30,335,000
23,705,000
21,060,000
15,800,000
19,540,000
15,970,000
25,070,000
25,070,000
219,575,000
99,575,000

$2,700,315,000 a/ $4,066,035,000

$2,700,025,000 b/

£' Includes $400,895,000 noncompetitive tenders from the public.
£' Includes $150,420,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

WASHINGTON, D.C. 20220

ELEPHONE W04-2041

April 22, 1975

FOR IMMEDIATE RELEASE

May 1, 1975,

as follows:

9L-day bills (to maturity date) in the amount of $2,700,000,000, or
thereabouts, representing an additional amount of bills dated January 30, 1975,
and to mature

July 31, 1975

(CUSIP No. 912793 XG6), originally issued in

the amount of $2,301,365,000, the additional and original bills to be freely
interchangeable.
182_day bills, for $2,700,000,000, or thereabouts, to be dated
and to mature October 30, 1975

May 1, 1975,

(CUSIP No. 912793 XV3).

The bills will be issued for cash and in exchange for Treasury bills maturing
May 1, 1975,

outstanding in the amount of $4,597,975,000, of which

Government accounts and Federal Reserve Banks, for themselves and. as agents of
foreign and international monetary authorities, presently hold $2,643,165,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, April 28, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
multiples of $5,000.

Tenders over $10,000 must be in

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(OVER)

-2securities and report daily to the Federal Reserve Bank of New York their positions
with^respect to Government securities and borrowings thereon may submit tenders
for account of customers provided the names of the customers are set forth in
such tenders.
own account.

Others will not be permitted to submit tenders except for their
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

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

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing May 1, 1975.
ment.

Cash and exchange tenders will receive equal treat-

Cash adjustments will be made for differences between the par value of

Accordingly, the owner of

bills (other than life insurance companies) issued hereunder must include in his
Federal income tax

return, as ordinary gain or loss, the difference between

Copies of the circular may be obtained from any Federal Reserve Bank or

E
Hello, I'm delighted to be here. And I'll try to
follow the advice of my husband Ed, who tells me that
a speech should have a good beginning and a good ending,
and what's good about them is that they're very close
together.
I am here to ask for your support on behalf of
the United States Savings Bonds Program. I am here
to give you a few reasons why I_ believe in the program,
and what we in the Treasury Department hope for in the
way of accomplishments this Bicentennial year of 197 5.
Savings Bonds have been part of America's life for
many*years. They belong — in cities, rural areas and
mid-town Manhatten. And I, like most of you, have seen
them from three different viewpoints.
As a young teenager, I was involved with the War
Bond drives of World War Two. On Saturday'afternoons,
I and my other young friends would sell bonds from the
steps of the post office of my hometown of Mountainair,
New Mexico. It was the patriotic thing to do. It still

Remarks by the Honorable Francine I. Neff, to.a TSIA Luncheon in Burlington, Vermont on April 22, 1975.

\y
-2-

is, in fact, during our current war on inflation.
Later on, as a young wife and mother during the
1950's,.my husband and I cashed in our bonds to make
the down payment on our first home.

Then, we bought

more bonds because it was a convenient, secure way
for someone like myself —
spenders —

the last of the big

to save for a rainy day.

My yearnings

often exceeded my husband's earnings, and it was ccnforting to know that the ir.oney supply in one small
corner of our budget was actually increasing.
Today, the interest rate of 6 percent is ir.uch
higher than it was 20 years ago. And even that 6
percent, attractive though it is, doesn't: tell the
whole story, because tax advantages can often raise
that to the equivalent of an 8 or 9 percent return.
And since April 15th was just a veek ago, I think
we're all pretty conscious of taxes right new.
Today, also, as the United States Treasurer and
the National Director cf the Savings Bends Division,
I continue to appreciate the patriotic and personal
benefits of bonds.

But I have a better understanding

of their third role —

which is the part they play in

our nation's debt structure.
Debt is a four-letter word to you Verncnters and
we New Mexicans.
Federal debt.

Eut let's take a closer look at our

-3-

By the end of February, the public debt outstanding
for the nation had risen to almost $500 billion —
actually $499.8 billion. Some $220.8 billion of this
is held by the Federal Reserve and various government
trust accounts, and these do not pose marketing or
refunding problems.
Of the remaining $27 9 billion of the public debt
in private hands, about 23 percent — or 64.8 billion —
is in the form of United States Savings Bonds.
This 23 cents of every dollar in the publicly-held
portion of the Federal debt represents far and away
the r.cct stable part of the debt. Specifically, E and
H bonds remain outstanding for more than 6 years, on
the average, as compared to less than 3 years, on the
average, for other marketable instruments.
Let's go over this again. Ten years ago, the
average maturity of the privately held marketable
debt not in Savings Bonds was 5 years and 9 months.
But this has declined by almost 50%. Today it averages
only 3 years. This is unsatisfactory for two reasons.
First, as the holding time decreases, the debt
becomes more liquid or "spendable". This can be very
inflationary.
Second, the job and the cost of refinancing a
rapidly maturing debt is difficult and expensive. Even
after eliminating Treasury bills, which come due as

\y
-4-

frequently as every 90 days, it is still true that
nearly 1 of every 5 dollars in marketable securities
held by the general public reaches maturity and needs
refunding every 365 days.

So I repeat — on the basis of past experience,
Savings Bonds sold today, on the average, will not be
redeemed for 6 years —

or more than twice as long as

dollars obtained through marketable issues. This is
true no matter what you hear about "X" number of bonds
being cashed in after the minimum waiting period.

and large, our buyers hold onto their bonds.
In addition, they are buying more bonds.
we had the largest dollar sales since 1945.

In 1974,

It looks

like this year may be even better, despite the general
economy.

Cash sales of E and H bonds for the first

quarter of 1975 totaled 1 billion 890 million dollars,
the highest first-quarter figures in 30 years. These
figures may go lower later this year, as people reach
that "rainy day" they've been saving for.
Vermont certainly did its share in sales. Your
1974 sales were more than 17 percent above 1973 figures.
And the upward trend continues. February 197 5 sales for
your state were 10 percent ahead of the same period in 1974.
That well-known Vermont thriftiness is at work, along

-5-

with some terrific volunteer leadership. I understand
that you've been extremely fortunate to have a father
and son succession as state chairmen. Misters Levi
Smith, Senior and Junior, between them have been state
chairmen since the inception o£ the job. That's
real thriftiness!
Vermonters were always leaders. Being something
of a history buff, I remember that Vermont was the
first state to prohibit slavery back some 198 years
ago. And I recall that one of the slave-holding Southern
states was so unhappy at this independent approach that
they adopted a resolution asking the President to hire
enough Irishmen to dig a deep ditch around Vermont so
that it could be floated out into the Atlantic Ocean
and set adrift!
I'm glad Mr. President said No. America would be
much poorer without your state and its green mountains
and good people.
We are all part of a great country. And it d^s
a great country. In the last 9 months, as United States
Treasurer, I've traveled to 27 states for the Savings
Bonds program. And as I fly over our Eastern cities,
our Midwestern prairies and our Western mountains and
deserts, I look out the window and I am constantly
reminded of what we Americans have and what we have
built in our almost 200 years as a Nation.

-6-

We have our wonderful, physical land; our people,
who came from all corners of the world to become Americans;
and our special,ideas and attitudes that make us the
nation that we are.
We have our free enterprise economic system, which
has doubled the medium income of American families in the
past 25 years, even taking inflation into account.
We have a country in which 60 percent of all families
own their own homes; where the number of Americans going
to college has doubled in the past 15 years; and where
even our income tax burden is the second lowest among
the top 13 industrial nations of the world.
No other country has our manpower, our brainpower,
our technology.

And, despite all cynicism, the word

"America" is recognized all over the world as a very
special word standing for a country unlike any other.
I am 100 percent with my boss, Treasury Secretary William
Simon, when he says that "those who take a perverse
delight in proclaiming the end of the American dream
are dead wrong."
America is a dream, and a reality, and a home for
the hopes and lives of 212 million of us. And United
States Savings Bonds are a grassroots part of that
America.
You know as well as I do the benefits of Savings

lib
-7-

Bonds. Their personal benefits as a savings program ...
their boost to America's future ... and their importance
to America's present.

Bonds are good for the individual,

good for the country, and good for our 3rd century of
existence.
Also, you know as well as I that fully 95 percent
of people working in the bond program are volunteers like
yourselves.

We ask a lot of you. We ask busy, important

people to become personally concerned and involved.

The

only reason we can do this is because our product is so
great.
So, you are what makes our program go. There's
no Big Brother —

no Big Daddy -- in Washington, to do

the job. We have less than 460 Treasury people, scattered
throughout our 50 states, to coordinate the work of
volunteers.

Savings Bonds are the government — non-

government program.

And we feel that's the way to be

both effective and economical.
So, as you help the program go and grow —
or it doesn't.

it does

It's that direct. We need you. The

country needs you.

And the country and the people need

our program.
In America's present economic climate, this may be
the most important year for Savings Bonds since the 1930's.
We are confronted with enormous economic problems. But
we also have tremendous opportunities.

Let's roll up our

rev
-8sleeves, and roll up a winner, by making this Bicentennial year a "buy bonds" year as well.
Thank you.

DepartmentoftheTREASURY
OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20226

ELEPH0NE 634-5248

FOR IMMEDIATE RELEASE
Tuesday, April 22, 1975
Contact: Priscilla Crane (202) 634-5248
Five publications of significance to the General Revenue
Sharing program were issued this week by the U. S. Treasury
Department's Office of Revenue Sharing. They are the following:
1. General Revenue Sharing FINAL DATA ELEMENTS
Entitlement Period 5, a complete list of the
final population, per capita income, adjusted
tax and intergovernmental transfer data used to
allocate General Revenue Sharing money to each
of nearly 39,000 states and local governments
for Entitlement Period 5, which is equivalent to
Federal fiscal year 1975.
2. General Revenue Sharing FINAL INTERSTATE DATA 5
ALLOCATIONS Entitlement Period 5, contains
detailed data definitions and the final data
elements used for interstate allocations of
shared revenues for Entitlement Period 5, and
includes computations for both the 3 factor
formula and 5 factor formula used in allocating
the funds.

-2-

General Revenue Sharing INITIAL DATA ELEMENTS
Entitlement Period 6, a list of data elements
for each recipient state and local government,
used to make initial allocations of Entitlement
Period 6 (Federal fiscal year 1976) funds.

General Revenue Sharing, INITIAL INTERSTATE DATA
§ ALLOCATIONS Entitlement Period 6, contains
the detailed data definitions and data elements
used to calculate initial allocations of shared
revenues at the state area level for Entitlement
Period 6, and includes computations for the 3
factor formula and 5 factor formula.

GENERAL REVENUE SHARING SIXTH PERIOD ENTITLEMENTS,
a book in which are listed initial allocations of
revenue sharing funds for the Sixth Entitlement
Period for each recipient government, final
Entitlement Period 5 amounts, Entitlement Period
5 adjustments, and cumulative totals of amounts
allocated to each unit of general government
from the beginning of the program in 1972 through
Federal Fiscal Year 1976.

The documents issued by the Office

of Revenue Sharing this

week may be inspected.in the Office of Revenue Sharing at 2401 E
Street, N.W. in Washington, D. C. or in the Treasury Department
Library at 15th Street and Pennsylvania Avenue, N.W.

Copies

have been sent to each Member of Congress and to each Governor.

ly
The General Revenue Sharing program was authorized by Title
I of the State and Local Fiscal Assistance Act of 1972 (P.L. 92-512).
The Act authorizes the distribution of $30.2 billion over a fiveyear period, from January 1972 through December 1976.

Money is

paid on a regular, quarterly basis to each unit of general government in the United States -- including nearly 39,000 states,
counties, cities, towns, townships, Indian tribes and Alaskan
native villages.

Each recipient government's amount is allocated

using formulas set forth in the law, based upon data supplied
primarily by the U. S. Bureau of the Census.

The data used in

calculating Fifth and Sixth Entitlement Period amounts, and the
allocations themselves are the subjects of the publications released
by the Office of Revenue Sharing this week.

-30-

SSL2L7!

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

TELEPHONE WO4-2041

(Ly
FOR RELEASE UPON DELIVERY
STATEMENT BY THE HONORABLE STEPHEN S. GARDNER
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON CONSUMER AFFAIRS
HOUSE COMMITTEE ON BANKING, CURRENCY AND HOUSING
TUESDAY, APRIL 22, 1975, 10:00 A.M.
THANK YOU, MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE:
I am pleased to be with you today to offer strong
support for the objectives of H.R. 3386, a bill which would
amend the Equal Credit Opportunity Act in order to prohibit
discrimination on the basis of race, color, religion, national
origin, or age. The bill meets an important need to expand
the reach of present law, which is confined to prohibiting
discrimination on the basis of sex or marital status and
generally all discrimination in lending to finance housing
purchases specifically. Credit should be equally available
to all worthy borrowers in our society.
Americans have long enjoyed one of the most comprehensive
systems of private credit availability in the developed
countries of the world. The multiplicity of credit arrangements
available to our citizens are uniquely diversified both
in the type of credit granted and in the type of institution
or individual granting credit. With the development of
electronic computerized techniques we can expect further
advances in practical and useful credit conveniences. It
is sound to provide a simple workable law to rule out prejudice
from this system.
To provide such a law we must recognize that a decision
to grant or deny credit does involve the exercise of judgment
by any potential lender on such fundamental matters as
the credit worthiness of the would-be borrower and the
likelihood of timely repayment. In your consideration of
this legislation I am sure you will take account of this
fact, both in selecting a means of enforcement and in deterWS-282
mining appropriate sanctions to assure compliance with
the Act.

-t.

We urge that the legislation or the legislative history
make clear that there are certain factors that are appropriate in making credit decisions. For example, a lender
considering a long-term loan to a person who is eligible for
retirement or early retirement should not be precluded by
the prohibition against discrimination because of age from
inquiring into the plans of the prospective borrower to
cease active employment before the loan is repaid. In
another example, it should not be improper for a lender to
seek to obligate both spouses if the decision to extend
credit has relied on the assets or earning ability of both.
There are other such examples that I feel sure the committee
will discover in subsequent testimony which will provide
additional history for the regulatory agencies charged with
enforcement.
In addition, there are commonly accepted and necessary
commercial practices in the business of granting credit that
should not be discouraged. An example is the declination
of a credit inquiry before any prepared application is submitted. Another example is the unwillingness of a financial
institution to grant certain types of loans for business
reasons even though such loans were offered in the past.
Discrimination is difficult to detect and prevent. Even the
most complete record of a credit denial does not always
indicate the most important reason for the decision. The
public will not be well served if the administration of the
Act is cumbersome and complex and inconsistent with the nondiscriminatory credit techniques that have been developed
from the experience of lenders over many years.
It is my opinion that compliance with the Act will be
obtained principally through the use of regulatory enforcement and wide spread publicity. The punitive clause of the
bill would permit the assessment of punitive damages up to
$50,000 or one percent of the net worth of a lender, whichever is greater. This presumes that large lenders such as
Sears Roebuck, General Motors, Household Finance, and major
banks are offenders and I have no knowledge of that possibility. I think responsible lenders may very well respond
without such a threat, and it is less likely to have the
same effect on the many smaller retail establishments where
a large number of consumer installment contracts orginate.
While some monetary penalty for noncompliance seems appropriate, it may be adequate to provide to a successful plaintiff the recovery of his or her actual damages plus all
costs associated with the recovery effort, including attorneys'
fees and other costs.

- 3 -

Section 1(b) of the bill provides an exemption for certain loan
assistance programs. We would urge that the Committee be satisfied
that this section of the bill does not result in the permitting of
discrimination for government-sponsored lending programs when such
discrimination would be prohibited in private commercial transactions.
In order to help insure that loan applicants are aware of their
rights under this proposed legislation, the Committee might consider
incorporating a provision requiring establishments granting credit to
display suitable notices stating that cUscximination in lending is
unlawful. Implementing regulations could require, depending upon
circumstances, that such notices be printed in more than one language.
Under the present Equal Credit Opportunity Act, an action may be
brought in any United States District Court, or in any other court of
competent jurisdiction, thus affording an individual a choice of
Federal or state courts. Hcwever, the bill would limit individuals
solely to actions in the United States District Courts. We question
the need for this change, particularly considering the heavy work load
of the U.S. District Courts. The Committee, if it has not done so
already, might wish to consult with the Judicial Conference of the
United States on this matter.
In summary the objectives of H.R. 3386 are not only cxxtmandable
but a basic and integral part of our American economic system and should
be incorporated into law. I commend the Conmittee for this work. I
also urge that in your deliberations full recognition be given to the
great body of experience that exists in the public and private credit
systems of the country. I am sure that we can prohibit discriinination
without dampening the innovation and development of beneficial nondiscriminatory credit practices.
Thank you.

DepanmentoftheTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

April 23, 1975
Contact: John P. Plum
964-2615

FOR IMMEDIATE RELEASE

INDUSTRIAL GOLD PURCHASES DECLINE 31 PERCENT
Net purchases of gold for United States industrial purposes
in 1974 dropped 31 percent to 4,651,000 ounces, the lowest level
in 10 years, according to figures compiled by Treasury Department's
Office of Domestic Gold and Silver Operations.
The total excludes an estimated 1,350,000 ounces bought for
non-industrial use in December. This surge of buying was by
dealers in anticipation of demand by individuals following termination of restrictions on ownership of gold at the end of 1974.
The sharp decline in industrial use last year was attributed
to the rise in the price of gold and the general economic slowdown.
Gold inventories held by industrial users were reduced by
178,000 ounces during 1974. A further decline is expected this
year, since the ratio of inventories to output of fabricated
gold products remains high, Thomas W. Wolfe, Director of the
Office of Domestic Gold and Silver Operations, said.
Net purchases of gold of 4,651,000 ounces in 1974 compared
with 6,729,000 ounces in 1973, and 7,285,000 ounces in 1972.
The 178,000 ounces decrease in gold inventory in 1974 compared
with 91,000 ounces increase in 1973, and 32,000 ounces increase
in 1972.
Gold used in jewelry and arts in 1974 amounted to 2,402,000
ounces, compared to 3,473,000 ounces in 1973, and 4,344,000 ounces
in 1972. Gold used for dental purposes totaled 509,000 ounces in
1974, as against 679,000 ounces in 1973, and 750,000 ounces in
1972.
The use of gold for all other industrial purposes, including
space and defense, totaled 1,740,000 ounces in 1974, as compared
to 2,577,000 ounces in 1973 and 2,191,000 ounces in 1972.

oOo
WS-284

FOR RELEASE ON DELIVERY, 10:00 A.M. EDT,
WEDNESDAY, APRIL 23, 1975
STATEMENT OF THE HONORABLE DAVID R. MACDONALD
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, OPERATIONS, AND TARIFF AFFAIRS)
BEFORE THE
SUBCOMMITTEE TO INVESTIGATE JUVENILE DELINQUENCY
OF THE COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ON PROPOSED FIREARMS LEGISLATION
WEDNESDAY, APRIL 23, 1975
Mr. Chairman, I am David R. Macdonald, Assistant
Secretary for Enforcement, Operations, and Tariff Affairs,
Treasury Department. I am pleased to be here today to
discuss with you several legislative proposals which are
being considered by the Treasury Department in the area
of firearms regulation. Accompanying me are James B.
Clawson, Deputy Assistant Secretary for Operations;
James J. Featherstone, Deputy Assistant Secretary for
Enforcement; Rex D. Davis, Director, Bureau of Alcohol,
Tobacco and Firearms; and Marvin J. Dessler, Acting Chief
Counsel, Bureau of Alcohol, Tobacco and Firearms.
This Committee has undertaken the awesome task of
isolating and legislatively addressing itself to one of
the most basic and distressing national problems — that
of rooting out the causes of juvenile crime. Handgun
availability is undoubtedly a factor to be considered in
pursuing the solution to this problem. Nevertheless, we
believe that any discussion of gun control in the context of
a growing problem of juvenile crime and delinquency may
imply a simplistic and exclusive cause and effect relationship between the two. There is no doubt, in our opinion,
that the easy availability of handguns does contribute to the
opportunity to commit violent crimes and thus to the
frequency with which they are committed. This may be
particularly true in the case of adolescents, as indicated
in Tables 3 and 4, appended to this statement.
Nevertheless, efforts at gun control legislation may
address more of a symptom than a cause of juvenile delinquency. This is not to say that any legislative effort
WS 283

-2in this area will be fruitless. I would, however, qualify
the importance of my testimony on gun control laws before
this Committee by pointing out that deeper, more basic
roots may be found to the thorny tree of violent juvenile
crime in a growing lack of confidence in the ability of
State and local enforcement agencies to protect the public,
and to loss of faith in the ability of the judicial system
to bring criminals swiftly and certainly to trial and
conviction, particularly in large metropolitan areas. This
loss of confidence finds objective support in the low
percentage of convictions to arrests, as indicated in
Table 5, appended to this statement.
This loss of faith leads naturally to a propensity on
the part of citizenry to attempt their own protection from
criminal elements — hence, a race to arms for selfprotection. Even beyond the loss of confidence in our
judicial system, there appears to be a deeper cause of
anxiety and instability in a large section of our youth
which has resulted from a weakening of our social institutions. The decline in stable social institutions historically appears to have gone hand in hand with a rise in
violence.
Thus, the solutions to difficulties which the Treasury
Department has experienced in administering the Gun Control
Act of 1968 which I am about to discuss do not purport to
present a "cure-all" legislative solution to the Nation's
crime problem or to youthful involvement in it. Instead,
the proposals represent what the Department tentatively
considers to be realistic and administratively feasible
responses to some of the more critical facets of the
firearms dilemma and which responses should not engender
unwarranted and deleterious side-effects. These proposals
have not been cleared with the Domestic Council or the
President.
Generally speaking, it has been the experience of the
Treasury Department that the basic precepts embodied in
the Gun Control Act of 1968 present a workable format for
regulating the sale of firearms in the United States. That
is to say, the Federal dealer-licensee concept and its
attendant recording provisions and restrictions upon the
transfer of firearms have proved to be a viable approach

-3to the firearms problem. Nevertheless, experience has
also shown that existing law is inadequate in many respects.
More specifically, the Department perceives the following
to be the most critical deficiencies:
(1) the absence of sufficient licensing
standards to insure that Federal licenses will
only be issued to responsible, law-abiding
persons who actually intend to conduct a bona
fide business;
(2) the absence of controls upon the importation
of parts for and the domestic manufacture and
assembly of small, lightweight, easily concealable,
and inexpensive handguns commonly known as
"Saturday Night Specials"; and
(3) the absence of an effective statutory means
to prosecute and punish felons and other dangerous
persons for the possession and use of firearms.
The legislative history underlying the licensing
provisions of the Gun Control Act of 1968 reflects a major
Congressional concern that licenses would be issued only
to responsible, law-abiding persons actually engaged in or
intending to engage in business as importers, manufacturers,
or dealers in firearms or ammunition. Unfortunately, it
has become apparent in recent years that Congressional
aspirations in this regard have been frustrated by a
proliferation of applications from individuals who never
intended to engage in a bona fide firearms business, but
who merely desire a Federal license in order to obtain
firearms or ammunition for their personal use at wholesale
prices or to receive firearms in interstate commerce for
that purpose. Frequently, such individuals are undercapitalized and lack both the business experience and
financial capacity needed to conduct a business. In many
instances no business is conducted at all, or a marginal
business is carried on which disregards Federal regulations.
Present Federal law requires every applicant for a
Federal firearms dealers license who pays his $10 annual
fee to be issued a license within 45 days unless he is
under indictment for a felony, convicted of a felony, a

-4fugitive from justice or a drug user or addict. Consequently, the Bureau of Alcohol, Tobacco and Firearms has
been compelled to issue literally thousands of licenses
to individuals, not all of whom engage in the business of
dealing in firearms full time. Under existing law, more
than 156,000 individuals or entities are currently licensed
to conduct firearms businesses in the United States. Since
the passage of the 1968 Act, this figure has increased
yearly. Of this number, it is estimated that less than
30 percent actually conduct a bona fide firearms business.
Due to the sheer magnitude of the number of licensees, it
is impossible for ATF to monitor each licensee and it is
becoming increasingly difficult to maintain a meaningful
and effective compliance program based upon even random
or periodic inspections.
Accordingly, the Department proposes a number of
interrelated amendments to the Gun Control Act which are
designed to tighten existing licensing standards in order
to reduce the number of Federal licensees and discourage
what might be called "nominal" applications.
First, we propose amending the existing licensing
standards by including a provision which would permit the
Treasury's Bureau of Alcohol, Tobacco and Firearms (ATF)
to inquire into each applicant's business experience,
financial standing, and trade connections in order to
determine whether the applicant is likely to commence the
proposed business within a reasonable period of time and
maintain such business in conformity with Federal law.
The proposed provision has been utilized for a number of
years in the issuance of liquor permits to-persons engaged
in liquor businesses under the Federal Alcohol Administration Act. In this regard, the provision has functioned
fairly and effectively and has been reasonably construed
by the courts. If incorporated into the firearms licensing
area, the proposed amendment would be of significant value
in weeding out "nominal" or disreputable licensees.
^AS^an additional means of strengthening the licensing
standards, we would propose an amendment which would require
a finding that the business to be conducted would not be
prohibited by any State or local law applicable in the
jurisdiction where the applicant's premises is located.

K1
This provision would further a major Congressional objective
in enacting the Gun Control Act which was to provide support
to State and local law enforcement officials and would
furnish the Department with a specific statutory basis for
denying a firearms application where State and local law
would prohibit the business sought to be conducted.
A third proposal is to amend the Act to create special
license categories for ammunition dealers, gunsmiths and
dealers in long guns only. Experience has shown that a
large portion of existing licensees (perhaps 20 to 30
percent) are engaged almost exclusively in selling ammunition. In fact, many of these licensees are small "mom and
pop" stores which carry ammunition only as a convenience
to their customers. Under existing law, separate categories
do not exist for these persons and they receive the same
dealer's license that is issued to firearms dealers. The
establishment of these special licenses would restrict those
persons to engaging in their limited activities. Hence,
neither a gunsmith nor an ammunition retailer could lawfully
sell firearms, and a long gun dealer could not sell handguns,
but a firearms dealer would be permitted to sell all firearms,
ammunition and to repair firearms. The new licensing
structure would facilitate a more efficient and economical
assignment of inspection priorities since these "limited"
licensees would not require the same scrutiny as would
unlimited firearms dealers.
We would also propose that the fee schedule be amended
by increasing license fees generally, particularly for
(1) firearms dealers handling handguns and (2) pawnbrokers
dealing in firearms. Thus, we would raise the handgun
firearms dealer's fee to a high multiple of the present
$10 paid annually which would assure that only those
seriously interested in pursuing the business would pay it,
and we would increase the pawnbroker - gun dealer's license
to an amount which basically finances frequent inspections
by ATF personnel. With regard to the increase in license
fees for pawnbrokers, it should be noted that ATF's "Project
Identification," which involved the tracing of firearms
used in crime in eight major urban areas, reflected that 30
to 35 percent of the handguns used in crime had passed

-6through pawnshops. In order to encourage applicants to
apply for a "limited" license, we would establish substantially lower fees for gunsmiths and dealers in ammunition
only, and moderate fees for firearms dealers who do not
deal in handguns.
We believe that the suggested fee modifications will
be reasonable and would not impose an impediment to any
applicant who is truly desirous of engaging in a bona
fide firearms business. Rather, the increased fees would
discourage the filing of license applications by those
who would not or should not qualify for licensing. From
a fiscal standpoint, the increased fees would, of course,
absorb a portion of the Department's costs with respect to
processing and investigating license applications.
We also find that there is a need for a greater range
of penalties than presently exists with which to deal with
firearms dealers who violate the laws. In this connection,
we believe that ATF should have authority to suspend firearms licenses and accept monetary offers in compromise for
such violations. Under existing law, licenses are subject
to revocation if the holder has violated any provision of
law or regulation. The only alternative to administrative
revocation, however, is the criminal prosecution of the
licensee for violations that frequently are only inadvertent.
While any violation of the Gun Control laws may be deemed
to be serious, some are less serious than others and do not
warrant the institution of criminal or revocation proceedings.
Even inadvertent violations, however, may warrant administrative action less severe than license revocation.
The "suspension" and "offer in compromise" authority
would afford ATF a more flexible vehicle with which to
equitably insure compliance. Ample precedent exists for
the granting of suspension and compromise authority under
other laws administered by the Treasury Department, including
laws relating to regulation of distilled spirits and tobacco
industries. This authority would appear to be equally
appropriate in the area of firearms regulation.
Turning now to the matter of handguns, the problems
engendered by the proliferation of handguns in American

cities has become self-evident and requires no real
elaboration at this point. Suffice it to say that recent
estimates place the number of handguns in America at
about 40 million while deaths by handguns have increased
almost 50 percent in the last decade. Accordingly, the
Department's proposals embrace a number of provisions
which are directed at the handgun problem generally and
more specifically at the proliferation of low quality,
inexpensive handguns known as "Saturday Night Specials."
In recent years the Department has carefully evaluated
a number of legislative proposals which have had as their
principal objective the eventual removal of the "Saturday
Night Special" from the American scene. Although the
various proposals have taken a wide range of approaches,
all of the proposals are premised upon the fact that these
small, lightweight, easily concealable and inexpensive
handguns present a unique danger to the American public.
Thus far, one of the difficulties encountered in these
legislative attempts to address the Saturday Night Special
problem has centered around the formulation of adequate
criteria to define that term. Obviously, effective proscriptions cannot be implemented against such firearms unless the
law also defines with precision what weapons are to be
affected. In this regard, we propose that the so-called
"factoring criteria" utilized under the Gun Control Act of
1968 for determining the eligibility of handguns for importation under the "sporting purpose" test be adopted, with
certain modifications, for use in the Saturday Night Special
area.
Thus, we would propose that it be made unlawful for any
licensed manufacturer or licensed importer to manufacture,
assemble, or import for purposes of sale in the United States
any handgun that has not been approved pursuant to detailed
specification criteria which would be set forth in the
statute. Prescribing the criteria by statute would negate
the objection that mutable standards determined by administrative officials govern the trade in handguns. Under such
criteria, the key characteristic would be overall size: No
handgun failing to meet certain minimum size standards would

-8be acceptable for manufacture, assembly, or importation.
In the case of revolvers, a barrel length of greater than
three inches would be mandatory.
In addition, various safety features would also be
required before a weapon would be acceptable. Other
characteristics would be dealt with by means of a point
system which would take into account such characteristics
as size, frame construction, weight, caliber, safety
features, and miscellaneous equipment. In addition to the
prerequisites of size and safety features, a pistol and a
revolver to be approved for manufacture, assembly, or
importation must achieve a minimum point value (85 points
in the case of a pistol and 60 points in the case of a
revolver).
Although the Department's proposal adopts the same
fundamental approach as the existing "factoring system,"
the existing system has been modified somewhat by increasing
the point value which must be met before a handgun is
acceptable. A wider variety of characteristics are provided,
however, under which a particular handgun model can achieve
points. It is believed that the revised point system is
more objective and provides greater flexibility to allow
quality handguns to meet the criteria for approval, while
at the same time eliminating the same lightweight, easily
concealable, cheap handguns which have no legitimate
sporting purpose. Exceptions would be provided for sales
to law enforcement agencies. Modification of handguns
which causes them to lose their qualification would be
prohibited.
Further, our proposal would include provisions for the
notification of licensed importers and manufacturers of the
results of handgun evaluations and would afford judicial
review of adverse decisions by ATF. In order to provide an
identical test to cover both foreign and domestic handguns,
we would recommend that the import provisions of the 1968
Act be amended to substitute the detailed criteria I have
described for the general language of the "sporting purpose"
test for importation.
Our proposals dealing with the so-called "Saturday
Night Special" are directed primarily at licensed importers

hi
and licensed manufacturers and would, therefore, strike
at the source of the problem. While these proposals would
not rid the nation of these firearms, they would effectively
stop the yearly flood of cheap handguns into the domestic
marketplace. In this connection, recent ATF studies
disclose that handguns recently acquired are those largely
used in the commission of violent crimes. Moreover, given
also increased controls over interstate dealings in handguns,
our proposal to remove the supply source of Saturday Night
Specials could place the problem where it may be adequately
further regulated by State Governments as they see fit.
As the Gun Control Act now stands, second or subsequent offenders who are convicted of the offenses of
carrying unlawfully or using a firearm in the commission
of a Federal crime are subject to a mandatory minimum of two
years imprisonment and a maximum of twenty-five years
imprisonment. We believe that the Act should be modified
so that a mandatory sentencing provision would be applicable
to first offenders as well as to recidivists. That is to
say, we would propose for first offenders a mandatory
minimum sentence of one year, with a discretionary fiveyear maximum. The new penalty proposal would not be so
harsh as to be counterproductive in terms of acceptability
by courts and juries, but would serve as a more formidable
deterrent to the misuse of firearms.
Finally, we propose new legislation which would prohibit
felons and other classes of dangerous persons from possessing
firearms. While existing law, enacted as Title VII of the
Omnibus Crime Control and Safe Streets Act of 1968, was
intended by the Congress to proscribe mere possession, receipt,
and transportation of firearms by such persons, this law was
construed by the Supreme Court on December 20, 1971, in a
five to two decision in United States v. Bass to require
proof of an interstate commerce nexus with respect to these
offenses. More specifically, it was held that the statutory
language "in commerce or affecting commerce" modified each
offense defined by the statute. In deciding the Bass case
as it did, the Supreme Court rejected the Government's
position that mere possession constitutes a crime under
Title VII, a position which was upheld by five of the six
United States Courts of Appeals that had ruled on this issue.

-10A review of the legislative history of the existing
statute convincingly demonstrates that the true intent of
Congress was to prohibit mere possession of firearms by
certain classes of people deemed too dangerous to society
to own them. This intent, however, was thwarted by the use
of inartful statutory language which led to the narrow
construction by a majority of the Court. Under the doctrine
of United States v. Perez, 402 U.S. 146, moreover, we
believe that a valid finding can be made by Congress that
the possession of weapons by such persons itself poses a
threat to interstate commerce, and thus that a commerce
nexus need not be proved as to each violation. Accordingly,
the Department would propose to delete the troublesome
language from the statute. If amended in this manner,
these laws could be enforced as Congress originally intended.
Additionally, we propose to repeal existing Title VII
and place the substance of its provisions, together with
needed corrective amendments, within chapter 44 of Title 18,
United States Code (Title I of the Gun Control Act of 1968).
This chapter, of course, contains all other provisions of
Federal law relative to the shipment, transportation, and
receipt of firearms by felons and other proscribed categories
of persons. It should also be noted that Title VII was a
floor amendment to the Omnibus Crime Control and Safe Streets
Act, and it is obvious that less than normal consideration
was given to conforming it to Title IV of the Act, the
predecessor to chapter 44. As a result, the categories of
persons who are prohibited by chapter 44 from shipping,
transporting, or receiving firearms in interstate commerce
and to whom Federal firearms licensees may not lawfully sell
firearms are not in conformity with the proscribed categories
of persons under Title VII. Therefore, we propose to make
these categories more closely conform.
Our proposals, Mr. Chairman, are addressed primarily
to the question of interstate traffic in firearms and
particularly handguns. We would like to preserve local
control over gun regulation. Our studies have convinced us,
however, that an interstate traffic exists with respect to
guns used m crimes which deserves more Federal attention
than it has received. We believe that the proposals in the
area of dealer licensing are somewhat analogous to the
regulation of brokers and dealers in investment securities

J1 u
under the Securities and Exchange Act of 1934. What we
are attempting to do is place ATF in a position to control
the "boilershops" in the handgun field and provide the
necessary support to enable local law enforcement agencies
to be effective instead of becoming engulfed in an
uncontrollable interstate handgun traffic.
We also believe that these legislative proposals are
acceptable to a majority of the people in this country.
With the polarized state of public opinion on the subject
of gun control, it is doubly important to structure laws
regulating human endeavor in such a manner that the incentive to comply with the law is maximized and its enforceability
is enhanced by its acceptance. A drastic extension of regulations in this area we believe can pose a real danger of
creating substantial illicit traffic in handguns, controlled
by organized crime groups, unless the underpinnings of public
acceptance accompany the regulations sought.
We appreciate your having provided us with an opportunity
to appear here today and to present our views on the subject
of firearms control. At this point, my associates and I
would be glad to attempt to answer any questions which the
Subcommittee may have.

INDEX OF VIOLENT CRIME, UNITED STATES, 1960-1973

"IV
UMBER
YEAR OF OFFENSES:
VIOLENT
CRIMES

MURDER

FORCIBLE
RAPE

ROBBERY ( I AGGRAVATED
ASSAULT

1973

869,470

19,510

51,000

382,680

416,270

1972

828,820

18,550

46,480

374,790

389,000

1971

810,680

17,670

41,940

386,150

364,920

1970

733,530

15,890

37,690

348,460

331,480

1969

657,050

14,670

36,880

297,650

307,850

1968

590,640

13,720

31,410

261,780

283,720

1967

496,150

12,160

27,410

202,100

254,490

1966

426,830

10,970

25,620

157,350

232,890

1965

384,340

9,900

23,230

138,130

213,090

1964

361,350

9,300

21,250

129,860

200,940

1963

314,490

8,580

17,510

116,000

172,400

1962

299,150

8,480

17,410

110,410*

162,850

1961

287,120

8,680

17,080

106,240

155,130

1960

286,220

9,050

17,050

107,410

152,720

+203.8

+115.6

+199.2

+256.3

+172.6

mnz-IT-ITLTm

^T-,

'ERCENT OF
1HANGE
960-1973

INDEX OF VIOLENT CRIME, UNITED STATES, 1960-1973
RATE PER 100,000 INHABITANTS:
YEAR

VIOLENT
CRIMES

MURDER

FORCIBLE
RAPE

ROBBERY

1973

414.3

9.3

24.3

182.4

198.4

1972

398.0

8.9

22.3

180.0

186.8

1971

393.0

8.6

20.3

187.2

176.9

1970

361.0

7.8

18.6

171.5

163.1

1969

325.4

7.3

18.3

147.4

152.5

1968

295.5

6.9

15.7

131.0

142.0

1967

250.8

6.1

13.9

102.1

128.6

1966

218.2

5.6

13.1

80.4

119.1

1965

198.3

5.1

12.0

71.3

109.9

1964

188.9

4.9

11.1

67.9

105.0

1963

166.8

4.5

9.3

61.5

91.4

1962

161.0

4.6

9.4

59.4

87.6

1961

156.9

4.7

9.3

58.1

84.8

1960

159.6

5.0

9.5

59.9

85.2

PERCENT OF
CHANGE
1960-197 3

+159.6

+ 86.0

+155.8

+204.5

AGGRAVATED
ASSAULT

+132.9

Table 3
TOTAL ARREST TRENDS, 1960-73
VIOLENT CRIMES
OFFENSE TOTAL ALL AGES UNDER 18 YEARS OF AGE 18 YEARS OF AGE AND OVER
CHARGED
1960

1973

PERCENT
CHANGE

1960

1973

PERCENT
CHANGE

+35.1

466,174

1,138,046

1960

1973

PERCENT
CHANGE

+144.1

2,776,400

3,243,922

TOTAL
3,242,574
ALL CRIMES

4,381,968

+16.8

TOTAL
92,997
VIOLENT CRIMES

215,540

+131.8

15,180

52,592

+246.5

77,817

162,948

+109.4

4,541

10,629

+134.1

337

1,197

+255.2

4,204

9,432

+124.4

1,766

1,660

-6.0

132

216

+ 63.6

1,634

1,444

-11.6

6,857

13,823

+101.6

1,185

2,753

+132.3

5,672

11,070

+ 95.2

ROBBERY

31,197

83,012

+166.1

7,352

29,336

+299.0

23,845

53,676

+125.1

AGGRAVATED
ASSAULT

50,402

108,076

+114.4

6,306

19,306

+206.2

44,096

88,770

+101.3

CRIMINAL
HOMICIDE:
a. Murder and
nonnegligent
manslaughter
b. Manslaughter by
negligence
FORCIBLE RAPE

—)

Table 4
TOTAL ARREST TRENDS, 1972-73
VIOLENT CRIMES
OFFENSE
CHARGED

TOTAL ALL AGES
1972

1973

18 YEARS OF AGE AND OVER

UNDER 18 YEARS OF AGE
PERCENT 1972
CHANGE

1973

PERCENT
CHANGE

1972

1973

PERCENT
CHANGE

TOTAL
5,950,936
ALL CRIMES

6,158,514

+3.5

1,555,288

1,630,722

+4.9

4,395,648

4,527,792

+3.0

TOTAL
255,504
VIOLENT CRIMES

277,116

+8.5

18,334

19,519

+6.5

58,182

63,698

+9.5

13,837

+ 8.2

1,382

1,442

+ 4.3

11,410

12,395

+ 8.6

CRIMINAL
HOMICIDE:
a. Murder and 12,792
nonnegligent
manslaughter
b. Man- 2,760
slaughter by
negligence

2,793

+ 1.2

250

327

+ 30.8

2,510

2,466

-1.8

13,210

14,755

+ 11.7
+ 1.0

FORCIBLE
RAPE

16,412

18,387

+ 12.0

3,202

ROBBERY

94,733

98,86S

+ 4.4

30,227

33,71

+ 11.5

64,506

65,157

146,023

+ 11.0

23,371

24,91

+ 6.6

108,196

121,111 + 11.9

AGGRAVATED
ASSAULT

131,567

3,63;: +13.4

Table 5
DISPOSITION OF PERSONS CHARGED BY THE POLICE, 1973
PERCENT OF CHARGED
OFFENSE

TOTAL

NUMBER OF PERSONS
CHARGED (held for
prosecution)

GUILTY
OFFENSE LESSER
CHARGED
OFFENSE

ACQUITTED OR
DISMISSED

REFERRED
JUVENILE
COURT

2,141,347

58.8

4.9

17.9

3,234

39.7

19.9

29.1

11.3

885

36.2

9.3

44.7

9.8

Forcible Rape

4,657

28.5

13.0

36.3

22.2

ROBBERY

23,075

29.6

9.9

25.3

35.1

AGGRAVATED ASSAULT

38,756

33.6

13.6

35.9

16.9

18.3

CRIMINAL
HOMICIDE:
a. Murder and
nonnegligent
manslaughter
b. Manslaughter
by negligence

FOR IMMEDIATE RELEASE
April 23, 1975
Contact: Priscilla Crane (202) 634-5248
Washington Township No.l, in Hall County, Nebraska will
repay $3,717.50 to the Treasury Department's Office of Revenue
Sharing, Graham W. Watt, Director of the Office of Revenue
Sharing announced today.
When verified adjusted tax figures replaced the estimated
data used to make initial payments of shared revenues for 1972,
the Office of Revenue Sharing saw that Washington Township had
been paid $7,435.00 more than it was entitled to receive.
The Office of Revenue Sharing requested return of the' money.
When the Township failed to repay, the Department of Justice
filed suit on behalf of the Office of Revenue Sharing in
U.S. District Court to recover the excess.
Before it received the Office of Revenue Sharing's
repayment demand, Washington Township had spent the full
amount of its revenue sharing payments to purchase a fire
truck, and made arrangements to lease the truck to the Grand
Island Suburban Fire Protection District of Hall County,
Nebraska, for $1.00 per year for 20 years. The Grand Island
Suburban Fire Protection District serves 11 communities in
three counties and the U. S. Army Cornhusker Ammunition Plant.

-more-

-2-

Township annual revenues for 1973 of $4,046.07 and expenditures of $3,463.53 made prospects dim for return of the full
amount owed Treasury. The Township did have some securities
purchased with proceeds from the sale of some property approximately six years ago. Under the circumstances, Watt said he
did not feel justified in forcing the liquidation of the
Township's only contingency reserve.
"Considering the unique circumstances of the case and the
likelihood that full prosecution of this case could cost the
Federal government in excess of the proposed $3,717.50 reduction
in our recovery, and considering the fact that the Township
complied with revenue sharing law and regulations to spend
the money it had received, I authorized the U. S. Attorney
to settle for not less than 50<j: on the dollar," Watt said.
The Treasury Department's Office of Revenue Sharing
distributes a portion of Federally-collected individual
income tax receipts to nearly 39,000 states and local generalpurpose governments. Title I of the State and Local Fiscal
Assistance Act of 1972 which authorized the General Revenue
Sharing program, provides $30.2 billion to be distributed over
a five-year period, from January 1972 through December 1976.

Department of theTREASURY
WASHINGTON, D.C. 20220

TELEPHONE WO4-2041

STATEMENT BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE
THE SENATE SUBCOMMITTEE ON APPROPRIATIONS
APRIL 29, 1975
10:00 A.M.
Mr.

Chairman and members of the subcommittee:

I am pleased to be here with you today to discuss the
Treasury Department's budget requests for operating appropriations during fiscal year 1976 and the three-month transition between FY 1976 and FY 1977.
Let me introduce to you my associates at the table Mr. Warren F. Brecht, Assistant Secretary for Administration;
Mr. David R. Macdonald, Assistant Secretary for Enforcement,
Operations, and Tariff Affairs; Mr. Donald Alexander, Commissioner,
Internal Revenue Service; and Mr. Gordon Hegdahl, Acting Director
of my Office of Budget and Finance.
With your permission, Mr. Chairman, I plan to make only a
short opening statement on the overall Department of the Treasury
budget, since I understand you have already conducted hearings
with a majority of the bureau heads.
The budget before you reflects our efforts to strike a
reasonable balance between the needs of the nation's economy
and the needs of our department. In keeping with the President's
efforts to restrict the growth of government and minimize inflation, we have requested increases only where the workload has
increased. On the other hand, we have not sought to reduce
spending below levels that are essential if the department is to
carry out its responsibilities relating to the financial and
economic affairs of the nation.

- 2Current Treasury Activity
Fiscal year 1975 has been and will continue to be filled
with an unusual amount of activity in the Department of the
Treasury.
- The Fiscal Service, especially its Bureau of
the Public Debt, has been engaged in an increased
level of financings.
- The Internal Revenue Service is expected very
shortly to compute and prepare the certification for
the issuance of 80 million refund checks as part of the
economic recovery effort.
- The income tax refund checks must be issued and paid
by the Bureau of Government Financial Operations.
- The 35 million special one-time payments to recipients
of certain retirement and survivor benefits will be
processed by our Bureau of Government Financial Operations
during early May, provided the appropriations pending in
Congress have been enacted.
- The U.S. Customs Service has been administering the
increase in oil tariffs which is part of the President's
overall energy package.
These activities have been added to the ongoing workload
of the Department, but we have requested supplemental funds only
for the Bureau of Government Financial Operations.
I expect that some of this increased level of activity will
carry itself over into the first half of fiscal year 1976, but
we are not yet in a position to discuss the requirements with
you today.
Fiscal Year 1976 Overview
Our estimates as contained in the President's budget for
fiscal year 1976 indicate that Treasury will require a total of
$2.5 billion for operating accounts. This figure is broken down
in detail in Table 1.
You will note that these appropriations represent an increase
of $163.9 million and 2,442 related average positions over 1975
levels. Of this amount, $36.2 million and 1,763 average positions
are needed to handle additional workload which is generated outside the Department and totally uncontrollable by us. For example

- The Department will process over 126 million tax returns
in fiscal year 1976, an increase of over 2 million from
the previous year.
- We expect an increase of 9 percent in delinquent tax
accounts processed and secured.
- We estimate that 38.3 million taxpayers will come to us
for assistance, an increase of 6 percent over 1975.
- We anticipate that 278 million persons will be arriving
at U.S. borders - 4 percent more than in 1975 - and
we will be processing over 17 million formal and informal
Customs entries.
- Almost 14 billion coins will be manufactured, 1.8 billion
more than in 1975.
- Over 146 million savings bonds will be issued and 137 million
retired.
- And the Department will issue more than 670 million checks
and will pay more than 793 million checks. This represents
an increase of 5 percent in the number of checks issued
and a 4 percent increase in checks paid.
The only program expansion -- that is, an increase in the
quality of our programs -- contained in our estimates involves
$13.9 million and 55 average positions. This very modest program
increase is made up of many small but necessary items scattered
throughout the Department.
Treasury is requesting $55.4 million and 624 average positions
just to carry on our present activities, which represents mainly
the impact of inflation and full year costs of some positions added
in FY 1975.
The transition budget covers our operating accounts for the
period July 1, 1976 through September 30, 1976, and amounts to
$624.9 million. This figure involves no program expansion. Rather,
it represents the amount required to continue the fiscal year 1976
program at its previous level for three additional months, to the
beginning of the new Federal fiscal year.
In addition, the amount of $58.4 million is requested for
construction projects which I will discuss in a moment.
In the meantime, I would
to show the relationship
requirements, as well as
derivation of Treasury's

like to insert Table 2 into the record
between our average position and dollar
Table 3, which provides the detailed
"Proposed Authorized Level for 1975."

- 4 Construction of Treasury Facilities
Our fiscal year 1976 budget estimates include $58.4 million
for the construction of certain Treasury facilities. Of these,
the major item is $40.6 million for the construction of a new
Denver Mint to meet the nation's growing coinage requirements.
Only eight years ago the nation's coinage requirements were less
than half of what they are today. When completed and added to
existing facilities, the new Mint will provide sufficient capacity
to meet our coinage requirements for many years to come.
We have requested $14.3 million to complete the Federal Law
Enforcement Training Center. This center was originally scheduled
to be built in Beltsville, Maryland, but because of problems that
arose in connection with that site, we have been seeking another
location. At the request of the Senate Public Works Committee,
the Department of the Treasury and the General Services Administration
reviewed available military bases as possible alternatives. We are
pleased to inform the committee that we have found a former naval
air station in Brunswick, Georgia, that would meet our requirements
if all concerned give their approval. The base in question is
a former Navy training school which offers excellent facilities of
recent vintage. If some of the funds previously appropriated for
the Beltsville site can be used to adapt the Georgia site to our
purposes, it is unlikely that we would require the additional
$14.3 million included in the President's 1976 budget for construction purposes. We will work closely with the committee to
keep you fully informed of our progress on this project. Because
of the need for professionalism in Federal law enforcement has
never been greater, we hope to make this new center fully operational
as soon as practicable.
Finally, we have included $3.4 million for repairs and improvements to the Main Treasury Building. Although it is a very fine
old building with many historic traditions, considerable amounts
of money and time are required to keep it in useful condition. The
monies we are requesting for this purpose will assure that the
building will be serviceable and ready for visitors during the
Maintenance
of Current celebration.
Operating Levels
nation's Bicentennial
Most of the S55.4 million and 624 average positions that we
are requesting for the maintenance of activity at current levels
is needed to cover the full-year cost of pay increases approved
earlier. One item amounting to $32.3 million results from the
pay increase for classified employees in October of 1974 and
the additional pay of blue collar workers required by Wage Board
action. The 624 average positions are entirely attributable to
the annualization of positions granted by the Congress during
fiscal year 1975 but not filled for a whole year. The cost of
these positions has been partially offset by savings. The other
items included in the $55.4 million figure relate to higher travel,

)V1
- 5 printing and communication costs, grade-to-grade promotions,
higher health benefit premiums, and one additional workday.
Summary
As you can see, Mr. Chairman, except for the construction
costs, the Department of the Treasury is asking for only minimal
program increases. We are attempting to hold the line on government employment to an extent commensurate with increased workload
requirements.
I might add with regard to the fiscal year 1975 rescission,
we are formulating our plans on the best use of the $22.5 million.
The justifications before you agree with the President's budget
and still take into account all of the rescissions; however, they
do not take into account the program supplemental for the Bureau
of Government Financial Operations.
I shall, of course, welcome the opportunity to answer any
questions you may have.
Thank you.

oOo

Table 1

-" 6 -

THE DEPARTMENT OF THE TREASURY
Annual Appropriations for Treasury Department for 1975
"and Estimated Requirements for 1976
(In Millions of Dollars)
1975
Proposed
Authorized
Level 1/

1976
Budget
Estimates

Increase
over
1975

Regular Operating Appropriations:
Office of the Secretary:
Salaries and Expenses
Office of Revenue Sharing

26.2

28.1
2.7

1.9
2.7

Federal Law Enforcement Training
Center:
Salaries and Expenses
Construction

3.1
18.9

3.2
14.3

.1
-4.6

Economic Stabilization Activity

2.0

Bureau of Government Financial
Operations:
Salaries and Expenses
Government Losses in Shipment
Eisenhower College Grants
Bureau of Alcohol, Tobacco and
Firearms

113.8
.6
9.0

120.1
.7
1.0

6.3
.1
-8.0

94.4

101.3

6.9

U. S. Customs Service

289.5

304.9

15.4

-2.0

Bureau of the Mint:
Salaries and Expenses
Construction of Mint Facilities

34.6

41.4
40.6

6.8
40.6

Bureau of the Public Debt ,-

97.2

98.6

1.4

42.2

45.3

3.1

725.6
803.5

772.9
837.6
1,655.8

47.3
34.1
84.5

Internal Revenue Service:
Salaries and Expenses
Accounts, Collection and
Taxpayer Service
Compliance
Total, IRS
Federal Tax Lien Revolving Fund

1,571.3
.5

—

-.5

82.9

95.3

12.4

TOTAL, Regular Operating Appropriations
$2,344.1

$2,508.0

163.9

U. S. Secret Service

NOTE: Amounts are rounded and do not add to total.
1/ Includes pay increases authorized by Executive Order 11811,
effective October 1, 1974, and program supplemental for
the Bureau of the Public Debt and the Internal Revenue Service,
750066
March 3, 1975

Table 2
- 7 THE DEPARTMENT OF THE TREASURY
Comparative Statement of Average Positions
Fiscal Years 1975 and 1976
(Direct Appropriations Only)
1975
Authorized
Level

1976
Estimate

Increase
over 1975

Regular Annual Operating Appropriations:
Office of the Secretary:
Salaries and Expenses
Office of Revenue Sharing

819
100

-32
100

Federal Law Enforcement Training
Center

Economic Stabilization Activities

-55

Bureau of Government Financial
Operations

2,515

2,518

Bureau of Alcohol, Tobacco and
Firearms

3,825

3,938

113

12,74-8

12,812

61+

Bureau of the Mint

1,758

1,934-

176

Bureau of the Public Debt

2,538

2,i+99

-39

l,83i+

1,896

1+2,613
38 ,050
82,4-97

i+i+,051
38 ,488
8i+,1+35

1,1+38
1+38
1,938

2,99i+

3,166

172

109,870

112,312

U. S. Customs Service

Internal Revenue Service:
Salaries and Expenses
Accounts, Collection and Taxpayer
Service
Compliance
Total, IRS
U. S. Secret Service
TOTAL, Regular Annual Operating
Appropriations

750068
March 3, 1975

2 ,i+i+2

Table 3

THE DEPARTMENT OF THE TREASURY
Derivation of "Proposed Authorized Level for 1975"
(in thousands of dollars)
1975 Appropriation $2,286,165
Supplemental Appropriation (Eisenhower College)

9,000

Proposed Supplementals:
Pay Increase:
a. Classified
b. Wage Board
c. Executive Protective
Service

$54-,821+
2,522
1,930

59,276

Program:
a.

Public Debt - Provides for increased
reimbursement to the Federal Reserve Banks
(i+^i+oo) , increased reimbursement to paying
agents for redemption of savings type
securities (500) , reimbursement to U. S.
Postal Service for increased mailings of
securities (727), and increased volume and
costs of printing security stock (1,37 3) .
7,000

b. Internal Revenue Service - Provides for
increased costs stemming from the recently
enacted Employee Retirement Security
Act of 1971+ (Public Law 93-1+06) .
6,61+9 .
Rescission of Budget Authority (H. Doc. 93-398) -24-,000
Proposed Authorized Level for 1975 2,31+4-,060

750069
March 3, 1975

13,61+9

;T OF

DepartmentoftheTREASURY
TELEPHONE W04-2041

WASHINGTON. D.C. 20220

/789

April 28, 1975

FOR IMMEDIATE RELEASE

RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.7 billion of 13-week Treasury bills and for $2.7 billion
of 26-week Treasury bills, both series to be issued on May 1, 1975,
were opened at the Federal Reserve Banks today. The details are as follows:
26-week bills
RANGE OF ACCEPTED
13-week bills
maturing
October 30, 197 5
COMPETITIVE BIDS: maturing July 31, 1975
Discount Investm
stmesit
Discount Investment
Rate
Rate
Price
ate 1/
Rate 1/
Price
Rate
98.570 a/ 5.657%
5.83%
High
98.550
5.736%
5.92%
Low
98.555
5.716%
5.90%
Average
a/ Excepting 1 tender of $600,000
b/ Excepting 2 tenders totaling $30,000

96.900 b/6.132%
6.175%
96.878
6.158%
96.887

6.43%J
6.48%
6.46%

Tenders at the low price for the 13-week bills were allotted 29%.
Tenders at the low price for the 26-week bills were allotted 41%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

72,475,000
Boston
$
New York
3 ,528,975,000
28,240,000
Philadelphia
53,985,000
Cleveland
26,475,000
Richmond
38,.040,000
Atlanta
313,625,000
Chicago
40,065,000
St. Louis
15,280,000
Minneapolis
41,230,000
Kansas City
33,010,000
Dallas
San Francisca. 231,175,000
TOTALS^ 4 ' 422 ' 575 ' 000

Accepted
$
29,625,000
2,255,720,000
27,630,000
38,985,000
20,225,000
37,220,000
112,815,000
30,010,000
10,930,000
33,385,000
20,300,000
83,615,000

Received

Accepted

$
29,770,000
4,399,590,000
58,495,000
149,900,000
12,865,000
35,830,000
311,235,000
26,445,000
37,710,000
21,710,000
14,975,000
379,390,000

$
7,535,000
2,514,910,000
8,495,000
20,380,000
10,065,000
12,640,000
34,310,000
10,145,000
3,710,000
15,610,000
7,175,000
55,165,000

$2,700,460,000 c/$5,477,915,000

$2,700,140,000 d/

c/Includes $369,390,000 nonc0inpetitive tenders from the public.
d/Includes $151,835,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

%v
Contact: L.F. Potts
EXT. 2951
FOR IMMEDIATE RELEASE April 28, 1975
TREASURY ANNOUNCES TENTATIVE NEGATIVE DETERMINATION
IN ANTIDUMPING INVESTIGATION ON
VINYL CLAD FENCE FABRIC FROM CANADA
Assistant Secretary of the Treasury David R. Macdonald
announced today a tentative negative determination in the
investigation of vinyl clad fence fabric from Canada under
the Antidumping Act, 1921, as amended. The fence fabric
in question is galvanized steel wire coated with polyvinyl
chloride and woven to provide an open mesh of rectangular
or diamond-shaped apertures. Its chief use is as the body
of chain link fence on residential or commercial properties.
It is generally sold in rolls which are fifty feet long and
of varying widths.
Comparisons between purchase price and home market
price revealed that purchase price was equal to or greater
than the home market price of such or similar merchandise.
Imports of all fence fabric, including vinyl clad
fence fabric, from Canada during CY 1974 amounted to
approximately 16.6 million pounds valued at approximately
$6.6 million.

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

TELEPHONE WO4-2041

April 24, 1975

FOR IMMEDIATE RELEASE
TREASURY'S 52-WEEK BILL OFFERING

The Department of the Treasury, by this public notice, invites tenders for
364-day Treasury bills to be dated May 6, 1975, and to mature May 4, 1976
(CUSIP No. 912793 YJ9).

The bills will be issued for cash and in exchange for

Treasury bills maturing May 6, 1975.
Tenders in the amount of $1,400 million, or thereabouts, will be accepted
from the public, which holds $796 million of the maturing bills.
Additional amounts of the bills may be issued at the average price of
accepted tenders to Government accounts and Federal Reserve Banks, for themselves
and as agents of foreign and international monetary authorities, which hold
$1,006 million of the maturing bills.
The bills will be issued on a discount basis under competitive and
noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Wednesday, April 30, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
in multiples of $5,000.

Tenders over $10,000 must be

In the case of competitive tenders the price offered

must be expressed on the basis of 100, with not more than three decimals, e.g.,
99.925.

Fractions may not be used.

Banking institutions and dealers who make primary markets in Government
securities and report daily to the Federal Reserve Bank of New York their
positions with respect to Government securities and borrowings thereon may
submit tenders for account of customers provided the names of the customers
are set forth in such tenders.

Others will not be permitted to submit

tenders except for their own account.
(OVER)

Tenders will be received without

-2deposit 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 bills applied
for, unless the tenders are accompanied by an express guaranty of payment
by an incorporated bank or trust company Public announcement will be made by the Department of the Treasury of
the amount and price range of accepted bids.

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 or Branch on

May 6, 1975,

cash or other immediately available funds or in a like face amount of Treasury
bills maturing

May 6»

1975

Cash and exchange tenders will receive

equal treatment. Cash adjustments will be made for differences between the
par value of maturing bills accepted in exchange and the issue price of the
new bills.
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 bills (other than life insurance companies) issued hereunder must
include in his Federal 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.
Department of the Treasury 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 theTREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

FOR RELEASE A.M.
THURSDAY, APRIL 24, 1975

Hi
E

STATEMENT BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE EIGHTH ANNUAL MEETING OF
THE ASIAN DEVELOPMENT BANK
MANILA, APRIL 24, 1975
On behalf of the United States delegation, I want to
express to all of you our pleasure at attending this Eighth
Annual Meeting of the Asian Development Bank.
I also want to extend to you the warmest personal
greetings of one of the strongest friends of this organization,
the President of the United States.
In the eight months since he has taken office, President
Ford has already made one visit to the Asian area. He is
also meeting with a number of Asian leaders this calendar
year. His trip and these meetings constitute a visible
symbol of the United States'continuing commitment to this part
of the world.
Role of the United States in Asia
Because of recent events in Indochina, I would like
to open my remarks this afternoon by talking briefly about
the United States in Asia, for it is important that all of
us keep that role in perspective.
The history of American friendship and mutual cooperation
with the nations of this region extends back for more than a
century. We have sacrified many of our finest young men
fighting in Asia to preserve human freedoms. We have supported
the efforts of many people here to gain their independence and
to become viable nation-states. And we have given generously
of our financial resources, contributing more economic and
humanitarian assistance to regional ADB members since World
War II than the rest of the world combined.
Since the last World War, U.S. bilateral concessional
assistance to regional members of the ADB has totaled $35.3billion. Moreover, we have provided a significant share of
the resources of the multilateral institutions, not only the
ADB to which we have contributed $342.6-million in concessional
funds and share subscriptions, but also to the World Bank and
IDA, to which our contributions have totaled $10.3-billion.
WS-285

2
As some of the countries of this region have proposed, less
concessional lending has become more appropriate. The U.S.
Export-Import Bank has loaned $7.8-billion to the regional
members of the ADB, of which $1.9-billion has been lent in
the past three years. I might also note that two-thirds of
all allocation of our Public Law 480 program is being targeted
on ADB regional members in the current fiscal year.
Against this background, the developments in Indochina
are a source of deep concern for my government, as I am sure
they are for all Asian Governments. The fall of the Cambodian
Government less than two weeks ago, and the tragic scenes we
are witnessing in Vietnam, seem to contradict the hopeful
evolution which has taken place elsewhere in the region in the
last several years — an evolution toward cooperation and away
from confrontation, toward peace and away from war.
I have no doubt that many governments of Asia are concerned
that Indochina, and our reactions to events there, may portend
a basic change in the United States' role in Asia. There have
been public expressions of that concern already — suggestions
that the United States can no longer be relied upon by its
friends. I can certainly understand those fears, but in view
of the long history of our friendship in this region and our
resolve for the future, I am confident that such fears are
unwarranted.
President Ford spoke directly to these questions in a
major foreign policy address to our Congress earlier this month.
He urged that foreign governments not be misled, for our will
remains strong and our purposes clear. In the President's words
"We will stand by our friends.
"We will honor our commitments.
"We will uphold our country's principles."
Nowhere are those views more relevant than in Asia. We have
basic commitments in this region, both bilateral and multilatera
We regard those commitments as important to our own interests
and to the interests of the nations with which we are associated
and we will uphold them. There will be no change in the
fundamental direction of American policy toward Asia — and
there will be no American "withdrawal" from this vast region.
Our friends need not fear, and our adversaries should beware of
adopting policies which are predicated on a miscalculation of
our firmness of purpose.

\y
The United States will continue to seek better
relationships with the major Communist powers — as we believe
this benefits all nations — but at the same time we will
continue to place highest value on our relations with our
friends of long-standing in Asia and around the world.
We will continue to work cooperatively with our friends in
maintaining and strengthening the security of Asia, and we
will join our efforts to theirs in building prosperity in the
region. For the United States, there can be no alternative
in a world that is increasingly interdependent. The United
States, as a nation of the Pacific as well as the Atlantic, must
and will remain actively involved in the problems and the
The
International
Economy
development
of Asia.
Just as the United States is learning to live in an
interdependent environment, so too the nations of Asia find
that their economic destinies are increasingly linked to those
of the global community. The challenges posed in the areas of
food and fuel are but the most dramatic examples of an
interdependent world. Before focusing, then, on the Asian
Development Bank, let me spend a few moments reviewing the
state of the international economy.
At last year's meeting of the Bank, inflation was plaguing
much of the world. That inflation grew partly out of the
simultaneous boom conditions of 1972 and 19 73 in the major
countries and partly from long-standing government policies
in many countries, including my own, that served to fuel
inflationary pressures. The steep increase in international
food and oil prices, of course, severely aggravated that
inflationary trend.
Since last year's meeting, most of our countries have
moved temporarily into a generalized condition of minimum or
negative growth and substantial unemployment. Inflation, while
diminishing, also continues to be the most fundamental long-term
economic problem facing many nations. With the acute strains
of current economic conditions, there is a natural tendency for
nations to turn inward and to seek economic solutions at the
expense of their trading partners. Although the solutions
must begin at home, we can all do a better job at solving our
problems through international cooperation. Mutual prosperity
depends on mutual cooperation more heavily now than ever before.
Clearly, the central challenges of international economic
policy today are:
— First, to restore economic growth and price stability
around the world.

4
—
Second, to adapt to the energy shock in ways that
will provide more secure sources of energy and will support
a pattern of orderly growth; and
— Third, to adjust our financial policies to
accommodate massive shifts in international flows of funds.
The role of international development banks must be seen
in the context of these challenges. But these institutions
should not be diverted from their fundamental purpose of
promoting long-term economic growth. They should not try to
solve short-term balance-of-payment problems for which other
institutions exist and for which other vehicles are being
developed.
In 1974, many of the developed countries which have
traditionally transferred resources and capital to the
developing world were themselves unable to cover their imports
of goods and services with export earnings and had to borrow
on an unprecedented scale. Yet these countries, including my
own, held steady in continuing their aid for developing
countries. For most donor countries, this is a new situation
in which they must, in effect, borrow in order to provide
assistance. In most cases, the interest and terms of such
borrowing are far harder than the terms of the aid they
are giving.
The non-oil developing countries were also forced to
increase their borrowings substantially, thereby adding to
an already heavy debt burden.
For all oil-importing nations, there were also fears
that the international financial system might collapse from
the disruptions of traditional payment patterns and fears
that some countries might even be forced into bankruptcy.
Neither of these fears has materialized. Despite some strains,
the financial system remains sufficiently flexible and open
to adapt successfully to the changed patterns of international
capital flows. We have worked together in both the public
and private sectors to establish new financial techniques and
mechanisms where there has been concern that supplemental
arrangements were needed. Countries were also able to avoid
potential bankruptcies by adjusting their domestic policies
and by obtaining a certain amount of assistance from other
nations. In both instances, the success of the oil-importing
nations in averting possible disasters was due in no small
measure to the willingness of governments to cooperate.

\y
Cooperation among nations has helped us to make a good
beginning in coping with many new challenges facing the
developing nations. In particular, establishment of the
development committee associated with the International
Monetary Fund and the World Bank gives us a better institutional
framework for addressing the problems of the developing
countries. The new committee is giving priority attention to
the needs of the countries most seriously affected by a decline
in their terms of trade. Among the specific items in the
committee's current work program are:
a U.S. proposal for a special trust fund to channel
funds on a highly concessional basis to the developing
countries most in need;
a study of ways to enable developing countries to make
greater use of markets; and
a follow-up to the conclusions reached in the World
Food Conference on the financing of food, fertilizer and
food production.
The United States plans to take an active part in the
forthcoming meeting in June of the Development Committee.
We are keenly aware of the plight in which many of the poorest
countries find themselves today, and through the Development
Committee we are determined to see that the international
community takes appropriate action.
Already a substantial volume of funds has been made
available from the International Monetary Fund's regular
resources to many countries with balance of payments
difficulties — developed and developing countries alike.
Moreover, about 2.5-billion SDRs have been loaned from the
IMF special oil facility established last year. It has been
agreed that the IMF's oil facility will be continued in 19 75.
Looking beyond 19 75, IMF members have agreed in principle
to seek an increase in IMF quotas which will place the fund
in a position to make substantial resources available to
countries in need. The United States has agreed to such an
increase, provided that agreement can be reached on a series
of important amendments to the IMF articles of agreement.
It is our hope that agreement on this comprehensive
package of quotas and amendments can be completed by the IMF's
Interim Committee in June. The United States is prepared to
work with other IMF members to develop arrangements under which
members' access to IMF resources could be expanded and to
facilitate greater usability of the Fund's currency holdings.

6
A major step has also just been taken to provide the
international payments system with an additional measure
of insurance. Together with the other OECD countries, I was
pleased to have signed, two weeks ago, an agreement on a
new facility to be called the Support Fund, that supplements
IMF and other sources of financing. This agreement establishes
a $25 billion safety net to be available to participating
countries as a supplement to, but not a substitute for,
established international institutions. The U.S. continues
to view the IMF as the principal source of multilateral
assistance for those members facing temporary balance of payments
difficulties. It is our hope that this safety net will never
be used, but the confidence it gives should make major
contribution to the effective functioning of the international
financial system. By so doing, it will help to avoid a situation
in which individual countries, anxious to gain greater
protection, would be tempted to take restrictive measures which
would in the end be detrimental to all.
Turning to trade matters, let me reemphasize that in
adapting international trade policies to the new situation,
we must discourage nations from turning inwards and seeking
unilateral solutions to their problems. Toward that end, the
United States has recently enacted legislation, the Trade Act
of 1974, which will help us to work constructively and positively
toward an increasingly open world trading system. Let me
reassure you that we are firm in our resolve to implement the
Tokyo Declaration with its special consideration for the needs
of the developing countries. A specific mandate in our Trade
Act gives special consideration to developing country interest.
The forthcoming Geneva negotiations will necessarily be
long, but we are working to resolve the full range of
outstanding problems in international trade.
In short, while the challenges of the international economy
have grown substantially in size and complexity, we are well
advanced in formulating an international response that will
be equal to them. The most important task now before us is
to continue our efforts to meet these challenges through improved
international cooperation.

- 7TRONGER U.S. SUPPORT FOR THE BANK

It is within this context that the United States views the
eed for international cooperation to accelerate basic economic
evelopment. We recognize that the Asian Development Bank is a critics
lultilateral institution for furthering such development in this regior
Within the last several months, the Congress in our country
Las signaled our own support for the Bank by taking two importact
ictions:
--Last December, $362 million was authorized as the United
States share in the Bank's replenishment of ordinary capital, and
--Last month, an appropriation was made of the second $50
lillion for the Asian Development Fund and the paid-in portion
>f our first installment to the replenishment of ordinary capital.
Yesterday, on behalf of my government, I transferred this
second $50 million contribution to the Asian Development Fund and
irranged to subscribe to a further $121 million of ordinary share
:apital.
We have been particularly pleased with the performance of the
5ank during the past year under the fine leadership of President
inoue. Let me highlight just a few of the trends we find most
iavorable:
--The Bank has recognized the importance of increasing food
>roduction by expanding its own support of agriculture. Last year
!5 percent of all loan projects were in the agricultural sector.
'he Bank has also increased its lending activities for fertilizer
)lants and feeder roads.
--By setting up the Asian Development Fund in 1974, the Bank
las established an integrated source of concessional resources for
:ountries with low per capita income whose balance of payments out.ook is not sufficiently strong to rely solely on ordinary capital
.oans. The Bank has also properly decided to reserve the use of
:oncessional funds to the poorest of its member countries.
--In addition, the Bank followed a responsible course in 1974
•y raising its interest rate to 8-3/4 percent on ordinary capital
oans and by adopting a split rate under which it charges 9% percent
r
or loans to high income countries. This is a step in the right
iirection toward "graduating" borrowing countries that can obtain
sxternal financing quite readily in the private capital market.

- 8--The Bank's net income for 1974 has increased substantially
o $26.4 million. In my view, the Bank ought to transfer some of
ts net income to the Asian Development Fund, beginning next year.
--I might also note that the Bank has borrowed in the U.S.
tarket for the first time since 1971. I welcome this entry into
iur market. At the same time, I hope that the Bank will avoid
•orrowing in currencies which are not internationally traded and are
;hus potentially subject to large and arbitrary changes in value.
n stepping up its borrowing, the Bank should also be mindful ot
:he dangers of increasing liquidity beyond its needs.
--Finally, let us recognize that the Bank has also made progress
m administrative reorganization, including the establishment of an
independent evaluation group. This sets the stage for further lm)rovement in implementation of loans.
In considering the progress made by the Bank, it is wise to
remember that the amount of new loans is not itself the measure of
the Bank's contribution to sustained economic development in its
nember countries. The key measure of the Bank's role is how much
levelopment actually takes place, and this depends on the quality
Df bank-supported projects and on the Bank's contribution to the
process of building institutions, training personnel, and setting
reasonable priorities within member countries.
Looking ahead to the coming year, we see the Bank planning
to expand its lending program, increase the volume of-resources
In the Asian Development Fund and, later, to increase the Bank's
capital base.
Concerning the Asian Development Fund, my own government still
las $50 million to be appropriated by our Congress before we can
contemplate seeking authorization for additional resources. As we
address the question of additional funding within the United States,
[ strongly urge that, apart from seeking new resources from member
countries, the Bank also make every effort to obtain participation
and special contributions from non-member countries that have
especially strong external positions.
As for ordinary capital, the Bank recently has been able to
Dbtain some special increases in capital from Indonesia and Malaysia,
and I understand that within the next year it will obtain a special
increase from the Federal Republic of Germany. It would be highly
desirable if member countries in a position to do so would make
available similar special increases to the Bank's ordinary capital.
Given the Bank's tight resource position, it will also be important
to make every effort, to fund new projects in cooperation with private
investors and banks in the form of parallel and joint financing. By
ictively seeking this type of arrangement, the Bank could, with a
jiven amount of its resources, contribute more widely to the development of its member countries.

1^
The private sector is important to the Bank, not only as a
lender but also as a recipient of bank loans. In fact, since
irivate sector free from government controls is the most certain
[erpinning for economic development, the Bank should seek to increase
i share of its lending to productive enterprises outside the public
iere.
With the very rapid growth in lending over the last few years,
would be prudent in the period immediately ahead to concentrate
improving the quality of new loans and on continuing to seek more
"ective implementation of loans underway. To further this effort,
j Bank must work toward a system of more intensive project supervision,
the Bank becomes stronger it should also become more active in
i difficult sectors where innovative lending is needed--such as
rural development and small town water supply projects which reach
/er income groups.
We hope the Bank will also continue to strengthen its cost
:imating procedures for projects in order to avoid the cost
jrruns that have become a major problem for the institution. I
rongly believe that cost overruns should normally be financed
)m other sources, leaving funds of the Bank available for new
)jects. Assuming the projects financed by the Bank are among the
*hest priority undertaking for the borrowing country, alternative
lancing can be found.
While increased production and productivity should remain the
Lef objective in agricultural loans, we believe the' Bank should
>o place special emphasis on projects which ensure that benefits
LI be widely shared among the rural population of its member countries.
With regard to post-project evaluation, I congratulate the Bank
its adoption of an independent audit mechanism. This year the
ik should move ahead rapidly to schedule the evaluation of projects
ler this new independent arrangement.
ELUSION
Gentlemen, if I may, I would like to conclude my remarks with
)rief personal note.
This visit to Manila, where the Philippines government has been
:h a gracious host, brings me near the end of an extended trip
)und the world. In Paris, I signed the agreement establishing
s $25 billion support fund that I mentioned earlier. In Moscow,
Led an American delegation that discussed means of increasing
ide with the Soviet Union. I also met there with General Secretary
jzhnev, where we exchanged assurances that each of our countries
lained firmly committed to a policy of detente.
During the seven days that followed I had the privilege of
;iting two Asian countries, India and Sri Lanka. In New Delhi,
let with Prime Minister Gandhi and in Colombo, with Prime Minister

- 10 of increasing mutual cooperation between our countries.
Throughout this journey, I have been struck by one central
fact: the nations of the world today share the same aspirations.
All of us yearn for peace and economic progress. All of us want
to overcome the uncertainties and complexities of today's environment. And all of us want our children to grow up in a world that
is secure from hunger and war.
Across the globe, there is talk today of crisis--the crisis
of hunger, the crisis of the international economy, the crisis of
Indochina, and so on. The list is long and imposing. But in each
country that I visited, there is also a recognition that in every
crisis, there is also opportunity.
We have within our grasp today the opportunity to build an
international community in which the blessings of economic and social
progress can be extended to every child. Certainly, we have our
problems. We will always have them in the international community.
But let us not allow our problems to become insurmountable barriers
or to obscure the interests that we share together. Let us instead meet these problems head-on by recognizing our common bonds
and working together to find solutions.
The United States is eager to participate in this process.
As we prepare to celebrate the tenth anniversary of the signing
of the charter for the Asian Development Bank, I pledge to you
that the United States shall remain a steadfast friend in the
search for peace and economic progress.
Thank you.

0O0

Department of theJREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

f
FOR IMMEDIATE RELEASE

Contact:

Peter 0. Suchman
964-5538
April 24, 1975

DETERMINATION IN COUNTERVAILING DUTY INVESTIGATION
OF EC DAIRY PRODUCTS
Acting Secretary of the Treasury Gardner today
announced that a final determination has been made in the
countervailing duty investigation of Dairy Products exported
from the European Community. Notice of Receipt of Petition
in this case was published in the Federal Register on
January 15, 1975, and a Preliminary Determination that
bounties or grants exist was published on February 14.
Acting Secretary Gardner said that as a result of
extensive discussions between representatives of the
Commission of the European Community and the U. S. Government
the EC has taken a number of significant actions to modify
the EC system of restitution payments as it applies to dairy
exports to the U. S., including the suspension of restitutions
on cheeses for further processing. These actions have in
large part met the concerns of representatives of the domestic
U. S. dairy industry and the U. S. Government that the EC restitution system was creating a situation of unfair competition for
domestic producers. It has therefore been determined that
although the EC restitution system, as it applies to dairy
products exported to the U- S., does constitute a bounty or
grant within the meaning of the U. S. Countervailing Duty Law,
the criteria of Section 331 of the Trade Act of 1974, providing for the waiver of imposition of countervailing duties
in certain circumstances have been met. This determination
follows after consultation between the Treasury Department
and representatives of the domestic producers, other concerned agencies of the Executive Branch, as well as interested
members of Congress. Countervailing duties will not be
imposed on those EC cheeses still benefitting from restitution payments during the period of applicability of the
waiver provision, and so long as the statutory criteria
continue to be met.
Section 331 of the Trade Act provides that the Secretary
of the Treasury may, for four years following enactment of the
Act, waive countervailing duties on an import if he determines that adequate steps have been taken to reduce substan(Over) or
tially or eliminate the adverse impact of any bounty

-2grant; that there is a reasonable prospect for successful
multilateral trade negotiations; and that imposition of the
waived duties would be likely to seriously jeopardize those
negotiations. The waiver must be revoked if the basis
supporting the determination ceases to exist, and the
waiver is subject to an override by either house of Congress.
It should be noted that the waiver applies only to
certain high quality specialty and table cheeses and not
to those products, more generally used for processing, which
directly compete with domestically produced cheese. EC
restitutions on the latter have been removed, therefore,
no additional duties would be appropriate on those products
so long as no restitution payments are being made. Acting
Secretary Gardner pointed out that this decision will afford
domestic producers protection from subsidized competition
while not unnecessarily raising the prices to consumers of
non-competitive cheese imports.
* * *

Department of theJREASURY

OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20226

"ELEPHONE 634-5248

FOR IMMEDIATE RELEASE
Tuesday, April 29, 1975
Contact: Priscilla R. Crane (202) 634-5248
The U. S. Treasury Department's Office of Revenue
Sharing and the U. S. Department of Housing and Urban
Development (HUD) formally agreed today to work together
to resolve complaints of discrimination involving States,
local governments, their contractors and secondary recipients
spending General Revenue Sharing funds.
A Memorandum of Agreement was signed this afternoon
in a plenary session of HUD's "Conference on Fair Housing
and Funding" at the Ramada Inn in Rosslyn, Virginia by
Graham W. Watt, Director of the Office of Revenue Sharing
and Gloria E.A. Toote, Assistant Secretary of HUD for Equal
Opportunity.
The Agreement provides that when the Office of Revenue
Sharing receives a complaint alleging discrimination in a
program where HUD has civil rights compliance responsibility,
(in the activities of housing and urban renewal authorities
or programs involving community development block grants,
for example) the matter will be referred to HUD for investigation.
-more-

-2-

Where HUD independently investigates a complaint of
discrimination and finds that General Revenue Sharing funds
are involved, the Department will notify the Office of Revenue
Sharing. The Office of Revenue Sharing then will notify the
recipient government involved, using procedures established
in revenue sharing regulations.
The Office of Revenue Sharing and HUD will keep each
other fully informed on matters of common concern.
Nothing in the agreement diminishes in any way the
responsibility of the Director of the Office of Revenue Sharing
to make his own determination of discrimination in the use of
General Revenue Sharing funds, based on whatever facts and
evidence are available to him.
Title I of the State and Local Fiscal Assistance Act ot
1972, which established the General Revenue Sharing program,
provides that "No person in the United States shall on the
grounds 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 activity funded
in whole or in part with ... (general revenue sharing funds)."
To assist in monitoring compliance with the civil rights
and other provisions of revenue sharing law, the Office of
Revenue Sharing has developed an innovative system which enlist
the assistance of other Federal and State agencies whose responsibilities relate to revenue sharing compliance activities.

The Office of Revenue Sharing draws on resources and expertise
already in place; rather than to duplicate what already exists.
Cooperative working agreements have been concluded with the
U. S. Equal Employment Opportunity Commission, State audit
agencies in nearly all States, and with the Maryland Commission
on Human Relations.

The arrangement with Maryland's civil

rights agency, concluded yesterday, is the first of a series
of comparable agreements to be negotiated with State civil
rights agencies throughout the country.
Revenue sharing law authorizes the distribution of $30.2
billion to nearly 39,000 states, counties, cities, towns,
townships, Indian tribes and Alaskan native villages over a
five year period that ends with December 1976.
Already, some $18.9 billion has been distributed. The
next quarterly payment of shared revenues will be made in
July 1975.

-30-

DepartmentoftheTREASURY
WASHINGTON. D.C. 20220

TELEPHONE W04-2041

FOR RELEASE UPON DELIVERY

DEPARTMENT OF THE TREASURY
STATEMENT OF
THE DEPUTY SECRETARY OF THE TREASURY
STEPHEN S. GARDNER
BEFORE THE
SUBCOMMITTEE ON ECONOMIC STABILIZATION
OF THE
HOUSE COMMITTEE ON BANKING, CURRENCY AND HOUSING
APRIL 29, 1975
Mr. Chairman and Members of the Subcommittee: I am
pleased to appear before you in support ofH.R. 6078, a bill
to establish a National Center for Productivity. The Department of the Treasury is vitally interested in improving the
U. S. economy. The Secretary of the Treasury is Chairman of
the Economic Policy Board which oversees the work of the
current National Commission on Productivity and Work Quality.
The Nation's future economic performance will be directly
affected by productivity gains.
Productivity is a matter of fundamental importance to
the U. S. economy. Improved productivity is the only basic
source for a rising national standard of living.. It would
provide major anti-inflation benefits. Our international
competitive position depends upon maintaining positive longterm trends in productivity. The preservation of the environment and the efficient allocation of valuable human and
material resources is directly affected. In fact, the
entire industrial relations environment, including the quality of work, will depend upon the success of programs to
stimulate national productivity.
The remarkable progress.of the U. S. economy has
resulted from the productivity of a highly trained and
educated labor force, effective managerial leadership,
extensive capital investment and the application of new
technology. It is, therefore, disturbing to note that the
rate of productivity growth in the United States has declined
in recent years and that for over a decade U. S. productivity
improvement has ranked well below the results reported in most
other industrial nations. It is no coincidence that the Nation's
level of capital investment has also been relatively low.
Part of the unfavorable comparisons may reflect cyclical
conditions
and the large size of our mature economy which inWS-286
creasingly emphasizes services and immediate consumption.

-2But merely recognizing the problem is an inadequate reaction.
Programs to stimulate productivity are badly needed. Therefore, we commend the Committee for focusing national attention on this crucial economic challenge.
Role of the Private and Public Sectors
The private sector of the U. S. economy has historically
been responsible for most of our gains in productivity.
Profit opportunities have motivated companies to invest
additional capital and to press for efficient production
and distribution procedures. Rising "real" earnings have
provided strong incentives for workers, who continuously
have moved into more productive jobs and occupations.
American families have emphasized increased educational
opportunities for their children to prepare them for these
better job opportunities. The rising standard of living
resulting from this combination of circumstances has been
a key factor in the economic success of America. Since
the actions of labor and management will continue to
largely determine productivity results, public and private
sector efforts should be coordinated. A major goal of any
governmental program should be to gain the support of
labor and management for cooperative efforts. But there
is also an important role for government programs:
1. The productivity of the entire economy could
be significantly improved by removing regulatory, legislative and administrative barriers to improving efficiency.
There are hundreds of specific governmental actions which
unnecessarily waste our valuable resources.
2. Government leadership can focus attention on
long-term goals and support experimental and demonstration
projects which in this burgeoning technological age are
too novel for private investment or even beyond the
capabilities of the private sector.
3. The government can increase the visibility of
productivity programs and coordinate efforts throughout
the private and public sectors.
4. The government can coordinate the efforts of
diverse educational and research institutions and the
activities of numerous State and local programs.

\y
-35. The government can develop comprehensive
statistical information and operate capital grant and
technical assistance programs.
For all of these reasons, the Administration supported
the creation of the National Commission on Productivity
(NCOP) in 1970. The performance of that Commission
during the first three years of its existence was restricted by funding and organizational limitations and chronic
uncertainties about its future. As a result, it has been
difficult to develop a sustained work program. Nevertheless, several important research and demonstration projects
are under way or have been completed. A summary of current
activities of the National Commission on Productiviey and
Work Quality is attached for the record.
Summary
We commend the Committee for its efforts to focus
attention on the vital subject of productivity. We believe
the proposed National Center for Productivity can serve as
a catalyst in coordinating labor, management and governmental efforts to stimulate productivity growth. While there •.
are numerous government agencies and programs that are
concerned about productivity problems, there is a need to
coordinate all of these efforts, the success of which will
directly effect the future of the U. S. economy. We urge
prompt legislative action on H.R 6078 so that the kinds of
delays and uncertainties that too often existed in the
past can be avoided.
o 0 o

SUMMARY* OF FY 1975 ACTIVITIES
OF THE
NATIONAL COMMISSION ON PRODUCTIVITY
AND WORK QUALITY

Accomplishment for the National Commission on
Productivity and Work Quality is measured by its
ability to cause elements of an industry, economic
sector or public service to engage themselves in
an effective effort to improve their own performance.
Given that catalytic role, it is important to
realize two things: 1) individual successes are the
result of many participants and credit belongs to
all; and 2) individual successes represent milestones
in a more important continuing effort towards improvement.
During FY 1975 the Commission itself was successfully reorganized to allow for the effective participation of its membership in its purpose. An executive
committee and functional area work groups of Commission
members have worked both on directing the efforts of
the staff and initiating activities on their own.
The work of the Commission toward improving productivity
is divided into four different categories:
1. Quality of Work - labor/management committees
and behavioral science applications to the
work place;
2. Public Sector - including Federal, State and
local governments;
3. Private Sector - food distribution, health
care, construction and transportation
industries; and
4. Education.

*Note - A more detailed description indicating the
background and context in which projects were
selected may be found in Part II of the Commission's
4th Annual Report.

- 2 QUALITY OF WORK
In response to its Congressional mandate, the
NCOP and WQ is developing material of practical help
in the establishment of labor/management committees.
A booklet "Labor-Management Productivity Committees in American Industry" is being printed and
material is now being edited that will result in
case studies of 8-10 public sector committees.
On the plant/community level the NCOP and WQ
has held five conferences in Illinois, Wisconsin and
New York (with FMCS), with plant-level technical
assistance follow-up by State Institutes of Labor
Relations. At least a half-dozen sites will be
setting up committees aided by the knowledge these
conferences provided.
Additionally, the results of these meetings are
being consolidated into a publication "Pointers for
Labor-Management Committees" which should go a long
way in overcoming obstacles to the formation of these
committees throughout the Nation.
In the behavioral science field the Commission
is evaluating the impact of two types of increasingly
popular programs on productivity for use by managers
and labor leaders.
A participatory incentive plan in a large
corporation (DeSoto Paint Corporation).
Flexible working hours in a service industry
(First National Bank of Boston).
Work (in cooperation with DOL) is being done to
produce guides for the appropriate application of
behavioral science techniques and a report will be
issued on management actions taken in response to
attitude surveys of 7,500 workers in five Federal
agencies (with CSC).

- 3 PUBLIC SECTOR
In the public sector the NCOP and WQ has
supported and encouraged the efforts of the OMB, CSC,
and GAO to measure and enhance Federal Government
productivity and is also active in a variety of
projects designed for productivity improvement in
state and local governments.
For Elected Officials - a guide entitled
"So, Mr. Mayor, You Want to Improve Productivity"
has been published and was the basis for a series
of meetings with top elected officials throughout
the country. Similar publications for city and
county elected officials are in process, as well as
a booklet on productivity improvement in state
government for legislators.
For management - a program to launch 20 cities
into productivity improvement programs with development of follow-up guidance during the initial months
of effort.
A series of five Productivity Workshops were
held for state and local officials to
facilitate the transfer of improved methods
between jursidictions.
Training materials, now scheduled for field
testing will, if successful, be provided for
internal instruction in the factors of
productivity.
Incentives - a comprehensive report updating an
earlier survey of personnel incentives, used by public
administrators is complete and scheduled for early
publication. It is hoped that awareness of existing
programs will stimulate further development of this
topic.
The successful Solid Waste and Police productivity
projects are being followed by a similar effort in
government inspections with draft guides for local
managers expected by the end of June. Also, in the
Police sector, a major conference on productivity
improvement techniques was recently held (with the Police
Foundation) for 200 police chiefs and mayors from
across the country.

- 4 PRIVATE SECTOR
In the private sector the NCOP and WQ is concentrating its activity in the fields of food distribution,
health care, construction and transportation.
In food distribution the following projects are
in progress:
- Work with CWPS to encourage backhaul through
a pamphlet on benefits and meetings with
manufacturers, FTC and distributors;
Investigation of consolidated delivery
systems costs and benefits to participants
(with Department of Agriculture);
- Enlistment of industry and Department of
Commerce support for a study of costs and
benefits of modularized system;
Developing awareness of technological needs
by retailers through holding conferences at
M.I.T. and the University of Southern
California; and
Stimulating the industry toward development
of orderly manpower adjustment programs.
In health care the following projects have been
undertaken to contribute to increased productivity:
Over 100 practitioners identified opportunities
to increase productivity throughout the
industry;
A nationwide education program on productivity
for hospital administrators;
Development of a statewide productivity
measurement system for national implementation;
- Pooling of expertise of industry and health
leaders in one state to pursue health care
productivity improvement opportunities;

EG
- 5 -

Removal of IRS barriers to hospital employee
incentive programs; and

Implementation of an in-hospital productivity
improvement program.
Problems of productivity in the construction
industry are being approached by:
- A conference held with leading labor/management
officials on common problems of productivity
measurement;
- A report on new labor management initiatives
to improve productivity; and
- A labor/management subcommittee to deal with
improvements in collective bargaining,
productivity, and manpower issues.
In transportation the NCOP and WQ has identified
freight car utilization as a central issue in the
fiscal viability of the railroad industry as well as
in the capacity to provide the increased service
required by the American economy.
Accordingly, work on the interchangeability of
freight cars has resulted in a "clearinghouse"
experiment designed to eliminate excessive movement
of empty cars. With three cooperating railroads,
this experiment shows substantial direct operating
savings, reduced capital investment and significantly
better service to shippers.
To encourage efficient capital investment
practices, the NCOP and WQ is encouraging railroad
and automobile representatives to confer and agree
on common designs as new rail cars are developed for
shipment of autos.
Work is also under way on applications of both
new and existing equipment for integrated shipments
in a transcontinental intermodal food distribution
service.

- 6 The dedicated train concept as the Commission
applied it in the "Fresh from the West" unit train
service is proving the refrigerator car cycle time
can be cut by 30%—the equivalent of 900 new cars
or a $40 million investment—with far better service
to the consumer. The staff is working with the
railroads and additional industries to increase the
application of this method of train operation, j
EDUCATION
To continue its efforts in technical education,
the Commission maintains a series of publications
of value to those working on productivity programs.
These include such studies as:
"The Role of Productivity in Controlling
Inflation."
- Productivity centers in other countries—
a comparison of objectives, programs and
background.
Productivity trends and differences at the
plant level:
° Casebook on Company Productivity Programs
with Emphasis Upon How the Companies Got
Started
° Analysis of Factors Affecting Interplant
Differences in Productivity in Selected
Industries
"Public Attitudes on Work-Related Matters."
Altogether, the Commission has completed 18
publications which have been distributed to key
managers, government officials and others throughout
the country. An additional 12 publications are in
various stages of completion.
The Commission also works actively with other
Federal agencies on the design and implementation
of research agendas.

- 7 -

The Public Awareness program, in cooperation
with the Advertising Council, Inc., launched in
the fall of 1973, continues in operation.
Using the themes "Pride in Work" and "Productivity, the Key to Your Future" it is estimated to
have made over 200 million contacts with the public
Materials have been requested and used by over:
2,500 Radio Stations
1,000 TV Stations
1,000 Newspapers
600 Magazines
100,000 Trains and Buses
3,500 Billboards

Department theTREASURY
TELEPHONE W04-2041

VASHINGTON, D.C.

April 29, 1975

FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING

The Department of the Treasury, by this public notice, invites tenders for
two series of Treasury bills to the aggregate amount of $5,600,000,000 »
thereabouts, to be issued

May 8, 1975,

as follows:

91-day bills (to maturity date) in the amount of $2,800,000,000, or
thereabouts, representing an additional amount of bills dated February 6, 1975,
and to mature

August 7, 1975

(CUSIP No. 912793 XH4), originally issued in

the amount of $2,400,740,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $2,800,000,000, or thereabouts, to be dated
and to mature November 6, 1975

May 8, 1975,

(CUSIP No. 912793 XWI).

The bills will be issued for cash and in exchange for Treasury bills maturing
May 8, 1975,

outstanding in the amount of $4,802,370,000, of which

Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,624,305,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, May 5, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
multiples of $5,000.

Tenders over $10,000 must be in

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(OVER)

Others will not be permitted to submit tenders except for their
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 bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated.bank or trust company.
Public announcement will be made by the Department of the Treasury of the
amount and price range of accepted bids.

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

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing
ment.

May 8, 1975.

Cash and exchange tenders will receive equal treat-

Cash adjustments will be made for differences between the par value of

Accordingly, the owner of

bills (other than life insurance companies) issued hereunder must include in his
Federal income tax

return, as ordinary gain or loss, the difference between

Copies of the circular may be obtained from any Federal Reserve Bank or

Contact: J.G. Wallar
x 2951
FOR IMMEDIATE RELEASE April 29, 1975
TREASURY ANNOUNCES INITIATION OF
COUNTERVAILING DUTY INVESTIGATION
Assistant Secretary of the Treasury David R. Macdonald
announced today the issuance of a "Notice of Receipt of
Countervailing Duty Petition and Initiation of Invesgiation",
on hydrogenated castor oil and 12 hydroxystearic acid from
Brazil. These castor oil products are used in the manufacture
of heavy lubricants. The Notice will appear in the Federal
Register of Wednesday, April 30, 1975.
The Notice states that on March 10, 1975, a petition in
satisfactory form was received alleging that payments or
bestowals, conferred by the Government of Brazil upon the
manufacture, production or exportation of these castor oil
products from Brazil constitute the payment or bestowal
of a bounty or grant within the meaning of the Countervailing
Duty Law (19 U.S.C. 1303). Under the statute, the Treasury
has six months from the date of receipt, until September 10,
1975, to make a preliminary determination, and 12 months,
until March 10, 1976, to make a final determination. If
Treasury finds that a bounty or grant has been paid or
bestowed, the imports in question would be subject to an
additional "countervailing" duty equivalent to the net
amount of the bounty or grant.
During calendar year 1974 imports of hydrogenated
castor oil from Brazil were valued at $833,000. For the
same period imports of 12 hydroxystearic acid from Brazil
were valued at $230,000.
#
#
#

FOR IMMEDIATE RELEASE
Monday, April 28, 197 5
Contact: Priscilla R. Crane (202) 634-5248
The first cooperative agreement between the U.S.
Treasury Department's Office of Revenue Sharing and a State
human rights agency was signed at the Treasury Department
today. Elbert L. Guillory, Executive Director of the Maryland
Commission on Human Relations and Graham W. Watt, Director of
the Office of Revenue Sharing executed the agreement at a
ceremony presided over by Edward C. Schmults, Under Secretary
of the Treasury.
The agreement signed today is the first of a series of
comparable arrangements that the Office of Revenue Sharing
plans to make with the 35 State human rights agencies which
are recognized by the U. S. Equal Employment Opportunity
Commission. These agreements will facilitate thorough
investigation of the civil rights requirements which relate
to expenditures of shared revenues by States and local
governments that receive the funds.

-more-

-2-

The Maryland-Office of Revenue Sharing agreement provides
that the Office of Revenue Sharing will advise the Maryland
Commission on Human Relations of all complaints alleging
discrimination in the use of General Revenue Sharing funds
by any general government in Maryland, by secondary recipients
or by their contractors.

The Maryland Commission on Human

Relations may then assist in the investigatory process by
conducting compliance reviews of the jurisdictions about which
complaints have been raised.
The Maryland Commission on Human Relations will extend its
ongoing monitoring and enforcement activities to include
reviews of compliance with the civil rights provisions of the
revenue sharing law.

Where there is reason to believe that

discrimination in violation of the revenue sharing law has
occurred, the Maryland Commission will advise the Office of
Revenue Sharing and the Office of Revenue Sharing will move to
resolve the problem.
Where the Maryland Commission has conducted a review, the
Office of Revenue Sharing will give the State's findings substantial weight.

A determination by the Maryland Commission

will not preclude the Office of Revenue Sharing from making
its own determination, however.

Likewise, a determination by

the Office of Revenue Sharing will not preclude the Maryland
Commission from making a separate determination with respect
to State statutes and other laws under its jurisdiction.

y\
The Office of Revenue Sharing and the Maryland Commission
on Human Relations will coordinate their work and cooperate
in all revenue sharing-related civil rights reviews that
take place within the State.
On a confidential basis, the two agencies will exchange
information relevant to adequate enforcement of the civil
rights provisions of revenue sharing law within the State of
Maryland.
The proposed agreements with State civil rights agencies,
of which today's is the first, are to be part of the Office
of Revenue Sharing's innovative audit and compliance system.
The Office of Revenue Sharing is drawing upon capabilities
already existing in the Federal and State governments, as
part of its overall program to assure compliance with all
provisions of revenue sharing law.
The Office of Revenue Sharing already has consummated
cooperative audit agreements with most States in the United
States through which State audit agencies are including
reviews of compliance with provisions of revenue sharing
law in their regular audits of state agencies and units of
local government.
The State and Local Fiscal Assistance Act of 1972 which
authorizes the General Revenue Sharing program provides that
"no person in the United States shall on the grounds of race,
color, national origin or sex be excluded from participation
in, be denied the benefits of, or be subjected to discrimination

-4-

under any program or activity funded in whole or in part
with .... (revenue sharing funds)."
Shared revenues must be spent in accordance with the
State and local laws and procedures which apply to the expenditure of a recipient government's own funds.

General Revenue

Sharing money may not be used to match other Federal funds.
And if 25% or more of a construction project involving $2,000
or more is paid from shared revenues, then the Davis Bacon Act
minimum wage rates must be paid.
Revenue sharing law further provides that State governments
may spend their revenue sharing dollars in any area of activity.
Local units of government may spend their shared revenues for
any capital purpose or for operating and maintenance of programs
in any one or more of eight priority categories specified in
the law.
The State and Local Fiscal Assistance Act of 1972 was
signed into law on October 20, 1972.

Since then, $18.9 billion

have been distributed to nearly 39,000 States and local governments throughout the United States.

The law authorizes the

distribution of $30.2 billion over a five year period that
ends with December 1976.

-30-

FOR IMMEDIATE RELEASE
Contact:

April 29, 1975
Helene Melzer, 964-8706

ANITA F. ALPERN BECOMES TREASURY'S
FIRST WOMAN GS-18 CIVIL SERVANT
With today's announcement of the appointment of Anita F.
Alpern as Assistant Commissioner for Planning and Research in
the Internal Revenue Service, the Treasury Department attains
its first career-level woman GS-18, the highest level in the
Civil Service merit system. Only 8 women have reached that
level in the classified Federal Service.
"The promotion of Anita Alpern to the highest grade in
the Civil Service is indeed well deserved and marks a milestone in the annals of the Treasury Department," said Warren F.
Brecht, Assistant Secretary (Administration), who has responsibility for Treasury's Equal Opportunity Program. "I have
worked closely with Anita over the past two years and regard
her highly. Her achievement points the way for other women."
Miss Alpern,who had been Deputy Assistant Commissioner,
and then Acting Assistant Commissioner, following the retirement of Dean Barron last December, had, as a GS-17, already
been Treasury's highest ranking woman in the career service.
The Director of the Mint and the Treasurer of the United
States, both appointed by the President, subject to Senate
confirmation, have the same grade-level equivalent, but are
not part of the competitive service.
Miss Alpern,55, began her government service in 1942 as
a P-l (now GS-5) economist with the U.S. Employment Service,
then the Bureau of Employment Security. In 1947, she transferred to the Department of Defense, where she served successively as administrator, senior program analyst, and
systems research analyst in the Office of the Secretary.
She joined the Internal Revenue Service in 1960 as a
management analyst, and subsequently was appointed chief of
the analytical services staff, collection division.
WS-287

(MORE)

- 2 In 1972, Miss Alpern became the first IRS "supergrade"
woman with her promotion to Director, Program Review and
Analytical Service Staff, and in December 1973, she was
appointed Deputy Assistant Commissioner for Planning and Research, as well as Director, Planning and Analysis Division.
In the course of her IRS career, the new Assistant
Commissioner has developed analysis systems for tax collection programs, supervised the design for systems to forecast
workloads and taxpayer assistance problems, tax collection
and tax returns processing.
In her new post, Miss Alpern coordinates national Internal
Revenue Service plans and policies, organization and procedures,
and directs all legislative, research and operations analysis
and tax systems redesign.
Miss Alpern was born in New York City and earned a B.A.
in political"science at the University of Wisconsin, later
completing graduate courses in public administration at
Columbia University. She has earned numerous awards at IRS,
including nominations in 1966, 1971 and 1973 for the Federal
Woman's Award; Outstanding Efficiency Ratings in 1966, 1967,
1968 and 1971, the latter with a high quality increase; and a
Special Act of Service Award in 1963. At DOD, she
also earned Outstanding Efficiency Ratings in 1952 and 1956,
and was nominated for an American Management Association
scholarship in 1955.
Since October 1974, Miss Alpern has been chairperson of
the Treasury Women's Advisory Committee, a top-level group
of women who advise the Secretary of the Treasury on the
special activities of women within the Department.
Miss Alpern is vice president of the National Capital
Area Chapter of the American Society for Public Administration
She is a member of the District of Columbia Society
of Crippled Children, and of the Board of Directors of the
Federal Executive Institute.
She has lectured on management by objectives and on
leadership techniques at the University of Southern California,
the Civil Service Commission and the Department of Interior
and has written articles on related topics.

oOo

DepartmentoftheTREASURY
TELEPHONE W04-2041

WASHINGTON. D.C. 20220

/789

FOR IMMEDIATE RELEASE

April 30, 1975

RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $1,400 million of 52-week Treasury bills to be issued to
the public, to be dated May 6, 1975,
and to mature May 4, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS: (Excepting 1 tender of $85,000)
Price
High
Low
Average

93.578
93.508
93.529

Discount Rate

Investment Rate
(Equivalent Coupon-Issue Yield)
6.79%
6.86%
6.84%

6.351%
6.421%
6.400%

TOTAL TENDERS FROM THE PUBLIC RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS
District

Received

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

$
33,840,000
2,290,950,000
27,500,000
59,070,000
30,915,000
13,220,000
321,560,000
39,565,000
26,445,000
17,755,000
34,070,000
497,620,000
$3,392,510,000

TOTAL

Accepted
$

3,545,000
828,770,000
7,500,000
24,030,000
20,035,000
7,220,000
159,040,000
14,695,000
21,445,000
. 8,225,000
10,190,000
296,470,000

$1,401,165,000

The $1,401,165,000 of accepted tenders includes 12% of the amount of
bills bid for at the low price and $56,035,000 of noncompetitive tenders
from the public accepted at the average price.
In addition, $1,033,225,000 of tenders were accepted at the average price
from Government accounts and from Federal Reserve Banks for themselves and as
agents of foreign and international monetary authorities.

FOR IMMEDIATE RELEASE

April 30, 1975
Contact: Stanley Sommerfield
964-2394

FOREIGN ASSETS CONTROL REGULATIONS
The Treasury Department today, at the request of the
State Department, announced that Foreign Assets Control
Regulations are now in effect with respect to South Vietnam.
The effect of these regulations is to prohibit all financial
and commercial transactions with South Vietnam unless permitted
by license by Treasury's Office of Foreign Assets Control.
While this action includes the blocking of South Vietnamese
government accounts in the United States and overseas, as well
as all accounts of persons acting or purporting to act on
behalf of South Vietnam who are not now in the United States,
accounts of private and official Vietnamese who are now in
the United States will not be affected. Accounts of South
Vietnam offrcials overseas who no longer act, or purport to act,
on behalf of South Vietnam will also not be affected.

oOo

WS-290

Department of theTREASURY

OFFICEWASHINGTON,
OF REVENUE
SHARING
D.C. 20226

w
w

TELEPHONE 634-5248

\o
For Immediate Release
Thursday, May 1, 1975
Contact: Priscilla R. Crane (202) 634-5248
In a joint agreement signed today, the Treasury Department's Office
of Revenue Sharing (ORS) and the Equal Employment Opportunity Commission
(EEOC) began preparation of "Guidebook on Equal Employment for Public
Employers;" The book is scheduled for publication in the summer of 1975.
The new guide will be designed primarily*to assist public employers
to comply with the civil rights provisions of the State and Local FiscalAssistance Act of; 1972, which authorized the general revenue sharing program;'?'
In addition, the'book is to contain summaries of other, relevant Federal laws;
and it will include a section on non-employment aspects o r revenue sharing law.
An independent consultant will research and wfite the guide, under^

-r

contract to the Office of Revenue Sharing, at an estimated costof $10,000.'*'-*
The lead agency to provide research assistance to the consultant will
be EEOC; and the ORS and EEOC jointly will be responsible for production and
distribution. The Educational Programs Division, Office of Voluntary Programs,
of EEOC and the Compliance Division of ORS will represent their respective
agencies in this project.
"This project is one of a number of new efforts being undertaken jointly
under the terms of a cooperative agreement that was signed by the Equal
Employment Opportunity Commission and the Office of Revenue Sharing in
October 1974," Graham W. Watt, Director of the Office of Revenue Sharing,

-more-

2.
announced today.

"That agreement established procedures to assist both

agencies to resolve complaints of employment discrimination against public
employers and their contractors," Watt added.
General Revenue Sharing is a five-year program which is returning $30.2
billion to some 39,000 states and local governments through December 1976.
More than $17 billion has been paid to recipient governments since the first
funds were distributed, in December 1972. President Ford will ask the
Congress early this spring for an extension of the program.
Revenue Sharing law provides that "no person 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 activity funded in whole or in part with funds made available
under ..." the_program.
Today's agreement for production of the new guidebook was signed for
the Office of Revenue Sharing by its Director, Graham W. Watt, and for the
EEOC by its Acting Executive Director, Harold S. Fleming.

###

For information on submitting tenders:

TELEPHONE WO4-2604

FOR IMMEDIATE RELEASE

May 1, 1975

TREASURY ANNOUNCES MAY REFINANCING
The Treasury will auction to the public next week up to $2.75 billion of
3-1/4-year notes, up to $1.50 billion of 7-year notes, and up to $0.75 billion of
30-year bonds. This will refund $3.8 billion of notes held by the public maturing
May 15, and will raise $1.2 billion new cash. Additional amounts of the notes
and bonds may be issued at the average price of accepted tenders to Government
accounts and to Federal Reserve Banks for themselves and as agents of foreign
and international monetary authorities, which hold $4.7 billion of maturing notes.
The notes and bonds to be auctioned will be:
Treasury Notes of Series E-1978 dated May 15, 1975, due August 15,
1978 (CUSIP No. 912827 EL 2) with interest payable on February 15
an'd August 15, 1976, and thereafter on February 15 and August 15,
Treasury Notes of Series A-1982 dated May 15, 1975, due
May 15, 1982 (CUSIP No. 912827 EM 0) with interest payable
on May 15 and November 15, and
Treasury Bonds of 2000-05 dated May 15, 1975, due May 15, 2005,
callable at the option of the United States on any interest
payment date on and after May 15, 2000 (CUSIP No. 912810 BU 1)
with interest payable on May 15 and November 15.
The coupon rates for the notes and bonds will be determined after tenders are
allotted.
Payment for the securities must be made on May 15, 1975, except that payment
for the bonds may be deferred until June 2, 1975. Payment may not be made through
tax and loan accounts. The 3-1/4-year notes will be issued in denominations of
$5,000, $10,000, $100,000 and $1,000,000. The 7-year notes and the bonds will be
issued in denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000. The
securities will be issued in registered and bearer form and will be available
for issue in book-entry form. Definitive 3-1/4-year notes in bearer form will
be delivered on or about May 27, 1975. Definitive 7-year notes and bonds in bearer
form will be delivered on or about May 28, 1975. Definitive bearer bonds will be
delivered on or about May 28, 1975, and June 2, 1975. Purchasers of bearer
securities may elect to receive interim certificates on the payment date, which
will be bearer securities exchangeable at face value for securities of the
appropriate issue when available.
Tenders for the 3-1/4-year notes will be received up to 1:30 p.m., Eastern
Daylight Saving time, Tuesday, May 6, tenders for the 7-year notes will be received
up to 1:30 p.m., Eastern Daylight Saving time, Wednesday, May 7, and tenders
for the bonds will be received up to 1:30 p.m., Eastern Daylight Saving
time, Thursday, May 8, at any Federal Reserve Bank or Branch and at the Bureau

-2of the Public Debt, Washington, D. C. 20226; provided, however, that noncompetitive
tenders will be considered timely received if they are mailed to any such agency
under a postmark no later than May 5 for the 3-1/4-year notes, May 6 for the
7-year notes, and May 7 for the bonds. Tenders for the 3-1/4-year notes
must be in the amount of $5,000 or a multiple thereof. Tenders for the 7-year
notes and the bonds must be in the amount of $1,000 or a multiple thereof.
Each tender must state the yield desired, if a competitive tender, or the term
"noncompetitive", if a noncompetitive tender.
Competitive tenders must be expressed in terms of annual yield in two
decimal places, e.g., 7.11, and not in terms of a price. Tenders at the
lowest yields, and noncompetitive tenders, will be accepted to the extent
required to attain the amounts offered. After a determination is made as to
which tenders are accepted, a coupon yield will be determined for each issue to
the nearest 1/8 of 1 percent necessary to make the average accepted prices 100.000
or less. Those will be the rates of interest that will be paid on all of the
securities of each issue. Based on such interest rates, the price on each
competitive tender allotted will be determined and each successful competitive
bidder will pay the price corresponding to the yield bid. Price calculations
will be carried to three decimal places on the basis of price per hundred, e.g.,
99.923, and the determinations of the Secretary of the Treasury shall be final.
Tenders at a yield that will produce a price less than 99.251 for the 3-1/4-year
notes, 98.251 for the 7-year notes, and 92.501 for the bonds will not be
accepted. Noncompetitive bidders will be required to pay the average price of
accepted competitive tenders; the price will be 100.000 or less.
Fractions may not be used in tenders. The notation "TENDER FOR TREASURY
NOTES (Series E-1978 or A-1982)" or "TENDER FOR TREASURY BONDS" should be printed
at the bottom of envelopes in which tenders are submitted.
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 $500,000 or less for each issue will be accepted in full at the average
price of accepted competitive tenders.
Commercial banks, which for this purpose are defined as banks accepting
demand deposits, and dealers who make primary markets in Government securities
and report daily to the Federal Reserve Bank of New York their positions with
respect to Government securities and borrowings thereon, may submit tenders for
the account of customers, provided the names of the customers are set forth in
such tenders. Others will not be permitted to submit tenders except for their
own account.
Tenders will be received without deposit from commercial and other banks for
their own account, Federally-insured savings and loan associations, States,
political subdivisions or instrumentalities thereof, public pension and retirement
and other public funds, international organizations in which the United States
holds membership, foreign central banks and foreign States, dealers who make
primary markets in Government securities and report daily to the Federal Reserve
Bank of New York their positions with respect to Government securities and
borrowings thereon, Federal Reserve Banks, and Government accounts. Tenders from
others must be accompanied by payment of 5 percent of the face amount of
securities applied for. However, bidders who submit checks in payment on tenders

9,D9
submitted directly to a Federal Reserve Bank or the Treasury may find it
necessary to submit full payment for the securities with their tenders in order
to meet the time limits pertaining to checks as hereinafter set forth.
Allotment notices will not be sent to bidders who submit noncompetitive tenders.
Payment for accepted tenders must be completed on or before Thursday,
May 15, 1975, at the Federal Reserve Bank or Branch or at the Bureau of the
Public Debt, except that payment for up to 100 percent of the amount of bonds
allotted may be deferred until June 2, 1975, as set forth in the following
paragraph. Payment must be in cash, 6% Treasury Notes of Series B-1975 or
5-7/8% Treasury Notes of Series F-1975, which will be accepted at par, in other
funds immediately available to the Treasury by May 15, or by check drawn to the
order of the Federal Reserve Bank to which the tender is submitted, or the
United States Treasury if the tender is submitted to it, which must be received
at such bank or at the Treasury no later than: (1) Monday, May 12, 1975, if the
check is drawn on a bank in the Federal Reserve District of the Bank to which
the check is submitted, or the Fifth Federal Reserve District in case of the
Treasury, or (2) Friday, May 9, 1975, if the check is drawn on a bank in another
district. Checks received after the dates set forth in the preceding sentence
will not be accepted unless they are payable at a Federal Reserve Bank. Where
full payment is not completed on time, the allotment will be canceled and the
deposit with the tender up to 5 percent of the amount of securities allotted
will be subject to forfeiture to the United States.
If payment for the bonds is to be deferred until June 2, 1975, the
bidder must indicate on the tender form the amount of bonds allotted on which
payment will be deferred. Accrued interest from May 15 to June 2, 1975, will be
charged on the deferred payment at the coupon yield established for the bonds.
In the case of partial payments from bidders who are required to submit a 5
percent deposit with their tender, 5 percent of the total amount of bonds
allotted, adjusted to the next higher multiple of $1,000, will be withheld
from delivery (in addition to the bonds on which payment is deferred) until
the total amount due on the bonds allotted is paid.

1o<
Comments to the Press Regarding Treasury Financing
by
Jack F. Bennett
Under Secretary of the Treasury
for Monetary Affairs
4:00 PM, May 1, 1975
Ladies and Gentlemen:
We appreciate your coming here today, for we are
grateful for your help in making the details of our
Treasury security offerings widely known.

This is the

fourth such conference this year.
Over the course of these conferences the estimates
of the Government's needs to borrow from the public
over the current half year period have varied.

On January 22

the estimated increase in indebtedness to the public from
December 30, 1974 to June 30, 1975 was $28 billion.
February 24 the estimate was up to $38 billion.
ago on March 31 the estimate was $41 billion.
estimate is $36 billion.

A month

Today our best

Since that last conference tax

payments have been coming in larger than expected so that
the estimate of total budget receipts for the current fiscal
year ending June 30 have been revised upward from $275 billion
to $282 billion, though of course, considerable uncertainty
remains even for this fiscal year's receipts.
Of the total of $36 billion of expected increase in
debt outstanding in this half year $28-1/2 billion has already
been accomplished or announced through the first four months,

- 2 that is through yesterday, April 30, leaving $7-1/2 billion
still to be arranged.

Of that amount some portion is

expected to be arranged through sale of Savings Bonds, leaving
$6-3/4 billion to be raised net through sales of marketable
securities to the public in issues not yet announced, that
is in addition to the sales we have already announced through
the sale of 3 and 6 month bills to be paid for on Thursday
of next week.
N That $6-3/4 billion net still to be raised in the market
is in addition to amounts to be raised to pay off securities
maturing during this period, that is the weekly maturities
of 3 and 6 -months bills; the one year bill maturing on
June 3rd; the coupon securities maturing on May 15, of which
some are held by the Federal Reserve Banks, which we assume
will roll over their investment, and of which $3*8 billion
are held by the public; the regular quarter-end security
maturing on June 30 of $2 billion; and finally the cash
management and tax anticipation bills maturing in mid-June
in the amount of $2.75 billion.
Of these maturities the market would confidently expect
that we would roll-over all the maturities except that
$2.75 billion of cash management and tax anticipation bills,
so that I tend to look at our market financing decision to
be how to raise in new borrowing the $6-3/4 billion of net
increase in indebtedness plus the $2.75 billion, for a total
of $9-1/2 billion.

1^
In raising that $9-1/2 billion we have to make difficult
decisions on which maturities to offer.

One factor we have

to take into account is that we have been concentrating our
borrowing very heavily in the short maturities with the
result that the average length of our marketable debt has
been declining, from 5 years, 9 months at the end of 1964
to 2 years, 9 mos. at the end of 1974, to 2 years, 8 mos.
yesterday, as indicated in one of the charts in the background
material we have distributed to you. As a net result of the
passage of time, the maturity of some securities, and new
issues by us, the Treasury now has outstanding $300 million
fewer securities maturing in over 7 years than it did at the
beginning of the year.

As of yesterday, of the $205 billion

of marketable Treasury securities in the hands of the public,
697o matures in 2 years or less, 23% matures in 2 to 7 years,
and only 87o matures in more than 7 years.
The financing plan we have come up with does not, however,
make much change in the average length of the debt.

Under

that plan the average length at the end of June is expected
to be 2 years and

9 months, and that average length would be

reduced further thereafter until our next longer term issue.
Our

financing plan consists of three parts:

several

securities which we are formally announcing today for sale
next week in the separate announcement you have received;
three coupon issues which we are tentatively projecting for

- 4 sale late this month and next month but have not finally
decided upon though we are announcing our projections at
this time for the information of prospective purchasers, and
thirdly some expected increases in our bill issues which
will be decided and announced later in the light of our actual
cash position.
The securities being offered today are:
$2.75 billion,

3-1/4 year notes maturing August 15, 1978;

1.3 billion,
.750 billion,

7 year notes maturing May

15, 1982; and

30 year bonds maturing May

15, 2005.

These securities total $5 billion and will raise $1.2
billion in-cash.

They will be auctioned in maturity order next

week on Tuesday, Wednesday, and Thursday by yield'auction.
The minimum denomination will be $5,000 for the 3-1/4 year
note and $1,000 for the longer term securities.

The payment

for the new securities will be on May 15 except that purchasers
will have the option to pay for the 30 year bond on June 2.
In addition to these securities we anticipate three coupon
issues to fit into our new 2-year note cycle.

The first will

be for $2 billion maturing on May 31, 1977, auctioned on May 14,
for payment on May 27.

I understand that the Home Loan Bank

system has announced today the paydown of $1.3 billion of
maturing securities on that date.

The second security will

be a 16 month $1.5 billion note maturing October 31, 1976,
to be auctioned on May 22nd, and paid for on June 6.

The

third will be a roll-over of the $2 billion maturity on

June 30 to June 30, 1977, probably to be auctioned on
June 17.
In addition to these securities sold to the public
we would expect some purchases of the same marketable
securities will be made by foreign monetary authorities.
For planning purposes we assume these purchases will
total about $600 million.
To achieve our forecast total financing need of
$9-1/2 billion we shall probably have in addition to
raise some amount, now forecast at $4.2 billion, through
additions to our bills outstanding.

We have five weekly

bill maturities and one yearly bill maturity prior to
mid-June, our traditional cash low point.

I intend to

maintain flexibility by not announcing individual amounts
for the prospective bill sales.
Finally I would like to mention that our current
estimate of the required net increase in our indebtedness
in the second half of the year is now about $40 billion
if the Congress accepts the President's recommendation of
a $60 billion budget deficit for the fiscal year 1976. Of
course our borrowing requirement will be higher if the
budget deficit is increased.
Now, I'd be happy to attempt to answer any questions.

FOR IMMEDIATE RELEASE

May 1, 1975
Contact: R.E. Harper
964-5775

PRESIDENT FORD MAKES FIRST-DAY PURCHASE
OF BICENTENNTlL-DESIGN SERIE?TE BOND
President Gerald R. Fdrd today purchased a Bicentennialdesign Series E. Savings Bond -- the first printed -- from
Secretary of the Treasury William Ee Simon in the White
House Oval Office.
Terms and conditions of the redesigned Bonds remain the
same; only the "face" has been changed. E Bonds earn six
percent interest, compounded semiannually, when held to fiveyear maturity.
In the new design, the Minute Man -- long a Savings Bonds
symbol -- replaces the eagle, and Bicentennial-related vignettes replace the Presidential portraits. The tint is in
blue ink, rather than green, and all of the face printing
that had been black is changed to blue. The Bicentennial
logo is printed in red, immediately to the left of the legend in the lower part of the Bond, while "1776 Bicentennial
1976" appears in red, immediately above the vignette.
WS-289

- 2 The commemorative vignettes, by denomination, are:

$25 --

Independence Hall; $50 -- Liberty Bell; $75 -- Spirit of f76;
$100 -- Valley Forge; $200 -- Crossing the Delaware; $500 -Washington; $1,000 -- Declaration of Independence.

The $10,000

denomination is unchanged.
The red, white and blue Bonds are now on sale, nationwide;
they will be available through December 1976.
Ceremonies marking the Bicentennial and the 34th anniversary
of the Savings Bonds Program are being held across the country, with governors, mayors, county executives buying "first"
issues and proclaiming the week of May 5-9 as "Minute-Man"
Week.
Thirty-four years ago, President Franklin D. Roosevelt bought
the first Series E Bond -- called a Defense Bond -- from then
Secretary of the Treasury Henry Morgenthau, Jr.
Since then, tens of millions of Americans have bought and held
Savings Bonds, setting dollars aside for new homes, automobiles,
college educations, better retirement, the proverbial rainy day.
At the same time, they have helped the government finance national programs and projects.

Today, approximately $65 billion worth is outstanding, and
sales have been setting postwar records.

Total sales in

1974 came to $6.8 billion; sales for the first quarter of
1975 amounted to $1.9 billion.
Participating in the ceremony were -- Secretary of Agriculture Earl L. Butz, Chairman, Interdepartmental Savings
Bonds Committee; H. J. Hintgen, Commissioner of the Public
Debt; Mrs. Marjorie Lynch, Deputy Administrator, American
Revolution Bicentennial Administration; W. Jarvis Moody,
Chairman, American Bankers Association Savings Bonds Committee, and President, American Security and Trust Co.,
Washington; Clifford C. Sommer, Chairman, Savings Bonds
Bicentennial Activities, and Vice President, University
of Minnesota Foundation, Minneapolis; Mrs. Francine I. Neff,
National Director, U. S. Savings Bonds Division, and Treasurer of the United States, and Jesse L. Adams, Jr., Deputy National Director, U. S. Savings Bonds Division.

-- USSB --

BICENTENNIAL-DESIGN SERIES E SAVINGS BOND
FACT SHEET
* The Bicentennial-design Series E Savings Bond will be
on sale through the Bicentennial years.
* Rates, terms and conditions of the Bicentennial-design
E Bond are identical to those of the familiar Presidential design; only the physical appearance has been
changed.
* Interest rate is six percent, when held to a five-year
maturity.
* Design changes, which make the Bond a patriotic red,
white and blue, are -Tint is in blue ink, rather than green, and all of
the face printing in black is changed to blue.
The "Minute Man" replaces the eagle as the central
figure in the tint design.
The Bicentennial logo is printed in red immediately
to the left of the legend in the lower part of the
Bond.
The Presidential portraits are replaced by the following commemorative vignettes -$25 - Independence Hall $200 - Crossing the Delaware
$50 - Liberty Bell
$500 - Washington
P
11:
£
76
*?nn " S nT
2 '
$1,000 - Declaration of Inde5100 - Valley Forge
pendence
The inscription "1776 BICENTENNIAL 1976" is printed in
red immediately above the vignette.
*

The Presidential-design E Bond will remain on sale until
stock is exhausted.

FOR IMMEDIATE RELEASE

May 1, 1975

JAMES J. FEATHERSTONE NAMED DEPUTY ASSISTANT
SECRETARY FOR LAW ENFORCEMENT
Secretary of the Treasury William E. Simon announced
today the appointment of James J. Featherstone to be the
Deputy Assistant Secretary for Law Enforcement. Mr.
Featherstone, who reports to Assistant Secretary David R.
Macdonald, will assume direct supervision of Treasury
law enforcement policies and programs. He comes to
Treasury from the Department of Justice where he was
Deputy Chief of the Organized Crime Section.
Born November 14, 1926, at Wilkes-Barre, Pennsylvania,
Mr. Featherstone spent much of his early youth in the New
York City area. He was a former member of the U. S. Navy
from 1944 to 1946 and received his LL.B. in 1953 from
Fordham University School of Law.
After two years with Mendes and Mount, a New York
law firm, he joined the Department of Justice in October
1955, serving initially in the Internal Security Division.
Later assigned to the Espionage Unit as a Trial Attorney,
he was on the trial staff which prosecuted Rudolph Ivanovich Abel.
In 1959 he transferred to the Organized Crime and
Racketeering Section of the Criminal Division. His
assignment as an Area Coordinator for the Midwest was
to develop investigative programs calculated to result
in prosecutions of major organized crime figures.
In 1961 he was assigned to Kansas City, Missouri for
over two years where he worked with agents from all federal
investigative agencies developing cases against organized
crime figures and their associates, conducted extensive
Grand Jury inquiries and tried cases resulting from the
investigations. He returned to Washington in 1963.
(more)

- 2 In 1966 he was placed in charge of the Labor
Racketeering Unit within the Organized Crime Section
and in 1968 he was made Attorney in Charge of the
Newark Strike Force. A Strike Force is a field office
established to conduct organized crime investigations
and prosecutions in the cities with the most acute
organized crime problems.
In the latter part of 1969, he became Attorney
in Charge of the Chicago Strike Force, where he remained
until becoming a Deputy Chief of the Organized Crime and
Racketeering Section in June 1970.
Mr. Featherstone resides in Clifton, Virginia, with
his wife, Mary, and their four children.

oOo

FOR RELEASE UPON DELIVERY

STATEMENT BY THE HONORABLE STEPHEN S. GARDNER
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
HOUSE COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON THE TREASURY,
POSTAL SERVICE, AND GENERAL GOVERNMENT APPROPRIATIONS
THURSDAY, MAY 1, 1975
Mr. Chairman, I am pleased to be here today in support of
the FY 1976 Appropriation Request for the National Commission
on Productivity and Work Quality. The request is directed
toward the $2.5 million contained within the President's 1976
budget for the Commission. Present authorizing legislation
for the Commission, P. L. 93-311, expires June 30, 1975. It
is intended that the work.of the National Commission on
Productivity and Work Quality will be carried on under new
authorizing legislation which has been introduced in both the
Senate and the House — S.765, S.937, and H.R. 6078 — providing
for a National Center for Productivity for at least a 3-year
period. As you know, the Commission has had a 4-year history
of uncertain annual authorizations which we hope will be
remedied by passage of new legislation.
The Department of the Treasury is vitally interested in
the improvement of the U.S. economy. The Secretary of the
Treasury is Chairman of the Economic Policy Board which oversees the work of the current Productivity Commission and
participates directly in its work.
Assistant Secretary of the Treasury Fiedler and I have
had the opportunity to testify before the House and Senate
respectively in support of the authorizing legislation for a
National Center for Productivity and we have been impressed
by this Nation's growing acknowledgement that productivity
growth and quality of work are essential components to a
revitalized economy and that we all must cooperate to achieve
it. As evidence of this awareness I would like to submit for
your information the joint statement of Secretary of Labor
Dunlop, former Chairman of the National Commission on
WS-288
Productivity and Work Quality; Donald Burnham, Vice Chairman;
and Bruce Thrasher on the behalf of I. W. Abel, Vice Chairman;

- 2 before the Economic Stabilization Subcommittee of the House
Committee on Banking, Currency and Housing, on the proposed
Center. Their testimony sets the framework of joint effort
and concern by labor, management and government about which
the request for $2.5 million is built.
In his testimony before the same House Subcommittee,
Assistant Secretary Fiedler reviewed a number of accomplishments of the Commission during the past year and I have
submitted with this statement a summary of those efforts.
What is evident throughout each of the major projects the
Commission has supported is that a concerted joint effort by
labor, management, government and others can yield significant
results.
The problem of moving perishibles from the West Coast
was identified by a committee of over 100 food distribution
experts as having resulted in a decade of total dissatisfaction by all concerned. With the leadership of the
Commission, everyone involved, from the growers to the Interstate Commerce Commission, worked at removing whatever
industry, regulatory and tradition-based barriers they could
identify and created a dedicated, unit train that now
brings fresh fruits and vegetables across the country in 6
days on schedule instead of 10 to 16 days on an irregular
basis, thereby allowing railroads to render a significantly
better service which under old operations would have required
capital investment in 900 refrigerated box cars.
We have also seen the entire steel industry and its
union take enormous strides toward cooperative efforts to
institute productivity improvements that will strengthen
that industry. The Commission has identified other situations
where labor/management groups have undertaken unique programs
within the working environment to yield improved job satisfaction and higher productivity. Rather than reiterate the
list of accomplishments we have submitted, or rearticulate the
details of the program contained in the submission to this
committee, I think it would be most helpful if I were to
describe one of the Commission's recent projects in some
detail. In so doing, I hope to make cl£ar both the potential
gains we can look for on an economic basis and demonstrate
how the continued effort to identify and resolve opportunities
for productivity gains has a cumulative impact among those
involved in the process.

- 3 Concerned with productivity in the food industry, the
Commission directed its limited resources at food transport
and stimulated, as I've already mentioned, the "fresh from
the West" train. The momentum of that project, however,
not only produced that train, but also has caused the food
industry to explore other opportunities in distribution
improvement. Moreover, the project stimulated further concentration within the broader context of rail transport
problems.
A committee of the Commission, in conjunction with the
Council of Economic Advisers, examined some of the problems
of the Railroad Industry and surfaced some startling facts:
(a) in spite of a nationwide rail car shortage, cars were
in motion only 15% of their useful life; (b) carried
freight at an average speed of 3.1 miles per hour; (c) in 1973,
42.3% of all railroad freight car miles traveled involved no
payload; and (d) 75% of the industry's capital investment was
in rolling stock with an industry average return on investment
of less than 3%. The Commission's task force felt that a
method must be derived to both increase the availability of
freight cars for loading and decrease the operating costs
associated with moving empty cars.
Through continued dialogue with industry officials,
the Federal Railroad Administration (FRA), the Interstate
Commerce Commission (ICC), the Association of American
Railroads (AAR) and others affected by this problem, the
Commission staff devised an experiment to reduce empty
mileage and maintain car availability. The effort eventually
produced the outline of a clearinghouse concept which was
refined in a series of workshops with the FRA, ICC, AAR,
industry officials, shippers and, receivers. Three railroads
quickly agreed to participate in the rail car clearinghouse
experiment. One barrier, an ICC regulation concerning car service
orders, was removed one day after the participating railroads petitioned for an exemption. This quick response by
the ICC Chairman was to a large measure the direct result
of the continuing participation of ICC personnel in the entire
project.
On September 15, 1974, less than six months after the
effort began, the experiment started. Today, the participating
railroads report substantial savings through fewer car
miles and lowered fuel consumption, lower switching costs
and greater efficiencies in car movement. They are also

- 4 gaining greater utilization of their freight cars and thereby
increasing the effective rate of return on their capital
investment.
There are approximately 70 class 1 railroads. It is now
estimated that if a majority of these railroads were operating under the Clearinghouse concept, $100 million could be
saved annually in operating costs alone. Once again, however,
the primary value of this project does not lie in the dollars
saved by the participating railroads but with the successful
experience of the joint labor, management and government
effort to develop for themselves new and more productive
means of doing business.
The measures of success for the Commission, as in the
past, must be in terms of its ability to cause elements
of an industry, economic sector or public service to engage
themselves in an effective effort to improve their
productivity. I'm sure I don't have to emphasize the need
we have of this effort today.
The bulk of the Center's activity in FY 1976 will be
directed toward the continuation, expansion or initiation
of projects such as the one described above and in the
background material submitted for your review.
The $2.5 million requested, is equal to the amount
requested in FY 1975 but $500,000 more than the amount appropriated. The $2.5 million will enable the Center to operate
with a full staff of 20 permanent positions, meet the
growing printing and mailing costs associated with the increasing demand for Commission publications, and undertake
both those projects that had to be delayed this past year due
to the lowered appropriation and those new projects important
to conducting a responsive program within each sector.
In his economic message addressed to the joint session
of Congress on October 8, 1974, President Ford spelled out
a specific mandate to the National Commission on Productivity
and Work Quality. Given the broad nature of the sources of
productivity improvement and the need to focus our limited
resources, the President said that the Commission "will
initially concentrate on problems of productivity in
government — Federal State and local. Outside of government,
it will develop meaningful blueprints for labor/management
cooperation at the plant level. It should look particularly
at the construction and health service industries." He also

- 5 charged the Commission to continue its work to improve
productivity in the food and transtporation industries.
The Commission's FY 1976 program plan submitted to you
is in response to that mandate. It now appears that the
President in his statement, Congress in their introduction
of legislation, and labor, management and government leaders
are united in their belief that productivity growth is
important for our economic well being and that an institution
like the proposed Center will assist us in attaininq that
growth.
The FY 76 program plan describes both the progress made
to date by the Commission in each of its major program
a 6
* to a n d . m o ? e detailed justification for the FY 1976 request
of $2.5 million and 20 permanent position. We would be
pleased to submit any additional information in support of
this request.

STATEMENT OF
MR . DONALD C. BURNHAM
DIRECTOR - OFFICER OF WESTIMGHOUSE ELECTRIC CORPORATION
DR. JOHN T. DUNLOP
SECRETARY OF LABOR
MR. BRUCE THRASHER
ASSISTANT TO THE PRESIDENT.,
UNITED STEELMAKERS OF AMERICA
HEARINGS BEFORE THE
HOUSE BANKING, CURRENCY, AND HOUSING COMMITTEE
ECONOMIC STABILIZATION SUBCOMMITTEE
FRIDAY, APRIL 25, 1975

MR, CHAIRMAN, WE ARE PLEASED TO BE ABLE TO TESTIFY IN
SUPPORT OF

H.R. 6078, A BILL TO ESTABLISH A NATIONAL CENTER

ON PRODUCTIVITY.

WE ARE APPEARING TOGETHER BECAUSE WE SHARE

A DEEP CONVICTION THAT THE PROPOSED CENTER WOULD CONTRIBUTE
TO THE STRENGTH OF THE AMERICAN ECONOMY IN A PERIOD OF
ECONOMIC UNCERTAINTY AND MOUNTING W O R L D PRESSURES,
TIVITY

PRODUC-

IMPROVEMENT IS THE FOUNDATION OF OUR ECONOMIC WELFARE

AND HIGH STANDARD OF LIVING AND IS, THEREFORE, A MATTER OF

2
CONCERN FOR ALL OF US - LABOR, BUSINESS AND GOVERNMENT.
THIS PROPOSAL FOR THE FORMATION OF A PRODUCTIVITY CENTER
IS PUT FORWARD WITH THE PROVISO THAT THE

BASIC RESPONSI-

BILITY FOR PRODUCTIVITY IMPROVEMENT RESTS WITH THOSE WHO
ARE RESPONSIBLE FOR DELIVERING GOODS AND

SERVICES TO THE

AMERICAN PEOPLE - NOT A NEW GOVERNMENT BUREAUCRACY,
TO GIVE SOME PERSPECTIVE TO THE NEED FOR PRODUCTIVITY
GROWTH, LET US BRIEFLY REVIEW SOME LONG-TERM TRENDS.
FIRST, WE ARE ENTERING A PERIOD IN WHICH OUR PRODUCTIVE
RESOURCES WILL GROW MORE SLOWLY THAN IN THE PAST.

AT THE

SAME TIME EXTRAORDINARILY LARGE DEMANDS ARE BEING PLACED
UPON OUR PRODUCTIVE SYSTEM.

WE MUST INVEST IN EXPENSIVE

PRIORITIES SUCH AS THE DEVELOPMENT OF NEW ENERGY SOURCES,
IMPROVED TRANSPORTATION, EXPANDED INDUSTRIAL CAPACITY,
HOUSING, BETTER HEALTH CARE, AND NEW INDUSTRIES WHICH
CREATE NEW JOBS.

THESE CHALLENGES SHOULD COMPEL US TO

EXPAND OUR EFFORTS TO IMPROVE THE EFFECTIVENESS AND
EFFICIENCY WITH WHICH WE UTILIZE OUR RESOURCES OF MANPOWER,
CAPITAL, ENERGY, AND MATERIALS,
SECOND; OUR ECONOMY IS BECOMING INCREASINGLY SERVICE-

ORIENTED. ABOUT TWO-THIRDS OF THE WORKFORCE ARE EMPLOYED
IN GOVERNMENT OR SERVICE INDUSTRIES WHICH HAVE, AS FAR AS
WE KNOW, RELATIVELY LOW RATES OF PRODUCTIVITY IMPROVEMENT.

(

WE NEED TO FIND WAYS OF INCREASING PRODUCTIVITY IN THESE
LAGGING LABOR-INTENSIVE SECTORS, IF WE ARE TO MAINTAIN
OUR HISTORIC PATTERN OF GROWTH,
THIRD AND FINALLY, WE LIVE IN A HIGHLY COMPETITIVE,
INTERDEPENDENT WORLD ECONOMY,

AMERICAN INDUSTRY IS BEING

MORE SERIOUSLY CHALLENGED EACH YEAR BY FOREIGN COMPETITORS
WITH TECHNOLOGY COMPARABLE TO OUR OWN, BUT MUCH LOWER
WAGE SCALES AND LIVING STANDARDS,

WE MUST MAINTAIN OUR

COMPETITIVENESS IF WE ARE TO PROTECT THE JOBS OF AMERICAN
WORKERS.
RECENT FIGURES, HOWEVER, SHOW THAT THE U.S. MAY BE IN
A DETERIORATING COMPETITIVE POSITION,

PRODUCTIVITY GROWTH

RATES IN OUR MANUFACTURING INDUSTRIES HAVE LAGGED BEHIND
THOSE OF OTHER MAJOR INDUSTRIAL NATIONS.

WE ARE SPENDING

RELATIVELY LESS OF OUR GNP ON CAPITAL EQUIPMENT THAN OTHER
INDUSTRIAL NATIONS, AND OUR RESEARCH AND DEVELOPMENT SPENDING
HAS BEEN DECLINING,
HAS DIMINISHED.

THIS IS NOT TO SAY THAT OUR POTENTIAL

WE HAVE THE MOST ADVANCED TECHNOLOGY IN THE

WORLD, WE HAVE AN INCREASINGLY BETTER EDUCATED WORKFORCE,
AND WE HAVE SKILLED MANAGEMENT THAT IS UNMATCHED,

WE HAVE

ENORMOUS OPPORTUNITIES TO MAKE OUR COUNTRY STRONGER, MORE
PROSPEROUS, AND MORE STABLE,

k
V'E BELIEVE THAT THE PROPOSED NATIONAL CENTER FOR
PRODUCTIVITY WOULD STRENGTHEN A NATIONAL EFFORT TO IMPROVE
THE PRODUCTIVITY PERFORMANCE OF THE AMERICAN ECONOMY.

K!E

NEED SUCH AN INSTITUTION WITHIN THE FEDERAL GOVERNMENT TO
SERVE AS A FOCAL POINT FOR THE GREAT VARIETY OF ACTIVITIES TO
PROMOTE PRODUCTIVITY THAT GO ON WITHIN AND OUTSIDE THE
GOVERNMENT.

PRODUCTIVITY IMPROVEMENT NEEDS TO BE GIVEN

GREATER VISIBILITY AND SUPPORT THROUGHOUT THE COUNTRY.
THE CONCEPT OF A PRODUCTIVITY CENTER IS BY NO MEANS NEW.,
PRACTICALLY EVERY NATION WITH SOME INDUSTRIAL CAPACITY, FROM
ICELAND TO MEW ZEALAND

HAS A CENTER FOR PRODUCTIVITY,

MANY

WERE ESTABLISHED AFTER KORLD WAR II AT THE REQUEST OF THE
UNITED STATES GOVERNMENT AND AS A CONDITION OF ASSISTANCE

UNDER THE MARSHALL PLAN.

I T IS GENERALLY AGREED THAT THESE

CENTERS HAVE PLAYED A CONSTRUCTIVE ROLE IN THE MODERNIZATION
OF EUROPEAN AND JAPANESE ECONOMIES,
THE CENTER, UNDER THE PROPOSED LEGISLATION, WOULD
PERFORM SEVERAL TYPES OF FUNCTIONS, WHICH OUR EXPERIENCE
TELLS US WILL BE HIGHLY USEFUL AND CONSTRUCTIVE,
FIRST; IT WILL SERVE, WITHIN THE GOVERNMENT, AS AN
ADVOCATE FOR POLICIES AND PROGRAMS WHICH IMPROVE PRODUCTIVITY,
IT HAS A PRIMARY RESPONSIBILITY TO INSURE THE DEVELOPMENT OF

POLICIES FOR THE PRESIDENT, THE CONGRESS, AND THE NATION AS A
WHOLE WHICH FOSTER PRODUCTIVITY, THERE IS A CLEAR NEED FOR
A KNOWLEDGEABLE CENTRAL EODY WHICH WILL DRAW ATTENTION TO
THIS ISSUE WHEN GOVERNMENT FORMULATES REGULATORY AND OTHER
INDUSTRY RELATED PROGRAMS.
A SECOND GENERAL FUNCTION, IS TO PROVIDE A FORUM IN
WHICH REPRESENTATIVES OF LABOR, MANAGEMENT, STATE, LOCAL AND
FEDERAL GOVERNMENT CAN EXCHANGE VIEWS ON THE PRODUCTIVITY
ISSUES IN WHICH THEY HAVE A COMMON STAKE,

THE COMMISSION IS

NOW IN THE PROCESS OF DEVELOPING A NATIONAL POLICY STATEMENT
THROUGH THIS TYPE OF FORUM,

THE DISCUSSION TO DATE HAS

FOCUSED ON FIVE PRIMARY ISSUES:

TECHNOLOGY, LABOR-MANAGEMENT

RELATIONS, CAPITAL INVESTMENT, EDUCATION AND TRAINING, AND
GOVERNMENT REGULATION,

THE EXCHANGE OF DIFFERENT VIEWPOINTS,

IN A PROBLEM-SOLVING ATMOSPHERE, IS BOUND TO INCREASE UNDERSTANDING, LESSEN TENSIONS, AND CONTRIBUTE TO A MORE OPEN
SOCIETY,
THE CENTER, WITH THE ASSISTANCE OF THE FEDERAL CONCILIATION
AND MEDIATION SERVICE, WILL CARRY FORWARD THE EFFORTS OF THE
NCOP&WQ TO STIMULATE THE DEVELOPMENT OF LABOR-MANAGEMENT
COMMITTEES AT ALL LEVELS IN THE ECONOMY IN ORDER TO IMPROVE
PRODUCTIVITY AND THE QUALITY OF WORKING LIFE,

IN THE STEEL

6
INDUSTRY, EXTREME ANTAGONISM HAS GIVEN WAY TO COOPERATION
BETWEEN MANAGEMENT AND LABOR IN ONE GENERATION, TO THE
MUTUAL BENEFIT OF BOTH PARTIES.

PERHAPS THIS NON-ADVERSARY

RELATIONSHIP CAN BE ADOPTED BY OTHERS.
ONE OF THE MOST CHALLENGING FUNCTIONS OF THE CENTER
WILL BE TO HELP LABOR AND MANAGEMENT FIND MORE EFFECTIVE
WAYS OF TAPPING THE KNOW-HOW AND COOPERATIVE SPIRIT OF
WORKERS,
FINALLY, THE CENTER WILL HAVE AN IMPORTANT EDUCATIONAL
FUNCTION - TO PROVIDE INFORMATION AND PROMOTE PUBLIC UNDER-

STANDING. WIDE DISSEMINATION OF INFORMATION ON SUCCESSFUL '
INCENTIVES, TECHNICAL INNOVATIONS, OR MEASUREMENT TECHNIQUES
WILL ENABLE THOSE ENTERPRISES OR GOVERNMENT AGENCIES OF ONLY
AVERAGE EFFICIENCY TO KNOW OF AND ACHIEVE LEVELS OF PERFORMANCE
EQUAL TO THE BEST KNOWN,
THERE IS ALSO A NEED TO INCREASE THE AVERAGE CITIZEN'S
RECOGNITION OF HIS/HER OWN STAKE IN PRODUCTIVITY IMPROVEMENT,
A BETTER INFORMED PUBLIC COULD PROVIDE A BETTER CLIMATE FOR
INNOVATION AND PROGRESS,
THE BILL BENEFITS FROM THE EXPERIENCE OF THE NATIONAL
COMMISSION ON PRODUCTIVITY AND WORK QUALITY IN SPECIFIC
FEATURES OF THE CENTER'S ORGANIZATION.
FIRST,, IT PROVIDES FOR A TRIPARTITE COUNCIL, WITH
REPRESENTATIVES OF LABOR, BUSINESS, AND FEDERAL, STATE AND

LOCAL GOVERNMENT OFFICIALS.

IT RECOGNIZES THE IMPORTANCE

OF SERVICE INDUSTRIES IN SELECTING MEMEERS.
MENT

THE ESTABLISH-

OF AN EXECUTIVE COMMITTEE AND SUBCOMMITTEES OF THE

COUNCIL IS A DESIRABLE FEATURE WHICH WILL INVOLVE COUNCIL
MEMBERS IN GREATER DIRECTION AND CONTROL OF THE CENTER'S
ACTIVITIES.
SECOND, THE PROPOSED CENTER WILL BE AUTHORIZED TO ENTER
INTO CONTRACTS BUT NOT GRANTS WITH ACADEMIC INSTITUTIONS
AND OTHER ORGANIZATIONS,

THIS PROVISION WILL SIMPLIFY

ADMINISTRATION OF THE PROGRAM AND AVOID EXCESSIVE OVERHEAD.
THIRD, THE CENTER WILL DRAW ON THE RESOURCES OF OTHER
FEDERAL AGENCIES, INDUSTRY, LABOR, AND ACADEMIC EXPERTS,
ACTING ITSELF AS A CATALYST TO STIMULATE OTHERS TO TAKE
APPROPRIATE STEPS TO INCREASE PRODUCTIVITY.
THE FOCUS OF SUCH ACTIONS WILL BE SPECIFIC AREAS
WHERE SELECTIVE CHANGES IN PRACTICES INVOLVE INDUSTRY-WIDE
OR INTERINDUSTRY ISSUES THAT FALL OUTSIDE THE MANDATES OF
EXISTING AGENCIES.
THE COMMISSION, WITH ITS SMALL STAFF, HAS PURSUED THIS
MODE OF OPERATION WITH NOTABLE SUCCESS.

IN THE CASE OF THE

"FRESH FROM THE WEST" UNIT TRAIN, THE COMMISSION'S STAFF
BROUGHT TOGETHER, ON A VOLUNTARY BASIS, SHIPPERS, RAILROADS,

8
AND DISTRIBUTORS TO DISCUSS, IN A PROBLEM-SOLVING ENVIRONMENT,
MUTUAL PROBLEMS OF FOOD TRANSPORTATION,
LAST YEAR, THE COMMISSION STAFF PLAYED A SIMILAR ROLE
IN INITIATING, WITH ICC APPROVAL, AN EXPERIMENTAL CLEARINGHOUSE TO REDUCE EMPTY RAIL CAR MOVEMENTS ON THREE RAILROADS.
SAVINGS FROM SUCH A SYSTEM, IF INTRODUCED NATIONWIDE, COULD
AMOUNT TO UPWARDS OF $100 MILLION IN ANNUAL OPERATING COSTS
FOR CLASS I RAILROADS.
PRODUCTIVITY IMPROVEMENT IS A QUESTION OF VITAL
IMPORTANCE TO THE HEALTH OF OUR ECONOMY.

YET THE TOPIC

HAS NOT RECEIVED THE ATTENTION, CONTINUITY, AND SUPPORT
NEEDED TO ACCOMPLISH THE RESULTS OUR NATION REQUIRES.
THIS PHENOMENON HAS BEEN REFLECTED IN THE EXISTENCE OF
THE PRODUCTIVITY COMMISSION ITSELF AND WE ARE THEREFORE
PLEASED THAT THE BILL BEFORE YOU PROVIDES A THREE-YEAR
AUTHORIZATION FOR THE CENTER.
TAINTIES

THIS WILL AVOID THE UNCER-

AND INABILITY TO PLAN THAT HAVE PLAGUED THE

COMMISSION FROM ITS INCEPTION.
IN SUMMARY, WE ENDORSE

H.R, 6078 AS AN IMPORTANT

CONTRIBUTION TO A MORE STABLE AND MORE EFFECTIVE ECONOMY,
AT THIS TIME IN OUR HISTORY, IT

IS ESSENTIAL THAT THE

FEDERAL GOVERNMENT STRENGTHEN ONE OF THE FOUNDATIONS OF
OUR HISTORIC SUCCESS.

PRODUCTIVITY WILL NOT BE IMPROVED

BY GOVERNMENT FIAT OR EXHORTATION, BUT STRONG GOVERNMENT
LEADERSHIP IN COOPERATION WITH LABOR AND BUSINESS WILL
GREATLY ENHANCE THE POSSIBILITIES FOR SIGNIFICANT AND
LASTING PRODUCTIVITY GAINS.

SUMMARY* OF FY 19 75 ACTIVITIES
OF THE
NATIONAL COMMISSION ON PRODUCTIVITY
AND WORK QUALITY

*Note - A more detailed description indicating the
background and context in which projects were
selected may be found in Part II of the Commission's
4th Annual Report.

- 2 QUALITY OF WORK
In response to its Congressional mandate, the
NCOP and WQ is developing material of practical help
in the establishment of labor/management committees.
A booklet "Labor-Management Productivity Committees in American Industry" is , being printed and
material is now being edited that will result in
case studies of 8-10 public sector committees.
On the plant/community level the NCOP and WQ
has held five conferences in Illinois, Wisconsin and
New York (with FMCS), with plant-level technical
assistance follow-up by State Institutes of Labor
Relations. At least a half-dozen sites will be
setting up committees aided by the knowledge these
conferences provided.
Additionally, the results of these meetings are
being consolidated into a publication "Pointers for
Labor-Management Committees" which should go a long
way in overcoming obstacles to the formation of these
committees throughout the Nation.
In the behavioral science field the Commission
is evaluating the impact of two types of increasingly
popular programs on productivity for use by managers
and labor leaders.
- A participatory incentive plan in a large
corporation (DeSoto Paint Corporation).
- Flexible working hours in a service industry
(First National Bank of Boston).
Work (in cooperation with DOL) is being done to
produce guides for the appropriate application of
behavioral science techniques and a report will be
issued on management actions taken in response to
attitude surveys of 7,500 workers in five Federal
agencies (with CSC).

- 3 -

PUBLIC SECTOR
In the public sector the NCOP and WQ has
supported and encouraged the efforts of the OMB, CSC,
and GAO to measure and enhance Federal Government
productivity and is also active in a variety of
projects designed for productivity improvement in
state and local governments.
For Elected Officials - a guide entitled
"So, Mr. Mayor, You Want to Improve Productivity"
has been published and was the basis for a series
of meetings with top elected officials throughout
the country. Similar publications for city and
county elected officials are in process, as well as
a booklet on productivity improvement in state
government for legislators.
For management - a program to launch 20 cities
into productivity improvement programs with development of follow-up guidance during the initial months
of effort.
- A series of five Productivity Workshops were
held for state and local officials to
facilitate the transfer of improved methods
between jursidictions.
Training materials, now scheduled for field
testing will, if successful, be provided for
internal instruction in the factors of
productivity.
Incentives - a comprehensive report updating an
earlier survey of personnel incentives used by public
administrators is complete and scheduled for early
publication. It is hoped that awareness of existing
programs will stimulate further development of this
topic.
The successful Solid Waste and Police productivity
projects are being followed by a similar effort in
government inspections with draft guides for local
managers expected by the end of June. Also, in the
Police sector, a major conference on productivity
improvement techniques was recently held (with the Police
Foundation) for 200 police chiefs and mayors from
across the country.

- 4 PRIVATE SECTOR
In the private sector the NCOP and WQ is concentrating its activity in the fields of food distribution,
health care, construction and transportation.
In food distribution the following projects are
in progress:
- Work with CWPS to encourage backhaul through
a pamphlet on benefits and meetings with
manufacturers, FTC and distributors;
Investigation of consolidated delivery
systems costs and benefits to participants
(with Department of Agriculture);
Enlistment of industry and Department of
Commerce support for a study of costs and
benefits of modularized system;
Developing awareness of technological needs
by retailers through holding conferences at
M.I.T. and the University of Southern
California; and
Stimulating the industry toward development
of orderly manpower adjustment programs.
In health care the following projects have been
undertaken to contribute to increased productivity:
- Over 100 practitioners identified opportunities
to increase productivity throughout the
industry;
- A nationwide education program on productivity
for hospital administrators;
- Development of a statewide productivity
measurement system for national implementation;
- Pooling of expertise of industry and health
leaders in one state to pursue health care
productivity improvement opportunities;

vl
Removal of IRS barriers to hospital employee
incentive programs; and
Implementation of an in-hospital productivity
improvement program.
Problems of productivity in the construction
industry are being approached by:
A conference held with leading labor/management
officials on common problems of productivity
measurement;
A report on new labor management initiatives
to improve productivity; and
A labor/management subcommittee to deal with
improvements in collective bargaining,
productivity, and manpower issues.
In transportation the NCOP and WQ has identified
freight car utilization as a central issue in the
fiscal viability of the railroad industry as well as
in the capacity to provide the increased service
required by the American economy.
Accordingly, work on the interchangeability of
freight cars has resulted in a "clearinghouse"
experiment designed to eliminate excessive movement
of empty cars. With three cooperating railroads,
this experiment shows substantial direct operating
savings, reduced capital investment and significantly
better service to shippers.
To encourage efficient capital investment
practices, the NCOP and WQ is encouraging railroad
and automobile representatives to confer and agree
on common designs as new rail cars are developed for
shipment of autos.
Work is also under way on applications of both
new and existing equipment for integrated shipments
in a transcontinental intermodal food distribution
service.

- 6 The dedicated train concept as the Commission
applied it in the "Fresh from the West" unit train
service is proving the refrigerator car cycle time
can be cut by 30%—the equivalent of 900 new cars
or a $40 million investment—with far better service
to the consumer. The staff is working with the
railroads and additional industries to increase the
application of this method of train operation. /
EDUCATION
To continue its efforts in technical education,
the Commission maintains a series of publications
of value to those working on productivity programs.
These include such studies as:
- "The Role of Productivity in Controlling
Inflation."
- Productivity centers in other countries—
a comparison of objectives, programs and
background.
- Productivity trends and differences at the
plant level:
Casebook on Company Productivity Programs
with Emphasis Upon How the Companies Got
Started
° Analysis of Factors Affecting Interplant
Differences in Productivity in Selected
Industries
- "Public Attitudes on Work-Related Matters."
Altogether, the Commission has completed 18
publications which have been distributed to kev
managers, government officials and others throughout
S r i o n ^ y - A n / d d i t i ° n a l 12 publications are in
various stages of completion.
Pp^rl?8,00^881011

alS

WOrks

actively with other

-TE

v»
I'm delighted to be here today.

I'm a native New

Mexican, but I have many, many ties to Oklahoma, and I
come to your state as often as I can find a decent excuse.
I am related by blood to the Hendersons and Dunns
of the Cushing, Stillwater, and Yale area. "Rose of the
Cimarron" was my great aunt, who believed in women's
rights, and some of women's wrongs as well, according to
history. Today, I'm proud to be kissing kin to dozens
and dozens of Oklahomans, including my own mother who is
staying with relatives in Yale.
I am also related, by a 27-year marriage, to Ed Neff,
who lived in Oklahoma City as a teenager, graduated from
Classen High School, and went to O.U. for two years.
After wartime service, my future husband joined his parents
in Albuquerque, where he finished his bachelor's degree
at the University of New Mexico and I finished his bachelor's days by marrying him on graduation.
So you see I think Oklahoma is more than O.K. —
it's super in the best way in the world.

Remarks by the Honorable Francine I. Neff before the Oklahoma City Chamber of Commerce, Oklahoma City, Oklahoma on
May 2, 1975.

The meaning of "super" is big.

And today, I'd

like to talk about one of the biggest things in our
lives — our Big Government and its big spending habits,
big labor force and Big Daddy approach to business.
The "Big Daddy" approach piles regulation upon
regulation and red tape on red tape. This costs the
consumer billions of dollars. In the auto industry,
for example, federal regulations added $320 to the price
of a 1974 car. And to compute another cost, it's estimated that individuals and corporations spend about 13 0
million manhours a year filling out government forms,
*—

excluding tax forms.
As for a big labor force, it is rather thoughtprovoking that government at all levels -- local, state
and federal -- has more personnel working for it than
the auto industry, the steel industry,and all other
durable goods industries combined.
But to most of us, the prime illustration of big
government is probably its enormous spending habits.
Our taxes, large as they are, do not take care of all
bills. So, let's look in more detail at government's
financial commitments.
For most of the nation's history, our annual budget was well under $100 billion. In 1962, we went past
that mark; in 1971 we broke the $200 billion mark and
this year we reached a record $300 billion a year. In

1,-^
the fiscal year beginning this July, we are likely to
reach and perhaps exceed a $365 billion budget.
In other words, your government will be spending
a billion dollars a day, each and every day of the year,
to pay its bills. That's one billion dollars a day —
a sum almost impossible to imagine. If a man were given
a thousand dollars to spend every day of every year of
every century beginning with the birth of Christ and
continuing to this week, he and his heirs in over 19
centuries would not be able to spend one billion dollars. Yet we will be spending that much in one day,
every day of this upcoming fiscal year.
Government spending at all levels of government now
takes a'third of the total GNP. If recent trends continue, it will consume some 60 percent by the year 2,000.
When local, state and federal governments grow so
large you give up half of your earnings to pay its bills,
then you have surrendered more than money. You have surrendered part of your freedom as well.
And I do not believe that by giving up our freedom,
we are enlarging the freedoms of those supported by our
taxes. All of us must help less fortunate Americans: the
sick, the old, those unable to work. But the present welf
system is full of inequities. It should be overhauled to
reward those willing to work and genuinely help those
unable to be employed.

in
The measure of a socially compassionate person
is not how much of the taxpayer's
money he is willing
to transfer from those who work to those who don't.
Most people in positions of public trust are concerned
for the welfare of their fellow Americans.

The real

question is not who cares the most, but how can we
combine a prosperous economy and a minimum amount of
human hardship without sacrificing our freedoms or
seriously harming our total economic system.
I have criticized Big Government, and you may
wonder how I reconcile my feelings about this with my
position as th6~United States Treasurer.
Well, one reason I can do this is because my job
as Treasurer includes the directorship of the United
States Savings Bonds Division.

And I like the Savings

Bonds Program for at least three reasons.
It is not Big Government.
It is good for America.
And it isi good for Americans.
U.S. Savings Bonds are the nongovernmental government program, because 97 percent of people working in
the program are unpaid volunteers.

Even our advertising

program is donated by the National Ad Council.

And I

feel right at home with volunteers because I was one myse
for so many many years.

In fact, I was selling War Bonds

way back, several wars ago, in my adolescence.

I have been aware of the personal advantages of
Savings Bonds for many years. They are safe, secure,
an easy way to save. They pay a competitive six percent interest. And there are tax advantages which can
raise the effective interest rate even higher.
Further, U.S. Savings Bonds are good for the country.
About 23 percent of the total public debt in private
hands is in the form of U.S. Savings Bonds.
This 23 percent is far and away the most stable
part of the debt, because E and H Bonds remain outstanding, on the average, for more than six years.
This compares ,to less than 3 years, on the average,
for other marketable instruments.
This long-term stability is important for two
reasons.
First, when the holding time decreases, any debt
becomes more liquid, and this can be inflationary.
And second, the job of refinancing a rapidly
maturing national debt is difficult and expensive.
So, Savings Bonds are good for America and good
for Americans. Last year we had the highest sales
since World War Two. For the first four months of
this year, sales are even higher. We Americans know
a good thing when we see it, and Savings Bonds are good
in many, many ways.
Now, if I may jump back into something not so good,

rv) o
let's look more closely at the upcoming Federal budget
deficits.
Our national budget has been in the red 14 out of
the past 15 years.
leap.

But this year there will be a quantum

Depending on which bills

are passed, it is pos-

sible, even probable, that our deficit for the coming
fiscal year alone could exceed $80

billion.

For

the first time, the government will borrow money that
will not be paid back until the 21st century.
These figures are enormous, but they do not represent the outer limits of what may actually develop.

They

do not include^ money for many of the legislative proposals
now under considerations in every congressional committee.
We^ are hopeful that the new Congressional budget
system may help to alter this.
As you know, it is Congress that more or less sets
federal fiscal policy, in terms of taxes and total spending.
Last year, Congress passed an act setting up new committees
on the budget in both the House and Senate, along with a
Congressional Budget Office to serve the committees.

The

act also changed the starting date of the federal fiscal
year from July to October, beginning in 197 6.
Under the old system in Congress, members could vote
to spend money without having to vote explicitly for any
deficits created by their new bills.

Under the new system,

the deficits resulting from the bills will at least be

E3/
placed out in the open.

Then Congress can either cut

back on the spending bills or Congressmen can go on
record favoring the higher spending total and the higher
deficit it entails.

When a campaigning Congressman

points to his record, we can see that record in dollars
and cents.
I will add the obvious point that the United States
Treasury Department must raise money for the government,
but Treasury does not choose how that money is spent nor
does it spend the money it raises, except for its own
allotment.

Being a financier is a big enough problem]

Someone facetiously remarked once that the biblical
Noah was our first financier.

He floated a limited company

when alJL the rest of the world was in liquidation.

I'm

tempted to add that he floated alone (a loan), but of
course we know he took all of those animals with him.
To return to reality, the Treasury Department will
probably have to borrow around $41 billion for the first
six months of calendar year 1975 alone.

13 9
The Treasury Department is well aware that borrowing very large sums of money may cause strains in
the private financial markets.

Although financial

conditions normally ease during a recession, this time
there may be difficulty financing our current large
federal deficits for several reasons.
For one, since the current recession came after a
considerable period of inflation, private financing
demands are heavier than usual.

Further, state and local

governments have had their tax receipts reduced by the
recession, and they will need to borrow substantial sums.
The Treasury and Federally-sponsored agencies will
* come into the capital markets for more net funds, both in
absolute terms and in relation to the size of the economy,
then have ever been borrowed in the capital markets in any
single year by the public and private sectors combined.
And since Federal requirements for money will be met first,
this may put the

crunch in the private sector.

Governments at all levels —

local, state and Federal —

will borrow an estimated 8 0 to 85 percent of new funds
available this year, leaving less than one dollar out of
every five for investment in private enterprise.
Several possibilities may occur.

An unhealthy compe-

tition between the government and private borrowers might
develop for capital funds.

Or the Federal Reserve could

accommodate these enormous borrowing requirements by

-9-

:?E?
creating a more rapid growth in money and credit.

our view, this latter step could mean a re-accelerated
inflation followed by a new recession.
Because our economy is currently depressed, the
capital market might be able to absorb the combined needs
of government and the private sector this year, and then
face the real crunch next year, when the economy has
gathered steam and the private sector is looking for more
money.

Thus, if runaway

Federal spending programs, com-

bined with permanent tax cuts^become a way of life in
America —

and the trend has been this way -- then we

could be in for~a lot of future economic trouble in the
form of an unstable economy and accelerated inflation.
Now, to change the subject somewhat, a number of
people have asked me, "How strong is the American dollar
internationally?"

And, since my name is on your dollar, I

have a very personal interest in this question.
The Treasury's view is that the only long range way
to maintain a strong dollar is to put our own economic
house in order.

With that caveat, we believe the future

dollar prospects are good for several reasons.
First, the U.S. lead in reducing interest rates -which weakened the dollar last fall -- may be ending.
As the recession bottoms out, incentives for interestsensitive flows could be reversed by a further change
in the international interest rate differentials.

Second, while oil producers are diversifying their
enormous investments, the United States' economy will
continue to receive a very significant share of these
investments.
And finally, our competitive position in world
markets remain strong. Bad as our inflation is, it
is still better than that of many other countries.
Further, oil imports to the United States dropped
sharply in March, for the second consecutive month,
and we posted a surplus in our balance
of trade. Specifically, March exports exceeded imports
by $1.38 billion.
So, save your Yankee dollars -- the economy of the
South,^North, East and West will rise again. And as it
does, we hope that inflation will fall.
Some people profess to find inflation a mystery.
But there's nothing mysterious about it. In the last
ten years:
— We fought a war in Asia and charged it.
— We had severe shocks to our economy due to high
oil prices, high food prices and worldwide crop failures.
— And for years we followed some unsound monetary
and fiscal policies. That is the fundamental reason.
Our government has spent beyond its resources for
at least a decade. And the government that did this
was you and me, through our Congressmen and other officials.

13<
We love what our spending programs bought us, but we
hate the morning-after bills that now stare us in the
face.
There are heartening signs that the rate of inflation
is slowing down.

Consumer prices are not climbing as fast;

the prime lending rate has fallen; funds are coming back
to thrift institutions and so on.
Nevertheless, the twin spectres of inflation and recession remain as monsters in our midst.

Our big problem

today is to balance the need to fight recession against
the need to keep inflation under control.
The Administration's tax rebate is one major recession-fighter.
We' prefer this to direct government spending for
two reasons.
First, tax rebate money going directly to you will
put more money, faster, into the nation's economic bloodstream.

You and I will spend the money this year.

Even

the dollars that we bank will eventually get out to the
home building and other industries.
And second, tax-rebate spending by individuals will
stimulate the private sector of our economy.

Since the

great majority of all jobs are there, that's where our
efforts should be concentrated.

Now, let's look more specifically at how inflation
and recession affect investment and production.
Businesses, like people, were hurt this past year.
Outmoded accounting practices and inflation sometimes
created the illusion of high business profits, but real
after-tax profits have dropped 50 percent since 1965.
I have seen figures which indicate that real retained
earnings after dividends of nonfinancial corporations
amounted to only $2.8 billion in 1973, compared to $18.9
billion in 1966.

The figures for 1974 are even worse, and

real retained earnings will probably show a deficit this
year.
When profits are poor, you have dried up a critical
source"of capital investment.
duction.

This in turn affects pro-

A recent Department of Treasury study shows that

U.S. business ranks among the lowest in the industrialized
world for investments and real economic growth.

The study

also notes that low investment has "limited job opportunities
in the sense that, had the growth of plant and equipment
exceeded that of the labor force, more jobs would have been
required to utilize that increased capacity."
The Administration will help business attract new
investment capital by proposing tax reform legislation
to offer additional incentives for savings and investment.
Another way the Federal government can help would
be to bring its budget into balance when the economy is

-13-

n
prosperous.

This will provide additional funds for investment

in the private sector.
In the long run, we must shift our national economic
policy towards more savings and investment and towards
less government spending.

We have lived too long upon

the momentum of past economic growth.

Now, that future

we were warned about some years ago has arrived.
Any talk of the future reminds me of one of my own
personal concerns.

And if what I'm about to say seems

obvious, ladies and gentlemen, I apologize, but I've found
that it is not obvious to many people.

And that is the

need for Americans to understand their own economic system.
We are all consumers.

It's simplistic to say the

consumer is the key to our economic recovery, because he
or she must buy more goods.

But before Mr. and Mrs.

America can go shopping, they must have jobs with enough
earning power to buy, thus making the consumer either a
worker or a businessman-worker, producing the goods and
services customers

will buy.

The worker needs a job; the businessman needs other
workers; and both need the consumer, who in turn is the
worker or businessman, and so forth.
The government provides various cushions for the
worker and businessman, and offers a helping hand to
the consumer through, for example, the current tax rebates*

-14-

73 %
»

This illustrates, very simply, the interdependencies
of the free enterprise system.

But I suspect even this

outline is not well understood.
Everyone knows part of the story.

We all know the

consumer wants to keep down prices on goods and services.
We know that workers and labor unions very legitimately desire higher wages, job retention, and more fringe
benefits.

This viewpoint is sympathetically presented

—

often on page one.
But where is the third viewpoint -- that of the
businessman?

Who gives John Q. Public, and his children,

. an informed or sympathetic insight into what the businessman thinks or expects, and what his problems are?
You can look a long time before you'll find a friendly,
front-page story about the problems,or low profitsyof corporations.

These problems are complex -- hard to understand --

so we shrug and pass them by.
One result is that most adults, in an opinion poll,
thought corporations reaped profits of about 28 percent.
In reality, the net return on sales averages 5 percent.
I became aware of this problem about 10 years ago.
My son and daughter were teenagers, and I used to talk
before teenage groups in different schools.

I would ask

classes how much profit they thought businessmen made.
Mind you, these were bright kids, yours and mine, but

1 5

they thought the businessman's profits ran between
40 to 50 cents on the dollar. They all but called me a
liar when I explained the facts.
Economic theories are certainly complex. Baron
Rothschild once said he had met only two people in the
whole world who understood gold — and they disagreed.
Nevertheless, there's something wrong with our
educational system, or with us as parents, when our
children know so little about the economic system which
provides them with the highest living standard of any
major country in the world. I suggest we would have
«—

better citizens, and better public servants, if our children
understood the basics of their own economy.
I"*m delighted with what Oklahoma has done in this
area. Last year your legislature passed an Economic
Education Act which requires all state schools to include
economics in their curriculum. And I know that many
businessmen in Oklahoma City volunteer their time as
resource people in the schools, while civic organizations
donate money for in-service training courses.
I understand that Liberty National Bank is especially
active. They donate thousands of dollars in awards to
enterprising teachers of economic education and to young
entrepreneurs in Oklahoma so they can demonstrate the
feasibility of their own ideas by starting their own
businesses. That's super, and I hope the other 4 9 states
follow the lead of your state.

Now, for our last few minutes together, let's leave
economics and look at the everyday world outside our
windows — the world where men and women are born, grow
up, work, fall in love, marry, have children and go
about the concerns and activities of people everywhere
in the world.
For Americans, our world is a pretty special place.
We have our big, beautiful country. Our farmlands,
forests, mountains, cities and seacoasts that stretch
from Hawaii to New York.
We have 213 million people whose ancestors came
from everywhere in the world.
We have the special ideas that produced a new nation
199 ye&rs ago, and that guide us today.
And we have free speech; a free press; the freedom
to accept new challenges, as I did when I accepted my
present job; and our bloodied but not beaten free
enterprise system.
Under our free enterprise system, the real purchasing power of the average American family has doubled
in the last 25 years.
During the same time, working conditions improved
for most Americans. And, in the last 15 years alone, the
number of our citizens going to college has doubled.
Further, our political and economic system is
enormously resilient. Consider the shocks it underwent
this Past year.

-17-

9^ .
Since last May
— We have had a new president and a vice-president
—

by appointive means, which is also new.
—

We have lived through the highest rate of inflation

in our peacetime history.
—

We have had the most severe recession in 25 years.

—

And some $100 billion of the world's wealth has

been transferred from oil-consuming nations to oil producing nations.
While these changes were occuring, some people
renamed our American Ship of State the Titanic, and
announced we were all halfway under water and sinking
fast.
That wasn't true, and it won't be true.

The Ship

of State still sails; the flag still flies; the sky
hasn't fallen, and most of us even continue to live and
love and fight with our own husbands and wives.
Further, our free enterprise system still functions,
and the laws of supply and demand still operate.

The fact

that it functions so well despite the problems is a tribute
to its basic strength.

Perhaps it is time to start

doubting our doubter's more and our system less.
We will always have problems.

But that does not

alter the fact that we have an incredibly strong nation,
both in spirit and in material goods.
It is time now to move beyond the pessimism that

paralyzes, into action that creates.

For a long time

we have told each other what's wrong with society. Now
it is time to speak to the good in each other.
But we need to do more than speak — we need to
act.
As parents, we need to instruct our children in
economics. We must transfer to them our knowledge of
the supply and demand system; our belief in the free
marketplace, and the legitimacy of profit.
As business people, it is incumbent on us to take
our knowledge and expertise into the classrooms, by
actually servihg as speakers and lecturers, and by seeing
that our elected school board members transmit the need
for sound economic education to the teachers.
As citizens, we must demand that the news media
make some effort to understand our economic system and
to report the third side of our free-enterprise story.
As voters, we must make certain that our elected
officials — from D.C. to City Hall — understand that
good economics is good politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years as a going,
growing nation. Then let us look forward with confidence
as we go about doing our jobs, raising our families and
helping our society.
Thank you.

Department of theTREMURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

/789

FOR IMMEDIATE RELEASE
MAY 5, 1975
FORMER TREASURY SECRETARY SHULTZ
RECEIVES ALEXANDER HAMILTON AWARD
Former Treasury Secretary George P. Shultz today
received the Alexander Hamilton Award from Treasury
Secretary William E. Simon.
Presented for outstanding and unusual leadership in
the work of the Treasury, the Hamilton Award, which includes
a gold medal, is confered on persons designated by the
Secretary only. It is the Department's highest award.
The citation noted that Shultz as Secretary "admirably
carried forward the traditions of that office and, indeed,
raised its standards of dedication and professional excellence
to unsurpassed new heights."
The citation praised his domestic accomplishments and
said "Internationally, his remarkable negotiating skills
and ability to work closely with leaders of every race
helped the nations of the world adopt a system of more
flexible exchange rates and to dismantle many of the trade
barriers that existed between them."
Shultz received the award on the occasion of the formal
unveiling of his oil portrait as the 62nd Secretary of the
Treasury. It was painted by Everett Raymond Kinstler whose
works may be found in many private and public collections
including the New York City Metropolitan Museum of Art. The
Shultz portrait will be hung in the Treasury building along
with *-hose of other former Secretaries.

Department of theTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE

May 5, 1975

RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.8 billion of 13-week Treasury bills and for $2.8 billion
of 26-week Treasury bills, both series to be issued on May 8, 1975,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing August 7, 1975
Price
High
Low
Average

Discount
Rate

98.661
98.641
98.646

5.297%
5.376%
5.356%

Investment
Rate 1/
5.46%
5.54%
5.52%

26-week bills
maturing November 6, 1975
Price
97.124
97.097
97.106

Discount
Rate
a/ 5.689%
5.742%
5.724%

Investment
Rate 1/
5.95%
6.01%
5.99%

a/ Excepting two tenders totaling $800,000
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

34,315,000
$
Boston
,558,635,000
New York
27,450,000
Philadelphia
75,940,000
Cleveland
29,490,000
Richmond
38,245,000
Atlanta
250,475,000
Chicago
56,750,000
St. Louis
25,420,000
Minneapolis
49,800,000
Kansas City
25,035,000
Dallas
San Francisco 238,425,000
TOTALS$4>409>980,000

Accepted
$
24,315,000
2,237,230,000
27,140,000
35,840,000
23,935,000
36,675,000
145,975,000
44,895,000
25,320,000
38,855,000
22,035,000
138,110,000

Received

Accepted

8,155,000
$
18,155,000 $
2,482,190,000
4,258,790,000
7,950,000
8,365,000
41,320,000
106,670,000
25,180,000
46,720,000
17,250,000
59,755,000
28,525,000
201,715,000
23,055,000
75,425,000
5,925,000
14,925,000
17,955,000
23,165,000
8,375,000
9,375,000
136,490,000
346,690,000

$2,800,325,000 b/ $5,169,750,000

$2,802,370,000 c/

b/ Includes $376,410,000 noncompetitive tenders from the public.
—'
— Includes $176,460,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

Hello, I'm delighted to he with you today.

like the subjects I've been asked to talk about -which are women and the economy. That's a nice, wide
variety.
Variety is what women are all about. And "all
about" is where we are these days.
We are mopping kitchen floors, raising families,
living in communes, robbing banks, trying for the
executive suite, and in general being as good, bad,
smart, silly and cantankerous as men.
Fifty percent of women between 18 and 65 are
currently working. We're as well educated as men but,
on the average, we earn only three-fifth's of a man's
salary. There are many reasons for this and one -the main reason — is that many women work only on a
part-time basis. For many women, jobs are secondary
to their careers as wives and mothers.

Remarks by the Honorable Francine I. Neff, League of Republican Women, Washington, D.C. on May 5, 1975.

Politics is one area that attracts women. Mrs.
Ella Grasso is now Connecticut's governor while Mary
Ann Krupsak is the Lieutenant Governor of New York.
Five new women entered Congress this year, to join
the dozen already there. A good friend of all of
ours, Mary Louise Smith, is the first woman chairman
of the Republican National Committeec And a few weeks
ago, I attended a reception honoring Mrs. Carla Hills,
our new Secretary of Housing and Urban Development, and
the third woman cabinet officer in history.
In other fields, American women are scoring other
gains. Congress outlawed credit discrimination based
on sex last year. The bank of America settled a clacc
action suit on behalf of its female employees, which
will mean about $10 million in additional income to
women. And in education, the number of women students
in medical schools is double what it was three years ago.
I've been talking about working women -- and we
automatically think of paid jobs. But I'd like to
put in a good word for volunteers. They are terribly
important to our society. Some 7 0 million people have
volunteer jobs, and they contribute an estimated $50 billion
a year to America's "gross national product."
I am a wife, mother and dedicated believer in the
value of volunteers. For the first quarter century of
my adult life, I volunteered for everything from the PTA

to the GOP.

I was privileged to learn many techniques

and skills this way, because a willing volunteer can
often work with top people. I personally feel my
route to a career was via the way of the volunteer.
Today, I work full-time as the United States
Treasurer and as National Director of the Savings
Bonds Division. I am heartened to know that 97 percent
of the people who help sell bonds are volunteers. I
suspect — I hope — that some of you are among those
workers in our program.
Our National Savings Bonds goal for 197 5 is 6.8
billion dollars in bond sales, and at least 2.4 million
new or increased savers.
Here in Metro Washington, we had total sales last
year of about 155 million dollars. This was more than
a quarter million dollars above our 1974 goal. Our goal
this year is a little more than 161 million dollars.
I'm especially pleased about this Washington goal, because
in just the last 8 years, it has gone up more than 250
percent.
I'm happy to toll you that in our United States
Savings Bonds program we have leadership from the top.
I was privileged to visit with President Gerald Ford
several weeks ago. He is a regular Savings Bonds buyer,
and he told me that this year he is increasing his payroll deduction.

I certainly don't intend to tell you all the advantages of Savings Bonds today. You probably already
know what they are. Bonds are a safe, convenient,
painless way to save, with a very attractive 6 percent
interest rate. A banker friend of mine has added up
figures which show that over the last 5 years $7 5
invested monthly in bonds is worth more today than the
same amount invested in stocks on the Moody's Industrial
Index.
Bonds also have tax advantages which can increase
that 6 percent rate substantially.
Finally, Savings Bonds help the nation. They put
more of the Federal debt into the hands of long term
savers. They remain outstanding, on the average, for
six years, while other marketable instruments turn over
in three years or less. Almost a quarter of our publicly
held national debt is in the form of Savings Bonds.
So, our Bonds are good for America and good for
Americans. Sales of series E and H bonds were at a
29-year high in 1974. And, so far this year, sales are
even higher. In this period of inflation and recession,
the proven performance of these United States Savings
Bonds is very appealing.
Let's talk a little more about inflation and recession, and some of the other shocks that have hit our
economy this past year.
Since last May —

-- -

W([

— We have experienced the highest rate of inflation in our peacetime history.
—

Our economy is in the worst slump in years.

—

Oil prices have quadrupled.

—

And $100 million of the world's wealth has been

transferred to a small bank of. developing nations.
These stories all made the headlines.
story —• equally as important —

did not.

But another
And that is

the story of how well our economic system has operated
under conditions of extraordinary stress.
Throughout 1974, the prophets of doom announced
that our Ship of State was halfway under water and
sinking fast.
That l s n > t true and it won; t be true.
alive and well.

America is

The Ship of State sails; the flag still

flies and most of us still live and love and fight with
our husbands.
Let's look at the record of what the doubters have
predicted, and then let's see what actually happened.
— Prices on foreign oil jumped in 1974, and it
was said that the international financial system might
collapse, as massive sums of money were transferred.
In fact, the financial institutions responded with
considerable skill.
disbursed.

OPEC funds were rather widely

And the oil consuming nations are presently

working on new international agreements for future emergencies.

Further, new oil discoveries outside of the OPEC
nations, and new production in the United States and
elsewhere will eventually result in lowered prices.
As Treasury Secretary William Simon says, it's a question
of when, not if.
For another example of how the sky didn't fall,
let's look at gold sales. Late last year, Americans
were allowed to buy gold for the first time in decades.
The predictions were that we were in for a great new
gold rush.
This did not occur. When I checked a few weeks
ago, gold was selling below the quoted prices of December 30.
For a final excuujjle, let's consider the fczrz cf
some people that we are heading into another Great
Depression.
Of course, we've had a recession, but it did not
come close to the conditions of the 1930fs. Unemployment figures in 1975 are only about a third of the
1930!s figures, and there are such safety nets as Social
Security, medicare, unemployment payments, and fcod
stamps.
Treasury Secretary William Simon believes the present economic slide will bottom out during the middle of
this year. As he put it the other day, he sees"patches
of blue in a gray, wintry sky."
Our free enterprise system still functions, and the
laws of supply and demand still work. But, too often

^ '

it seems to me, we tend to doubt our institutions and
not our doubters.
Since I am a strong advocate of the free enterprise
system, people sometimes ask me, "If this system works
so well, why is there such a high rate of inflation and
unemployment?"
There are several reasons.
We fought a war in Viet Nam and charged it.
We sustained worId-wide crop failures.
We suffered an oil embargo, and oil prices today are
high.
But more fundamentally, we have for years abused our
economic system. The fact that it still functions so
well is a great tribute to its basic strength.
Our growing Federal government puts enormous
demands on the economy.
The proliferation of government regulations burdens
both business and the consumer. Federal regulations,
for example, added $320 to the price of a 1974 c?r.
And, our national habits of encouraging consumption
and federal spending at the cost of savings and investment
is a very serious concern. Capital investment in the
United States in recent years has been the lcvest of any
industrial nation in the free world.
Secretary Sir.cn and other government officials :re
working to turn some of these trends around. They feel,
and I agree, that

-8-

— We must restore greater discipline to our

financial affairs.
— We must lighten the hand of government in many
areas.
— And we must encourage savings, investment and
capital formation.
Finally, we must turn away from the doomsayers.
Despite our problems, we have an incredibly strong nation,
both in spirit and in material goods. Now we need to
speak to the good in each other.
But we need to do more than speak -- we need to
act.
As parents, we need to instruct our children in
economics. We must transfer to them our knowledge
of the supply and demand system; our belief in the free
marketplace, and the legitimacy of profit.
As business people, it is incumbent on us to take
our knowledge and expertise into the classrooms, by
actually serving as speakers and lecturers, and by
seeing that our elected school board members transmit
the need for sound economic education to the teachers..
As citizens, we must demand that the news media
make some effort to understand our economic system.
As Republicans we must make certain we do our work
well. We must see that the voting public has a choice
of candidates on election day. We must convince good
people to run for office. We must then support them with

-9our money, our volunteer time and efforts. V7e must
conduct vigorous and effective registration'campaigns,
voter preference polls, get-out-the vote campaigns and
ballot security schools. Then after the elections are
over, wTe must make certain our elected officials understand that good economics is good politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years of history.
Then let us look forward with confidence as we go about
doing our jobs, raising our families and helping society.
Thank you.

Department oftheTREASURY
WASHINGTON. DC. 20220

' '

TELEPHONE W04-2041

l^ I
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE AMERICAN MINING CONGRESS
PITYSBURGH. PENNSYLVANIA, MAY 5, 1975

MR. OVERTON, DISTINGUISHED DELEGATES TO THIS SPECIAL
CONFERENCE OF TE AMERICAN MINING CONGRESS, AND LADIES AND
GENTLEMEN;

IT IS A GENUINE PLEASURE TO APPEAR BEFORE YOU HERE IN
PITTSBURGH TODAY AND TO BRING YOU THE WARMEST GREETINGS OF
THE PRESIDENT OF THE UNITED STATES.

DURING THE TWO-AND-ONE-HALF YEARS THAT I HAVE, SERVED
IN WASHINGTON, I HAVE HAD THE PRIVILEGE OF WORKING CLOSELY
WITH LEADERS OF YOUR INDUSTRY ON MANY OCCASIONS. EACH TIME I
AM REMINDED OF THE ENORMOUS CONTRIBUTIONS THAT THE COAL INDUSTRY
HAS MADE TO OUR NATION'S GROWTH AND OF THE RICH PROMISE THAT IT
HOLDS FOR THE FUTURE. THE HUGE COAL RESERVES OF THIS COUNTRY
ARE A COMMANDING NATIONAL ASSET NOT ONLY HERE AT HOME BUT IN
OUR RELATIONS ABROAD, AND I BELIEVE — AS DO YOU -- THAT WE

- 2MUST BE WILLING TO DEVELOP THOSE RESERVES TO MEET THE ENERGY
NEEDS OF THE FUTURE.

AND OVER THESE LAST FEW YEARS, AS I

HAVE COME TO KNOW MANY OF YOU PERSONALLY, I MUST SAY THAT I
HAVE ALSO FOUND THAT YOUR INDUSTRY IS CAPTAINED BY MEN OF
STRENGTH AND VISION —

MEN OF THE ARENA WHO HAVE BATTLED

WITH THE HARD REALITIES OF LIFE AND HAVE LEARNED TO SHAPE
THOSE REALITIES TO SERVE A HIGHER GOOD.

SO I COME BEFORE

YOU TODAY FULLY APPRECIATIVE OF THE PLACE THAT YOU AND YOUR
INDUSTRY OCCUPY WITHIN OUR NATION.

WHEN I ACCEPTED YOUR KIND INVITATION TO SPEAK HERE,
ALLEN OVERTON SUGGESTED THAT SINCE FRANK ZARB WOULD ALSO BE
ADDRESSING THIS AUDIENCE, I MIGHT DIRECT MY REMARKS PRIMARILY
TOWARD THE PROBLEMS OF

THE ECONOMY.

I WILL BE HAPPY TO DO

so, RECOGNIZING,>OF COURSE, THAT OUR ECONOMIC FORTUNES ARE
INEXTRICABLY BOUND TO THE FUTURE DEVELOPMENT OF OUR ENERGY
RESOURCES.

NEARING THE END OF THE RECESSION
A WEEK AGO TODAY I RETURNED FROM AN EXTENDED TRIP
ARQUND THE WORLD THAT ENABLED ME TO SPEAK WITH LEADERS OF
MANY DIFFERENT NATIONS ON ECONOMIC ISSUES. ONE OF THOSE
MEETINGS WAS IN PARIS WHERE I CONFERRED WITH THE FINANCE
MINISTERS FROM WESTERN EUROPE AND JAPAN

~ THE OECD NATIONS.

I CAN REPORT TO YOU TODAY THAT THERE WAS WIDESPREAD AGREEMENT
AMONG THOSE MINISTERS THAT THE WESTERN WORLD IS NEARING THE
END OF THE CURRENT RECESSIONARY CYCLE.

FORTUNATELY, EVERY RECESSION SOWS THE SEEDS OF ITS OWN
RECOVERY, AND THIS ONE IS NO EXCEPTION. HERE IN THE UNITED
STATES, THERE ARE SOLID GROUNDS FOR BELIEVING THAT THE WORST
PART OF THE ECONOMIC SLIDE MAY ALREADY BE BEHIND US:

OF SPECIAL SIGNIFICANCE WAS THE RECORD REDUCTION
IN INVENTORY HOLDINGS IN THE FIRST QUARTER OF THE YEAR.
FIGURES RELEASED LAST WEEK INDICATED THAT THE INVENTORY

-nLIQUIDATION IN MARCH WAS EVEN GREATER THAN FIRST ESTIMATED.
y

THE IMPORTANCE OF THIS LIQUIDATION PROCESS IS THAT SALES
ARE* MOVING AHEAD MORE RAPIDLY THAN PRODUCTION.

As THAT

CONTINUES, WE CAN EXPECT AN INCREASE IN PRODUCTION IN
ORDER TO MEET DEMAND.

AND AS THAT HAPPENS, OF COURSE,

WE WILL BE ENTERING UPON THE RECOVERY.

THE INVENTORY LIQUIDATION REFLECTS A TURN AROUND IN
RETAIL SALES. EVEN APART FROM THE INFLUENCE OF PRICE
REBATES ON AUTO SALES, RETAIL SALES ROSE BY A TOTAL OF
3% PERCENT IN THE FIRST QUARTER OF THIS YEAR AND APPEAR
TO HAVE INCREASED A BIT FURTHER IN APRIL.

WE CAN

ALSO DRAW ENCOURAGEMENT

FROM

THE EMPLOYMENT

FIGURES RELEASED ON FRIDAY. WHILE THE RATE OF UNEMPLOYMENT
'«

ROSE TO 8.9 PERCENT, THE HIGHEST LEVEL OF THE POST-WAR
PERIOD, THE INCREASE WAS A SMALL ONE AND — MORE IMPORTANTLY "
APRIL ALSO BROUGHT THE FIRST INCREASE IN OVERALL EMPLOYMENT

-5 -

-} *5"£

IN HALF A YEAR. THERE HAS ALSO BEEN A LEVELING OFF IN
THE RATE OF JOB LAYOFFS, WHICH HAS A CRUCIAL IMPACT NOT
ONLY ON UNEMPLOYMENT BUT ALSO UPON PUBLIC CONFIDENCE.

THERE ARE SEVERAL OTHER SIGNS WHICH ARE ALSO POINTING
IN THE RIGHT DIRECTION:

— INFLATION HAS COME DOWN FASTER AND FURTHER THAN
ANYONE FIRST ESTIMATED, SO THAT BY THE END OF THIS YEAR, THE
OVERALL RATE OF INFLATION SHOULD BE IN THE NEIGHBORHOOD OF
6-7 PERCENT.

— As MONETARY POLICY HAS BECOME MORE EXPANSIVE AND
INFLATION HAS SUBSIDED, SHORT-TERM INTEREST RATES HAVE
FALLEN AND FUNDS HAVE BEGUN FLOWING BACK INTO THE THRIFT
INSTITUTIONS. THIS SETS THE NECESSARY PRECONDITION FOR AN
UPTURN IN HOUSING.

— IN ADDITION, CONDITIONS IN THE INTERNATIONAL ECONOMY
HAVE BEGUN TO STABILIZE.

- 6— SURVEYS ALSO INDICATE AN UPTURN IN CONSUMER CONFIDENCE,
WHICH HAS BEEN AT RECORD LOWS.

* — THERE HAS ALSO BEEN A DEFINITE AIR OF OPTIMISM IN
THE STOCK MARKET, WHERE THE DOW JONES HAS RISEN BY MORE THAN
A THIRD SINCE ITS LOW POINT IN 1974.

MOREOVER, THE GOVERNMENT IN WASHINGTON IS ALSO TAKING
POSITIVE STEPS TO ASSIST THE FORCES OF RECOVERY. AS I
MENTIONED, THE FEDERAL RESERVE HAS ALREADY EASED MONETARY
CONDITIONS SUBSTANTIALLY, AND BOARD CHAIRMAN ARTHUR BURNS
HAS INDICATED THAT THE FED WILL CONTINUE TO SUPPORT THE
RECOVERY WHILE AVOIDING EXCESSIVE STIMULATION. AT THE SAME
TIME, THE CONGRESS HAS PASSED AND THE PRESIDENT HAS.SIGNED
THE BIGGEST TAX CUT IN OUR HISTORY. COMBINED WITH A LARGE
FEDERAL DEFICIT,»THE TAX CUT WILL GIVE A STRONG BOOST TO
THE ECONOMY.

1 DO NOT MEAN TO ASSERT THAT THE END OF THE RECESSION

- - 1*1
is AT HAND.

DURING COMING MONTHS, MUCH OF THE ECONOMIC NEWS

WILL CONTINUE TO BE BLEAK, REGISTERING FURTHER STATISTICAL
EXPRESSIONS OF THE RECESSION.

I DO SUGGEST, HOWEVER, THAT

THE ECONOMY IS NOW.PROVIDING MOUNTING EVIDENCE THAT THE
RECESSION
YEAR.

WILL

BOTTOM OUT DURING THE MIDDLE MONTHS OF THE

BY THE END OF THE YEAR, WE WILL DEFINITELY BE ON THE

ROAD TO RECOVERY.

WHAT LIES BEYOND RECOVERY?

THE MOST SERIOUS QUESTION BEFORE US IS NOT WHETHER
RECOVERY IS COMING, BUT WHAT LIES JUST BEYOND.

CAN WE

SUSTAIN A STEADY, UPWARD MOVEMENT OF THE ECONOMY, OR WILL WE
BEGIN CLIMBING ONLY TO PLUNGE ONCE AGAIN INTO THE ABYSS?
THAT IS THE ISSUE THAT WE MUST FACE UP TO IN OUR ECONOMIC
POLICY DECISIONS*

THERE IS NO DOUBT IN MY MIND THAT WE HAVE THE ABILITY
TO STEER THE ECONOMY BACK TO THE PATH OF PROGRESS AND PROS-

- 8PERITY. DESPITE THE REPORTS THAT YOU SOMETIMES READ IN THE
PRESS, THERE IS NO' REAL MYSTERY ABOUT HOW WE GOT
INT,0 THIS MESS NOR SHOULD THERE BE MUCH DISPUTE ABOUT HOW WE
GET OUT. MY DEEPEST CONCERN IS WHETHER WE HAVE LEARNED THE
LESSONS OF THE PAST AND NOW HAVE THE WISDOM AND THE COURAGE
TO TAKE THE PROPER MEDICINE FOR THE FUTURE.

AS LEADERS OF THE COAL INDUSTRY, YOU HAVE GROWN ACCUSTOMED
TO THE RIGORS OF THE FREE ENTERPRISE SYSTEM. YOU KNOW WHAT
IT'S LIKE TO EXPERIENCE SETBACKS, BUT YOU ALSO HAVE THE
BACKBONE AND THE DETERMINATION TO OVERCOME YOUR PROBLEMS.
THAT IS WHY I AM SURE YOU CAN BE COUNTED ON IN THE COMING
EFFORT TO PUT THE AMERICAN ECONOMY BACK ON SOLID FOOTING.
WE CERTAINLY NEED YOUR HELP.
*

LET'S FACE TT:

OUR ECONOMY IS IN TROUBLE TODAY BECAUSE

WE HAVE TRIED TO LIVE BEYOND OUR MEANS FOR SO MANY YEARS AND
WE HAVE SERIOUSLY ABUSED THE FREE ENTERPRISE SYSTEM THAT HAS

I91>
BEEN THE FOUNDATION OF OUR ECONOMIC ABUNDANCE.

MORE AND

MORE WE HAVE TURNED TO THE GOVERNMENT TO SOLVE OUR PROBLEMS,
WHEN IN OUR HEARTS WE ALWAYS KNEW THAT GENUINE PROGRESS
COMES THROUGH THE SWEAT AND DETERMINATION OF

FREE MEN

AND WOMEN.

NO ONE CAN BE SO EMPTY HEADED AS TO DENOUNCE ALL FORMS
OF GOVERNMENTAL ACTIVITY, BUT THE RAPID GROWTH OF GOVERNMENT
IN RECENT YEARS HAS EXCEEDED ANYTHING IN OUR HISTORY AND HAS
HAD A POWERFUL IMPACT UPON OUR ECONOMIC GROWTH,

IT TOOK 186 YEARS FOR THE FEDERAL BUDGET TO REACH $100
BILLION, A LINE IT CROSSED IN 1962,

THEN ONLY NINE MORE

YEARS WERE REQUIRED TO REACH $200 BILLION AND ONLY FOUR MORE
YEARS TO REACH $300 BILLION —
YEAR.

A RECORD WE ARE SETTING THIS

AS WE HAV^ OPENED THE FLOODGATES ON THE FEDERAL

BUDGET, GOVERNMENT SPENDING HAS BECOME A DOMINANT FORCE
WITHIN OUR ECONOMY.

TOTAL GOVERNMENT SPENDING TODAY ACCOUNTS

- 1U FOR ABOUT A THIRD OF OUR GNP - ALMOST THREE TIMES THE LEVEL
OF PRE-DEPRESSION YEARS - AND IF RECENT TRENDS PREVAIL,
GOVERNMENT SPENDING COULD ACCOUNT FOR AS MUCH AS 60% OF OUR

GNP BY THE YEAR 2000.
THAT GROWTH HAS FRIGHTENING IMPLICATIONS. WHEN ANY
GOVERNMENT TAXES AWAY MORE THAN HALF OF WHAT A PEOPLE PRODUCE,
ROBBING THEM OF THEIR ECONOMIC FREEDOMS, CAN THERE BE ANY
DOUBT THAT THE LOSS OF THEIR SOCIAL AND PERSONAL FREEDOMS
WILL FOLLOW CLOSE BEHIND?

IT HAS NEVER BEEN POLITICALLY POPULAR, OF COURSE, TO
INCREASE TAXES, SO THAT INCREASED FEDERAL SPENDING HAS MEANT
A STRING OF FEDERAL DEFICITS — 14 IN THE LAST 15 YEARS. As
A RESULT, THE GOVERNMENT OVER THE PAST DECADE HAS BEEN
REQUIRED TO BORROW A QUARTER OF A TRILLION DOLLARS FROM THE
PRIVATE CAPITAL MARKETS THAT HAVE ALWAYS BEEN THE CENTERPIECE
OF OUR FREE ENTERPRISE SYSTEM. IN THIS CALENDAR YEAR ALONE,

THE TREASURY DEPARTMENT WILL BE REQUIRED TO BORROW AT LEAST
$80 BILLION ~ OVER A BILLION AND A HALF DOLLARS A WEEK.

MONETARY POLICY HAS ALSO BEEN A CULPRIT OF OUR ECONOMIC
TROUBLES. FROM 1955 TO 1965, THE MONEY SUPPLY GREW AT AN
AVERAGE RATE OF 2 1/2 PERCENT A YEAR, AND WE ENJOYED A
PERIOD OF REASONABLE PRICE STABILITY. SLNCE 1965, HOWEVER,
THE RATE OF GROWTH HAS MORE THAN DOUBLED TO 6 PERCENT A
YEAR, FAR MORE THAN THE ECONOMY COULD REASONABLY ABSORB.
WITH THE MONEY SUPPLY GROWING SO MUCH MORE RAPIDLY THAN THE
ECONOMY ITSELF, IT IS NO ACCIDENT THAT INFLATION HAS BECOME
A CHRONIC PROBLEM.

A RELATED TREND WHICH HAS HAD A DESTRUCTIVE IMPACT UPON
THE ECONOMY HAS BEEN THE ENORMOUS PROLIFERATION OF FEDERAL
REGULATIONS IN RE*CENT YEARS. I KNOW THAT EXCESSIVE GOVERNMENTAL
REGULATIONS HAVE BECOME A MAJOR CONCERN IN THE ENERGY INDUSTRY.
LET ME ASSURE YOU OF THIS: YOU ARE NOT ALONE. AN INCREASING

- 12 -

NUMBER OF PRODUCERS AS WELL AS CONSUMERS ARE COMPLAINING
ABOUT THIS BURDEN. CONSIDER JUST A FEW EXAMPLES OF
THE REGULATORY PROCESS IN ACTION:
s

~ IT IS ALMOST TWICE AS FAR FROM SAN FRANCISCO TO LOS
ANGELES THAN FROM NEW YORK TO WASHINGTON, AND YET THE AIR
FARE ON THE CALIFORNIA TRIP IS ALMOST A THIRD CHEAPER. WHY?
BECAUSE AIRLINES OPERATING INTRASTATE IN CALIFORNIA ARE NOT
CONTROLLED BY FEDERAL REGULATORS,

— THE GOVERNMENT ALSO REQUIRES THE RAILROADS TO MAINTAIN
AS MANY AS 50,000 MILES OF TRACK THAT MAY NO LONGER BE
NEEDED, CREATING ADDITIONAL FINANCIAL BURDENS ON AN INDUSTRY
ALREADY IN PERIL.

— IN THE FIELD OF ENERGY, THE FEDERAL POWER COMMISSION,
DESPITE REPEATED WARNINGS FROM EXPERTS, HAS BEEN REQUIRED
FOR MORE THAN TWO DECADES TO KEEP THE WELLHEAD PRICE OF
NATURAL GAS AT AN ABNORMALLY LOW LEVEL IN ORDER TO HOLD DOWN

- 13 -

PRICES FOR CONSUMERS. BUT THESE CONTROLS HAVE REDUCED THE
INCENTIVES FOR DEVELOPMENT OF NEW DOMESTIC SUPPLIES, SO THAT
TODAY THERE IS MUCH LESS NATURAL GAS THAN WE NEED.

GOVERNMENTAL

REGULATIONS HAVE, IN EFFECT, CREATED A NATIONAL SHORTAGE.

SURVEYING THE WHOLE RANGE OF REGULATIONS, IT IS APPA-

RENT

THAT IN A SUBTLE BUT INSIDIOUS WAY THEY HAVE SPREAD

THROUGHOUT OUR SOCIETY SO THAT TODAY THEY ENCUMBER ALMOST
EVERY PHASE OF BUSINESS AND INDUSTRIAL LIFE AND COST CONSUMERS UNTOLD BILLIONS OF DOLLARS.

IS THERE ANY DOUBT HERE

TODAY THAT THE WAY TO SOLVE MANY OF OUR ECONOMIC PROBLEMS IS
TO ALLOW THE FREE ENTERPRISE SYSTEM TO FUNCTION FREELY?

LET US BE AWARE, HOWEVER, THAT THE FREE ENTERPRISE
SYSTEM IS NOT AS POTENT AS IT ONCE WAS, OVER THE LAST DECADE,
AS THE FORCES OF*BIG GOVERNMENT HAVE BEEN OVERFED AND OVERNOURISHED,
THE FREE ENTERPRISE SYSTEM HAS GRADUALLY BEEN WEAKENED.

THE RECORD OF CAPITAL INVESTMENT IN THE UNITED STATES

- 14 IN RECENT YEARS HAS BEEN THE LOWEST OF ANY MAJOR INDUSTRIALIZED NATION IN THE FREE WORLD.

FROM 1960 THROUGH 1973,

TOTAL FIXED INVESTMENT IN THE U.S. AVERAGED ABOUT 18 PERCENT
A YEAR OF OUR REAL NATIONAL OUTPUT, COMPARED TO 35 PERCENT
IN JAPAN, 26 PERCENT IN WEST GERMANY, AND 25 PERCENT IN
FRANCE.

NOT SUPRISINGLY, OUR RECORDS OF PRODUCTIVITY GROWTH

AND OVERALL ECONOMIC GROWTH DURING THIS SAME PERIOD WERE
ALSO AMONG THE LOWEST OF THE MAJOR INDUSTRIALIZED NATIONS.
REAL GROWTH OF THE U.S. ECONOMY DURING THIS PERIOD AVERAGED
4 PERCENT A YEAR, COMPARED TO 11 PERCENT A YEAR IN JAPAN AND
JUST UNDER 6 PERCENT A YEAR IN WEST GERMANY AND FRANCE.

I RECENTLY RECEIVED THE RESULTS OF A STUDY BY THE RESPECTED
ECONOMIST
us.

PIERRE RENFRET

WHICH SHOULD CONCERN ALL OF

THE STUDY REVEALS THAT AS OF MARCH OF THIS YEAR, WHILE
»

THE ECONOMY WAS IN THE DEEPEST SLUMP SINCE WORLD WAR II, WE
WERE STILL OPERATING AT APPROXIMATELY 85 PERCENT OF CAPACITY.
WHILE HIS FIGURES ARE CONSIDERABLY ABOVE THOSE COLLECTED BY

. W

THE GOVERNMENT, THEY SUGGEST THAT WE HAVE FAR LESS RESERVE
CAPACITY THAN IS GENERALLY RECOGNIZED,

I KNOW FROM MY OWN

EXPERIENCE THAT THE STEEL INDUSTRY TODAY IS OPERATING CLOSE
TO CAPACITY.

WHAT THIS MEANS IS THAT DURING THE ECONOMIC

RECOVERY THAT LIES AHEAD, WE MAY QUICKLY BUMP UP AGANIST THE
LIMITS OF PRODUCTIVE CAPACITY, FORCING UP PRICES ONCE AGAIN.

WHY WE HAVE FAILED TO BUILD AND EXPAND OUR INDUSTRIAL
BASE?

A FUNDAMENTAL REASON, I WOULD ARGUE, IS THAT WE HAVE

HAD POLICIES WHICH PROMOTE PERSONAL CONSUMPTION AND FEDERAL
SPENDING AT THE EXPENSE OF SAVINGS, INVESTMENT AND CAPITAL
FORMATION.
DIVERTED

TOO MANY OF OUR FINANCIAL RESOURCES HAVE BEEN
FROM THEIR MOST PRODUCTIVE USE, THE PRIVATE SECTOR,

TO THEIR LEAST PRODUCTIVE USE, THE GOVERNMENT.

A RELATED

PART OF THE PROBLEM HAS BEEN THE SERIOUS DETERIORATION IN
CORPORATE PROFITS SINCE THE MID-1960S,

CONTRARY TO POPULAR

OPINION, AFTER-TAX PROFITS MEASURED IN REAL TERMS HAVE
DROPPED BY 50 PERCENT SINCE 1965.

IT IS NOT UNFAIR TO SAY

- 16 -

THAT WE HAVE BEEN AND REMAIN TODAY IN A PROFITS DEPRESSION
IN THE UNITED STATES,

* THE INTERACTION OF THE VARIOUS TRENDS THAT I HAVE
MENTIONED HERE TODAY — EXCESSIVE FISCAL AND MONETARY POLICIES,
OVERZEALOUS REGULATION BY THE GOVERNMENT, AND INADEQUATE
CAPITAL FORMATION AND ECONOMIC GROWTH ~ HAS HAD A NUMBER OF
EFFECTS WITHIN THE ECONOMY, BUT NONE HAS BEEN MORE SIGNIFICANT
THAN THE GENERAL INFLATION THAT HAS RESULTED. SLNCE THE
MID-1960S, WE HAVE BEEN PLAGUED WITH AN INFLATION RATE THAT
HAS GRADUALLY CLIMBED FROM ONE PLATEAU TO THE NEXT. IN
RECENT YEARS, THAT RATE WAS PUMPED SWIFTLY UPWARDS BY THE
QUADRUPLING OF OIL PRICES, THE INCREASE IN FOOD PRICES, AND
OTHER CAUSES, BUT AS THOSE SPECIAL FACTORS DISAPPEAR, IT
WILL BE APPARENT THAT THE UNDERLYING REASON FOR MODERN
INFLATION HAS BEEN OUR MISGUIDED POLICIES.

ECONOMISTS HAVE ALSO BEGUN TO RECOGNIZE THAT MORE THAN

ANY OTHER FACTOR, INFLATION WAS RESPONSIBLE FOR CAUSING
TODAY'S RECESSION. AS PRICES SKYROCKETED AND REAL INCOMES
WER,E ERODED, CONSUMER CONFIDENCE FELL AND WE EXPERIENCED THE
WORST DROP IN CONSUMER SPENDING IN A QUARTER OF A CENTURY.
SIMILARLY, AS PRICES ROSE, FUNDS WERE DRAWN OUT OF THE
THRIFT INSTITUTIONS, INTEREST RATES WERE DRIVEN UP, AND THE

BOTTOM FELL OUT OF THE HOUSING INDUSTRY. WE MUST WAKE UP
THE FACT THAT INFLATION IS THE SINGLE MOST DESTRUCTIVE FORCE
WITHIN OUR ECONOMY.

THE CHIEF DANGER WE FACE TODAY IS THAT WE WILL FAIL TO
HEED THE LESSONS OF THE PAST BUT WILL INSTEAD PURSUE THE
SAME OLD POLICIES. PRESIDENT FORD IS FIGHTING HARD TO
HOLD THE FEDERAL DEFICIT FOR THE COMING FISCAL YEAR TO $60
BILLION. YET IT IS APPARENT THAT A MAJORITY OF THE CONGRESS
BELIEVE THAT DEFICIT IS TOO LOW. THEY COULD EASILY PUSH IT
UP TO $70-80 BILLION, AND CONCEIVABLY UP TO $100 BILLION,
WHAT A SAD COMMENTARY THAT WOULD BE IF 14 YEARS AFTER THE

- 18 ENTIRE FEDERAL BUDGET BROKE THE $100 BILLION FIGURE, THE
DEFICIT ALONE WERE OVER $100 BILLION.

, RUNAWAY FEDERAL DEFICITS — DEFICITS IN THE NEIGHBORHOOD
OF $80 - 100 BILLION -- WOULD CREATE A SERIOUS RISK OF
TOUCHING OFF A NEW ROUND OF EVEN MORE SERIOUS INFLATION
FOLLOWED BY STILL MORE UNEMPLOYMENT. MOST OFTEN, NEW
SPENDING PROGRAMS REQUIRE A YEAR TO 18 MONTHS BEFORE
THEY COME ON STREAM. THUS, PROGRAMS ENACTED IN COMING
MONTHS WOULD NOT PUMP STIMULUS INTO THE ECONOMY UNTIL
WE ARE ALREADY MOVING TOWARD FULL CAPACITY, AND THEY
WOULD THEN CONTRIBUTE SIGNIFICANTLY TO INFLATIONARY
PRESSURES.

A SECOND DANGER FROM HUGE FEDERAL DEFICITS WOULD
ARISE IN OUR PRIVATE CAPITAL MARKETS. I HAVE SAID SEVERAL
TIMES BEFORE THE DEFICITS IN THE NEIGHBORHOOD OF $50 - 60
BILLION WOULD BE MANAGEABLE, EVEN THOUGH THEY WOULD CREATE
STRAINS, BUT DEFICITS OF A MUCH LARGER MAGNITUDE WOULD

- 19 • y^>
BE VERY RISKY INDEED.

IN AN ORDINARY RECESSION, LARGE-SCALE FEDERAL BORROWING
CAN1 BE ACCOMODATED IN THE PRIVATE MARKETS BECAUSE PRIVATE
DEMANDS FOR FUNDS ARE SLACK. IN THIS RECESSION, HOWEVER,
THE HIGH RATE OF INFLATION AS WELL AS THE SKEWED NATURE
OF THE CORPORATE DEBT STRUCTURE HAVE HELPED TO KEEP
PRIVATE DEMANDS FOR FUNDS HIGHER THAN WE WOULD OTHERWISE
EXPECT IN A RECESSION.

MOREOVER, AS THE RECOVERY TAKES HOLD, PRIVATE DEMANDS
FOR FUNDS WILL RISE. AT THE SAME TIME, THE TREASURY WILL
STILL BE BORROWING LARGE AMOUNTS OF MONEY TO COVER THE
DEFICITS. IT IS WELL TO REMEMBER THAT OUR RECESSION IS
NEARLY 75% COMPLETED BUT OUR BORROWING TO COVER THE DEFICITS
IS ONLY 25% COMPLETED.

THE DANGERS THAT WE FACE HERE ARE OF TWO KINDS.
ONE POSSIBILITY IS THAT THE EXCESSIVE FEDERAL DEMANDS ON
THE CAPITAL MARKETS AS THE ECONOMY RECOVERS AND PRIVATE DEMANDS

- 20 -

ARE ACCELERATING, WOULD SET IN MOTION A VICIOUS COMPETITION
BETWEEN THE GOVERNMENT AND PRIVATE BORROWERS FOR CAPITAL
FUNDS, INEVITABLY, MORTGAGE BORROWERS AND MEDIUM TO
LOWER-RATED BUSINESS BORROWERS WOULD BE CROWDED OUT OF THE
MARKETPLACE. THIS COULD ABORT THE EXPECTED ECONOMIC RECOVERY
AT AN EARLY STAGE AND CAUSE UNEMPLOYMENT TO RISE AGAIN.

THE OTHER POSSIBILITY WOULD BE FOR THE FEDERAL RESERVE
TO ACCOMMODATE THE ENORMOUS BORROWING REQUIREMENTS OF THE
FEDERAL GOVERNMENT, AS WELL AS PRIVATE DEMANDS, BY CREATING
A MORE RAPID GROWTH IN MONEY AND CREDIT. THIS MIGHT POSTPONE
THE ADVERSE IMPACT ON THE RECOVERY FOR PERHAPS A YEAR OR
TWO, BUT THE CONSEQUENCES OF SUCH ACTION WOULD SOON CATCH
UP WITH US IN THE FORM OF A REACCELERATED INFLATION FOLLOWED
BY A NEW RECESSION AND HIGHER UNEMPLOYMENT.

I AM NOT PREDICTING SUCH DIRE RESULTS, BUT IT IS ABSOLUTELY
ESSENTIAL THAT WE BEAR IN MIND THE DANGERS THAT WOULD BE
CREATED IF WE TRY TO OUT SPEND OURSELVES OUR OF THIS RECESSION,

- 21 -

POLICIES FOR THF FURTURE
WHAT, THEN, SHOULD BE OUR POLICIES FOR THE FUTURE?
., FIRST AND FOREMOST, WE MUST CONTINUE TO SUPPORT THE
FORCES OF ECONOMIC RECOVERY SO THAT WE CAN END THE HARDSHIPS
OF UNEMPLOYMENT. IN WARMING UP THE ECONOMY, HOWEVER, WE
MUST BE EQUALLY CAREFUL NOT TO OVERHEAT IT. THAT WILL
REQUIRE A SLOWER PERIOD OF RECOVERY THAN WE WOULD LIKE, BUT
WE ARE ONLY BUYING MORE TROUBLE FOR OURSELVES OVER THE LONG
RUN IF WE RESORT TO SHORT-TERM PALLIATIVES,

SECOND, AS WE REGAIN OUR PROSPERITY, WE MUST"RESTORE
MUCH GREATER DISCIPLINE TO OUR FISCAL AND MONETARY POLICIES.
INSTEAD OF AN UNBROKEN STRING OF FEDERAL DEFICITS, WE SHOULD
BEGIN TO PURSUE BUDGET SURPLUSES IN GOOD YEARS SO THAT WE
CAN FREE UP MORE FUNDS FOR CAPITAL INVESTMENT.
' » •

THIRD, I E MUST LIFT THE DEAD HAND OF GOVERNMENTAL
REGULATION FROM THE MANY AREAS WHERE IT SMOTHERS ECONOMIC

- aINCENTIVES AND GROWTH. THIS GOAL IS PARTICULARLY RELEVANT
IN THE FIELD OF ENERGY. IF WE ARE TO ACHIEVE GREATER SELF
SUFFICIENCY IN ENERGY, AS I BELIEVE WE MUST, THEN WE MUST
ACCELERATE THE DEVELOPMENT OF RESOURCES SUCH AS COAL BY
STRIKING A REASONABLE BALANCE BETWEEN ENVIRONMENTAL AND
ENERGY REQUIREMENTS. THE RESTRAINTS IMPOSED BY THE GOVERNMENT
UPON PRODUCTION, SALE AND USE OF OUR ENERGY RESOURCES ARE
UNNECESSARILY RESTRICTIVE AND SHOULD BE SWIFTLY REVISED,

FOURTH. WE MUST MAKE A BASIC SHIFT IN OUR DOMESTIC
POLICIES SO THAT WE PUCE LESS EMPHASIS UPON CONSUMPTION AND
GOVERNMENT SPENDING AND MORE UPON SAVINGS, INVESTMENT AND
CAPITAL FORMATION. WHILE ESTIMATES OF FUTURE CAPITAL NEEDS
ARE ALWAYS DIFFICULT, A VARIETY OF STUDIES HAVE CONCLUDED
THAT OUR INVESTMENT NEEDS DURING THE NEXT DECADE WILL BE.
»

ALMOST TRIPLE THE AMOUNT OF RECENT YEARS,

INVESTMENTS

DEMANDS WILL BE PARTICULARLY ACUTE IN THE FIELD OF ENERGY,
GENERAL PROJECTIONS OF ENERGY INDUSTRY REQUIREMENTS OVER THE

NEXT DECADE RANGE FROM $750 BILLION TO $1 TRILLION.

UTILITIES

WILL NEED THE GREATEST PORTION OF THESE FUNDS, BUT WE MUST
ALSO CHANNEL BILLIONS OF DOLLARS INTO ACCELERATED DEVELOPMENT
1

OF PETROLEUM, NATURAL GAS, COAL AND NON-FOSSIL FUELS. THE
POTENTIAL FOR FUTURE DEVELOPMENT OF ENERGY RESOURCES IS
GREAT, BUT IT IS CLEAR THAT WE WILL NOT REALIZE THAT POTENTIAL
SO LONG AS THE GOVERNMENT IGNORES THE FINANCIAL REALITIES INVOLVED
AND INHIBITS THE PROCESS OF CAPITAL FORMATION.

FINALLY, WE MUST BEGIN TO PLACE GREATER RELIANCE UPON
THE FREE ENTERPRISE SYSTEM ONCE AGAIN AND LESS UPON GOVERNMENT, THE PRIVATE ENTERPRISE SYSTEM HAS LONG BEEN A CONERSTONE
OF OUR FREEDOMS AND HAS PROVIDED THIS NATION WITH THE GREATEST
PROSPERITY AND THE HIGHEST STANDARD OF LIVING EVER KNOWN.
BUT IN TODAY'S ECONOMIC TURBULENCE, THERE ARE CONTINUING'
'»•

TEMPTATIONS TO REPLACE THAT SYSTEM WITH THE FORCES OF CENTRALIZED
GOVERNMENT, THE GOVERNMENT HAS BECOME SO HUGE AND DOMINEERING ~
AND WE HAVE TURNED TO IT SO OFTEN FOR SOLUTIONS THAT HAVE

- 24 FALLEN SHORT OF OUR DREAMS ~ THAT THE TIME HAS COME TO REDISCOVER HOW MUCH CAN BE ACCOMPLISHED BY PRIVATE ENTERPRISE
AND> BY MEN AND WOMEN WHO ARE FREE TO DETERMINE THEIR OWN
DESTINIES.

IN COMING YEARS, IF WE ARE TEMPTED ONCE AGAIN BY THE
SIREN SONGS OF BIG GOVERNMENT, WE WILL NOT ONLY INFLICT
ENORMOUS DAMAGE UPON OUR ECONOMY BUT WE WILL ALSO PLACE THE
FREE ENTERPRISE SYSTEM IN THE GREATEST DANGER IT HAS FACED
IN OUR LIFETIMES, THAT SYSTEM IS ALREADY UNDER SEIGE: IT
IS MINDLESSLY DISTRUSTED BY FAR TOO MANY PEOPLE — AND
WHEREVER IT IS DISPLACED, THE GOVERNMENT QUICKLY FILLS THE
VACUUM.

THIS GENERATION — OUR GENERATION — MAY BE THE LAST
WHICH CAN STOP THE SWING OF THE PENDULUM BEFORE IT IS TOO
LATE. AS MEN AND WOMEN AT THE HEART OF AMERICAN INDUSTRY, I
URGE YOU TO STAND UP AND FIGHT FOR THAT CAUSE.

THANK YOU,
* # #

STATEMENT OF THE HONORABLE CHARLES A. COOPER,
ASSISTANT SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS,
BEFORE THE SUBCOMMITTEE ON
INTERNATIONAL TRADE AND COMMERCE
OF THE COMMITTEE ON INTERNATIONAL RELATIONS,
HOUSE OF REPRESENTATIVES
10:00 a.m., May 5, 1975, 2255 RHOB
Mr. Chairman, I am pleased to appear before this Subcommittee to discuss the proposed Financial Support Fund.
This new international financial arrangement represents a
key element of our efforts to promote effective international
cooperation — in both energy and general economic policy —
in a period of great uncertainty and change. An effective
response to the financial and economic challenges posed by
the severe increases in oil prices demands a unity of purpose
and common effort among major oil consuming nations. The
Support Fund can play a major role in shaping that common
effort.
Basic Purposes and Principles of Support Fund
The Support Fund Agreement signed by Secretary Simon on
behalf of the United States on April 9 has its origins in
proposals put forward independently by the United States and
by the Secretary General of the Organization for Economic
Cooperation and Development (OECD) late last year. Those
proposals were pursued intensively first by a working party
of the Deputies of the Group of Ten major industrial nations.
\TS - 2 f) 1

- 2 The outlines of the plan were accepted in principle by Ministers
of the Group of Ten in Washington in January. Detailed technical and legal drafting was then assigned to a working party of
the OECD, an organization whose membership includes nearly all
the developed nations of the non-Communist world. The agreement
therefore represents a major international cooperative effort.
But the basic purpose and substance of the agreement closely
parallel original U.S. concepts.
The proposals for a Support Fund arrangement were
developed following a period of widespread concern — which has
subsequently proved unwarranted — that the oil importing world
faced nearly certain financial disaster, that the private
financial markets were utterly incapable of handling financing
of the magnitudes and variety foreseen and that a large new
official "re-cycling" mechanism be imposed on the world to
intermediate between the oil exporting investors and the oil
importing borrowers. Those who held such views suggested
various proposals involving more or less open-ended official
financing arrangements between lenders and borrowers, displacing
private markets and other existing financing channels, and
frequently envisaging guarantees or other special incentives
to induce the oil exporters to place their funds with the new
arrangement. Proposals for a massive, open-ended IMF oil
facility — involving IMF borrowings from the oil producers on
the basis of market-related rates of interest, exchange rate

and default guarantees to lenders, and virtually automatic
credit to borrowers — perhaps best typified these schemes.
Our proposal for a Financial Support Fund was based
on a different analysis of the situation and a different
assessment of the requirements.
First, we felt it was not desirable to create a major
new financial mechanism to deal with oil-related financing
without addressing more fundamental problems. Any new
arrangement must demand of its participants cooperation in
energy policy, as well as cooperation in broader economic
and financial policy.
Second, the U.S. viewed the financial problems posed
by the increases in oil prices as transitional in nature.
Energy conservation and increased energy production in the
oil importing world will over time cut into the oil exporters'
revenues. Rapidly growing demands in oil exporting countries
for foreign goods and technology will over time substantially
increase their payments abroad. These transfers will impose
the real costs of high oil prices, but they will also serve
to make the financial problem temporary. Current projections
are that the accumulated investible surplus of the oil
exporters as a group will have peaked by the end of this decade,
if not before, in the range of $170-$250 billion (at 1974
prices). If this expectation is correct, the largest annual
imbalances between the oil importing and exporting groups have

- 4already occurred and will taper off toward the end of the
1970's. But large imbalances and financing needs will
continue for the next several years, and their cumulative
effects may mean that the severest tests still lie ahead.
Third, we believe that any official financial mechanism
established should not seek to displace the private markets
or other existing sources of financing. These arrangements
performed well in 1974 in the face of rapidly changing
circumstances, and should be permitted and encouraged to
continue to perform and adapt.
Fourth, in our view the nature of the financing problems,
or potential financing problems, faced by the developed oil
importing countries was not the unavailability of financing
in the aggregate. The oil exporting countries have no
practical alternative to placement of the bulk of their
financial surpluses in the capital and money markets of the
major oil importing countries. Instead, the danger is that
an individual country may not be able to obtain on reasonable
terms the external financing it needs to maintain appropriate
levels of domestic economic activity, to avoid recourse to
restrictions on international trade and capital flows, and to
maintain cooperative energy policies.
The major dangers that to many seemed so prominent in
the immediate aftermath of the oil price increases have been
avoided thus far, and we hope that will continue to be the
case. Nonetheless, there is no assurance at present that this

favorable situation will continue, and that individual
countries will not be driven to inappropriate and unfair
policies by the unavailability, actual or prospective, of
needed external capital. This possibility may increase as
the imbalances, and countries' use of international financing
arrangements, accumulate. Once begun, recourse to such policies could quickly spread, triggering a destructive and selfdefeating spiral of restrictions on world trade and payments
and moves toward excessive curtailment of economic activity.
Our ability to achieve effective cooperation on the real
problems of energy, growth, inflation and economic development
would be gravely jeopardized. The risk of such a trend is
shared by all countries. It is manageable, but it must be
managed.
This basic analysis, which has gained widespread acceptance,
has determined several fundamental principles of the Support
Fund's operations.
— The Support Fund is designed to meet a common danger,
and all risk associated with its operations will be shared
fully and equitably, on a predetermined basis, among all
participants. Risk will not fall — as it might in the absence
of the Fund — on the one or two countries that might be in the
strongest position when an emergency arises elsewhere in the
system.
-- Commitment to cooperation in energy and general

- 6 economic policy is a basic requirement of participation in
the Support Fund. In the event the Fund has to be used,
specific policy conditions will be attached to its loans.
The need for a financial mechanism complementary to cooperation in energy and economic policy made it desirable that the
arrangement be established within the general framework of
the OECD, which provides the central forum for such cooperation among developed countries.
— The Support Fund is a temporary device. Its authority
to provide financing will lapse two years after it comes into
existence, and no new institution or staff will be created. The
Support Fund will be headquartered at the OECD in Paris; its
policies and operations will be guided by financial officials
from participating capitals, meeting as necessary to conduct the
Fundfs business; and needed staff work will be carried out by
the OECD staff under agreed compensation arrangements. At the
end of two years, of course, circumstances may show that we have
been too optimistic and that the life of the Fund should be
extended. But that does not appear likely at this stage.
— The Support Fund is an insurance mechanism, a "safety net"
to supplement other sources of financing, private and official,
only in the event those other sources prove inadequate to meet
world financing needs. To be eligible to request a loan from the
Support Fund, a country must demonstrate not only that it is encountering serious external financial difficulties but also that

it has made the fullest appropriate use of other sources
of financing available to it. Loans will be based on market
terms. The existence of the Fund should serve to strengthen
the operations of the private markets and make recourse to
the Fund's resources unlikely.
These principles assure that the new arrangement will
serve as a mutual insurance fund in support of mutual objectives, with risk spread equitably and with any participant
entitled to borrow from the Fund if its circumstances warrant.
It will not be a regularly-used financing channel or be viewed
as a foreign aid device. There is no scope in the Support
Fund for the provision of financing without appropriate policy
conditions, or for concessional assistance. If the Fund is
used, participants will make financing available to it on
market terms, and the cost of financing to borrowers will be
greater than the cost of financing to the Fund. The aim is to
assure access to financing, not to provide financing on generous
terms.
In essence, the Support Fund is designed to provide
confidence:
— Confidence to the private markets in the strength
and integrity of the system as a whole; and
— Confidence to participants in their ability to handle
their own problems — to deal with their energy-related
financing needs without dependence on the oil exporting
countries.

- 8 This self-confidence is essential to the close cooperation
in energy and other policies that is needed in the period
ahead.
The practical facts of the situation are that the major
oil importing countries can handle their own financing needs
without relying on the agreement or specific investment
policies of the oil importing countries.

The close relation-

ship of the Fund to energy policy and the need to maintain
confidence on the part of the oil importing countries,
individually and as a group, indicate that they should handle
their mutual problems on their own.
Main Operating Provisions of Support Fund
Copies of the Support Fund Agreement have been made
available to the Subcommittee.

Having outlined the basic

purposes and principles of the Support Fund, let me now
sketch its main operating provisions very briefly.
1.

The Support Fund will be open to all OECD member

countries prepared to commit themselves to cooperation in
energy and general economic policy.

In fact, all OECD members

except Turkey have already signed the agreement, and Turkey
intends to sign shortly.
2.

Like any insurance policy, the resources of the

Support Fund must be seen to be adequate to meet potential
needs, and seen to be available promptly if needed.

Total

country quotas in the Support Fund will amount to about

^76
$25 billion. The U. S. quota will amount to about $7 billion,
or 27.8 percent of the total.
3.

No money is to be paid in to the Support Fund unless

and until the need arises.

Quotas will simply be available

on a standby or "call" basis in case of need.
4.

Countries' quotas will determine (a) the distribution

of default risk; (b) voting power; (c) obligations to provide
financing; (d) rights to borrow; and (e) maximum financial
obligations to the Fund.
5.

The main financial decisions —

and calls to provide financing —

decisions on loans

will require a 2/3 weighted

majority vote plus a simple unweighted majority of the number
of countries voting.

Decisions on loans that raise a borrower's

debt to the Fund above the amount of that country's quota, but
less than twice its quota, will require a 90 percent weighted
vote; and loans that cause a borrower's debt to the Fund to
exceed twice its quota will require unanimous consent.

practice, therefore, the U.S. and any other single major
participant could together exercise an effective veto on all
operations of the Fund, and the U.S. alone will have veto power
over any loans that raise a borrower's outstanding debt to the
Fund above its quota.
6.

All decisions will be taken by a Governing Committee

composed of one senior financial official and one alternate
from each participating government.

An Advisory Board of

- 10 experts nominated by members and designated by the Governing
Committee will prepare the work of the Committee. No secretariat
or permanent institutional structure will be created. The Fund
will rely on the OECD Secretariat for necessary staff work.
7. Financing of Support Fund operations will be flexible.
The Governing Board can decide to finance a loan by (a)
"individual commitments," involving either a direct loan to
the Fund or a borrowing by the Fund on the strenqth of individual countries' quarantees; or (b) borrowinqs bv the Fund
on the strenqth of the collective quarantee of all participants.
Resources will be made available to the Fund on market-related
terms.
8. In principle, all participants except the borrower
will share in the provision of each financinq operation
accordinq to quota shares. However, there will be some scope
for countries to be excused from the obliqations to provide
financinq to the Fund under "individual commitments" and also
to "mobilize," or obtain early repayment of, a loan already
made to the Fund. In either case, the country would itself
have to be in serious balance-of-payments difficulty and
obtain the approval of the Governing Committee by a 2/3 majority
vote. These clauses relate strictly to the provision of
financing. They do not excuse a participant from assuming its
share of the default risk on any loan made by the Fund, a risk
which in all cases will be shared in proportion to quotas.

Loan recipients will have to be facing serious

balance-of-payments difficulties and making fullest appropriate
use of alternative sources of financing available on reasonable
terms. They will also have to follow policies consistent with
the Support Fund's objectives, including cooperative energy
policies, and will have to accept specific economic policy
conditions established by the Governing Committee.
10. Loans may be "phased," with each installment contingent on the borrowerf s performance with respect to the
agreed conditions. Loans may be made for up to seven years
and will bear interest adequate to cover the cost of resources
to the Fund.
U. S. Participation in Support Fund
Signature of the agreement establishing the Support Fund
did not constitute an obligation of the U.S. to participate or
provide financing to the Support Fund. The agreement expressly
provides that it will enter into force for a signatory only
after that country has obtained all necessary legislation or
other authority constitutionally required or otherwise necessary
for its participation. Most prospective participants will need
domestic legislation, and all understand clearly that approval
of the Congress will be needed before the United States can
participate.
Preparation of the draft legislation to enable the U.S.
to participate is near completion, and I hope that it can be
transmitted to Congress in the very near future.

- 12 Conclusion
Mr. Chairman, the U.S. interest in preservation of a
cooperative and smoothly operating world economy is unmistakable. That interest, reflected in the extensive framework
of international cooperative arrangements developed since
World War II, has been underscored with a vengeance by the
events of the past two years or so. The proposed Support
Fund is a basic element of our efforts to develop, together
with other oil importing nations, a cooperative response to
the energy situation and to maintain a strong and open
world economic order.
The Support Fund is based on principles of mutual
support and equitable sharing of common risks. It will
promote maximum reliance on the existing financial arrangements that have served us well to date, while providing a
valuable multilateral insurance facility should those
existing arrangements prove inadequate. Should the Support
Fund not have to be used, that insurance will have been
costless. If it must be brought into play, the benefits
to U.S. interests will have been well worth the effort.
The legislation that will come to the Congress shortly will
embody a central element of U.S. foreign economic policy,
and I hope it will receive your strong support.
o 0 o

.b to

federal financing bank

__ O

WASHINGTON, D.C. 20220

FOR IMMEDIATE RELEASE

Contact:

Jack Plum
964-2615
May 6, 1975

SUMMARY OF LENDING ACTIVITY
April 4 - May 5, 1975
Federal Financing Bank lending activity for the period
April 4 through May 5, 1975 was announced as follows by
Roland H. Cook, Secretary:
On April 7, Amtrak, the National Railroad Passenger V
Corporation made a $20 million drawing at an interest rate
of 6.432% against its $100 million line of credit. The
line of credit matured on April 11, 1975, and the outstanding advances totaling $75.0 million were rolled over for 91
days at an interest rate of 6.1137o. The new maturity date
is July 11, 1975.
On April 9, the Bank advanced $539,207 to the Doniphan
Telephone Company at an interest rate of 8.59%>, payable on
a quarterly basis. The loan is guaranteed by the Rural
Electrification Administration and matures December 31, 2009.
On April 10, the General Services Administration made
a $48 million drawing against a $107 million commitment signed
on December 13, 1974. The interest rate is 8.70% and the
maturity is November 15, 2004.
On April 14, the Student Loan Marketing Association
(Sallie Mae) borrowed $10 million from the FFB at 7.15%
interest. The maturity date is April 15, 1976.
On April 16, the Bank advanced $8.3 million at a 7.65%^
interest rate to the Goverrment of Greece under a $48 million,
10-year commitment signed Februray 28, 1975. On April 30,
the Bank made another advance of $4.2 million to the Government of Greece at 8.55% interest. The loan is guaranteed
by the Department of Defense.
(Over)

- 2On April 16, the Bank advanced $750,000 to the South
Mississippi Electric Power Association at an interest rate
of 7.61%, payable on a quarterly basis. The loan is guaranteed by the Rural Electrification Administration and
matures April 18, 1977.
On April 23, the Bank purchased $4.4 million of
Small Business Investment Company 10-year debentures at
an interest rate of 8.707_.
On April 30, the Bank loaned $4.5 million to borrowers
guaranteed by the Rural Electrification Administration;
$3.0 million to Oglethorpe Electric Membership Corporation
at 7.92% quarterly interest, and maturing May 5, 1977, and
$1.5 million to the Quincy Telephone Company at 8.80% quarter
interest and maturing December 31, 2009.
On April 30, the Tennessee Valley Authority borrowed
$70 million at 5.99% interest. This loan matures July 31,
1975.
On April 30, the Bank purchased $500 million of
5-year Certificates of Beneficial Ownership from the Farmers
Home Administration at an interest rate of 8.68% on an annual
basis.

oOo

CONTACT: Jack Plum
964-2615
FOR IMMEDIATE RELEASE May 6, 19 75

MONETARY REFORM COMMITTEE MEETS,
SHULTZ NAMED NEWEST MEMBER
The Advisory Committee on Reform of the International
Monetary System, meeting at the Treasury Department today
under the chairmanship of former Secretary of the Treasury
Henry H. Fowler, reviewed current issues in international
monetary negotiations, including the agreement by member
countries of the Organization for Economic Cooperation
and Development (OECD) to establish, subject to legislative
approval, a $25 billion Financial Support Fund.
The Committee, which advises the Secretary of the Treasury,
also considered proposed increases in quotas in the International
Monetary Fund (IMF), a series of possible amendments to the IMF
Articles of Agreement, and techniques for meeting the balanceof-payments financing needs of developing countries.
At the meeting, Secretary William E. Simon announced the
appointment of former Treasury Secretary George P. Shultz to
the Committee. Mr. Shultz, currently Executive Vice President
of the Bechtel Corporation, established the Committee in
August 1973, when he was Secretary of the Treasury.

WS-29L(Over)

- 2 Besides Mr. Shultz, the Committee includes four other
former Secretaries of the Treasury:
Henry H. Fowler, Advisory Committee Chairman and
Partner, Goldman, Sachs and Company
John B. Connally of Vinson, Elkins, Searles and Connally
C. Douglas Dillon, Chairman, Dillon Read and Company
David M. Kennedy
Other members of the Committee are:
William Blackie, Senior Partner, Lehman Brothers
Alden W. Clausen, President, Bank of America
Gaylord Freeman, Chairman, First National Bank of Chicago
Gabriel Hauge, Chairman, Manufacturers Hanover Trust Company
Reginald H. Jones, Chairman, General Electric Company
William McChesney Martin, former Federal Reserve Board
Chairman and presently Counselor to the Board of the
Riggs National Bank
Elmore C. Patterson, Chairman, Morgan Guaranty Trust Company
Howard C. Petersen, Chairman, Fidelity Bank of Philadelphia
David Rockefeller, Chairman, Chase Manhattan Bank
Robert V. Roosa, Partner, Brown Brothers Harriman and Co.
Walter B. Wriston, Chairman, First National City Bank of
New York

o 0 o

9 7i

It's a pleasure to be here today in the great
state of Texas. I realize that you originally had
hoped that Deputy Secretary Stephen Gardner would
be here today. He had hoped to be here also; however, Secretary Simon had need for him to go abroad.
Therefore, it's your misfortune, but my good fortune
to be here with you today.
I'm truly delighted to be back in the Southwest,
My only daughter and new son-in-law live in Houston,
and my lifelong home has been New Mexico. Little
did I dream a year ago that in May of 197 5 I would
leave my beloved Southwest to become Treasurer of the
United States. In fact, I can hardly believe the
whole past year.
When I first went to Washington as the United
States Treasurer last summer, I had only a vague idea
of what my days would be like. After 26 years as a

Remarks by the Honorable Francine I. Neff, Top Management
TSIA Meeting in Austin, Texas on May 6, 1975.

o
i/
housewife, my real forte was mopping the kitchen floors
— which was, in fact, what I was doing when the call
came asking me to fly East and be interviewed for the
position.
After several interviews, and some soul-searching
on my part, I was offered, and accepted, the position
as our 35th Treasurer. And so, on June 21, 1974, I
took my oath of office.
In the eleven months since then, I've found that
my duties fall into four main categories.
My most glamorous job is reviewing and endorsing
our currency. I still find it hard to believe it is
mv hamR on our dollar bills., and I still get a thrill
out of pulling "Francine I. Neff" out of my pocket when
I buy something -- which, according to my husband, is
much too often.
My second job is to represent the Secretary of the
Treasury and the Under Secretary for Monetary Affairs
as a spokesman in communicating and coordinating Departmental policies.
My third job is to chair the.Treasury Department's
bicentennial programs. I find it exciting to tell the
Treasury story -- we're the second oldest agency -- and
we're planning a number of projects, the most exciting
of which includes transforming the second floor of
Main Treasury into a museum for the Bicentennial.

-3-

a~>
My fourth job is National Director of the United

States Savings Bonds Division. And I'd like to brag
just a little about our Savings Bonds people and say
that this year we've had the highest sales for the
first lour months'of any year since 1945.
So my work at Treasury is financial, bicentennial,
buy bonds, and by gosh speak outI
I do speak to many groups about our "Take Stock
in America" Savings Bonds program.
But I also remind people to take stock of America
— to look around our country and see what's really
happening.
A lot of people don't like what they set today.
And they say so — loud and long.
But there is far more to America than rising unemployment and falling Dow-Jones averages. Let's look
out our windows, and into our minds, for a few basics.
We have the American land -- your Texas hills and
high plains and cities, and my New Mexico mountains and
mesas and all of the other places Americans call home.
We have the ideas and attitudes that shaped us
200 years ago and that shape us today.
We have the many freedoms we take for granted.
There is the freedom to accept new challenges -as I did when I became the United States Treasurer and
accepted the challenge of working full time for the

19^
country I love.
There are the freedoms we all applaud, such as
free speech and a free press.
And then there are the freedoms that don't get
their fair share of cheers. I'm thinking of our free
enterprise system, which has brought us the greatest
mass prosperity in history.
Under our free enterprise economic system, the
medium income of American families has doubled in the
last 25 years — even taking inflation into account.
In those same 25 years, the working conditions
for most people have improved dramatically. At the
same time, new homes, roads, and ail of the ether
public"facilities for 35 million people have been
constructed -- a tremendous job.
Furthermore, economic and social conditions have
been such that, in the last 15 years alone, we have
more than doubled the number of young and older Americans
going to college — the greatest example of upward
mobility in a nation in history.
And — returning to the economy and energy, we
are still the most nearly independent of the world's
major nations, and our automobile gas tanks are still
full -- for a pricfe.
So, despite our economic problems, we are not a
down-and-out, 97-pound weakling of a nation. We are not

in another Great Depression of the 1930's, when one out
of every four heads of households was out of work.
And for those who are unemployed today, we have a comprehensive program of benefits — social security,
medicare, food stamps and many others -- that never
existed in my, or perhaps your childhood, when my own
family tried to eke out a living on our hardscrabble
New Mexico pinto bean farm.
Today, no other country has our manpower, our brainpower, our technology. And despite all cynicism, the
word "America" is recognized around the world as a very
special word standing for a country unlike
any Ount;!" Oil cdiLiu I aiTi J. \j \j pti^tnL wluu 'i.'.^ LOSS,

Treasury Secretary William Simon, when he says that
"those who take a perverse delight in proclaiming the
end of the American dream are dead wrong."
Z^fter all of this, some people may accuse me of
loving my country — and they're right I I grew up in
the small town of Mountainair, New Mexico -- on a good
day the census taker could find 1200 people — and I
was raised on a diet of patriotism and pinto beans.
The beans were sometimes scarce, but the patriotism
was always there. I was taught to love your family,
your community and your country, and that whatever you
did in life — you did your best.

As a teenager in World War Two, I sold war bonds
at the Mountainair Post Office on Saturday mornings
and rolled Red Cross bandages in the afternoon. I
thought then that patriotism was a willingness to die
for your country.
Today, I still think that's one way to define
patriotism. But I also think loving your country
can be a willingness to live for it — to say "yes"
to America in sickness and in health, till death us
do part -- and to accept the resulting obligations.
What are these obligations towards society?
Well, my office at the Treasury Department in
Washington is next door to the White House. I often
see the protesters who march and picket around the
President's home. They support many diverse and sometimes obscure causes.
The opportunity to demonstrate this way is a basic
right of all of us. But I wonder ... who speaks -who marches — for society as a whole? Who supports
or defends our society -- as a society -- when it is
attacked, as it seems to be almost daily?
Angry young men and women may think that our
society is made of granite. But you and I know that
any modern civilization is enormously intricate. It
holds together because thousands of spoken and unspoken
acts and beliefs and forms of cooperation are repeated

daily.

Even strong societies are vulnerable to their
«

own citizens. And no society — no social contract
of any kind — can hold together forever if the forces
that beat upon it are too strong for too long.
The ultimate fate of any nation is determined by
the willingness of its citizens to voluntarily give
that society some part of their time, trust and money,
and to agree that certain norms of behavoir will be followed by the great majority of people.
United States Savings Bonds volunteers understand
this very well. You know, when we talk about America's
wealth at the Treasury Department and elsewhere, we
generally mean money -- dollars and gross national
product. And, despite our problems, we probably lead
the world in this.
But there's another kind of wealth we also lead
the world in -- and I refer to our American spirit
of volunteerism.
Volunteerism is men and women giving freely of
themselves in time, interest, energy and money for a
cause they believe in. An estimated 70 million American
volunteers now work for one or more worthwhile causes.
And I'm very happy that thousands of those volunteers -like yourselves — have chosen to work with the Treasury
Department, and the American people on the U.S. Savings
Bonds program.

-8-

I > /
We call Savings Bonds our nongovernmental government program, because 97 percent of people working in
the program are unpaid volunteers. Even our advertising
program is donated by the National Ad Council. And I
feel right at home with volunteers because I was one
myself for so many years.
I think we all know the personal advantages of
buying bonds. They are safe and secure in an uneasy
world. Their six percent interest is competitive with
other savings institutions and with the stock market.
And they have some significant tax advantages.
Further, they are good for the country. About
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is in the form of U.S. Savings Bonds.
This 23 percent is far and away the most stable
part of the debt, because E and H Bonds remain outstanding, on the average, for more than six years.
This compares to less than three years, on the average,
for other marketable instruments.
This long-term stability is important for two
reasons.
First, when the holding time decreases, any debt
becomes more liquid, and this can be inflationary.
And second, the job of refinancing a rapidly
maturing national debt is difficult and expensive.
So, Savings Bonds are good for Timerica and good

-9-

for Americans.

Last year we had the highest sales

since World War Two. For the first four months of
this year, sales are even higher. We Americans know
a good thing when we see it, and Savings Bonds are
good in many, many way£.
Of course,- to save money, you must make money
— you must work. Here in America 85% of all jobs
are in the private sector of our economy. Yet it's
my observation that the whole story of the American
free enterprise system is not well understood.
The consumers' viewpoint of our economy is well
known. Consumers, of course, want prices to stay down.
Workers and labor unions legitimately desire
higher wages, job retention and more fringe benefits.
That, too, is well known.
But where is the third viewpoint? Who is giving
us, and our children, an informed insight into what
the businessman thinks and expects and what his problems
are? '
Think about it. "Profits" is a dirty word to many
people, especially young people, implying greed or even
dishonesty.
I say "nonsense" -- and sometimes I even say something even stronger.

-10-

_ ^-o

It seems to me that businessmen need not feel defensive because they earn money. Profits are what make a
company healthy, and what allows the owner to provide
more jobs.
As for excessive profits — corporate profits today,
in the aggregate, are at an all-time low as a percentage
of our total national income, taking inventories and
depreciiation into account. Figures show that after-tax
profits have dropped by 50 percent since 1965. But that,
too, is an unpublicized story.
Of course, the free enterprise system isn't perfect,
because it's operated by imperfect people like you and
rn.e: B"t whpn

hpar oapi ta 1 i

STTI

dpnouncpd,. I am reminded

of Sir Winston Churchill's remark about democracy.
"Democracy," said Sir Winston, "is the worst form of
government, except for all of those other forms that
have been tried."
The free enterprise system can be defended not as
super-good, but as better than its competitors.
Since I am a strong advocate of this system, people
sometimes ask me: "If free enterprise works so well, why
do we have such a high rate of inflation and unemployment?"
Well, we all know there are several reasons for this.
We fought a war in Viet Nam and charged it.
We have sustained world-wide crop failures.
We have just recently suffered an oil embargo and
prices on oil are higher.

But more fundamentally, we have, for years, as
a nation abused our economic system.
— Our Federal government puts enormous demands
on the economy. This year our national budget is past
the $300 billion barrier. And for the first time, the
Treasury Department is borrowing money that will not
be repaid until the 21st century.
— Our national monetary policy — huge deficits,
heavy borrowing and a growing money supply — has increased our problems.
— The proliferation of government regulations
continues and we continue to encourage consumption
and federal spending at the cost of savings and investments. As you know, the record of capital investment in the United States in recent years has been the
lowest of any major industrialized nation in the free
world.
These trends place enormous strains on our economy
and are major causes of inflation. There are many
recent signs of improvement. But we must still restore
greater discipline to our financial affairs; lighten
the hand of government on many areas of our economy; and
encourage savings, investment and capital formation.
Finally, we must turn away from the doomsayers who
see only the dark side of the world. We have an incredibly strong nation, both in spirit and in material

-]2-

'9
goods.

Now we need to speak to the good in each other.

But we need to do more than speak — we need to
act.
As parents, we need to instruct our children in
economics. We must transfer to them our knowledge
of the supply and demand system; our belief in the free
marketplace, and the legitimacy of profit.
As business people, it is incumbent on us to take
our knowledge and expertise into the classrooms, by
actually serving as speakers and lecturers, and by seeing
that our elected school board members transmit the need
for sound economic education to the teachers.
As n "i t i v. pn s .

mu s t d em a nd t ha t t he n ews m ed i a

make some effort to understand our economic system and
to report the third side of our free-enterprise story.
As voters, we must make certain that our elected
officials — from D.C. to City Hall — understand that
good economics is good politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years as a going,
growing nation. Then let us look forward with confidence
as we go about doing our jobs, raising our families and
helping our society.
Thank you.

FOR RELEASE ON DELIVERY, 10:00 A.M., EDT
TUESDAY, MAY 6, 1975

STATEMENT OF THE HONORABLE DAVID R. MACDONALD
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, OPERATIONS, AND TARIFF AFFAIRS)
BEFORE THE
SUBCOMMITTEE ON APPROPRIATIONS
UNITED STATES SENATE
TUESDAY, MAY 6, 1975

Mr. Chairman and Members of the Subcommittee:
I am pleased to appear before you today to discuss
the U.S. National Central Bureau of the International
Criminal Police Organization - INTERPOL. With me today
are James B. Clawson, Deputy Assistant Secretary (Operations);
James J. Featherstone, Deputy Assistant Secretary (Enforcement);
Louis B. Sims, Chief, National Central Bureau.
U.S. Membership and Funding
By statute (22 U.S.C. 263a), the Office of the Attorney
General, U.S. Department of Justice, is the "Office of
Responsibility" for INTERPOL in the United States. In 1958,
the Attorney General designated the Department of the
Treasury the official liaison with INTERPOL. There are
currently ten full-time positions assigned to INTERPOL.
One of these positions is presently located at the Headquarters of INTERPOL in France, and the remaining nine are
located in the Main Treasury Building in Washington, D. C.
These positions are funded as follows: Two (2) by the
Department of Justice; two (2) by the Office of the Secretary,
U.S. Treasury Department; two (2) by the U.S. Secret Service;
three (3) by the U.S. Customs Service; and one (1) by the
Bureau of Alcohol, Tobacco and Firearms.

The Fiscal,Year 1975 Department of the Treasury
Salaries and Expenses Appropriation for the Office of the
Secretary, in addition to the two (2) permanent positions,
contains resources for travel and communication costs and
for $80,000 for the INTERPOL annual dues. The Fiscal Year
1976 budget request for this appropriation does not reflect
any increase over the '75 level.
Public Law 93-468, approved October 24, 1974, increased
the limit on INTERPOL dues from $80,000 to $120,000. We
are anticipating an additional funding requirement of
approximately $120,000 in Fiscal Year 1977.
In September of 1974, the INTERPOL 43rd General Assembly
voted an increase in the INTERPOL annual dues from 4850 Swiss
francs per budget unit to 5900 Swiss francs per budget unit.
The United States, Germany, Italy, United Kingdom and France
pay'60 budget units each or the equivalent of 354,000 Swiss
francs. Other member countries pay correspondingly less.
In addition to the increased budget unit, currency fluctuations
have increased the dollar equivalent of the budget unit as
expressed in Swiss francs. For this reason, annual dues have
ranged in value from $117,420 in October, 1974, to $147,000
in February, 1975, and are now valued at approximately $138,000.
The current U.S. dues represent 5.8 percent of the overall

- 5 1952, the German Federal Republic was allowed to join
INTERPOL.
INTERPOL presently consists of 120 member countries
with the General Secretariat located in Saint Cloud, France,
outside of Paris. The Secretary General is a French citizen
named Jean Nepote. The current President of INTERPOL is
Mr. William L. Higgitt, recently retired Commissioner of
the Royal Canadian Mounted Police, and presently head of
the Canadian Safety Council, who was elected in 1972 by
the General Assembly.
Mr. Jean Nepote, the current Secretary General of
INTERPOL, was elected by the General Assembly in 1963,
and was re-elected in 1968 and 1973. Mr. Nepote is a
"Commissaire Divisionnaire" of the French Surete Nationale,
a "Chevalier" in the French Legion of Honour, and has been
decorated by a number of other countries.
INTERPOL is an intergovernmental organization composed
of member countries represented by their law enforcement
officials. This normally is the head of the National Police.
In the U.S., the designated representative is the Assistant
Secretary of the Treasury who is responsible for law enforcement. The National Central Bureau of each country maintains
its sovereignty by operating within its country's laws. In
the United States, the National Central Bureau operates by

yy
- 3 budget of 5,919,520 Swiss francs.
In 1974-75, the U.S. made a one-time, non-recurring,
voluntary contribution of $135,000 from Foreign Assistance
Funds for International Narcotics Control administered by
the

Department of State.

In accordance with normal practice

in the case of Foreign Assistance Funds, Senator Inouye and
Congressman Passman, Chairmen of the Foreign Operations Subcommittees of the Senate and House Appropriations Committees,
were advised of this contribution at the time.

The U.S.

contribution is used to support an INTERPOL liaison office
for illegal drug enforcement for Southeast Asia and Latin
America.

This same program as set up in Europe has been so

successful in combatting drug traffic that the number of
liaison offices in Europe has been increased this year from
three (3) to five (5). The European program is funded by
contributions from European countries.
History of INTERPOL
Our research indicates the following to be accurate
with respect to the history of international cooperation by
national police organizations.

An organization called the

International Criminal Police Commission (ICPC) was organized
in 1923 and was located in Vienna, Austria.

The constitution

of the organization at that time required that the head

- 4 -

of the Austrian police be, by virtue of his office, automatically the Secretary General of ICPC. At the time of
the Anschluss in 1938, Nazi forces which occupied Austria
deposed the Austrian police chief, took a Nazi literally
from the jails of Vienna and installed him as new chief of
the Austrian police. The Nazis then claimed that by virtue
of the ICPC constitution, this same man automatically assumed
a position as head of the ICPC. As a result, cooperation
with the ICPC by the free world steadily disappeared and by
1938, when World War II began, the activities of the ICPC
outside Nazi controlled areas virtually ceased. In 1942, the
Headquarters of the ICPC were transferred to Berlin under
unknown circumstances. Whatever was left of the ICPC died
with the death of the Third Reich.
In 1946, under the leadership of Sweden and other
free world countries, several of the countries which had
resigned from the ICPC before or during World War II met
and determined to form a new organization, headquartered in
Paris, France. This time the member countries were smarter.
They drafted a constitution which provided for an elected
president and elected directors, in order to avoid the
outside seizure of the organization as had occurred in
1938. This organization came to be known as INTERPOL. In

- 6 statute, and answers to the Assistant Secretary of the
Treasury and to the Congress.
Functions of INTERPOL
INTERPOL'S function is to provide the communications
mechanism for law enforcement agencies (local, State or
Federal), having a foreign investigative requirement, to
transmit that requirement to other appropriate foreign
agencies. Television drama to the contrary notwithstanding,
INTERPOL has no investigative force of its own and carries
on no investigations. It has no control over its constituent
countries' police forces, so it is unable to do anything
other than transmit information or requests for action by
one country's police to another country's police. These
requests will be complied with if the recipient country sees
fit to do so. The requests for information or action which
are handled by INTERPOL normally range from a criminal
history record check to a full investigation, leading to
the subsequent arrest and extradition of an international
criminal. The United States National Central Bureau (NCB)
activities and efforts are directed toward:
1. Arranging for prompt assistance by foreign police
to law enforcement agencies in the United States
(local, State and Federal) in their investigative
requirements.

Arranging for prompt assistance to a foreign

investigative requirement in the United States,
provided it concerns a criminal investigation and
is in accord with United States law.
3. Increasing State and local law enforcement's
awareness of the assistance available through
INTERPOL in the event they have foreign investigative requirements.
In consonance with its function of acting as the medium
of communication between foreign and U.S. law enforcement
agencies, the United States NCB does not arrange for
assistance to law enforcement agencies in the United States
regarding their domestic investigative requirements.
The FBI has granted the United States NCB access to
the FBI's National Crime Information Center (NCIC). This
access is granted pursuant to the guidelines established by
the FBI for the protection of individual's rights and covers
only those records containing information on:
1. Stolen Securities
2. Stolen Motor Vehicles
3. Wanted Persons (Warrants Outstanding)
4. Stolen, Missing or Recovered Guns
5. Stolen Boats
6. Stolen License Plates
7. Computerized Criminal Histories

7^ hi

Director Clarence M. Kelley of the FBI has states:
"The NCIC is not, as some have alleged, a secret intelligencegathering network filled with loosely managed and frivolously
gathered information concerning anyone coming to the attention
of the police.

It has indexed only the names of individuals

for whom arrest warrants are outstanding or persons who have
had substantial involvement, supported by fingerprint records,
with the criminal police system."
Member countries of INTERPOL, United States law enforcement agencies or any other organization, person, etc. with
whom the United States may come into contact within the
course of carrying out its responsibilities, have no direct
access to criminal records in the United States.

Requests

from law enforcement agencies for information contained in
the United States are evaluated individually by Federal agents
assigned to the United States NCB and arrest or other information is provided as approved (1) by the agency from which the
information is obtained and (2) by the responsible agent in the
United States NCB.

This is known as the "Third Agency Rule",

and applies to all exchanges of information between enforcement
agencies.
The procedure within INTERPOL requires the requesting
country to state the nature of its investigative request,
which includes identifying its investigation and the reason
for the request.

If this is not stated along with the request,

the receiving country will make a request for that information
prior to transmitting the request.

The request must be in

"7 ^
accord with the laws of the country receiving the request,
as well as being related to a criminal offense in both
countries.

Furthermore, the request must not be in conflict

with Article III of the INTERPOL Constitution which reads,
"It is strictly forbidden for the organization to undertake
any intervention or activities of a political, military,
religious or racial character."

This Article, of course,

does not prohibit a criminal inquiry concerning a political
activist who commits generally recognized criminal activity,
such as bank robbery.
A typical request would concern a case in an INTERPOL
member country where John Doe, United States citizen, has
become the subject of a criminal investigation.

Upon receipt

of this information, the United States NCB queries NCIC and
determines, for example, that there is a warrant out for the
arrest of the subject by the Los Angeles Police Department.
The Los Angeles Police are immediately notified of the
subject's present location and situation so they can initiate
extradition papers through diplomatic channels or commence
any other action they deem advisable in the case.

The

foreign country is notified that the subject is wanted by
authorities in the United States and advised of the charge
against the subject as well as his criminal history.
Through INTERPOL we can locate a United States wanted
person and frequently this results in the apprehension and

- 10 prosecution of an international criminal. The same
situation commonly exists when the subject is a foreign
national and is wanted in the United States.
If INTERPOL did not exist, the same international
inquiries and investigative requests would be made by both
U.S. and foreign enforcement agencies in a much more haphazard
and costly fashion. The same information would be given out
by the receiving agencies on a unilateral basis and without
the additional filtering protection provided by the constitution and long standing practices of INTERPOL. By the
nature of its function, INTERPOL does not add or subtract
any substantive dimension to the law enforcement investigative
process. The protection of rights in connection with this
process is and must be the responsibility of the law enforcement agencies who approve the transmission of information.
INTERPOL is a useful communications tool used by national
enforcement agencies.
This concludes my statement, and my associates and I
will be pleased to answer any questions that the Committee
may have. Thank you.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

May 7, 1975

MEMORANDUM FOR CORRESPONDENTS:

For information call:
(202) 456-6757

Following is the text of a telegram Albert Rees, Director
of the Council on Wage and Price Stability, sent to Representative Norman A. Murdock of the Ohio legislature in
response to his request for a Council opinion on a bill
which would compel prices to appear on grocery store items:
We are informed that H. 720, a bill to require
prices in arabic numbers to be marked on merchandise
displayed for sale, is being considered by the Ohio
legislature. Such bills would deprive consumers
of much of the considerable savings to be achieved
through automated checkstands. Such systems should
be given a complete and fair test to ascertain
whether or not adequate price information can
be given consumers through shelf labels and
itemized receipts, H. 720 would prevent testing
and therefore, we urge that it be defeated.
o 0 o
CWPS-41

Department of theTREASURY
WASHINGTON, DC 20220

TELEPHONE W04-2041

97H
FOR IMMEDIATE RELEASE May 6, 1975
RESULTS OF AUCTION OF 3-1/4-YEAR TREASURY NOTES

The Treasury has accepted $2.75billion of the $5.3 billion of
tenders received from the public for the 3-1/4-year notes auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 7.60% 1/
Highest yield
Average yield

7.74%
7.70%

The interest rate on the notes will be 7-5/8%. At the 7-5/8% rate,
the above yields result in the following prices:
Low-yield price 100.001
High-yield price
Average-yield price

99.604
99.717

The $2.75 billion of accepted tenders includes 15% of the amount of
notes bid for at the highest yield and $0.6 billion of noncompetitive
tenders accepted at the average yield.
In addition, $2.35 billion of tenders were accepted at the average-yield
price from Government accounts and from Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities.

1/ Excepting 5 tenders totaling $325,000

Department of the
WASHINGTON, D.C. 20220

TELEPHONE WO4-2041

T7T
May 6, 1975

FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING

The Department of the Treasury, by this public notice, invites tenders for
two series of Treasury bills to the aggregate amount of $5,600,000,000 , or
thereabouts, to be issued

May 15, 1975,

as follows:

91-day bills (to maturity date) in the amount of $2,800,000,000, or
thereabouts, representing an additional amount of bills dated February 13, 1975,
and to mature

August 14, 1975

(CUSIP No. 912793 XJ0), originally issued in

the amount of $2,499,115,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $2,800,000,000, or thereabouts, to be dated May 15, 1975,
and to mature November 13, 1975

(CUSIP No. 912793 XX9).

The bills will be issued for cash and in exchange for Treasury bills maturing
May 15, 1975,

outstanding in the amount of $4,805,195,000, of which

Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,786,370,000.
These accounts may exchange bills they hold for the bills now being offered at
the average prices of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their face amount will be payable without
interest.

They will be issued in bearer form in denominations of $10,000,

$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value), and in
book-entry form to designated bidders.
Tenders will be received at Federal Reserve Banks and Branches up to
one-thirty p.m., Eastern Daylight Saving time, Monday, May 12, 1975.
Tenders will not be received at the Department of the Treasury, Washington.
Each tender must be for a minimum of $10,000.
multiples of $5,000.

Tenders over $10,000 must be in

In the case of competitive tenders the price offered must

be expressed on the basis of 100, with not more than three decimals, e.g., 99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government

(0VE& ,

Others will not be permitted to submit tenders except for their
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

Those submitting competitive tenders

will be advised of the acceptance or rejection thereof.

The Secretary of the

in cash or

other immediately available funds or in a like face amount of Treasury bills
maturing May 15, 1975.
ment.

Cash and exchange tenders will receive equal treat-

Cash adjustments will be made for differences between the par value of

Accordingly, the owner of

bills (other than life insurance companies) issued hereunder must include in his
Federal income tax

return, as ordinary gain or loss, the difference between

Department of theJREASURY
IASHINGTON, D.C. 20220

TELEPHONE WO4-2041

FOR RELEASE ON DELIVERY

u '

Statement of
The Honorable Jack F. Bennett
Under Secretary of the Treasury for Monetary Affairs
Before the
Subcommittee on Foreign Commerce and Tourism ,
Senate Committee on Commerce
May 7, 1975
Foreign Investment in the United States
Mr. Chairman, I am pleased to have the opportunity to
present to this Committee the Administration's view on
foreign investment in the United States and on the three
bills, S.1303, S.329 and S.995, which are now being
considered by your committee.

•••?•••

The subject of foreign investment in the United States
has received intensive attention over the past year in
both the Congress and the Executive Branch and there
are two basic propositions on which we appear to be in
agreement:
-- Foreign investment in the United States is,
on the whole, beneficial and, subject to
limited restrictions, should continue to be
welcomed as a healthy input to our economy.
-- More information on foreign investment should
be available to all branches of the Government
and to the public.
WS-293

- 2-

It is my impression, however, that the bills
before you do not adequately take into account the fact
that steps have already been taken to make that information available and do not adequately take into account
that in these circumstances new legislation could have
the practical effect of deterring beneficial new investment in the United States.

Legislation discriminating

against foreign investors could result in foreign
investors discriminating against us.
Data on Foreign Investment
In view of the sharp increase in the investment
potential of the oil-producing countries, it is understandable that a concern over foreign investment in the
United States and a desire for more information have
developed.

However, I think there may be some miscon-

ceptions about the total magnitudes involved, and about
the capability the Government now has to follow developments in this area. We have a substantial amount of
information on new inflows with respect to both overall
amounts and the acquisition of operating control over
individual publicly traded firms, and we believe that
many of the concerns frequently expressed about the
adequacy of this information are unfounded.

- 3-

oOl

The published data on foreign direct investment
inflows into the United States show figures of $2.5 billion in 1973 and $2.3 billion in 1974. However, these
figures drop to $1.8 billion in each year, when one set
of transactions -- those associated with the foreign
purchase of a U.S.-incorporated company, whose entire
operations are abroad -- are excluded. Of the remaining
$1.8 billion a major part, of course, represented capital
inflows into companies that were already foreigncontrolled.
The flows of foreign portfolio investment into U.S.
securities (excluding U.S. Government issues) actually
fell from $4.8 billion in 1973 to $2.1 billion in 1974.
The major portion of this decline consisted of a decrease
in foreign purchases of stocks -- from $2.8 billion in
1973 to $0.5 billion in 1974. Even after taking into
account the depressed conditions on U.S. stock markets,
it is obvious that foreigners did not rush in to take
advantage of bargain prices. In the early months of
this year, with the rise in U.S. stock prices, foreign
interest in portfolio investment in U.S. stocks seems to
have picked up.
There is no evidence, however, of any trend toward
takeover of important segments of U.S. industry by foreign

- 4 -

interests.

Reports to the Securities and Exchange

Commission and other sources of information show no
significant foreign activity in this regard.

According

to reports to the SEC during the period January, 1974
through April, 1975 by purchasers of over 5% of the
stock in U.S. publicly held companies, their purchases
involved 72 U.S. companies.

The majority of the U.S.

companies were small and the foreign investors were
mainly from the U.K., Canada, Netherlands, Germany and
Japan.

During this period, foreigners gained majority

control of only three U.S. industrial companies with
assets of over $100 million.

In these cases the investors

were private European and Canadian companies.
OPEC Investment
The evidence does not suggest that the United States is
being inundated by foreign investment.

Thus any concerns

presumably are, for the most part, based on the potential
for future investment, particularly by the OPEC countries.
Some of the alarming estimates of long-run OPEC financial
accumulations made last year have, however, already been
drastically reduced, and several new sets of projections
also suggest a lower level of peak investment accumulation by these countries on the order of $175 to $250 billion

y$V
in dollars of 1974 purchasing power. In any case, of
the estimated $60 billion in total accumulations by
OPEC countries in 1974 (which we believe will prove to
be their peak year) we estimate that only about three
quarters of a billion dollars was placed in long-term
private investments in the United States, and the bulk
of that investment was made in securities chosen and
managed by private U.S. financial institutions.
Looking ahead, we predict that the oil producing
countries will place a larger proportion of their
investments in longer-term debt and equity instruments.
We hope that a substantial amount of these investments
will take place in the United States, but we must take
account of the facts that the rate of investment by the
oil producers outside their own countries now appears to
be declining and, furthermore, that the percentage coming
to the United States seems to be smaller this year than
last year.
The managers of OPEC funds have indicated to us that
they have neither the desire nor the necessary skilled
manpower to gain or maintain control over major segments
of the U.S. economy.

Rather, they are following the

diversified investment objectives of institutional
investors.

Thus, while there may be some additional

- 6-

cases of major investments similar to the proposed - but
not yet final - arrangements between Iran and Pan Am,
for instance, we seriously doubt whether any of the major
OPEC investors would consider any moves in this area
which we might view as inimical to the U.S. national
interest.
The New Administration Initiative
We expect that the likelihood of difficulties arising
over OPEC investments in this country will be further
minimized by the new Administration initiative with
respect to inward investment.

You may recall that in

testimony on March 4 before the Subcommittee on Securities
of the Senate Committee on Banking, Housing and Urban
Affairs, Administration witnesses laid out our new
approach to providing more information and to dealing
with potential major investments in this country by
foreign governments.

We believe that this new approach

offers us the means to achieve the same basic objectives
as the three bills before this Committee while enabling
us to avoid the disadvantages inherent in them.
Our new initiative involves the establishment of a
high-level, interagency Committee on Foreign Investment
and a new Office on Foreign Investment which will deal

-,-

with these concerns, and make periodic reports on foreign
investments here as well as recommendations on any
legislation that may be warranted in light of future
developments.

At the same time, we are making arrange-

ments with the pricipal potential foreign governmental
investors on advance consultations on major prospective
investments in this country.
In undertaking these various measures we have taken
care to assure that they will not be construed as a break
from our traditional policy of neutrality towards incoming
foreign investment.

Investment decisions, both within

and among countries, are affected by psychological factors
as well as by laws and regulations.

In making such

decisions with regard to investments in the United States
or any other country, potential foreign investors look at
developing trends, the general climate for investment, and
the prospects for the future.

They consider political as

well as economic factors, just as U.S. investors do when
they contemplate making investments in other countries.
Legislation which singles out foreign investment for
discriminatory treatment will inevitably be interpreted
as a negative factor for the future.

- 8-

There is also the question of what effect an apparent
change in attitude toward foreign investment by the U.S.
Government would have on foreign governments. The
question is not primarily whether other governments
would retaliate in kind in the short run. Rather it is
what such actions by the United States would signal to
other governments about our views on the more basic
policy issues concerned with the free flow of capital
between countries. Throughout the postwar period the
United States has been the champion of liberalizing
the international flow of trade and capital, and substantial
progress has been made. Legislation which appeared to
point in the opposite direction could compromise our
efforts to minimize artificial impediments to capital in
seeking its most productive place of employment.
This is not to say that we rule out the possibility
that legislation may be necessary at some point in the
future. We are aware, as you are, Mr. Chairman, that
there may be gaps in our various reporting requirements
on foreign investments in this country. The new Office
we are establishing will be specifically charged with
drawing together the information collected by these
various sources and combining it, with the objective of

- 9-

4
v

obtaining as clear and comprehensive a picture as possible
of the activities of foreign investors in the United
States. Once that is accomplished the Office can identify
the gaps in our existing reporting system and determine
what legislation, if any, might be required to fill them.
Existing Sources of Information
Since it is not generally appreciated how much information on foreign investment is currently available to us
and how much new information we will be developing in
the months ahead, I think it would be useful for me to
give some details.
With respect to aggregate data showing overall
inflows and trends, our reporting program for the
balance of payments yields quarterly data on direct
investment and monthly data on portfolio investment
with reporting lags of about 3 months and 2 months
respectively.

The specific data collected under these

programs are described in detail in the CIEP/OMB study
which the CIEP witness will be submitting to the Committee
later today.

While no reporting system is all inclusive,

there is no reason to believe that these data significantly
underestimate the aggregate inflows of foreign capital.
Sample tables of some of the data collected by the Treasury
are reproduced in Attachment A to my statement.

- 10 -

With respect to data on investment in individual
companies, our main source of information is the
filings with the SEC, required by law, by foreign as
well as domestic investors acquiring more than 5 percent
of any class of equity security of publicly traded
corporations.

These filings under Section 13D of the

Securities Exchange Act of 1934 provide detailed
information on the identify of the purchaser (although
there is no requirement under this section to disclose
the partyfs nationality), the source of his funds, the
purpose of his acquisition, and his plans for the
company.

We have compiled the transactions in 1974 and

1975 which appear to have been made by foreign persons.
This is presented in Attachment B.
Newspapers and trade journals, which normally pick
up any transactions of significance, and discussions
which businessmen have with U.S. officials are also
valuable sources of information

on foreign investment.

Negotiations on foreign investment in U.S. companies are
frequently reported, thus alerting us to potential
investments.

- 11 -

1 6

Finally, the benchmark surveys being undertaken by
the Commerce and Treasury Departments in accordance
with legislation introduced by this Committee will give
us a wealth of detail. The Treasury survey will show as
of end-1974, foreign portfolio investment, in the form of
both equity and debt, in U.S. companies with assets of
more than $1 million where foreign control is less than
10 percent. This information will be broken down to show
foreign holdings by type of foreign investor from each
foreign country. Attachment C to my statement, which
is a copy of two of the forms required from reporters,
shows this detail.
While the Treasury survey is aimed at portfolio investment, it will also produce abbreviated reports from
U.S. companies which are 10 percent or more owned by
foreigners, that is, through direct investment. These reports will show for each such company asset size, total
revenue, kind of business and the percentage of foreign
ownership. We expect to have a very substantial proportion
of our data ready for inclusion in the preliminary report,
which will be submitted to Congress in October. The Commerce
Department survey will give even more detail on direct investment in the United States.

- 12 -

Proposed Legislation
We already gather a substantial amount of
information on foreign investment in the United States
through the reporting requirements of a variety of
agencies, and this data will soon be supplemented by
the results of the benchmark surveys now in progress.
Moreover, it is intended that the new Office of Foreign
Investment in the United States will be drawing all this
information together for the first time to give us as
comprehensive a picture as possible of the extent and
nature of foreign investment here.

The new Office will

also be charged with the task of identifying the gaps in
our existing system and making recommendations for legislation or administrative action to fill in these gaps.
Therefore, we feel that we should wait and see the
results of these extensive efforts rather than legislating
new measures at this time.
Furthermore, we are troubled by provisions of
S.1303 which would go well beyond existing data-gathering
programs in the type of investment to be reported and the
level of ownership or control which would trigger a
reporting obligation.

In particular, we do not see any

justification for the broad discretion granted to the

lot
Secretary of Commerce under the bill to lower the
reporting threshold below the five percent level that
is currently the statutory basis for the SEC's reporting
requirements.
Further, the extension of reporting obligations to
investment in nonpublic companies having assets of
$3,000,000 or more as provided for in this bill, seems
unwarranted without some evidence that investment in
all such companies by foreigners would be of concern to ^
us as a matter of course.
lacking.

We feel that such evidence is

In fact, the industries that would be of

greatest concern to us are already subject to special •-.
disclosure rules administered by the Federal regulatory
commissions and the Defense Department.
Section 6(b)(1)(C) of the bill would extend the reporting
requirements to other business arrangements which would give
a foreign investor "predominant influence11 over a public
or

nonpublic company covered by the Act, or result in

the ownership or control of more than $1,000,000 in
property in the United States.

We feel that this

provision is extremely overbroad and would tend to have
a chilling effect on foreign investment in a variety of
constructive business arrangements.

Foreign investors

would have to guess at which arrangements might trigger

- 14 -

the attention of the Administration or bring about a
reporting obligation. This is of particular concern in
that the bill would impose a reporting obligation directly
on the foreign investor as well as on other persons.
In addition, the inclusion in this provision of
$1,000,000 worth of U.S. property of unspecified type seems
lacking in foundation. There would not appear to be any
reason for United States concern over ownership or
control of $1,000,000 of property without regard to
its type or importance. However, the bill would permit
the Secretary to establish an even lower figure. We
perceive the same difficulty of rather low threshold
figures in Section 6(b)(1)(D) dealing with investments
in real estate.
In the aggregate, these new disclosure requirements
would place a Federal reporting burden on many persons
not presently so affected without a showing of need for
such additional detailed information. We should bear
in mind that our current reporting requirements are
considered by many firms and individuals as onerous.
The bill also contains several provisions that would
severely hamper the ability of the Government to develop
well-coordinated positions and recommendations on foreign

investment and to give all appropriate agencies an
opportunity to contribute to the process.

For example,

Section 5(7) of the bill would permit the new agency
which would administer this Act, in the discretion of
its Director, to propose additional programs in furtherance
of the policy of the Act to the pertinent Congressional
committees without prior submission or clearance by any
other agency or officer of the United States.
In addition, Section 7 would authorize the Secretary
to issue statements and guidelines on foreign investment
in companies and industries important to the United
States' national security, foreign policy, and economic
security.

In effect, the head of a single department would

be given the sole power to make economic policy judgments
of a sort which should result from comprehensive interagency
review within the Executive branch in cooperation with
Congress.
The provisions governing the confidentiality of
information for purposes of publication or release to
other agencies are too indefinite to be soundly
implemented by the new administration or to provide
adequate assurances to investors.

Section 6(d), for

example, provides for rather broad discretion on the

- 16 -

part of the agency as to what information can be published.
This vagueness would be of serious concern to investors in
view of the apparent authority of the agency to obtain
information submitted in confidence to other Federal agencies.
It would also create enforcement problems not now present
since some firms feel very strongly about the confidentiality
of the data now supplied.
Moreover, the interrelationship of the provisions
of Section 8 relating to obtaining information from, or
releasing it to, other agencies is not clear. Paragraph (a)
of that section seems to grant to the agency very broad
discretion in the release of information. However, it
is not clear how much this authority is restrained by
the confidentiality provisions of Paragraph (b). In
addition, the possibility that IRS information could be
obtained would violate the privacy of tax return information.
Finally, the authority contained in the section to release
information to foreign governments seems both unnecessary
and unwise, and no standards are provided as to the
circumstances where this might be done.
My remarks on the extensive detail called for in
S.1303 are also applicable to S.329, which would establish
even lower thresholds for reporting, going down to one-half
of one percent of the outstanding marketable securities

of U.S. firms.

This would entail a tremendous reporting

burden for no significant benefit and would be quite
costly for the new Pffice to process and analyze
effectively.
S.995 would require the approval of the Secretary of
Commerce for foreign government investment in the United
States above certain minimum levels. The Administration
recognizes the new circumstances arising from the sharp
increase in oil prices which presumably have prompted
this bill. It is for this reason that we are making
arrangements with the principal governmental investors
for advance consultations on major investments in the
United States. We already have had clear indications
that those countries recognize our legitimate concerns
regarding the potential for investments of a controlling
nature in U.S. firms by countries that are accumulating
large investable reserves. In certain instances, such as
the recent Iranian negotiations with Pan Am, they have
already informally sought advance concurrence of the
U.S. Government. In addition, the communique following
the meeting of the U.S.-Saudi Arabia Joint Commission said
that the two governments "agreed that each government would
consult with the other regarding significant undertakings"
in the other government's country.

- 18 -

We feel that this kind of cooperative preventive
approach is sufficient to safeguard against possible
unwanted investments by foreign governments and is
preferable to restrictive legislation which would likely
be regarded as a signal of a hostile U.S. attitude toward
all investment by foreign governments and thereby deter
much desirable investment.
Mr. Chairman, I feel that developments thus
far plus the measures recently announced by the Administration make new legislation as proposed in these three bills
unnecessary at this time, and that these bills would
institutionalize procedures which both the Congress and
the Executive Branch might later find to be a cure worse
than the disease.
I want to reiterate, however, that the Administration
does not foreclose the possibility that some legislation
may be needed at a later time.

If this should be the case,

we would hope to work closely with the Congress to help
design the best possible legislation.

The Foreign

Investment Study Act of 1974, which was initiated by this
Committee, is a good example of how close cooperation
between the two branches of government can produce good
legislation.

We look forward to a continuing dialogue with

this Committee in a spirit of cooperation.

ATTACHMENT A

118

Treasury Bulletin
.CAPITAL M O V E M E N T S
Section V - Transactions in Long-Term Securities by Foreigners
Reported by Banks and Brokers in the United States
Table CM-V-1. - Foreign Purchases and Sales of Long-Term Domestic Securities by Type
(In millions of dollars: negative figures indicate net sales by foreigners or a net outflow of capital from the United Stat.Pgl
Marketable Treasury bonds and notes

Corporate and other securities

Net foreign purchases
Calendar year
or month

Foreign countries
Total

1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1974-Feb...
Mar...
Apr...
May...
June..
July..
Aug...
Sept..
Oct. ..
Nov...
Dec...
1975-Jan. p.
Feb. p,
1/

36
689
127
512
-728
671
-338
-76
-616
-43
-489
-45
56.
1,672
3,316
305
-418
-45
157
-237
-28
-101
23
-37
-116
70
132
196
68
341

Official
institutions

-59
-20
-245
48
-380
-115
-41
1,661
3,281
465
-646
-37
-172
.-7

-73
-60
25
150
118
182

Other
foreigners

-237
524
-98
-20
-207
369

36
95
56
30
51
59
123
-119
-22
5
70
-39
-10
16
-50
-3
14
-11
26
38
50
20
10
102

International
and
regional
273
165
224
532
-521
302
-315
-151
-427
-121
-161
11
-25
130
57
-165
156
31
166
-82
29
-97
9
47
-82
32
57
26
-60
57

Gross
foreign
purchases

1,224
1,217
1,730
1,744
1,780
1,867
1,149
1,077
680
585
443
528
691
2,414
4,358
2,738
3,130
422
264
225
427
161
120
313
183
20J.
403
352
245
599

Data include transactions in issues of states and municipalities, and
of corporations and other agencies of the U.S. Government.

Net
foreign
Gross
purchases
Net
foreign of
sales
corporate foreign
and other purchases
securities
1,188
-39
17
528
435
73
1,603
252
50
1,231
223
-99
2,508
60
-51
1,196
207
9
1,487
-173
176
1,153
-375
38
1,296
678
1,011
629
1,070
313
932
4,234
1,964
574
2,688
1,202
634
1,582
956
742
1,435
703
1,043
4,068
1,881
2,433
1,979
3,547
1,615
2,073
467
-144
13
107
139
188
462
203
222
455
66
51
261
242
251
97
-5
-7
350
190
268
298
178
180
132
226
205
271
224
211 r
156
207
228
178
61
251
258
-287
247

Preliminary,

Bonds 1/

Stocks

Gross
Net
Gross
iross
foreign
foreign
foreign foreign
purchases sales
purchases purchases
361
369
442
317
308
256
461
675
1,553
2,243
4,446
3,054
2,499
2,967
4,723
5,812
8,181
459
777
549
327
653
541
820
914
895
919
586
424
271
Revised.

344
296
392
416
359
246
284
637
542
1,929
2,481
1,853
1,543
2,263
2,842
3,832
6,566
603
638
346
261
411
546
629
737
669
695
379
363
557

-56
363
202
323
111
198
-349
-413
-333
757
2,270
1,487
626
731
2,188
2,785
456
157
49
19
-15
8
-2
78
2
-22
-13r
21
190
534

1,397
2,224
1,977
3,067
2,260
2,724
3,076
3,720
4,740
8,033
13,118
12,429
8,927
11,626
14,361
12,762
7,552
743
896
577
576
521
508
580
447
673
604 r
450
731
1,382

Gross
foreign
sales
1,454
1,862
1,775
2,745
2,149
2,527
3,425
4,133
5,074
7,276
10,848
10,942
8,301
10,894
12,173
9,978
7,09^
586
846
559
591
513
510
502
445
695
616
429
541
849

r
^
^

ATTACHMENT A (continued)

125

April 1975
.CAPITAL M O V E M E N T S
Section V - Transactions in Long-Term Securities by Foreigners
Reported by Banks and Brokers in the United States
Table CM-V-9. - Foreign Purchases and Sales of Long-Term Securities,
by Type and Country, During February 1975 Preliminary
(in millions of dollars)

,
Gross sales by foreigners

Gross purchases by foreigners
Domestic securities
Marketable
Total
Treasury
purchases bonds and
notes

wountry

Foreign securities

Corporate and
other
Bonds
Bonds

Stocks

Domestic securities
Total
sales

Stocks

Marketable
Treasury
bonds and
notes

Foreign securities

Corporate and
other
Bonds
Bonds

Stocks

lOurope:

Greece
Italy

9
57
I
*
119
112
4
24
81
6
1
5
3
373

Turkey
United Kingdom
Yugoslavia

506
13

U.S.S.R

1
1
*

7
*
*
5
7

3
1

*
*

*
1
20

117

*
Total Europe

1,313

9>u~
Latin America;
Argentina
Bahamas
Brazil
Chile
Colomb ia
Cuba
Mexico
Panama
Uruguay
Venezuela
Other Latin American Republics....
Netherlands Antilles and Surinam..
Other Latin America
Total Latin America

•X

*
18
24

*
11
31
*

*
1
*

1
21
*

•*

1
8

5
3
«

2
1
*
*
4

*
11
*

5
5
37
38

2
2

1
•X

*
*

104

261

*
33

*
1

>
4

11
*
*
50
119

415

209

502

218

*
*
1

1
21
*
1
#
169

2
*
13

213

195

5
2

3
*

2
2

Total international ajid regional..

J__ss than $500,000.

•X

103
#
3

*
1

1
8
*
*
*

*
il
*

«
1

8
4
*
*
5
2
23
35

101

*
9.
-X

•

36
*

« •

•X

•

*
*
*

«
*

-X

114

11
*
*
1
38
*
1
*
13

48
33

*
*
1
45
1
-

•

•X

£_

*
*

•X

•K

1,961

244

294

849

5
*

272
150
8

263

1__

430

264

~134~"

2,391

14
258

5
118

i7~

*
*
X

1,382

271

133

113

599

5
27

1,369

148

267

569

528

2,504

1
3

130

3
2
*
*
*
*
9

5
13

•X

*
*

6
6

-X

7
46
-*
1

243

*
*

1
110
13
*
1
5
2
69
38

•X

1
*
*

International and regional:

•*

1
8
*
*

176

73
130

322

3
2,410

200

999
501

Other countries:
Australia

*
*

*
1
17

3
31
1
*
83
65
5
17
35
4
2
5
2
209
• *

*
6
*

150

Africa:
Morocco
South Africa
Zaire
Other Africa

-X

46
1

9
5
*
3
1
*

1
22

Korea
Philippines
Thailand
Other Asia

X-

Asia:
China, People's Republic of
China, Republic of (Taiwan)
Hong Kong

1
10
6
146
45

•

4
9

3
45
1
*
108
89
5
25
63
5
2
7
3
241
*
390
*
13
*

899

-x

•

5
5
*
4
2

1
2

163

88
13

7
-*

117

3
10
•

8
39
1
*
104
90
3
16
49
6
1
5
1
324
-*
251
*
2
*

557~

*
*
402
3
150

153
849~~

"555"

173

"17T

y(°
Attachment B
Section 13D Acquisition Reports by Foreign Investors,
January 1974 - April 1975
The following compilations represent chronological
listings of security acquisitions by apparent foreign
beneficial holders, as reported on Schedules 13D filed with
the Securities and Exchange Comrftission pursuant to Rules 13D-1
of the Rules and Regulations under the Securities Exchange Act
of 1934. Schedule 13D does not require specific disclosure
of the citizenship or domicile of persons controlling an
acquiring entity although this is given in most cases. While
a person must report within 10 days when his holdings reach over
five percent of a class of security,
the percentage amount
of outstanding securities of the issuer held following the
acquisition is not required. To the extent, therefore, that
independent sources were required to be utilized in providing
information on domicile and percentage holdings, the lists
must be recognized to be incomplete and to represent approximations.
The security acquisition list involves abstractions
from the monthly Statistical Bulletins and the daily News
Digests, published by the S.E.C., which are based upon
statistics compiled from the Schedule 13D reports by the
Office of Registrations and Reports. The Statistical
Bulletins and News Digests include the domicile country of
the acquiring company or individual and percentage of
securities held, where readily apparent from the Schedule 13D
report filed by the acquirer. Information, including the
domicile of possible foreign acquirers and the percentage
of securities of the issuer held following the acquisition,
when not indicated in the Statistical Bulletin, has been
derived from an examination of certain of the Schedule 13D
reports and certain independent reference sources, including
the Moody's manuals. Transactions not involving U.S.
controlled or domiciled issuers have been omitted to the
extent possible.
Amended acquisition reports, identified by an asterisk
are made when there are any changes in security holdings
above the 5% level, or any other material changes in the
contents of the original report. Thus, it is possible to
follow changes in the amount of stock held, once the initial
13D report is filed.

- 1 -

Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Date Filed

• Hartford National Bank
and Trust Co., Trustee
(United States Philips
Trust) (Netherlands)

North American Philips Corp.
(Del.) Common Stock 6,278,283 shs. (61%)

1-2-74

Hanson Holdings, Inc.
(an indirect wholly
owned subsidiary of
Hanson Trust Ltd.
(United Kingdom)
Fitzwilliam Resources
Ltd. (Ireland)

Gable Industries, Inc. (Me.)
Common Stock - 534,200 shs.
(22%) on consummation of
Stock Purchase agreement with
four shareholders
Intercontinental Energy Corp.
(Del.) Common Stock 134,000 shs. (22%)

1-2-74

*Prixilla S.A.
(Switzerland)
Pricel S.A. (France)

Dymo Industries, Inc. (Cal.)
Capital Stock - 426,200 shs.
(16%)

1-17-74

Canadian and Foreign
Investment Trust Ltd.
(Scotland)

Invent Inc. (Del.)
Common Stock - 20,000 shs.(1.4%)

1-30-74

Scottish American
Investment Co., Ltd.
(Scotland)

Invent Inc. (Del.)
Common Stock - 51,000 shs.(3.5%)

1-30-74

Scottish Northern
Investment Trust Ltd.
(Scotland)

Invent Inc. (Del.)
Common Stock - 60,000 shs.(4.2%)

1-30-74

Standard Life Assurance
Co. (Scotland)

Invent Inc. (Del.)
Common Stock - 7 5,000 shs.(5.2%)

1-30-74

U.B. (Holdings) U.S.,
Ltd. (Sub. of English
Corp.)

Keebler Co. (Del.)
Common Stock - 520,002 shs.(30%)

2-1-74

Fitzwilton Ltd. (Ireland)

National Mine Service Co. (W.Va.)
Common Stock - 103,000 shs.(7%)

2-4-74

(* Amended or Supplemental Reports)

1-7-74

- 2 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Edmond de Rothschild
California European CoCalrop, S.A.
Lafayette Corp.
(Luxembourg)
Walter Haefner Holding
AG (Switzerland)

Bancal Tri-State Corp. (Del.)
Common Stock - 650,550 shs. (20%)

2-5-74

Wyly Corp. (Del.)
Common Stock - 804,400 shs.(10%)

2-11-74

Date Filed

*Liquifin Aktiengesell- Ronson Corp. (N.J.) 2-11-74
schaft Liquigas S.p.A.
Common Stock - 1,375,848 shs.(31%)
(Liechtenstein & Italy)
(Above shares purchased pursuant
to a tender offer which has been
extended to February 22, 1974)
David Jones Ltd.
Buffurns' (Cal.)
2-15-74
(Australia)
Common Stock - 510,357 shs.(53%)
6% Debentures 2,451,000 Prin.Amt.
5-1/2% Debentures 309,500 Prin.Amt.
(Above purchased pursuant to the
tender offer which has been extended
to March 8, 1974)
*Liquifin AktiengesellRonson Corp. (N.J.)
2-15-74
schaft Liquigas S.p.A.
Common Stock - 1,405,365 shs. (32%)
(Liechtenstein & Italy)
(Above shares purchased pursuant
to the tender offer which was
extended to February 22, 1974)
*Compagnie de SaintCertain-teed Products Corp.(Md.) 2-19-74
Gobain-Pont-A-Mousson
Common Stock - 3,453,237 shs. (31%)
(France)
Common Stock 600,000 shs.
on conversion of Pfd
*Prixilla S.A.
Dymo Industries, Inc. (Cal.) 2-19-74
(Switzerland) Pricel
Common Stock - 438,100 shs. (17%)
S.A. (France)
Bel-Fran Investments
Ltd. Bel-Cal Holdings
Ltd. Bel-Alta
Holdings Ltd.(Canada)
*David Jones Ltd.
(Australia)

Far West Financial Corp. (Del.)
Capital Stock - 106,600 shs.(6%)

2-20-74

Buffurns' (Cal.)
2-25-74
Common Stock - 849,021 shs. (89%)
fl 1 ^ 2 ! Deben tures $397,500 Prin.Amt.
6% Debentures $3,079,000 Prin.Amt.
(Above purchased pursuant to the tender
offer through February 20, 1974)

- 3 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Liquifin Aktiengesellschaft Liquigas S.p.A.
(Liechtenstein & Italy)

Ronson Corp. (N.J.)
Common Stock - 1,530,417 shs.(34%)
(The above shares have been
purchased as of February 22, 1974,
pursuant to the tender offer which
has been temporarily stayed until
further order of the Court)
IMC Magnetics Corp. (N.Y.)
Common Stock - 36,300 shs.(5%)
Common Stock - 200,000 shs.
on conversion of Note
National Mine Service Co.(W.Va.)
Common Stock - 207,735 shs.(14%)
Bancal Tri-State Corp. (Del.)
Common Stock - 660,600 shs.(21%)

Japan International
Technology Corp.
(Sub. of Japanese Corp.)
*Fitzwilton Ltd.
(Ireland)
*Edmond de Rothschild
California European Co
Calrop, S.A.
Lafayette Corp.
( Luxembourg)
*David Jones Ltd.
(Australia)

Schlesinger European
Investors Ltd.
(United Kingdom)

Accident and Casualty
Insurance Co. of
Winarthur, Switzerland
(Switzerland)
Chevy Chase Property Co
Ltd. Foxwood Investors
Inc. (Bermuda and
Netherlands Antilles)
*Pricel S.A. (France)
Prixilla S.A.
(Switzerland)

Date Filed
2-26-74

3-1-74

3-6-74
3-7-74

Buffurns' (Cal.)
3-8-74
Common Stock 943,022 shs. (99%)
5-1/2% Debentures-$315,000 Prin.Amt.
6% Debentures - $3,251,000 Prin.Amt.
(Above securities purchased pursuant
to the tender offer through 3-6-74)
Overseas Securities Co., Inc. (N<.Y.) 3-11-7
Capital Stock - 45% of the
outstanding shares on consummation
of the agreement between SEI
and Overseas
CNA Financial Corp. (Del.)
3-12-74
Common Stock - 1,917,428 shs.(6%)
Conv. Series A Pfd - 530,013 shs.
Combined Properties Corp. (Del.)
Common Stock - 77,400 shs. (5%)

3-13-74

Dymo Industries, Inc. (Cal.)
Common Stock - 452,700 shs.(17%)

3-15-74

- 4 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Stabetag AG
(Switzerland)

Nachman Corp. (111.)
Common Stock - 570,125 shs.(68%)

Ciba-Geigy Corp.
(Sub. of Swiss Corp.)

Funk Seeds International,Inc.(Del.)3-22-74
Common Stock - 2,165,754 shs.(64%)
(2,114,754 of above shares were
purchased pursuant to the Tender
Offer)
Savin Business Machines Corp.(N.Y.)3-25-74
Common Stock - 20,000 shs.(.07%)
Common Stock - 150,000 shs.
on exercise of Warrants
CNA Financial Corp. (Del.) 3-26-74
Common Stock - 2,038,728 shs.(6.2%)
Conv. Series A Pfd - 530,013 shs.

Ricoh of America, Inc.
(A wholly-owned
subsidiary of Ricoh Co.,
Ltd. (Japan)
*Accident and Casualty
Insurance Co. of
Winterhur, Switzerland
(Switzerland)
*Fitzwilton Ltd.
(Ireland)
*Accident and Casualty
Insurance Co. of
Winterthur,
Switzerland (Switzerland)
California European CoCalrop, S.A. Lafayette
Corp. Edmond de
Rothschild
( Luxembourg)
*Pricel S.A. (France)
Prixilla S.A.
(Switzerland)

National Mine Service Co.(W.Va.)
Common Stock - 310,735 shs.(21%)

Date Filed
3-22-74

4-3-74

CNA Financial Corp. (Del.) 4-4-74
Common Stock - 2,189,228 shs.(6.7%)
Series A Conv.Pfd. - 530,013 shs.
Bancal Tri-State Corp. (Del.)
San Francisco, Calif.)
Common Stock - 670,600 shs.(21%)

4-5-74

Dymo Industries, Inc. (Emeryville, 4-10-74
Cal.) Common Stock - 454,700 shs. (18%)

- 5 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

•Japan International
Technology Corp.
(Sub. of Japanese
Corp.)

IMC Magnetics Corp. (Westbury
4-18-74
N.Y.)
Common Stock - 45,300 shs. ( 7%)
Common Stock - 200,000 shs.
on conversion of Note
Ronson Corp. (Woodbridge,N.J.)
4-22-74
Common Stock - 1,539,011 shs.(34%)

*Liquifin
Aktiengesllschaft
(Liechten stein) (Italy)
Ivaco Industries Ltd.
(Canada)

Date Filed

Laclede Steel Co. (St.Louis,Mo.)(Del.) 4-24-74
Common Stock - 22,52 0 shs. (6%)

Establishments Machkim, Israel Hotels International,Inc. 4-25-74
Enkas, Opil and Norima
(Del.) (New York City)
(Liechtenstein)
Common Stock - 1,256,530 shs.(92%)
Harver Educational Services Inc. 4-26-74
Purnell & Sons Ltd.
(Freeport, NY) (N.Y.)
(England)
Common Stock - 68,917 shs.( 22%)
*U.B. (Holdings)
U.S., Ltd.
(Sub. of English
Corp.)
Triad Holding Corp.,
S.A. (Luxembourg)
*David Jones Ltd.
( Australia)

*Japan International
Technology Corp.
*Fasco A.G.
( Liechtenstein)
(Italy)

Keebler Co. (Elmhurt, 111.)(Del.) 4-26-74
Common Stock - All outstanding shs.
(Through a merger of a wholly owned
subsidiary into Keebler)
Arizona-Colorado Land and Cattle
5-1-74
Co. (Phoenix, Ariz.)(Ariz.)
Common Stock - 500,000 shs.(15%)
Buffums' (Long Beach, Calif.)(Cal.)5-6-74
Common Stock - 949,780 shs.(99%)
5-1/2 Debentures-$317,000
6% Debentures - 3,272,000
(Above securities were purchased
pursuant to a Tender Offer)
IMC Magnetics Corp.(Westbury,N.Y.) 5-6-74
(N.Y.)
Common Stock - 60,600 shs. (9%)
Seaport Corp. (Pittsburgh,Pa.)
5-6-74
(Del.)
Common Stock - 765,570 shs. (44%)
Common Stock - 200,000 shs.
on exercise of Warrants

- 6 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Fasco A.G.
Fasco, Inc.
(Liechtenstein)
(Italy)

Argus Inc. (Ann Arbor, Mich.)
5-6-74
(Del.)
Common Stock - 895,178 shs. (11%)
Common Stock - 480,000 shs.
on conversion of Preferred
Hotel Corp. of Israel (Chicago, 5-9-74
111.)
Common Stock - 211,732 shs. (93%)
(Above shares including shares
issuable on conversion of
Debentures, have been purchased
under the Tender Offer)
Okuraya/Davos International,Inc.
5-10-74
(N.Y.) (New York City)
Common Stock - 1,500,000 shs.(27%)
Common Stock - 1,000,000 shs.
on exercise of option
Laclede Steel Co. (St. Louis,Mb.)
5-13-74
(Del.)
Common Stock - 31,120 shs.(.08%)
Ronson Corp. (Woodbridge,N.J.)
5-15-74
(N.J.)
Common Stock - 1,602,981 shs.(39%)
TFI Companies, Inc.
5-20-74
(Chicago, 111.) (Del.)
Common Stock - 1,786,739 shs.(59%)
Certain-Teed Products Corp.
5-22-74
(Valley Forge, Pa.) (Md.)
Common Stock - 3,492,737 shs. (31%)
Common Stock 600,000 shs.
on conversion of Preferred
Funk Seeds International, Inc.
5-23-74
(Del.) (Bloomington, 111.)
Common Stock - 2,996,165 shs.(89%)

*Ropa Anstalt
(Israel)

Okuraya of America
Inc.
(Wholly-owned subsidiary of Okuraya
Corp. (Japan)
*Ivaco Industries,
Ltd. (Canada)
*Liquifin
Aktiengesllschaft
(Liechtenstein)(Italy)
J. Lyons & Co. Ltd.
(England)
*Compagnic De SaintGobain-Pont-AMousson
(France)
*Ciba-Geigy Corp.
(Sub. of Swiss Corp.)

Date Filed

*Schlesinger European
Investments Ltd.
(United Kingdom)

Overseas Securities Co., Inc. 6-3-74
(N.Y.) (New York City)
Capital Stock - 122,428 shs. (89%)

Burmah Oil Company,
Ltd. (Scotland)

KMS Industries, Inc. (Ann Arbor, 6-10-74
Mich.)
Common Stock - Options to purchase up
to 20% of Common Stock .of its sub-

- 7 Reporting Company
or Individual

Capitalfin
International Ltd.
(Bahamas) (Italy)
*Pricel S.A. (France)
Prixilla S.A. (Switz.)

Issuer and Number of Shares
and Percentage of Ownership

Date Filed

sidiary, KMSF Fusion, Inc.
have been acquired including rights
to convert such shares into an
equivalent percent of Common of
KMS Industries
Signal Companies, Inc. (Beverly 6-11-74
Hills, Calif.) (Del.)
Common Stock - 983,492 shs.(4.7%)
Conv. Pfd.
- 12,877 shs.
Dymo Industries, Inc. 6-13-74
(San Francosco, Calif.) (Cal.)
Common Stock - 498,800 shs. (19%)
Talcott National Corp.
6-14-74
(New York City) (N.Y.)
Common Stock - 1,600,000 shs.(52%)

Fasco A.G.
(Liechtenstein)
wholly-owned by
Michele Sindona (Italy)
Wilkinson Sword Inc.,
Scripto, Inc. (Atlanta, Ga.)(Ga.) 6-21-74
a wholly-owned
Common Stock - 3,284,704 shs.(53.6%)
subsidiary of
Wilkinson Sword,
Ltd. (England)
Cascade Steel Rolling Mills, Inc. 6-24-74
C. Itoh & Co., Ltd.
(McMinnville, Ore.)
(Japan)
Common Stock - 195,000 shs.
C. Itoh & Co.
(America) Inc.
CIBA-GEIGY Corp.
Airwick Industries, Inc.
6-26-74
(Subsidiary of
(Carlstadt, N.J.) (N.J.)
Swiss Corp.)
Common Stock - 3,294,592 shs.(94.7%)
(Above shs. were purchased pursuant
to the tender offer which expired on
June 21, 1974)
Hussel Holding AG
Micron Corp. (Salt Lake City, Utah)6-28-74
(Switzerland)
Common Stock - 1,6 35,000 shs. (51%)
(wholly owned sub. of
Common Stock 100,000 shs.
German Corp.)
on exercise of option
Societe de Traction
Arthur G. McKee & Co.
7-5-74
et d'Electricite
(Independence, Ohio) (Del.)
(Belgium)
Common Stock - 100,000 shs. (7%)
Denison Mines Ltd.
Fibreboard Corp. (San Francisco,
7-5-74
(Canada)
Calif.) (Del.)
Capital Stock - 165,100 shs. (5%)

- 8 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Carpano et Pons
(France)

Garcia Corp. (Teaneck, N.J.)
7-8-74
(N.J.)
Common Stock - 800,000 shs. (3.4%)

*Schlesinger European
Investments Ltd.
(England)
*Aktiebolaget
Electrolux
(Sweden)

*Ropa Anstalt
(Liechtenstein)

*Ivaco Industries Ltd
(Canada)
International Mogul
Mines Ltd.
Canadian Vendbar
Industries, Ltd.
(Canada)

*C. Itoh & Co., Ltd.
C. Itoh & Co. .(U.S.)
Inc. (Japan)
Multiple Access Ltd.
(Canada)

Date Filed

Overseas Securities Co., Inc.
7-10-74
(N.Y.) (New York City)
Capital Stock - 124,828 shs. (88%)
National Union Electric Corp.
7-12-74
(Greenwich, Conn) (Del.)
Common Stock - 1,522,670 shs.(75%)
(An additional 356,033 shares have
been tendered pursuant to the Offer
and, subject to certain requirements,
will be purchased)
Hotel Corporation of Israel 7-17-74
(Chicago, 111.)
Common Stock - 221,909 shs. (97.9%)
including shs. that may be issued
on conversion of Debentures
(Above shs. acquired pursuant to the
Tender Offer which expired on
June 4, 1974)
Laclede Steet Co. (St. Louis, Mo.) 7-18-74
(Del.)
Common Stock - 50,620 shs. (1.3%)
Graphic Sciences Inc. (Danbury, 7-22-74
Conn.) (N.Y.)
Common Stock - 254,750 shs. (8%)
Common Stock - 195,690 shs.
on exercise of Option Agreement with
an executrix of an estate
(Vendbar is a wholly-owned subsidiary
Cascade
Steel Rolling Mills, Inc. 7-24-74
of Mogul)
(McMinnville, Oregon)
Common Stock - 195,000 shs.
TCC, Inc. (Dallas, Texas) (Tex.)
8-2-74
Common Stock - 4,005,530 shs.(68%)
Common Stock 854,126 shs.
on conversion of Debenture

- 9 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Richard W. Evans
(England)

Delos International Group, Inc.
(Del.) (Waltham, Miss.)
Common Stock - 68,500 shs. (6%)

*Schlesinger European
Investments Ltd.
(England)
*Japan International
Technology Corp.
(Sub of Japanese
Corp.)
McCorquodale &
Blades Trust, Ltd.
(England)
*Ivaco Industries Ltd.
(Canada)
Dension Mines Ltd.
(Canada)
Henkel Inc., a whollyowned subsidiary of
Henkel GmbH (Germany)
international Nickel
Co. of Canada, Ltd.
(Canada)

*Dr. Wolfgang Forster
(West Germany)
Creusot-Loire
(France)

Date Filed
8-5-74

Overseas Securities Co., Inc.
8-5-74
(New York City) (N.Y.)
Capital Stock - 128,428 shs. (91%)
IMC Magnetics Corp. (Westbury,N.Y.)8-5-74
(N.Y.)
Common Stock - 88,200 shs. (14%)
Falconer Co. (Baltimore,Md.)(Md.) 8-8-74
Common Stock - 158,855 shs. (51%)
(Above shs. were purchased pursuant
to the Tender Offer)
Laclede Steel Co. (St. Louis,Mo.) 8-9-74
(Del.)
Common Stock - 52,620 shs. (1.4%)
Fibreboard Corp. (San Francisco,
8-9-74
Calif.) (Del.)
Capital Stock - 201,200 shs. (6.2%)
Clorox Co. (Oakland, Calif.)(Cal.) 8-14-74
Common Stock - 1,459,900 shs. (6.6%)
ESB Inc. (Philadelphia, Pa.)(Del.) 8-16-74
Common Stock - 5,287,780 shs. (95%)
(Above shares purchased by Inco
Holdings Inc., its wholly-owned
subsidiary, pursuant to the Tender
Offer)
R. D. Products, Inc. (Victor, N.Y.)8-21-74
(N.Y.)
Common Stock - 583,334 shs. (31%)
Alan Wood Steel Co. (Conshohocken, 8-26-74
Pa.) (Pa.)
Common Stock - 78,000 shs. (9.7%)
Common Stock - 44,4 00 shs.
on exercise of Option

- 10 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Chloride Inc., a
wholly owned subsidiary of Chloride
Group Ltd.
(England)

Chloride Connrex Corp. (Tampa,
8-30-74
Fla.) (Del.)
Common Stock - 499,473 shs.
(Above shs. acquired pursuant
to the Tender Offer. Chloride
Group owns 1,316,500 shares
(70%) of the outstanding
shares)
Indian Head Inc. (New York City)
9-4-74
(Del.)
Common Stock - 5,511,200 shs. (90%)
Common Stock 34,982 shs.
on exercise of Warrants
(1,963,619 of above shs. were
acquired from TBG. The balance
of 3,547,581 shs. and the
Warrants were acquired pursuant
to the Tender Offer)
Bancal Tri-State Corp. (San 9-6-74
Francisco, Calif.) (Del.)
Common Stock - 800,100 shs. (24%)
Common Stock - 50,000 shs.
on exercise of a right under an
agreement
Laclede Steel Co. (St. Louis, Mo.) 9-9-74
(Del.)
Common Stock - 227,480 shs.(6%)
Overseas Securities Co., Inc. 9-10-74
(New York City) (N.Y.)
Capital Stock - 129,728 shs.(92%)
Tejon Ranch Co. (Lebec, Calif.) 9-13-74
(Cal.)
Common Stock - 130,460 shs.(10.4%)

Thyssen-Bornemisza
Inc., a wholly
owned subsidiary of
Thyssen-Bornemisza
Group N.V.
(Netherlands)

*Edmond de Rothschild
California European
Co.-Calrop, S.A.
Lafayette Corp.
(Luxembourg)
*Ivaco Industries Ltd
(Canada)
*Schlesinger European
Investments Ltd.
(England)
*Superior Oil Co.
Canadian Superior
Oil Ltd.
Superior Farming Co.
(Canada) (u.S. controlled)
Minerals and Resources
Corp. Ltd.
(Bermuda) controlled
by Anglo American
Corp, South Africa

Date Filed

Engelhard Minerals & Chemical
9-19-74
Corp. (New York City)
Common Stock - 8,112,995 shs.(30.5%)
Preferred Stock - 122,878 shs.(20.7%)
(ownership transferred from HD
Development Ltd. (Lux.), a subsidiary
of Anglo American, which purchased
stock in 1972)

- 11 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Academic Pension Plan
of University of
Alberta (Canada)

Great Western United Corp.
9-19-74
(Denver, Colo.) (Del.)
Common Stock - 107,700 shs. (5.1%)
$1.88 Preferred Stock - 2,400 shs.
Fibreboard Corp. (San Francisco 9-23-74
Calif.) (Del.)
Capital Stock - 250,000 shs. (7.8%)
ESB Inc. (Philadelphia, Pa.)(Pa.) 9-23-74
Common Stock - 5,415,096 shs.
(97.1%) (Above shares were
purchased pursuant to the Tender
Offer by Inco Holdings, Inc.,
its wholly-owned subsidiary.
Magnavox Co. (Fort Wayne, Ind.) 9-25-74
(Del.)
Common Stock - 14,250,000 shs.( 8 0%)
(Above shares were purchased
pursuant to the Tender Offer)
Landmark Land Company, Inc. 9-27-74
(Oklahoma City, Okla.)(N.Y.)
Common Stock - 721,000 shs.(22%)

Denison Mines Ltd.
(Canada)
•International Nickel
Co. of Canada, Ltd.
(Canada)

North American Philips
Development Corp.
(Netherlands Sub)

Covent North American
Properties Ltd.
( Canadian Sub. of
English Corp.)
*Ivaco Industries Ltd.
(Canada)
Trade Development Bank
Hldgs.S.A.(Luexembourg)
Trade Development Bank
(Switzerland)
Trade Development Bank
Internatl. Inc. (Panama)
Safrabank S.A. (Panama)
Odin Shipping Ltd.
(Bermuda)
(Controlled by Danish
national)
Raynard Sportswear,Ltd.
( Hamlet Yuen of Hong
Kong is its sole
shareholder)

Date Filed

Laclede Steel Co. (St.Louis,Mo.)
9-27-74
(Del.)
Common Stock - 244,180 shs.(6.4%)
Republic New York Corp. (New York 9-30-74
City) (N.Y.)
Common Stock - 1,665,599 shs. (53%)
(Stock transferred between
subsidiaries of owner)
Atwood Oceanics, Inc. (Houston,
10-3-74
Texas) (Tex.)
Common Stock - 210,526 shs.(11.3%)
Don Sophisticates, Inc. (New York
City) (N.Y.)
Common Stock - 400,500 shs. (67%)

10-3-74

-12 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Edmond De Rothschild
California European Co
Calrop, S.A.
Lafayette Corp.
(Luxembourg)
*Hussel Holding AG
(Switzerland)
(wholly-owned sub.
of German Corp.)

Bancal Tri-State Corp.
(San Francisco, Calif.)(Del.)
Common Stock - 875,600 shs.
(27%)

*North American Philips
Development Corp.
(Netherlands Sub.)
*Denison Mines Ltd.
(Canada)

*Edmond de Rothschild
California European Co.
Calrop, S.A.
Lafayette Corp.
( Luxembourg)
Seamar (Holland)
B.V.
(Netherlands)

*Ivaco Industries Ltd.
(Canada)
*Japan International
Technology Corp.
(Sub. of Japanese
Corp.)
Universe Tankships,Inc.
(Liberia)

Date Filed
10-3-74

Micron Corp. (Salt Lake City,
10-15-74
Utah)
Common Stock - 1,635,000 shs. (51%)
Common Stock - 100,000 shs.
on exercise of Option
Magnavox Co. (Fort Wayne, Ind.)
10-29-74
Common Stock - 14,967,966 shs.(84.1%)
(Above shares were purchased
pursuant to the Tender Offer)
Fibreboard Corp. (San Francisco
10-30-74
Calif.)
Common Stock - 277,600 shs.
(8.6%)
Bancal Tri-State Corp.
11-4-74
(San Francisco, Calif.)
(Del.)
Common Stock - 876,200 shs.
(26.6%)
Bond Industries, Inc. (New York 11-11-74
City) (Del.)
Common Stock - 395,688 shs. (23%)
Common Stock - 120,000 shs.
on exercise of Option
Laclede Steel Co. (St. Louis,Mo.) 11-15-74
(Del.)
Common Stock - 269,180 shs.(7.1%)
IMC Magnetics Corp.
(Westbury, N.Y.) (N.Y.)
Common Stock - 117,400 shs. (18%)

11-18-74

St. John D'el Rey Mining Co.,Ltd.
(Cleveland, Ohio)
Ordinary Shares - 751,047 shs.
(18.86%)

11-21-74

- 13 Reporting Company
or Individual
*Compagnie de SaintGobainPont-a-Mousson
(France)
*Japan International
Technology Corp.
(Sub. of Japanese
Corp.)
Hugo Mann (West
Germany)

Bel-Fran Investments
Ltd. (Canada)
Bel-Cal Holdings Ltd.
(Canada)
Bel-Alta Holdings Ltd.
(Canada)
*Japan International
Technology Corp.
(Sub. of Japanese
Corp.)
*Ivaco Industries Ltd.
(Canada)
*Canada Development Corp
(Canadian Govt
Corp.)

Issuer and Number of Shares
and Percentage of Ownership ^
Certain-teed Products Corp.(Md.)
(Valley Forge, Pa.)
Common Stock - 3,893,837 shs.(34.7
Conv. Pfd.
- 1,300,000 shs.
IMC Magnetics Corp. (Westbury,
N.Y.) (N.Y.)
Common Stock - 134,700 shs. (21%)
Fed-Mart Corp. (San Diego, Calif.)
(Cal.)
Common Stock - 640,000 shs. (51%)
(Above shares to be purchased
under an Agreement which also
gives Mr. Mann an option to purcha
any additional shares to maintain
the 51% interest)
Cordura Corp. (Chicago, 111.)
(Cal.)
Common Stock - 235,700 shs. (4.1%)

IMC Magnetics Corp. (Westbury,
N.Y.) (N.Y.)
Common Stock - 176,400 shs.(27%)
Common Stock - 200,000 shs.
on conversion of Note
Laclede Steel Co. (St.Louis,Mo.)
(Del.)
Common Stock - 299,950 shs. (8%)
Texasgulf Inc. (New York City)
(Tex.)
Common Stock - 9,259,720 shs.(31%)
(Ownership of above shares has
been transferred to CDC Nederland
B.V. (Netherlands), a wholly-owned
subsidiary of CDC)

- 14 Reporting Company
or Individual

Issuer and Number of. Shares
and Percentage of Ownership

Thomson-CSF (France)

Nucleonic Products Co., Inc.
(Canoga Park, Calif.)
Common Stock - 287,000 shs.

1-28-75

*Bowater Holdings, Inc.,
a wholly-owned subsidiary of Bowater
Corp. Ltd.
(England)
*ABM Corp., a whollyowned subsidiary of
Boehringer Mannheim
GmbH (Germany)

Kay Corp. (Alexandria, Va.)
Common Stock - 3,935,313 shs
(72%)

1-30-75

*Sanbil Handels Anstalt
(Liechtenstein)
Pharma-Investment Ltd.
(Canada)
(Boehringer Ingelheim
GmbH (Germany) owns
74% of the voting power
in Pharma)
*Creusot-Loire
(France)
*ABM Corp.
(Delaware)
wholly-owned subsidiary of Boehringer•
Mannheim Corp.
(Germany)
British Assets Trust Ltd
Second British Assets
Trust Ltd*
Independent Investment
Co. Ltd. (U.K.)

Date Filed

Bio-Dynamics, Inc.
2-4-75
(Indianapolis, Ind.)
Common Stock - 1,681,902 shs.(94%)
(Above shares purchased pursuant
to the Tender Offer which has been
extended to February 21)
General Refractories Co. 2-14-75
(Bala Cynwyd, Pa.)
Common Stock - 274,600 shs.
Hexagon Laboratories, Inc. 2-18-75
(Bronx, N.Y.)
Common Stock - 485,601 shs.
Convertible Debentures - $104,200
(Above securities, representing 86%
of all shares have been purchased
pursuant to the Tender Offer which
has been extended to February 25)
Alan Wood Steel Co. 3-3-75
(Conshohocken, Pa.)
Common Stock - 122,400 shs. (9.7%)
Bio-Dynamics Inc. 3-3-75
Common Stock 1,708,145 shs.(95%)
(Above shares acquired pursuant to
Tender Offer)
Bio-Medical Sciences Inc.
(Fairfield, N.J.)
Common Stock 81,600 shs.
(in exchange for 6 1/2% converible subordinated notes,
1-6-82 Series A)

3-4-75

- 15 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

Swiss Reinsurance Co.
Plantronics, Inc.
Swiss Reinsurance Co.
(Santa Clara Calif.)
Trust B
Common Stock - 82,400 shs.
North American Reinsurance
Corporation
North*American Reassurance
Company
*Pharma-Investment Ltd
Hexagon Laboratories, Inc.
(Canada)
(Bronx, N.Y.)
(Germany)
Common Stock - 527,235 shs.
Convertible Debentures 112,600
(Above securities representing
93% of all shares purchased
pursuant to tender offer of
Feb. 25)
ESMIL BV
Envirotech Corp.
(Netherlands)
(Menlo Park Calif.)
50% owned by
Common Stock 1,188,000 shs.
Hoesch, N.G. Germany

r
Date Filed
3-4-75

3-4-75

3-6-75

Richard Gruner
(Liechtenstein)

American Airlines
New York, N.Y.
Common Stock - 1,550,200 shs.(5%)

*Pharma-Investment Ltd.
(Canada)
(Germany)

Hexagon Laboratories Inc.
3-17-75
(New York)
Common Stock - 537,279 shs. (97%)
Convertible Debentures - $114,700
Wisconsin National Life
3-27-75
Insurance Co.
Common Stock 1,002,908 shs. (95%)

*The Netherlands
Insurance Co. N.V.
subsidiary of
Nationale Nadeslanden
N.V. (Netherlands)
Haitian Equities
Gilbert Pasquet
Elsie Malebranche
Jean Claude Kenol
( Haiti)
Trade Development Bank
Hldgs. S.A.
(Luxembourg)
Trade Development Bank
(Switzerland)
Trade Development Bank
Internatl. Inc. (Panama)
Safrabank S.A. (Panama)

Basic Food Industries, Inc.
(Miami, Fla.)
Common Stock 450,000 shs.

3-31-75

Republic New York Corp.
(New York City) (N.Y.)
Common Stock -1,7*8,899

3-30-74
shs.

- 16 Reporting Company
or Individual

Issuer and Number of Shares
and Percentage of Ownership

*Edmond de Rothschild
California European Co.
Caltrop S.A.
Lafayette Corp.
Luxembourg
Loblaw Companies Ltd.
(Canada)

Bancal Tri-State Corp.
(San Francisco Calif.
Common Stock 896,500 (27.2%)

4-4-75

Loblaw Inc.
(New York)
Common Stock 2,835,582 (76.2%)
(Tender offer made for balance
of shares @ $6)
National Tea Company
(Illinois)
Common Stock 4,650,679 (59.27%)
(Tender offer made for
1,830,000 shares @ $7 (80%)
Fed-Mart Corp.
(San Diego, Calif.)
Common Stock - 800,000 (58.7%)
(above shares may be purchased
under tender offer and stock
purchase agreement)
Atlas Hotels Inc.
(California)
Common Stock 134,150 (10%)
National Mine Service Co.
Common Stock 453,542 shs. (31%)

4-9-75

Loblaw Companies Ltd
(Canada)

*Hugo Mann
(Germany)

Carlos Bustamonte
(Mexico)
*Fitzwilton Ltd.
(Ireland)
*Thyssen-Bornemsza
Inc. (Netherlands)

Indian Head Inc.
(New York)
Common Stock 5,549,718 (91%)
Common Stock
35,082
on exercise of warrants

Date Filed

4-9-75

4-11-75

4-14-75

4-23-75

ATTACHMENT C
U.S. DII'AIHMINI Of" TMl

THEASUHY

(tMH N n (HNS-74001

Schedule A.

E.I. number

N a m e <>( re|K)rter. _

REPORTING FORM FOR U.S. ISSUERS OF SECURITIES

Idcnt if v stock issue

BREAKDOWN OF FOREIGN OWNERSHIP IN U.S. STOCKS AND OTHER
EQUITY INTERESTS, BY COUNTRY 1

I
Issue code number I
|*
CUSIP numbei L_
Total number of countriei reported for this itiue

N U M B E R O F S H A R E S H E L D B Y FOREIGN PERSONS AS O F 12/31/74
Country
Tol.il

code
counti les

U.S.

(Column'.

nationals residing

in foreign
(4) thtmii|h (9))
(1)

(2)
Number i

ALL OTHER RESIDING
FOREIGN PERSONS
INDIVIDUALS
ABROAD

Foreign

countries
(41
No.
of
No.
No.
or of

(3)
No of

N o of
(3b)

00000 000,000 0 0 , 0 0 0 , 0 0 0
Grind total • All countries

holdnrt
(4a)
00(10

Foreign nationals
Official

residing in foreign

institutions

countries
(5)
\narm

No. of
idnri

<4b]
IB«]_
DO,000,000 0000

(6)
No" of"
tn a rot
(Bb)

00,000,000

No ol
hnldi-i-,
(fin)

OOuo

No. ol
shiiiiu
<6h>
OO.OOD,000

Investment cos.,insurance
cos., pension funds &
other employee benefit

Bankt, brokers
and nominees
N o . of
holdi; »
7

J £>
0000

funds pi trusts
(8)
N o ot
iliarti

(7)
No of

N o of
holdari

imiitn

_(7b)

J§sL_

'00,000,000 0000

Other business
fiims
(01
IJQ.OP
holdari

JSkl
00,000,000.

m.
00,000,000

(to appear on tint page only I

't miudnditijct unci mdiraci fioidm^ m U S mrunrii'i l>v lormgn d m i i invmior*

0000

No. of
there*

A foreign doIK.I inveitor It any foralgn panon owning 1 0 % or mora of thn votmu ttot-k of the U.S. company. (See paragraph 0 ?!><?) of the General Instructions,)

ATTACHMENT C (continued)
OMB

No. 048S-74001

U.S. DEPARTMENT OF THE TREASURY

Schedule B.
REPORTING FORM FOR U.S. ISSUERS OF SECURITIES
BREAKDOWN OF FOREIGN OWNERSHIP IN U.S. LONG TERM DEBT
OBLIGATIONS. BY COUNTRY1

Name of reporter:
Idem if y debt issue or obligation:

E.I. number |_
J«
CUSIP number L
Issue code number I
I <
Foreign currency code 2 [__
Total number of countries reported for this issue

(Give all amount* shown below in the currency of ittuei

FACE A M O U N T O F ISSUE H E L D B Y FOREIGN P E R S O N S A S OF 12/31/74
Foreign
countries

Country
code
No.

(1)

(2)

AA
Grand total - All countries
Sample entries « •

INDIVIDUALS RESIDING

Total
(Columns
(4) through (9))

(3)
Face amount
No. of
Numbers
of ittue
holdnri
.
<3a)_ . _..<*)_..

oobbo 000,00000,000,000

U.S. nationals residing
in foreign
countries
(4)
No. of
holders

_ _*»»....
0000

Face amount
of issue
__(4b]

00,000,000

ALL OTHER FOREIGN PERSONS

ABROAD

Foreign nationals
residing in foreign
countries
(5)
No. of
holders
(Be)

0000

Official
institutions
(6)

Face amount
of issue

00,000,000

No. of
holders
(6a)

0000

Face amount
of issue
(6b)

00,000,000

Banks, brokers
and nominees
(71
No. of
holders

0000

Face amount
of issue
ttbi

00,000,000

Investment cos..insurance
cos., pension funds &
other employee benefit
funds or trusts
No of 18)Face amount
holders

INI
0000

of issue

tttl
00,000,000

Other business
firms

No. of
holders

m0000

(to appear on first page only)

Exclude direct and indirect holdings In U.S. securities by foreign direct investors. A fore.gn direct investor is any foreign person owning 10% or more of the voting stock of the U.S. company. (See paragraph B.2.b(2) of the General Instructions.)
2

Ute country code number from Annex B of the General Instructions to .dentify foreign currency issue.

Fee* amount
of issue

00,000,000

STATEMENT BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE
THE SENATE FINANCE COMMITTEE
MAY 7, 197 5
Mr. Chairman and Members of this Distinguished Committee:
I welcome this opportunity to appear before you this
morning on a subject of timely and urgent concern: our
capital investment needs for the future.
For several months, many economic policy makers in
Washington have been preoccupied with the problems of ending
the recession, slowing the rate of inflation and steering
the nation back to a course of stable, durable economic
growth. Today there are many signs that the economic slide
is gradually decelerating, and we can be increasingly confident
that we will be on the road to recovery before the end of this
year.
As we emerge from the recession, it is especially
important that we now begin to focus greater public attention
on the longer-range problems of our country. While the
process of recovery will require careful and vigilant management,
we must be equally concerned whether the period of the recovery
and beyond will bring sustained economic progress or a
sorrowful repetition of the boom and bust cycles of the
past.
Certainly there is no subject more central to our hopes
for the future than our ability and our willingness to meet
the capital investment needs of coming years. Those needs
are impressively large, and they will demand a full-scale
effort. In my testimony this morning, I want to draw upon
an abundance of documentary evidence showing that the United
States has not been keeping pace in its capital investments
and that we must devote more of our resources to this
purpose if we are to achieve our most basic economic dreams
for the future. To summarize, the record shows that:
-- During the 1960s, the United States had the worst
record of capital investment among the major industrialized
nations of the Free World.
-- Correspondingly, our records of productivity growth
and overall economic growth during this period were also
among the lowest of the major industrialized nations.
-- As other nations have channeled relatively more of
their resources into capital investment and have acquired
more modern plants and equipment, they have eroded our
competitive edge in world markets.
WS-294

- 2-- Our record on capital investments reflects the heavy
emphasis we are placing on personal consumption and government
spending as opposed to savings and capital formation.
-- Our record also reflects a precipitous decline in
corporate profits since the mid-1960s.
-- While the U.S. economy remains sufficiently large
and dynamic to overcome our investment record of recent
years, our future economic growth will be tied much more
directly to the adequacy of our capital investments.
— Estimates of future needs vary, but it is relatively
clear that i n coming years we will have to devote approximately
three times as mucn money to capital investments as we have
in the recent past.
— It is an economic fact of life that increased productivi
is the only way to increase our standard of living. For the
sake of future economic growth -- jobs, real income and
reasonable price stability -- the inescapable conclusion is
that government policies must become more supportive of
capital investment and that we must make a fundamental shift
in our domestic policies away from continued growth in
personal consumption and government spending and toward
greater savings, capital formation and investment.
Some analysts have concluded that it will not be possible
to meet our future capital investment needs. I disagree. I
firmly believe that we are capable of achieving our basic
investment goals, but I also believe that they represent one
of the most formidable economic challenges of the decade
ahead.
I. CAPITAL INVESTMENT EXPERIENCE
The beginning point for our consideration of capital
investment -- and one that should be of keen concern to
everyone -- is the pattern of economic growth during the
decade of the 1960s. The average annual rate of real economic
growth during that period for the twenty nations belonging
to the Organization of Economic Cooperation and Development
(OIICD) ranged from a high of 11.1 percent for Japan, to a
median of about 5 percent for Australia, the Netherlands and
Norway, to a low of 2.8 percent for the United Kingdom. The
United States during this time experienced an average
growth, rate of 4 percent a year -- 17th among the 20 nations
(Table 1).
Of the many economic, political and social factors that
influence economic growth rates, none is more important than
the level of capital investment. Economists generally agree

that the factors affecting growth include: (1) the accumulated
base of capital goods; (2) the current pace of new capital
investments; (3) the effective application of new technology;
(4) the quality of the national labor force — its education,
training, discipline and commitment; (5) the infrastructure
of transportation, communication, financial and service
facilities; (6) access to industrial raw materials; (7)
managerial skills; and (8) the organization of the economic
system. The mix of these basic economic variables — along
with other specific factors not listed -- varies from country
to country and changes over time. It is also possible to
substitute one, or a combination, of these productivity
variables for specific inadequacies. Most analysts agree,
however, that a strong rate of new capital investment is
required to generate sustained growth. In fact, the effectiveness
of all of the other factors that determine productivity are
heavily dependent upon the quantity and quality of capital
goods made available by new investment.
The United States retains a position of economic leadership
because it has been blessed over a long period of time with
a favorable mix of all of the important economic variables,
along with political stability and improving social mobility.
For many years our advantageous ratio of capital to labor has
been acknowledged as the basis of the remarkable rise of the
U.S. economy. Even now spending for plant and equipment
continues to increase and these outlays still exceed the
amounts invested elsewhere because of the large size of the
U.S. economy (Table 2 ) . In 1974, gross private domestic
fixed investment totaled $195.6 billion, up from $194.0
billion in 1973 and $131.7 billion in 1970. Investments in
business structures and producers' durable equipment totaled
$149.6 billion in 1974, up from $136.8 billion in 1973 and
$100.6 billion in 1970.
Nonetheless, even though plant and equipment expenditures
will continue in the future as the economy grows, it is
unrealistic to assume that the historical patterns of investment
and productivity will be adequate to meet the priorities of
the future. And I certainly am not suggesting that we can fulfill ever)
claim presented by society. The disappointing record of
Federal deficits in fourteen of the liist fifteen years ending
with FY 1975 -- or forty out of the last forty-eight years -and the unfortunate boom and bust pattern of economic performance
over the past decade indicate that we have not been able to
effectively identify and manage our national economic priorities.
Some analysts have claimed that future economic growth will
release unused resources to fulfill new claims against the
national output. To the contrary, the intensity of claims
for available resources will likely increase in the future.

- 4 The assertion that additional government spending programs
can be added without disrupting the allocation of resources
in the private sector has been refuted by the events of the
past decade, particularly the increasing inflation pressures
and shortages of materials and production capacity.
Comparative Rates of Investment
Recognizing the relatively low rate of U.S. economic
growth in the 1960s, it is worthwhile to look now at the
relative rate of capital investment in this country. Although
the amounts of capital investment continue to increase in
the United States and our capital-to-labor ratio is
still relatively high, other nations during recent years
have allocated a substantially larger share of their resources
to new capital formation. Furthermore, the gap between the
U.S. level of investment, measured as a share of national
output, and the commitments of other leading industrial
nations has increased. A study prepared by the Department
of the Treasury indicates that total U.S. fixed investment
as a share of
national output during the time period
1960 through 1973 was 17.5 percent. The U.S. figure ranks
last among a group of eleven major industrial nations;
our investment rate was 7.2 percentage points below the
average commitment of the entire group. When only nonresidential
investment is considered the level of commitment is naturally
lower for every nation but the relative position of the
United States is not changed.

- 5 Investment a.f> Percent of

Total
Fixed**

Nonresidential
Fixed

Japan
West Germany
France
Canada
Italy
United Kingdom

35.0
25.0
24.5
21.8
20.5
18.5

29.0
20.0
10.2
17.4
14.4
15.2

U.S.

17.5

13.6

11 OECD Countries 24.7 19.4
~ OECD concepts of investment and national product. The
OECD .concept includes nondefense government outlays for
machinery and eqipment in the private investment total
which required special adjustment in the U.S. national
accounts for comparability. National output is defined
in this study as "gross domestic product," rather than
the more familiar measure of gross national product, to
conform with OECD definitions.
** Including residential.
Source: U.S. Department of the Treasury.

The reduced pace of capital investment in the U.S.
economy has also been emphasized by Professor Paul W. McCracken,
former Chairman of the Council of Economic Advisers and now
Senior Consultant to the Department of the Treasury. Using
historical figures, reported in constant dollars, for the
amount of nonresidential capital formation per person added
to the labor force4 he estimates that commitments in the
United States during the 1970s are 22 percent below the
level reported in the 1956 to 1965 decade. In terms of
business capital investment per worker, the United States
still maintains a considerably higher capital to labor ratio
than in Europe and Japan. However, our advantage has declined
as other nations have increased their capital investments
per worker. The Department of Commerce estimates that since
1960 the existing base of plant and equipment assets has

- 6 nearly doubled in France and Germany and more than tripled
in Japan. 1/ The cumulative total of such assets in the
United States increased at most by about 50 percent during
the
period
the same
same neriod.

Gross Nonresidential Fixed Investment
Per Person Added to Civilian Labor Force
(In 1950 dollars)
Period
1956 - 1960 $49,500
1961 - 1965
1966 - 1970
1971 - 1974

Amount
55,300
46,400
41,000*

;

•Estimate based on incomplete data for 1974
Source: Statement of Paul W. McCracken before
the Committee on Ways and Means, January 29, 1975
Basic data from the Departments of Commerce and
Labor.

Factors Influencing U.S. Rate of Capital Investment
In evaluating the relatively slower rate of capital
investment in the United States, several moderating factors
should be considered.
First, the unusually large size of the U.S. economy and
its relatively advanced stage of development, including the
accumulated total of previous capital investments, creates a
different investment environment. In 1974 the U.S. national
output was $1.4 trillion, which is approximately equal to 90
percent of the combined total for the nine countries in the
European Economic Community and Japan. Having already created
such an impressive productive capacity it is to be expected
that our rate of additional growth might be lower than the
development rates of other nations who are striving to
achieve our relatively advanced level of economic activity.
1/ An Overview of Investment: The United Stater; and__Major Foredgn
Economies, International Economic Policy and Research Report,
U.S. Department of Commerce, Domestic and International Business
Administration, October 1974, p.9

- 7A second and even more important influence has been the
historical priority placed on consumption within the U.S.
economy. We are a consumption-oriented society and this
pattern has been developing for several decades. The emphasis
on consumption has undoubtedly caused much of the rapid
development of the U.S. economy because it has created a
strong demand for goods and services needed to sustain
output, employment and investment. In 1974 personal consumption
totaled $877.0 billion, or 63 percent of our gross national
product; total government purchases of goods and services
totaled $308.8 billion, or 22 percent; gross private domestic
investment, which includes the change in inventories, was
$208.9 billion, or 15 percent; and net exports of goods and
services amounted to $2.0 billion or 0.1 percent of total
national output. Personal and government consumption outlays
have long dominated the GNP totals, and this pattern of
economic activity is deeply ingrained in our society. As a
result, despite our high per capita incomes, the accumulations
of gross savings flows required for capital investment are
lower in the United States than elsewhere. It is also
important to note that the level of gross private savings in
the United States has remained stable throughout the postwar
Average Annual Gross Savings Flows
era.
As a Percent of Gross National Product
(Percent)

1955-59 1960-64 1965-69 1970-74
Gross Private Saving 15.9 15.4 15.9 15.8
4.5
Personal saving
Undistributed corporate profits
3.4
Inventory valuation adjustment
-0.3
Capital consumption allowances
8.3

3.8
2.8
0.0
8.8

4.5
3.1
-0.3
8.7

U.S. Government Surplus -0.1 0.2 -0.2 -1.1
State and Local Government Surplus -0.3 0.1 0.0 0.5
Source:

Department of Commerce, Bureau of Economic Analysis

5.5
2.8
-1.2
8.7

- 8 These figures are subject to differing interpretations.
Some analysts have claimed that it will not be possible to
attract enough savings to meet future investment needs.
This negative conclusion assumes that the capital needed to
increase plant and equipment.capeity will be preempted or
diverted to meet the consumption preferences of the private
and public sectors. I would hope that the severe output,
inflation, unemployment and balance-of-payments distortions
of the past decade would be a useful warning against such a
result. It should be apparent from the experience of recent
years that we must invest adequate funds in new plant and
equipment — as well as in education and training — in
order to increase our nation's productivity and thereby raise
our standard of living. Failure to provide necessary productive
capacity to meet the Nation's economic goals is certain to
have undesirable effects upon our society over the long run.
Other analysts have used the same gross savings figures
to claim that there will not be any particular strain in
handling our future investment needs. They believe that as
investors are provided with a sufficiently high return on
their investments, they will increase savings to meet the
higher demand for capital. This conclusion seems to be
based on two questionable assumptions: (1) that the existing
savings ratio of the past decade is adequate for both past
and future capital investment needs; and, (2) that each
sector in the economy can obtain its minimum investment
needs within the total outlays financed.
I do not agree that past investment levels have been
fully adequate. Experience has demonstrated that inflation
and unemployment problems have been created in part by
capacity shortages. Many of our current difficulties are
the direct result of the energy and raw materials strains
that developed in early 1974 and eventually contributed to
our current recession and related unemployment. The continuous
deterioration of our international trade balance during the
1960s, when the dollar was overvalued, was also at least
partly the result of the loss of competitiveness for U.S.
products and increased reliance on foreign sources of goods.
As you will see in a moment, I think there is also clear
evidence that in order to meet future needs, the Nation must
increase its capital investment as a claim against national
output. Unfortunately, specific investment needs have not
been adequately fulfilled in many sectors of the economy,
even though general outlays have increased. We must also be
concerned about the capacity of our capital markets to
provide adequate financing. Economists often assume that
the supply of investment funds will automatically match the

demand for capital if interest rates and equity yields are
attractive. Our financial markets are very efficient in
collecting savings and allocating the funds. However, we
should be more sensitive to the disruptive impact of high
interest rates. Even though financial markets may be functioning
well in allocating the available capital, specific sectors
of the economy may not be able to obtain the investment
funds needed, particularly at interest rates they can afford.
The periodic problem of providing adequate mortgage financing
at reasonable interest rates is one example of the limitations
within the markets. The difficulty in obtaining equity
financing is another. Whether or not industry will be able
to acquire the investment funds needed will be heavily
influenced by future actions of the government. National
policies cannot ignore financial realitites by diverting
capital into deficit financing and disrupting the goals of stable
monetary policy without inhibiting the necessary process of
capital formation. The costs of capital and its availability
for private sector needs are heavily dependent on these
public fiscal and monetary actions. While the financial
markets are very resilient and responsive to changing credit
and equity needs, they are not entirely immune to the disruptive
impact of government policies.
A third important factor affecting the pattern of U.S.
investment compared with other nations is the relatively large
share of total capital outlays we commit to the services
category, which includes housing, government and other
services. According to a study published by the Organization
for Economic Cooperation and Development (OECD), the United
States allocated 70 percent of its total investment to the
services category during the 1969 to 1971 time period. The
U.S. figure is significantly higher than that reported by
the other five major industrial nations included in the
study (Table 3). Accordingly, the U.S. share of investment
committed to the manufacturing sector, 19.7 percent, was
considerably lower than the figures reported by France (27.8
percent), West Germany (25.2 percent), Japan (26.8 percent),
and the United Kingdom (23.8 percent). Our heavy investment
in the services category tends, of course, to emphasize
consumption and moderate the growth in productivity. This
arrangement may satisfy immediate consumer preferences, but
we must weigh those preferences against long-term concerns
about domestic productivity and international competitiveness.

- 10 A fourth in luence on the pattern of capital investment
in the United States is the relatively large share of our
investment that must be used for replacement and modernization
of existing facilities. It is estimated that 62 percent of
U.S. capital investment during the time period 1960 to 1971
was used for replacement needs, compared to the United
Kingdom, 61 percent; Canada, 52 percent; France, 54 percent;
West Germany, 53 percent; and Japan, 31 percent. 2/ The
divergent pattern reflects the advanced status of economic
development in some nations and the postwar experience of
Europe and Japan in restoring their devastated industrial facilities
following World War II. The Department of Commerce estimates
that 60 to 70 percent of the U.S. stock of plant and equipment
has been added since 1960, compared to approximately 75
percent of the capital goods of West Germany and France and
85 percent of Japan's industrial capacity. It should be
emphasized that this heavy replacement requirement does
provide a continuing opportunity to introduce new technology
into the U.S. economic system. Since the annual value of
U.S. capital investment is so large, it cannot be assumed
that the entire U.S. industrial system is technologically
obsolete, even though some specific sectors have suffered a
sharp competitive deterioration. Nevertheless, the otherwise
imposing outlays for replacement and modernization do not
add to the total productive capacity of our economy.
A fifth and final factor influencing the national rate
of capital investment is the pattern of government policies.
Government can affect investment either directly through
the incentives it provides or indirectly through various tax
and regulatory policies and its own pattern of spending.
A review of the diversified economic incentives available
in other nations indicates the very active investment role
played by many foreign governments. Basic industries are
frequently controlled by the government with total, or at
least dominant, public ownership. Special financial and
operating assistance is also frequently provided for preferred
private companies to assist their development if it is
considered to be in the national interest. The United
States has avoided most of the capital allocation and special
incentive programs used in other countries. I strongly
favor this private sector approach and believe that it has
been a positive factor in the development of our economy.
There are some Federal programs which provide direct
financial support through the Economic Development Administration,
the Small Business Administration and 169 different government
credit programs, but the major influence of Federal Government

- 11 -

on capital investment comes through the Federal budget. Government budget decisions now represent approximately one-third
of the total GNP and this figure will rise even higher if spending
trends of the past twenty years are continued. The government
also influences private sector activities by providing capital
grants, research funding and other incentives which stimulate investment. For example, the FY 1976 budget prepared by the President
calls for outlays of $4.6 billion on general science, space and
technology programs, $2.2 billion on energy activities and $9.4
billion for environmental and natural resources. Part of these
outlays will involve capital investment needs.
The Government is also exercising increased influence over
private investment decisions through the growing number of safety,
health an£ environmental standards. Precise estimates are difficult,
but it has been estimated that during 1972, 8 percent of the textile
industry's capital investments and 12 percent of the steel industry's
investments were related to health and safety standards mandated
by the government. While such standards may be highly desirable,
we should recognize that these investments do not increase the
Nation's total productive capacity.
Many State and local governments also provide special incentive
programs to attract capital investment into specific geographical
areas. Such incentives include capital grants, advantageous credit
arrangements, relocation and manpower training grants, special site
and building assistance, infrastructure investments, and preferred
tax and utility arrangements. While such incentives have influenced
the location of some facilities, the total amount of capital investment has probably not been increased.
The private sector continues to be the best means of increasing
capital investment in the United States and our government has
fortunately not attempted to control the pattern of such investments.
Negative Results of Inadequate Capital Investment
While the historical pattern of capital investment in the United
States may satisfy our immediate goals, there are serious economic
risks in having a slow rate of capital investment for an extended
period of time. The emphasis on immediate consumption has occurred
because American consumers have historically preferred to spend
91 percent of their disposable after.-tax income. The government
has basically supported this independence of choice although its
tax and spending policies have unfortunately exercised an increasing
influence on private decisions. But we must now question the future
adequacy of past investment patterns if we are to adequately prepare
for the economic future of our great nation.

- 12 Various studies have indicated the close relationship
between capital investment and various measures of economic
growth and productivity. A dynamic economy is needed to create
jobs by applying new technology and expanding production capacity.
A productive labor force is also necessary for producing goods and
services to meet rising demands for an improved standard of living
and as a means of holding down inflation. When productivity increases,the effects of rising wages are offset so that unit labor
costs can be held down and prices are more stable. Inadequate
capital investment also limits new job opportunities and creates
unemployment. Specific examples of production capacity shortages became
painfully apparent to the Cost of Living Council (COLC) as it
administered the program of wage and price controls from August 1971
until June 1974. Recognizing the inflation pressures created by
these numerous capacity constraints, the COLC followed a definite
policy of requiring specific capital investment commitments from
private industry as a basis for price decontrol decisions. The
COLC also became very concerned about future inflation problems
that could result from raw materials shortages and increasing
capacity shortages in several basic industries as economic growth
occurs. Unfortunately, productivity gains in the United States have
been disappointing, particularly when compared with the experience
of other leading nations.
Productivity Growth, 1960-1973
(Average Annual Rate)

Gross Domestic Product
per employed
person

Manufacturing
output per
manhour

United States

2.1

3.3

Japan
West Germany
France
Canada
Italy
United Kingdom

9.2
5.4
5.2
2.4
5.7
2.8

10.5
5.0
6.0
4.3
6.4
4.0

11 OECD Nations

5.2*

6.1

Average for 6 OECD countries listed.

Source:

Department of the Treasury

- 13 1/

The rapid growth of the U.S. economy to its present size
and the relatively low level of inflation until the late 1960's
has been based on the creativity and productivity of the system.
Americans have grately benefitted from this growth, not only in
personal economic gains but in terms of national security and
international leadership. Continued prosperity, however, cannot be
taken for granted; it must be earned. We must be willing to allocate
more of our resources to the future and fewer to satisfying immediate
demands. This is a difficult concept for some to accept because they
prefer current consumption. With so many needs still unsatisfied
in a land of relative plenty, this feeling is understandable. Our
ability to fulfill these needs will only be restricted, however, if
we now fail to prepare for the future. The simple truism that we
cannot consume more than we produce should be obvious, but we
sometimes ignore it in setting national priorities. And we can
no longer afford to ignore the fact that as the real output of other
nations has increased more rapidly than our own, our competitive
advantage has gradually been eroded.

Real Output por ErnpJcvcd Civilian
1950-74
Irctoxe*. United States • 100

.United States
100

^Canada

,„.-•-.•'

ranee
United
Kingdom
•

^ Japan
20

1950

Source:

1955

1960

1965

Department of the Treasury-

1970 72 74

- 14 II. FUTURE CAPITAL INVESTMENT REQUIREMENTS
Economic projections are always difficult, but estimating
future capital needs is particularly uncertain at this time
because costs and priorities continue to change rapidly. It is
obvious, however, that future capital requirements will be
enormous -- larger than anything we have ever faced before.
Clearly we will need to increase the quantity and quality of
housing; develop new energy resources; improve the quality of our
environment; rehabilitate the existing transportation system
and develop a better urban transportation system;
continue the mechanization of agriculture; construct new office
buildings, communications systems, medical facilities, schools and
other facilities; and meet the massive needs for new plant and
equipment. In all of these sectors we must not only replace and
modernize existing facilities but also add new capacity, particularly
in many of our most basic industries.
The Department of Commerce estimates that capital requirements
for producers' durable equipment and nonresidential structures will
total $3.4 trillion during the 1974 to 1985 period. If annual
outlays for residential construction, which have averaged $50 billion
during the past four years, are added to this figure, the total capital
needs rise to well over $4 trillion. Details of their estimate
include:
Gross Private Domestic Nonresidential Fixed Investment
(billions of current dollars)
Cumulative
1974
1985
1974-1985
Total producer's durable equipment $100.0 $276.7 $2,188.8
Nonresidential structures
54.7
151.3
1,197.3
$154.7
$428.0
$3,386.0

A similar study performed by the General Electric Company
confirms the massive size of future capital requirements. Assuming
a real GNP growth rate of 4 percent and an inflation rate of 5 percent, General Electric expects gross private domestic investment,
including residential housing, to total $4'_ trillion over the 1974
to 1985 time period.
The General Electric and Commerce studies are consistent if
housing outlays are added to the Department of Commerce totals.
Both estimates are limited to private investment and exclude the
large government expenditures required for roads, dams, government
facilities, schools, pollution abatement outlays, and many other
projects.
Assuming, then, that the cumulative investment needs between
1974 and 1985 will range from $4 to §\h trillion, the point to
remember is this: over the most recent period of the same length,

v-1
1962 through 1973, our total outlays for capital investment in the
United States were %\h trillion. Thus, our capital investment
needs in coming years are approximately three times the level of the
recent past. That is perhaps our best measure of our challenge
ahead.
Both of the studies I have mentioned are necessarily based on
many uncertain projections and arbitrary assumptions about a continuing close relationship between investment and economic growth.
But even if some of these assumptions prove to be erroneous -- as
they will -- and new investment requirements arise - - a s always
happens -- the actual results will not materially change the
following conclusions:
1. Capital requirements for gross private domestic investment
will be in excess of $4 trillion during the 1974 to 1985 time period.
2. The future rate of inflation will be a crucial factor
in determining the amount of future investment because it will
influence both the price of assets acquired and the economic
incentives for future investment.
3. The achievement of national capital investment goals is
possible if we are willing to increase the share of national resources committed.
Energy Investment Requirements
One area of capital investment that is particularly critical
for the future is energy. To achieve greater self sufficiency
in energy, enormous capital investments will be required. We
basically have two alternatives. The first one is to meet our
increased energy investment requirements by reducing outlays in
other sectors. While energy priorities are indeed important, it
would be most unfortunate to disrupt the entire economic system
in this way. A second -- and more desirable -- approach is to
include these new requirements within an enlarged total investment
goal. Our purpose should not be to redistribute the economic pie,
but to continue enlarging it so that everyone will have a bigger
share.
Recognizing that the ultimate cost of energy investment needs
will be influenced by many variables, it appears that capital
requirements over the next decade will total about $1 trillion
stated in current dollars to include the effects of inflation.
Energy investments will comprise an important share of the total
capital requirements discussed above but their financing is manageable if they are given a high priority as part of a comprehensive
national energy program. The specific amounts to be spent in
each category will depend upon the energy policies adopted and
dynamic developments within the economy. Nevertheless, the range
of possible needs is indicated in four separate studies prepared
by the Federal Energy Administration, National Petroleum Council,

- 16 National Academy of Engineering and Arthur D. Little, Inc.
All four studies are stated in constant 1973 dollars to make
them comparable. If necessary adjustments are made for potential
inflation and the increased needs that have been identified since
the studies were prepared the resulting capital needs expressed
in current dollars, will approximate $1 trillion between now and
1985.

Comparison of Capital Requirements Estimates*

Total Dollars

Cumulative 1975 - 1985
(Billions of 1973 Dollars)

Oil and Gas
(including refining)
Coal
Synthetic Fuels
Nuclear
Electric Power Plants
(excluding nuclear)
Electric Transmission
Tran spo rt at ion
Other (e)
Total

(a)

FEA
Accelerated
Supply

NPC

NAE

ADL

(a)

(b)

(c)

133

149

122

98.4

8
10
7
137

18
19
93
53

6
6
84
43

11.9

42
43

125

90
43
8
396

380

457

.6
138.5
60.3
116.2
25.5(d)

2.2
454

U.S. Energy Outlook, a summary report of the National Petroleum
Council, Washington, D.C., December 1972 (Average of four supply
cases)

(b) U.S. Energy Prospects, An Engineering Viewpoint, National
Academy of Engineering, Washington, D.C., 1974
(c) Arthur D. Little estimates based upon an energy conservation
scenario.
(«i) Does not include investments required for tanker fleets, buu
docs include $5.5 billion targeted for Trans-Alaska oil pipeline
(e) Solar, Geothermal, Municipal Waste Treatment Plants, and Shale
Oil.
Source; Federal Energy Administration, Project Independence Report,
November 1974, p. 282.

- 17 The overall impact of energy requirements is summarized in
a special report issued by the Chase-Manhattan Bank in March of
1975. The Energy Economics Division of the bank is noted for the
quality of its special reports. Over twenty years ago that
division predicted that an energy shortage would develop in the
United States if certain policy adjustments were not made. One of
the major concerns of these reports over the years has been the
chronic underinvestment in energy resources which became apparent
in the late 1950's. The conclusion of the most recent Chase
Manhattan Bank report is particularly perceptive:
"Although the relationship between investment and supply of
energy is an elementary principle that applies to any and all
sources of primary energy, it is nevertheless one that is not well
understood. In fact, the lack of understanding was responsible
for the incredibly unenlightened regulation and many other political
actions about the world that had the two-pronged effect of preventing
the generation of sufficient capital funds and discouraging the
investment of money that actually was available. And the current
energy shortage is the consequence. Ye*t, even today, after so much
damage has been done, there is still a widespread failure to recognize
the relationship between investment and supply. Instead, two distinctly different attitudes generally prevail. Many apparently
continue to believe they can somehow again have enough energy
without paying all the associated costs. Others, obviously, are
resigned to the prospect of a permanent shortage and see conservation
as the only avenue of partial relief. Neither attitude is realistic,
of course. The world still does not lack basic energy resources
remaining to be developed. And it is conceivable that eventually
there can again be enough to serve all its needs but only if the
necessary investment is made first. If it is not, a permanent
shortage will indeed be the certain outcome."
Source: The Chase Manhattan Bank, Energy Economics Division
How Much Oil -- How Much Investment," A Special
Petroleum Report, March 1975.

- 18 -

The report goes on to emphasize -- correctly, I believe —
that a permanent shortage is intolerable because it would so
constrict total economic growth that the growth in labor
force — even at the more moderate pace expected in the
1980s — could not be absorbed. The resulting unemployment
problems would cause severe economic problems in addition to
threatening our political and social stability.
Future investments in energy resources will naturally
be determined by total demand over time. Estimates have
already changed dramatically as costs have risen and conservation
efforts have increased. However, these developments are so
recent that it is difficult to predict future demand until a
national energy policy is agreed upon and the various energy
incentives and disincentives are identified. The Chase
Manhattan analysts had originally projected a continued
growth in the world's demand for energy at an average annual
rate of 5 percent which is the same pace as recorded from
1955 to 1970. Admitting the unusual degree of uncertainty,
the bank has now lowered its projection to an annual rate of
4.2 percent with a strong warning that energy forecasts have
historically erred on the conservative side. Oil consumption
is expected to grow at a more rapid annual rate of 4.5
percent over the 1970 to 1985 period, resulting in a cumulative
consumption of 375 billion barrels, nearly two and a half
times more than in the 1955 to 1970 period. North America
is expected to remain the world's largest consumer of total
energy and oil, but the growth rate for this area may be
lower because of a slower population growth and our potential
for conservation savings.
Turning to the financial requirements for the petroleum
industry, Chase Manhattan Bank estimates a world-wide need
for $400 billion to find 600 billion barrels of oil between
1970 and 1985. This is more than two and a half times the
actual investment for this purpose during the 1955 to 1970
period. An additional $370 billion will be needed between
1970 and 1985 for world-wide development of refineries and
processing facilities, tankers, pipelines, environmental
equipment and the necessary marketing facilities. The total of $770
billion is nearly three times the actual commitment in the
preceding fifteen year period. Finally, another $400 billion
will be required for other investments, payment of dividends,
debt repayments and additions to working capital.
The total financial needs of the world's petroleum
industry from 1970 to 1985 are estimated by the bank to be
$1.2 trillion stated in constant 1970 dollars. Inflation
will of course increase the dollar amounts required. If
inflation averages 5 percent over the time period, the world
petroleum industry financial needs would rise from $1.2 to
$1.6 trillion. With 10 percent inflation, the figure would
increase to $2.2 trillion.

With regard to financing these world-wide petroleum
industry requirements, the bank estimates the following
distribution of potential sources based on the $1.2 trillion
constant dollar estimate:
(1) Communist nations, $225
billion; (2) new capital market issues, $240 billion; (3)
capital recovery allowances, $260 billion; and (4) profits,
$460 billion. These figures must be adjusted upward according
to whatever rate of inflation occurs.
This brief listing of sources obviously conceals many
difficult financial challenges. The world's capital markets
will already be absorbing large public and private financing
demands. Government policies may reduce capital recovery
allowances permitted for computing tax liabilities. And the
assumption that oil industry profits will be large enough to
cover such a large share of the total is questionable. Commenting
on the public's reaction to oil industry profits in 1973
and 1974 after fifteen years of average performance, the bank
report states:
"As emphasized earlier, there cannot possibly be enough
energy of any kind without adequate investment. And
investment cannot be adequate without sufficient profits.
But profits are labeled excessive and restraints are
proposed without apparent consideration of the need for
profits as a source of investment funds. As indicated
earlier, the industry will need at least $845 billion
of profits between 1970 and 1985 if the world experiences
a 10 percent rate of inflation. But in the first four
years of the period the industry generated no more than
$60 billion of profits, only 7 percent of the required
amount. Even in the highly unlikely event of no further
inflation, the $60 billion would represent but 13
percent of the industry's total needs for the fifteen
year period."
III. GOVERNMENT POLICIES
While our economy is capable of financing its large
private capital investment requirements, our success in
mooting that goal is heavily dependent upon the shape of
government policies. It is absolutely imperative that
government policies become more supportive. A continuation
of the severe fiscal and monetary distortions of the past
decade would undoubtedly prevent the achievement of our
basic goals. Inflation must be controlled, and the government
must avoid disrupting the capital markets if the private sector is
obtain the financing required. In fact, public officials
must balance the Federal budget over time and record occasional
surpluses in order to free up capital resources to fulfill
existing private investment claims. Instead of reducing
private investment to release resources for government
social programs, we should concentrate on balancing the
budget over time so that the future flow of savings is not diverted away
from private investment.

- 20 -

Unfortunately, the Federal Government has reported a
deficit in fourteen out of the past fifteen years ending
with FY 1975. During the single decade FY 1966 through FY
1974, the cumulative Federal deficits totaled $103 billion.
Net borrowings for supporting over one hundred "off-budget"
Federal programs totaled another $137 billion during that
decade. As a result, the Federal Government withdrew one
quarter of a trillion dollars out of the capital markets.
But this record is only a prelude to our present situation
when Treasury financing requirements will total about $75
billion in calendar year 1975 in order to finance the massive
Federal deficits expected. While much of the current deficit
results from the recession, which has caused tax revenue losses,
increased unemployment compensation benefits and other outlays
resulting from the "automatic stabilizers" used to fight
recession, a review of the budget details indicates that
traditional spending programs are also rising rapidly and new
programs are proposed almost every day. As indicated in
Table 4, the spending figures included in the original budget
submitted by the President last February called for outlays
of $3.13.4 billion in Federal spending in FY 1975 and $349.4
billion in FY 1976. Recent projections by the Office of
Management and Budget indicate that FY 1975 outlays
will be $324.2 billion, an increase of 20.8 percent over
FY 1974 outlays. It should be obvious that government spending-both for temporary stimulus and traditional programs -- is
increasing at a rate that is creating serious resource allocation
problems far into the future and that these pressures will not
conveniently disappear as we gradually emerge from the recession
later this year.
Looking beyond the recession problems of 1975, we seem
to face the dilemma of having an apparently irresistible force
of growing government spending meeting the immovable object of
future capital investment requirements. But we should no longer
consider the growth of government spending and related deficits
to be an irresistible force. To do so will inevitably lead to
even more serious economic problems of unemployment, reduced
real gains in our national standard-of-living and even more
inflation resulting from inadequate physical capacity and reduced
productivity„ We must recognize the basic reality that when we
apply too much pressure on our capacity to produce goods and
services, the inevitable result is inflation and shortages.
The underlying growth trends of the U.S. economy will continue
to provide for further economic progress, but we cannot
realistically expect to satisfy every new claim within our
economy by simply shifting resources from the private to the
public sector. Adding new government commitments is not feasible
if the total productive capacity of the economy is exceeded.

This guideline has been frequently violated as total demand
has increased too rapidly for the economic system to absorb.
When this happens the economy begins a boom and bust sequence
with severe inflation and unemployment distortions. Nor can
we wish away the problem by claiming that there is plenty of
slack in the 1975 recession and that we can ignore problems of
overheating the economy until later years. The escalation of
government spending levels summarized in Table 4 has already
seriously eroded- our future fiscal flexibility and the lagged
impact of current spending decisions will directly affect the
future. In short, if we are to achieve our crucial goal of
adding at least $4 trillion of private capital investment by
1985, we must first establish more moderate and sustainable
fiscal and monetary policies.
Tax Policies
Federal tax policies affect capital investment decisions
by determining the after-tax earnings available for investment
and by establishing incentives or disincentives for future
investment. An OECD study of tax policies indicates that total
government tax collections in the United States during the years
1968, 1969, and 1970 were a smaller proportion of the gross national
product than in most other industrial nations. The U.S. figure
of 27.9 percent for those three years was above that of Switzerland
(21.5) and Japan (19.4 percent) but below the levels reported for
many European nations, ranging from Italy (30.1 percent) to
Sweden (43.0 percent). Since the study was completed, the United
States undertook major tax policy changes in 1971 and in March
of 1975, but the comparative relationships have probably not
changed very much. There is, however, a major difference in the
distribution of the tax burden. As indicated in Table 5, only
18.1 percent of the U.So tax revenues in 1971 were provided by
taxes on the consumption of goods and services. Other industrial
nations relied much more heavily on consumption taxes: France,
34.8 percent; West Germany, 28.1 percent; United Kingom, 26.6
percent; Canada, 28.7 percent; and Japan 20.7 percent.
The definite tilt toward personal and corporate income
taxes in the United States is consistent with our historical
preference for immediate consumption. It is not my purpose
to critizc this historical priority, but the future requirements
for capital investment indicate that tax policies should be
reviewed. Just such a review has been underway in the Department
of the Treasury in preparing for the tax law changes completed last
month and in anticipation of a joint review with the Congress in
the coming months of possible tax reform initiatives. I do not
want to make any specific recommendations this morning because
we are still working on our analysis and recommendations. We
will want to review the options with Congress before specific
actions are suggested. I will merely refer to some of the policy
areas that need to be reviewed:

- 22 -

1. Corporate income tax -- These taxes directly influence
the cash flow available for investment. The rate has vacillated
slightly above or below the 50 percent level for many years.
While a reduction in the rate of taxation would probably be
the most straight-forward approach to enhancing investment
incentives, any change would represent a major shift in policy and
would require extensive Congressional consideration. The Tax
Reduction Act of 1975 did increase the corporate surtax exemption
from $25,000 to $50,000 and decrease the "normal" tax from 22 to
20 percent on the first $25,000 of earnings. These changes,
however, do not affect the tax impact on the great bulk of corporate
earnings subject to the corporate surtax.
As part of this on-going review of tax policies we also
need to consider the influence on investment of our two-tier
system of corporate taxation in which income is taxed once
at the corporate level and again at the shareholder level. This
approach discriminates against corporate investors generally and
small equity investors particularly. An individual in the 20
percent tax bracket in effect pays 48 percent at the corporate
level and then an additional 20 percent on what is left for a
total tax burden of 58.4 percent, or nearly three times his
individual rate. If the individual is in the 70 percent bracket,
he pays 48 percent at the corporate level and then an additional
70 percent on what is left. His total tax burden is 84.4 percent.
If the same business could be conducted in a noncorporate form,
the investors would pay only 20 and 70 percent respectively.
Our tax system puts a great penalty on companies that
must incorporate. Companies that do incorporate are those that
have large capital needs that must be raised from many persons.
We should keep in mind that our system of taxation bears more
heavily on corporations than do the tax systems of almost every
other major industrial nation. In the last few years our major
trading partners have largely eliminated the classical two-tiered
system of corporate taxation. Through a variety of mechanisms
they have adopted systems of "integrating" the personal and
individual income taxes so that the double taxation element
is radically lessened.
2* 1 nvcstmcnt Tax Creel i t (1 TCI) - Business firms have
strongly supported tlic I'TC as a major stimulus to additional
capital investment. Empirical studies do indicate that the
amount of investment in machinery and equipment has increased
when the ITC has been put into effect and has declined when
it is suspended. Some critics believe, however, that the ITC
simply influenced the timing and types of investment rather
than increasing the total amount. Whichever view is correct,
there was strong support for the investment tax credit provision
in the Tax Reduction Act of 1975 which increased the credit to
10 percent for
two years and
removed the lower
percentage tax
limitation
for utilities.
Unfortunately,
the investment

- 23 -

^ \

3r
credit has had an uncertain status once it was initiated
January 1, 1962 and businessmen are justifiably concerned
about the stability of an incentive which has already been
removed twice and then reinstated.
3. Depreciation guidelines - The amount of capital
recovery charges permitted for tax purposes also influences
the after-tax earnings available for private investment. In
1954 the Internal Revenue Tax Code was changed to permit
depreciation charges to be made on an accelerated basis.
The official guidelines were again liberalized in 1962,
and in 1971 the Asset Depreciation Range (ADR) -- along
with the investment tax credit -- was added to the regulations.
The ADR rules allow companies to select a time period for
calculating depreciation within a range of 20 percent above
or below the Treasury guideline which specifies useful life
periods for various assets. Despite these adjustments,
American businesses complain that they have a competitive
disadvantage compared with some other nations0 The figures
summarized in Table 6 do indicate that American firms using
both the ADR and the investment tax redit can recover 55 percent
of the value of new investments during the first three years.
By comparison, the allowances in other nations are as follows:
Canada, 100 percent; France, 90.3 percent; Japan, 63.9 percent;
United Kingdom, 100 percent; and West Germany, 49.6 percent.
It should be added that the U.S. position becomes more comparable
by the seventh year. Various business groups have proposed
further liberalization, such as a wider ADR percentage, but
further consideration should be part of the general tax reform
analysis involving the Department of the Treasury and the
Congress.
4. Special Incentives - The government is frequently
asked to provide special incentives in the form of reduced
or delayed taxes, accelerated depreciation schedules, capital
grants or other benefits to enchance the rate of return on
capital investments. While such incentives are usually
requested on the basis that they will contribute to the
achievement of some national priority, it is usually difficult
to justify such special treatment. When special advantages are
given to a specific industry or geographical region, others
become relatively disadvantaged and it is very difficult for
government authorities to determine which claims should be
favored, particularly in a dynamic economy where priorities
can change rapidly. While there may be a few specific
situations where the government should intervene in the
allocation of resources which is now handled efficiently by
the private markets, my overwhelming preference is to avoid
the economic distortions which are found to occur.

- 24 -

Corporate Profitability
The final area of concern that I want to address here
is the future outlook for corporate profitability. Such
profits are, of course, the major incentive for additional
investment and an important source of funds for financing
outlays, along with various external sources. In a fundamental
sense profits are the driving force of our system -- the
engine that pulls the economic train for the 85 percent of our
work force still in the private sector -- and they are just
as much a "cost" of doing business as payments to workers,
supplies of materials and services, taxes, etc
Unfortunately, corporate profits are too often thought
of as an unnecessary claim required by greedy businessmen
rather than the basic incentive in Qur economic system.
Public opinion surveys in the 1930s and in more recent years
are consistent in indicating that the general public thinks
that profits account for approximately 28 percent of the sales
dollar. The fact is, however, that profits account for
approximately 5 cents out of each dollar of sales. Actual
earnings of business firms are thus far below what the general
public -- and some Members of Congress -- perceive them to be.
In fact, corporate profits will have to improve substantially
in order to provide the necessary incentives and to make the
necessary contribution to futute investment outlays. My
concern is that the negative attitudes about profits held by
many Americans might become an unfortunate part of public
policy. We must avoid legislation and regulation that is
punitive of profits honestly earned. The result could only be
that capital formation would be inhibited, and the real purchasing
power of wage earners would rise more slowly. We must always
be alert to the fact that profits translate into jobs, higher
wages, and an increased standard of living for all of our people.
One important reason why there is so much misunderstanding
about corporate profitability is that our accounting system
has not yet been able to adapt to the disruptive effects of the
double-digit rate of inflation we have suffered. Inflation
hurts investment by increasing the prices of new assets and
eroding the purchasing power of corporate earnings. Taxes
must be paid on reported earnings even though these figures
are exaggerated by inventory valuation profits and the inadequacy
of capital recovery allowances, which are based on the historical
costs of existing assets rather than the inflated outlays
required for new assets. Inflation also disrupts investment
by discouraging savings once the general public recognizes that
the purchasing power of such commitments is eroded so quickly.

99l
Fortunately, the Department of Commerce publishes
figures which attempt to adjust for the distorting effects
of inventory valuation, the effects of accelerated depreciation
methods and the understatement of capital recovery allowances
based on historical cost asset values. The results of these
adjustments are summarized in Table 7. These figures clearly
indicate that adjusted after-tax profits of nonfinancial
corporations as a share of national income and of the value
of corporate output are far lower than the public opinion
polls would suggest. Furthermore, from a peak in 1965 through
1973 the relative share of corporate after-tax profits has
declined by one-half according to both measures. The same
discouraging pattern results when these adjusted earnings
figures are compared to the replacement value of capital assets
to determine the rate of return on invested capital. From a
peak rate of return of 10 percent. In 1965 this measure
declined to 5.4 percent in 1970 before recovering to a level
of 6.1 percent in 1973. The sluggish economy of 1974 and
1975 will further reduce this figure. It is not unfair to
say that the United States has been and remains today in a
profits depression. Since the incentive for new investments
ultimately depends upon sustaining an attractive rate of
return on capital, this trend is particularly disturbing.
It should be emphasized that all of these comparisons
have been stated in current dollars which conceals the negative
impact of inflation on the purchasing power of retained earnings.
Professor John Lintner of Harvard University recently reported
that the retained earnings of U.S. nonfinancial corporations
were 77 percent lower in 1973 than in 1965 if the figures
are converted into constant dollars in order to remove the
effects of inflation and if adjustments are made to remove the
effects of inventory valuation gains and the underreporting
of depreciation changes based on historical costs. Without
these adjustments, reported retained earnings in 1973 were
46 percent above the 1965 figure. 3/
Because business firms cannot use "phantom" earnings to
acquire capital assets, the future pace of private investment
will depend upon the growth of real profits. The government
can influence the economic incentives needed to stimulate
investment through its tax policies, regulatory and administrative
practices and various spending programs, but the private investment
decision ultimately depends upon the rate of return expected and
3/Lirfther, John, "Savings and Investment for Future Growth: 1975-6
and Beyond," presented at a colloquium on "Answers to Inflation and
Recession: Economic Policies for a Modern Society," conducted by
The Conference Board, Washington, D.C., April 8-9, 1975, p.15.

- 26 the availability of adequate financing at a reasonable cost.
Government officials and the general public must recognize
the basic importance of corporate profitability and the
disruptive effects of excessive government spending pressures -pressures which create deficit financing requirements that take
precedence over private investment needs in the capital markets.
This problem has not received adequate attention.

IV.

SUMMARY

As we strive to end the most severe economic recession in our
postwar experience, my deep and abiding concern about the future
adequacy of capital investment will perhaps appear to be ill-timed
to some analysists. There is extensive slack in our economy with
an unemployment rate near 9 percent and reduced rates of plant
capacity utilization in many" specific industries. The economic
slide, however, will not last much longer, and we will again be
reporting real growth gains before the end of the year. As the
pace of economic activity accelerates, we will likely rediscover
shortages of labor and production capacity. In fact, some industries
still have high plant capacity utilization ratios, and many types
of skilled labor will be difficult to find even in the early stages
of economic recovery. In 1971 it was widely believed that extensive
slack existed but the economy was again operating at a very high
rate of capacity by 1972 and shortages and explosive inflation soon
occurred.
Our statistics on plant capacity have always been uncertain
measures, and current economic conditions have motivated the
Department of Commerce to give top priority to a comprehensive survey
of production capacity as a basis for preparing more meaningful
estimates of plant capacity utilization rates. It is ironic that
such a fundamental factor in preparing national economic policies
has been based on such uncertain economic statistics.
Dr. Pierre Rinfret, President of a well known economic
consulting firm, Rinfret Boston Associates, Inc., has published
an impressive study of the national production capacity which indicates that our current government statistics grossly underestimate
the rate of capacity utilization in American industry and that there
is virtually no reserve capacity. His study estimates that the
capacity utilization rate for manufacturing industries was 86.6 percent in 1974 (Table 8) a figure well above the government's
estimate for 1974, of 78.9 percent. It should also be emphasized
that the concept of operating at 100 percent of physical capacity
is misleading. Over the last fifteen years the government figures
indicate that manufacturing capacity utilization has averaged only
83 percent despite some periods of intense output. The highest
figure reported by the government during these fifteen years was
91.9 percent for 1966. Most companies need to preserve some reserve
capacity to handle unexpected output requirements and to substitute
for operating assets which need repairs or replacement. Therefore,
the existing
government
figures
do not accurately measure the
realistic
level
of capacity
utilization.

27 -

?y
i

y L^

Looking beyond the current problems of recession and sustaining
an economic recovery, the additional capital investment of at least
$4 trillion from 1974 to 1985 represents a major challenge to the
future growth of our economy. We must also give careful attentiontment
to the problems of specific industries in attracting needed invest
for balanced growth. I am confident that these basic goals can be
,. K O J
R n t t h e desired results will require government
S
which wi 1 moderateInflation and balance the Federal
S t r o v e ? time in order to avoid diverting needed capital
awaffrom Investment and into the financing of chronic government
deficits
A continuation of the fiscal and monetary distortions
o? the past decade will only frustrate our capital ^vestment
future. and lead to still more serious economic problems in the
efforts
Thank you.

- oOo -

TABLE

Average Annual Rate of Change in Real Growth for Member Nations of OECD,
1960-70
(percent)

Japan
Greece
Portugal
Yugoslavia
France
Italy
Canada
Finland
Australia
Netherlands
Norway
Eelgium
Denmark
West Germany
Austria
Iceland
Ireland
U.S.
Luxembourg
United Kingdom

Source:

11.1
7-6
6.3
6.7
5.8
5.6
5.2
5.2
5.1
5.1
5.0
4.9
4.9
4.8
4.8
4.3
4.0
4.0
3.3
2.8

Organization for Economic Development and Cooperation.

TABLE 2
Gross Private Domestic Fixed Investment, 1950-1974 (Billions of dollars)
PART A. Nominal Dollars
Residential
Structures

Year

Total

Nonresidential Structures
and Producers' Durable Equipment

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974p

$47.3
49.0
48.8
52.1
53.3
61.4
65.3
66.5
62.4
70.5
71.3
69.7
77.0
81.3
88.2
98.5
106.6
108.4
118.9
131.1
131.7
147.4
170.8
194.0
195.6

27.9
31.8
31.6
34.2
33.6
38.1
43.7
46.4
41.6
45.1
48.4
47.0
51.7
54.3
61.1
71.3
81.6
83.3
88.8
98.5
100.6
104.6
116.8
136.8
149.6

19,.4
17..2
17,.2
18..0
19.,7
23..3
21..6
20..2
20..8
25..5
22..8
22.,6
25..3
27.,0
27.,1
27.,2
25..0
25. 1
30.,1
32.,6
31.,2
42. 8
54. 0
57. 2
46. 0

37.5
39.6
38.3
40.7
39.6
43.9
47.3
47.4
41.6
44.1
47.1
45.5
49.7
51.9
57.8
66.3
74.1
73.2
75.6
80.1
77.2
76.7
83.7
94.4
94.1

23.5
19.5
18.9
19.6
21.7
25.1
22.2
20.2
20.8
24.7
21.9
21.6
23.8
24.8
24.2
23.8
21.3
20.4
23.2
23.7
22.2
29.1
34.3
32.9
24.0

PART B.
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974p
Source:

Constant 1958 Dollars
61.0
59.0
57.2
60.2
61.4
69.0
69.5
67.6
62.4
68.8
68.9
67.0
73.4
76. 7
81.9
90.1
95.4
93.5
98.8
103.8
99.5
105.8
118.0
127.3
118.1

Department of Commerce, Bureau of Economic Analysis

TABLE

Output and Investment by Sector
1969-1971 Averages
United
States

Germany

Canada

Japan

Sector Percentage of Total Output:

PARTITION A
Agriculture
Mining
Manufacturing
Utilities
General Services
(Dwellings)
(Government)
(Other Services)
Total

France

United
Kingdom

(Current price percents)

3.0
1.6
30.3
2.3
62.8
(5.4)
(14.7)
(42.7)
100

5.9
0.8
45.3
1.8
46.2
(4.5)
(8.8)
(32.9)
100

3.2
2.2
50.4
2.3
41.9
(3.8)
(9.4)
(28.7)
100

2.6
1.4
33.5
2.8
59.7
(2.3)
(10.1)
(47.3)
100

3.9
3.4
26.6
2.4
63.7
(3.3)
(14.0)
(46.4)
100

7.3*
0.9
43.0
2.0
46.8
(NA)
(3.1)
(NA)
100

Sector Percentage of Total Investment
Agriculture
Mining
Manufacturing
Utilities
General Services
(Dwellings***)
(Government)
(Other Services)
Total

3.8
1.0
19.7
5.2
70.3
(19.9)
(20.4)
(30.0)
100

PARTITION B

4.6
.7
27.8
3.9
63.0
(26.3)
(12.8)
(23.9)
100

5.3**
1.3
25.2
5.0
63.2
(22.2)
(9.9)
(31.1)
100

Sector Ratios:

2.6
1.5
23.8
8.6
63.5
(15.1)
(15.9)
(32.5)
100

5.5
7.5
16.6
9.4
61.0
(21.5)
(17.9)
(21.6)
100

5.9
.9
26.8
3.9
62.5
(17.9)
(24.9)
(19.7)
100

Investment Percentages

Divided by Output Percentages

Agriculture
Mining
Manufacturing
Utilities
(leiirrill

fliTvicoii

(Dwellings)
(Government)
(Other Services)
Source:

1.3
0.6
0.7
2.3
1. 1
(3.7)
(1.9)
(0.7)

0.8
0.9
0.6
2.2
1 .4
(r>.H)
U.'J)

(0.7)

1.7
0.6
0.5
2.2
1 .5
( ).B)
(1.1)
(1.1)
f

1.0
1.1
0.7
3.1
.1 .1
(6.6)
(1.6)
(0.7)

1.4
2.2
0.6
3.9
1.0
(6.5)
(1.3)
(0.5)

0.8
1.0
0.6
2.0
.1.3
(NA)
(8.0)
(NA)

OECD, Nat:ional Acco unts of OECD Countries, 196071.

*
Output averages of Japan are for 1969-70
** Investment averages of Germany are for 1967-68.
*** Investment in owner-occupied dwellings. For Canada, France and
the United Kingdom the figure is from residential investment, which
differs slightly from the former category.

TABLE 4
FEDERAL BUDGETS
CHANGES IN THE UNIFIED BUDGET OUTLAYS
BY FISCAL YEAR, 1961-1976
(dollars in billions)
Fiscal Year over
Preceding Year

Federal
Outlays

Dollar
Increase

Percentage
Increase

1961

$ 97.8

$ 5.6

6.1

-3.4

1962

106.8

9.0

9.2

-7.1

1963

111.3

4.5

4.2

-4.8

1964

118.6

7.3

6.1

-5.9

1965

118.4

-0.2

—

-1.6

1966

134.7

16.3

13.8

-3.8

1967

158.3

23.6

17.5

-8.7

1968

178.8

20.5

13.0

-25.2

1969

184.5

5.7

3.2

+3.2

1970

196.6

12.1

6.6

-2.8

1971

211.4

14.8

7.5

-23.0

231.9

20.5

9.7

-23.2

1973

246.5

14.6

6.3

-14.3

1974

268.4

21.9

8.8

-3.5

1975 (est.)*

313.4

45.0

16.8

-34.7

1975 (est.)**

324.2

55.8

20.8

-42.2

1972

Surplus
or Deficit

•

* Last official budget estimates published February 3, 1975.
** May estimate of OMB as to expected FY 1975 outlays and most recent,
May , Department of Treasury FY 1975 receipts.
Source: Economic Report of the President, February 1975, Table C-64, p.324,
for years 1961 through 1974.

TABLE

Comparison of General Tax Revenue Sources. 1971

Unite i States
1'ax Revenue
by Type
Corporate Income 4 Profit —

<V£fuon.»
30?34

France Germany

T o U . fti!£. m l l U « >
10.4%

18747

?.U1
5.8%

JSS'L..-)
11655

?oU.
4.5%

United KtngflprrValue
% of
('££» „ * U ~ > To.a.
7.8%

1558

Japan ,.

Canjgda
Value
<cin*l.i»>
3080

of
To.a.
10.2%

Value

% of

,Y.. n,.»i~.»

ToU.

2977

18. 8 %

10.1

26.9

6668

33.2

10221

24.0

32492

70295

3R02

98176

33.6

33.9

Household Income & Profit —
2/
Consumption Taxes —'

73425

28.1

5340

26.6

R660

?0. 7

34.8

32R9

18.1

112139

28.7

52698

88430

33.8

2828

14.1

2463

20.0

134802

41.9

3174

20.7

8.2

Social Security Contributions 60286

23916

17655

6.7

3685

5710

19.0

16. S

17.2

7.4

2612

50301

18.3

Other Taxes

100.0%

322096

20079

100.0*

i oo. or. 15854

291695

30134

Total

00. 0%

76)460

100.0%

Comparison Excluding Social Security Distributions
11.1%

23.5%

38.6

37.0

30.0

42.4

31.0

31.3

25.9

10.2

21.4

20.6

13.1%

10.0%

Household Income & Profit 1

42.4

17.3

40.6

Consumption Taxes —

22.8

59.9

Other Taxes

21.7

12.8

Total

231409

100.0%

187294

100.0%

9.0%

6.8%

Corporate Income & Profit —

J7303O

100.0%

17251

100.0%

27671

100.0%

1/ Includes capital gains.
2/ Defined as taxes levied on transactions in goods and services on the basis of such intrinsic characteristics as value, weight, strength, etc.
1
?he source d o c L e n t provides further elaboration concerning tax category defin.Uons.
SOURCE: Revenue Statistics of OECD Member Countries 1965-1971. OECD.

126*0

100.0%

TABLE

Comparative Cost Recovery Allowances for Industrial
Machinery and Eguipment

Country

Representative
Cost-Recovery
Period (years)

Canada

France

Japan

First
Taxable
Year

First 3
Taxable
Years

First 7
Taxable
Years

50.0

100.0

31.3

90.3

37.1 S/

63.9

88.1

100.0

100.0 c/

United Kingdom

Western Germany

9 f/

16.7 9/

49.6

88.8 h/

with investment credit
but without ADR
(Accelerated
Depreciation Range)
13 i/

21.7 j /

47.9

80.1

33.9

66.1

54.7

88.5

100.0

United States:

without either investment credit or ADR
13 i/

7.7

with both investment 10-1/2 i/ k/ 23.5 j/
credit and ADR

Beginning May 1972 machinery and eguipment acguired for manufacturing or
processing of goods in Canada could be written off over two years (50 percent
per year).

250 percent declining balance method multiplied by a factor of 2 to give
effect to multiple shift operations.

vear.
Method changed to straight line in fourth taxable year.
applied to original cost in such year.

Modified double declining balance method; 18.9 percent per Japanese
Government rate table multiplied by a factor of 1.28 to give effect to
multiple shift operations.

Includes special first year allowance of 25 percent; allowance reduces
recoverable base cost in second and succeeding taxable years.

The average cost recovery period for machinery and eguipment in Western
Germany is 8 to 10 years to which additional allowances are permitted for
multiple shift operations: 25 percent of allowance for two-shift operations
and 50 percent of allowance for three-shift operations. Allowances may be
further increased when plant is located in certain areas such as Berlin,
areas bordering on iron curtain countries, and undeveloped areas.

Straight line rate

-2(TABLE

f/ continued
Cost recovery allowances based on an average cost recovery period of
9 years. The double declining balance method is used. A 25 percent
additional allowance for two-shift operations is taken into account
beginning with the fifth year when the method is changed to straight
line. The corporate depreciation rate thus computed is slightly over
the maximum 20 percent rate permitted on a declining balance method
to reflect that:
(A) The straight line method produces more depreciation than
does the double declining balance method for certain shortlived assets; and
(B) Items of machinery and eguipment costing under U.S. $200 can be
expensed.
No other incentives have been taken into account.
g/ Full year allowance in first taxable year for assets acguired in first
half of such year; half year allowance for assets acquired in second half.
h/ Method changed to straight line in fifth taxable year.
i/ Double declining balance method.
j/ Includes 14 percent allowance equivalent to 7 percent investment credit
at effective 50 percent income tax rate. Credit does not reduce
recoverable base cost.
k/ 13-year recovery period reduced by 20 percent and rounded to nearest
one-half year.

SOURCE:

Statement of Arthur Anderson and Company, before the Committee on
Ways and Means, U.S. House of Representatives, April 16, 1973.

TABLE 7
l»«l'«-TIC IROMT$J5r WOM tt:»n< lAXCOKTrWATlOtJS.
dillions if dollar*)

Adjustments

V.ar

Wonfinancial
don*atic
Ii-fits of
nonfirancial
corporatlona

Tor
inventory
profit• or
loatas

To
•tandardisa
drprrciatIon
tie t hod 1/

To atondardlaa
depreciation on
If pl*< i«i'nl

cost bati• 27

Adjusted
domestic
profJta of
nonfinancial
corporatlona

Tai
liability

Adjusted
after-tax
profita of
domestic
nonfinancial
corporations

wtroirrro HID Jkroi'STHD.

National
Incona

Adjusted
after-tan profits
Of d O M B t l C
corporation* aa
parcent of national
in coac

1950-1973

Grose product
originating in
nonfinancial
corporations

Adjusted *fi r-t.» | u f i « »
of nonf »na.-,: i«l :SIJI t*- it's
as percer.i of <;n..» |i,l..'
origtnat it.? in noi.f I M M , i.i
ctri-crativt.t

—'

1950
1951
1952
1953
1954
1955
1956
1957
1956
1959

38.5
39.1
33.8
34.9
32.1
42.0
41.8
39.8
33.7
43.2

-5.0
-1.2
1.0
-1.0
-0.3
-1.7
-2.7
-1.5
-0.3
-0.5

-0.4
-0.2
0.0
0.6
1.5
2.7
2.9
3.3
3.2
3.5

-3.6
-4.4
-4.6
-4.3
-4.1
-4.2
-5.1
-5.7
-5.6
-5.5

29.5
33.4
30.2
30.2
29.2
39.0
36.8
35.8
30.9
40.7

16.7
21.0
17.8
18.5
15.7
19.8
19.8
18.9
16.3
20.8

12.8
12.3
12.4
11.7
13.5
19.2
17.0
16.9
14.6
19.9

241.1
278.0
291.4
304.7
303.1
331.0
350.8
366.1
367.8
400.0

5.3
4.4
4.3
3.8
4.4
5.7
4.9
4.6
4.0
5.0

151.7
174.3
182.0
194.7
191.6
216.3
231.2
241.9
236.0
263.7

8.4
7.1
6.8
6.0
6.9
8.8
7.4
7.0
6.3
7.6

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

40.1
40.3
44.7
49.1
55.8
65.8
71.2
66.2
72.4
68.0

0.2
-0.1
0.3
-0.5
-0.5
-1.7
-1.8
-1.1
-3.3
-5.1

3.4
3.1
5.3
5.2
5.2
5.7
5.9
6.0
6.3
7.4

-5.1
-4.5
-4.1
-3.7
-3.5
-3.8
-4.2
-4.8
-5.4
-7.8

38.6
38.8
46.2
50.1
57.0
66.0
71.2
66.3
70.0
62.5

19.5
19.8
20.9
22.9
24.3
27.6
30.1
28.4
34.0
33.7

19.1
19.0
25.3
27.2
32.7
38.4
41.1
37.9
36.0
28.8

414.5
427.3
457.7
481.9
518.1
564.3
620.6
653.6
711.1
766.0

4.6
4.4
5.5
5.6
6.3
6.8
6.6
5.8
5.0
3.8

273.1
278.4
302.8
320.0
346.0
377.6
413.0
430.8
469.9
504.3

6.9
6.8
8.4
8.5
9.4
10.2
9.9
8.8
7.6
5.7

1970
1971
1972
1973

55.7
63.2
76.3
95.8

-4.8
-4.9
-7.0
-17.6

7.6
8.2
9.4
10.2

-9.1
-10.1
-11.4
-12.5

49.5
56.4
67.3
75.9

27.6
29.8
33.4
40.7

21.9
26.6
33.9
35.2

800.5
857.7
946.5
1065.6

2.7
3.1
3.6
3.3

519.1
555.1
614.3
684.3

4.2
4.8
5.5
5.1

1/ The adjustment to standardize depreciation method is equal t > the difference between tax depreciati on and
~~
depreciation calculated assuming a straight-line depreciation formula and 85% of the Internal Revenue Service's
1942 edition of Bulletin F service lives.
2/ The adjustment to put depreciation on replacement cost basis is equal to the difference between depreciation
as calculated on the assumptions stated in the preceding note and as calculated using the same assumptions
but on a current rather than historical cost basis. Numbers in this and following table may not add because
of rounding.
*
Source: Department of Commerce, Bureau of Economic Analysis

TABLE 8

CAPACITY UTILIZATION: March 1975

Is this level of operation
higher, lower, or about
the same as in 1974?
Industry
All Industries*

Utilization
Rate
84.5

(Percent Distribution)
Higher
Lower
Same
13.2
45.0
41.7

Manufacturing
Nonmanufacturing*

86.6
78.6

14.2
10.5

51.3
28.1

34.4
61.4

Manufacturing
Dunble Goods
Primary Metals
Iron & Steel
Nonferrous Metals
Electrical Machinery
Nonelectrical Machinery
Transportation Equipment
Motor Vehicles & Parts
Aerospace
S.one, Clay & Glass
Other Durable Goods

86.6
86.6
89.7
90.5
88.0
87.2
94.5
75.3
79.2
67.2
77.7
85.7

14.2
12.8
8.7
11.8
0.0
50.0
15.0
23.5
11.1
42.9
0.0
0.0

51.3
50.0
39.1
23.5
83.3
0.0
40.0
58.8
77.8
42.9
72.7
72.7

34.4
37.2
52.2
64.7
16.7
50.0
45.0
17.6
11.1
14.3
27.3
27.3

Nondurable Goods
Food & Beverage
Textiles
Paper
Chemicals
Petroleum
Rubber
Other Nondurable Goods

86.7
89.2
72.5
87.9
82.3
89.7
80.4
82.1

16.2
23.5
0.0
0.0
33.3
22.2
0.0
14,3

52.9
17.6
100.0
80.0
50.0
22.2
100.0
57.1

30.9
58.8
0
20.0
16.7
55.6
0.0
28.6

Nonmanufacturing*
Mining
Railroad
Air Transportation
Other Transportation
Public Utilities
Electric
Gas & Other
Commercial & Other

78.6
94.8
87.1
81.0
89.4
76.6
74.3
86.0
78.0

10.5
0.0
0.0
0.0
0.0
12.5
12.5
12.5
16.7

28.1
0.0
75.0
66.7
50.0
22.5
18.8
37.5
16.7

61.4
100.0
25.0
33.3
50.0
65.0
68.8
50.0
66.7

* Excludes Communication.
Source: 1975 Capital Investment Surveys; Rinfret Boston Associates
March 1975, P e r s p e c t i v e — 5
GPO

890-208

Inc.

WASHINGTON, DC. 20220

TELEPHONE WQ4-2Q41
____
/789

May 7, 1975

FOR IMMEDIATE RELEASE

RESULTS OF AUCTION OF 7-YEAR TREASURY NOTES

The Treasury has accepted $1.5 billion of the $3.9 billion of
tenders received from the public for the 7-year notes auctioned today,
The range of accepted competitive bids was as follows:
Lowest yield
Highest yield
Average yield

7.96%
8.02%
8.00%

The interest rate on the notes will be 8%.
the above yields result in the following prices:
Low-yield price 100.212
High-yield price
Average-yield price

At the

8% rate,

99.894
100.000

The $1.5 billion of accepted tenders includes 71 % of the amount of
notes bid for at the highest yield and $0.3 billion of noncompetitive
tenders accepted at the average yield.
In addition, $1.2 billion of tenders were accepted at the average-yield
price from Government accounts and from Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities.
1/ Excepting 5 tenders totaling $53,000

Department of theTRE/[$URY
INGTOIM, DC. 20220

TELEPHONE W04-2041

FOR IMMEDIATE RELEASE
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
TO THE
AMERICAN SOCIETY OF BUSINESS WRITERS
MAY 7, 19 75
Mr. Rowen, Members of the Society of American Business writers,
and distinguished guests:
I welcome this opportunity to meet again with you and to
talk about the subject of continuing concern to all of us: ;
the state of our economy.
As you will recall, the Administration started out early
this year with essentially three economic goals, all of which
were interrelated:
-- First, to end the recession;
-- Second, to reduce the rate of inflation; and,
-- Third, to achieve greater self sufficiency in energy
and reduce our vulnerability to foreign disruptions of our
energy supplies.
With four months of the year now behind us, it is apparent-and I know that you have written about this almost to the point
of exhaustion-- that we have made encouraging progress on two
of those fronts.
Ten days ago I returned from an extended trip around the
world that enabled me to speak with finance ministers and several
heads of state on a wide range of economic issues. One of those
meetings was in Paris where I conferred with the finance ministers
from the OECD Nations of Western Europe and Japan. It was the
near unanimous view among those ministers that the Western world
is nearing the end of the current recessionary cycle.
Here in the United States, there are solid grounds for
believing that as much as 75 per cent of the recession is
already behind us. With an audience as knowledgeable as this
one, I can be brief in addressing this matter.
WS-295

- 2In my view, two factors have been especially important
in bringing us close to the end of the recession. One has y
been the rapid liquidation of inventories, which reached a
record level in the first quarter of this year. The importance
of this liquidation process is that in many industries sales
are moving ahead more rapidly than production. As that continues, we can expect an increase in production in order to
meet demand. And as that happens, of course, we will be
entering upon the recovery.
ir;
The inventory liquidation reflects another factor of equal
importance: the turnaround in retail sales. Even apart from
the influence of price rebates on auto sales, retail sales
rose by a total of 3-1/2 per cent in the first quarter of this
year and appear to have increased a bit further in April.
There was also encouraging news in the employment figures
released last Friday. While the rate of unemployment rose to
8.9 per cent, the highest level of the post-war period, the
increase was a small one and--more importantly--April also
brought the first increase in overall employment in half a
year. There has also been a slight reduction in the rate of
job laybffs, which has a crucial impact not only on unemployment but also upon public confidence.
There are several other signs that are also pointing in
the direction of recovery:
-- As monetary policy has become more expansive and
inflation has subsided, short-term interest rates have fallen
and funds have begun flowing back into the thrift institutions.
This sets the necessary precondition for an upturn in the hardhit housing industry.
-- The reduction in the rate of inflation should also
bring a significant increase in real earnings, which will help
to increase consumer purchasing.
-- Surveys already show that consumer confidence is perking
up.
-- And there has been a definite air of optimism in the
stock market, where the Dow Jones has risen by some 35 per cent
since its low point in 1974.

In addition to these developments within the private sector,
the Government has also taken several positive steps to assist
the forces of recovery. As I mentioned, the Federal Reserve
has already eased monetary conditions substantially and Board
Chairman Arthur Burns has indicated that the Fed will continue
to support the recovery while avoiding excessive stimulation.
At the same time, the Congress has passed and the President
has signed the biggest tax cut in our history. Combined with
a large Federal deficit, the tax cut will give a strong boost
to the economy.
I am not suggesting that prosperity is at hand. During
the coming months, much of the economic news will continue to
be bleak, registering perhaps the last statistical expressions
of the recession. I do suggest, however, that the economy is
now providing mounting evidence that the recession will bottom
out during the middle months of the year, quite possibly before
mid-year. Before the end of the year, we will definitely be
on the road to recovery. Thus, we are making considerable
headway in achieving our first economic goal of ending the
recession.
On the second economic front--inflation--we have made
even more progress--more, in fact, than anyone thought possible
this quickly. The wholesale price index has dropped four
months in a row, and its effects are already showing up in the
consumer price index. By the end of this year, the' overall
rate of inflation should be in the neighborhood of 6 per cent.
On the third front--energy--I regret to say that progress
has been painfully slow. Frank Zarb observed earlier this
week that we are more vulnerable now to foreign oil disruptions
than we were during the embargo, and I must say that I agree
with that observation. If recent trends prevail, we will be
dependent on foreign nations for more than half of our oil
before the end of this decade. We cannot afford prolonged
delays in attacking this problem. The President has set forth
a sound, progressive program which would mobilize the forces
of the marketplace to encourage conservation and simultaneously
develop our own resources. While disagreements continue to
exist with the legislative branch, we are working closely with
the Congress and we remain hopeful that a national energy policy
can be hammered out. In the final analysis, however, if the
Congress does not act soon, the President will have no choice
but to exert his own personal leadership once again by exercising
the full powers of his office.

- 4The Shape of Recovery
Assuming that we can work out a reasonable agreement on
energy between the Congress and the Administration--and I am
still optimistic on that score--the most pressing economic
question now before us is what shape the recovery will take.
Will we bounce back vigorously? Can we sustain a steady,
upward movement of the economy? Or will we begin climbing
only to undertake a sorrowful repetition of the boom-andbust cycle of the past?
The time has come, I believe, to begin taking a longer
view toward our economic policies. In recent months, we ^
have been preoccupied with the immediate problems of fighting
inflation and then with combating both inflation and recession.
As we begin to emerge from the thick of battle, we must finally
break the habit of resorting to short-term palliatives at the
expense of long-term gains and instead take those steps which
will correct the deep-seated imbalances in our economy and overcome the continuing scourge of inflation. I cannot overemphasize
that the inflationary policies of the past are the chief culprit
in creating our economic problems of today, and more than
anything else, the threat of inflation remains our most fundamental long-term economic challenge. With both the recession
and inflation now receding, we have a golden opportunity now
to shape our policies to meet our long-term needs, and it would
be a tragic mistake to pass it by.
The concern that I have expressed on several occasions
is that we will become overly impatient with the pace of the
recovery and that enormous political pressures will be generated
to speed it up through highly stimulative fiscal and monetary
policies. Increasingly, we hear from some Members of the
Congress that our first priority should be to end the recession
as quickly as possible and that we should postpone worrying
about the risk of new inflation until next year or later.
I strongly disagree with that view, and I have argued
as forcefully as I can that those are precisely the policies
that led us into this thicket. Does it make any sense to
spend our way out of this recession if we know that we are
running a high risk of creating even more inflation and a
more devastating recession in the future?

To me, the answer to that question is self-evident. In order
to avoid new errors in economic policy, we must finally be
willing to pay the price of old ones.
Since my warnings about the impact of huge deficits on the
private capital markets have been the subject of considerable
attention and debate in the press, I would like to try to set
the argument in perspective.
What I have said is that deficits in the range of $50 to
$60 billion a year will create some strains in our financial
markets, but they should be manageable. However, as I have
emphasized--and as I shall continue to stress as long as the
danger exists--deficits in the magnitude of $80 to $100 billion
would be clearly excessive and dangerous. And in my talks
with financial leaders around the country, I find that most
of them agree with that view.
In an ordinary recession, large-scale Federal borrowing can
be accommodated in the private markets because private demands
for funds are slack. In this recession, however, demands for
funds are higher than we would otherwise expect. The effects
of inflation are one of the prime reasons for this. Corporate
borrowing also remains high because of the illiquidity and poor
debt structure of our financial and non-financial institutions.
Some corporations are also borrowing now because they are increasingly fearful of the inflation that would result if the
Congress refused to stay within reasonable fiscal units. In
addition, State and local borrowing remains high because of their
strained fiscal positions. As a result of all of these factors,
we are already experiencing some difficulties in the capital
markets and interest rates have not declined as far as they
normally would during a recession.
The real danger, however, will arise not this year but
next when the recovery will take hold and we will have a rising
tide of private and public demands for funds.' It is well to
remember that while our recession is 75 percent over, the borrowing
to finance our deficits is only 25 percent completed. Based on
the President's budget and current enactments, we expect that
the Treasury will need to borrow some $75 billion in funds this
calendar year--a billion and a half dollars a week. In 1976,
if the outlay totals projected by the House Budget Committee
are an accurate projection and if there is an extension of major
tax provisions, our borrowing needs next year could reach $84
billion.
As the recovery takes hold, it should be apparent that
deficits of the $80 to $100 billion range could create a vicious
borrowers.
competition for funds between the Federal Government and private

- 6Because the Federal Government always stands at the head
of the line in the private money markets, that kind of competition could well disrupt the economic recovery that is now
getting underway and ultimately lead to greater economic problems
in the future. Interest rates could rise again, impeding or r
aborting a recovery in the critical housing industry. Prime
borrowers are already paying a high rate of interest. Even
higher interest rates would create severe difficulties for them
and would crowd out many small businessmen and borrowers who
are not in higher-rated categories.
In addition, such Government borrowing would further encroach on private demands for capital investment. As I testified
before the Senate Finance Committee this morning, there is no
greater long-range need within our economy than to shift our
domestic priorities toward greater savings and capital formation
and away from so much personal consumption and government spending.
During the next few years, in order to replace existing plant
and equipment and to meet our goals in energy, environmental
improvements, transportation, housing, and in many other fields,
our capital investments must be three times as large as those
of recent years. Those investments translate into higher levels
of productivity, into more jobs, and into a higher standard of
living for all of our people. Clearly, if we impose large Federal
demands upon the private sector we are preempting the critical
needs for capital investment.
The immediate impact of huge Federal demands during a period
of recovery would depend, of course, upon the monetary policy of
the Federal Reserve. Indeed, monetary policy will continue to
be a critical element in shaping our economic prospects both
now and in the future. If we create too much competition for
funds, interest rates will remain above desired levels even if
the Federal Reserve pursues a moderate policy. The other alternative is that the Federal Reserve might seek to accommodate the
enormous borrowing requirements of the FederaJ. Government, as
well as private demands, by creating an excessive growth in money
and credit. That approach might temporarily ease the problem
of financing the large Government deficits and the recovery,
but the consequences of that action would soon catch up with us
in the form of a reaccelerated inflation followed by a new recession and higher unemployment. This alternative; then, would
have highly undesirable results, and it seems clear that we
would be far wiser to avoid policy decisions which would force
us to make such a Hobsonfs choice.
As Secretary of the Treasury and chief financial officer of
the United States, it is my duty to warn of the injuries that
Arthur
policies
that
could Ibe
Burns
intend
that
inflicted
and
to
I believe
pursue
others
on our
so
are
tofinancial
be
long
doing.
misguided.
as the
and
Letdangers
me
economic
This
emphasize
exist,
issystem
the that
course
just
by Ias
am

9/
not predicting that these events will transpire, but it is
essential that we be aware of the jeopardy in which we would
place our hopes for recovery if we adopt excessive fiscal and
monetary policies. Let me also add that I have been heartened
by the recent debates on this matter within the Congress and
by the efforts to impose a ceiling on the size of our deficits.
There is growing awareness of the dangers that we face, and I
am hopeful that that awareness will be translated into sound
policies for the future.
Policies for the Future
What policies, then, should we follow in trying to steer
the nation toward a steady, durable recovery?
First and foremost, we must continue to support the forces
of economic recovery so that we can end the hardships of unemployment and restricted growth. In warming up the economy,
however, we must be equally careful not to overheat it. We must
firmly resist the policies, as tempting as they are, of being
overly stimulative in the fiscal and monetary areas. That will
mean a slower period of recovery than we would like, but we
are only guaranteeing more trouble for ourselves if we decide
once again to take a short cut.
Second, as we regain our prosperity, we must restore much
greater discipline to our fiscal and monetary affairs. Instead
of an unbroken string of Federal deficits, we should begin to
pursue budget surpluses in good years so that we can free up
more funds for capital investment.
Third, and this is a theme you will hear increasingly in
the future, we must lift the dead hand of governmental regulation
from the many areas where it smothers economic incentives and
growth. Reforms are clearly needed in the regulation of the
energy industry, transportation and many other critical sectors
in our society.
Fourth, as I mentioned earlier, we must make a basic shift
in our domestic policies so that we place less emphasis upon
consumption and government spending and more upon savings, investment and capital formation. It is an economic fact of life
that increased productivity is the only way to increase our
standard of living.
Finally, as I have stressed time and again, we must begin
to place more reliance on ourselves and the free enterprise system
and less upon government. The government has become so huge and
domineering--and we have turned to it so often for solutions that
have fallen short of our dreams--that the time has come to rediscover how much can be accomplished by private enterprise and

- 8by men and women who are free to determine their own destinies.
I know that some of you agree with me; some of you do not
but believe that we ought to pursue other goals. I am not here
today to ask that you support my positions, but in closing these
remarks, I would like to ask that we continue to work together so
that the choices for the future of our economy are clearly presented to the American people. That is the highest responsibility
we share together.
Thank you.

0O0

Contact:

Robert E. Harper
964-5775

FOR IMMEDIATE RELEASE MAY 8, 1975
TREASURY SECRETARY SIMON NAMES EDWARD L. PATTON
U. S. SAVINGS BONDS CHAIRMAN FOR ALASKA
Edward L. Patton, President, Alyeska Pipeline Service Co.,
Anchorage, is appointed Volunteer State Chairman for the Savings Bonds Program in Alaska by Secretary of the Treasury William E. Simon, effective immediately.
He will head a committee of business, banking, labor, government and media leaders who --in cooperation with the U. S.
Savings Bonds Division -- assist in promoting Bond sales in the
state. He succeeds Fred D. Chiei, Deputy Administrator, Federal
Energy Administration, Anchorage, who receives the Treasury Department MAward of Merit".
Patton is a native of Newport News, Va. He was graduated
from the Georgia Institute of Technology in 1938, with a BS degree in Chemical Engineering. After graduation, he joined an
affiliate of Standard Oil ( New Jersey ) -- now Exxon -- in
Baton Rouge, La., working on several engineering assignments
before going on active duty with the Navy in 1941. From 1941
to 1946, Patton served as commanding officer of a number of
antisubmarine and escort ships in the Carribbean, North Atlantic
and Pacific.
After the war, he returned to Exxon in Baton Rouge and progressed through a number of management positions before transferring to Exxon's Norwegian affiliate to help in the construction of a new refinery. He returned to the United States in 1964
as an adviser for Exxon operations in the Mediterranean, Middle
East and Far East. In 1966, he was transferred to Exxon's chief
domestic affiliate to assume responsibility for the construction
and operation of a new refinery complex in Benicia, Calif.
Patton assumed his present post in August 1970, upon the formation of Alyeska.
He and his wife, Dorothy, have twin daughters -- Judith,
now living in Atlanta, and Laura, attending the University of
Washington, Seattle.
oOo

DepartmentoftheTREASURY
WASHINGTON, D.C. 20220

Eltii?

TELEPHONE WO4-2041
'789

For information on submitting tenders: TELEPHONE WO 4-2604
FOR IMMEDIATE RELEASE

May 8, 1975

TREASURY TO AUCTION $2.0 BILLION OF NOTES
The Treasury will auction to the public under competitive and noncompetitive
bidding up to $2.0 billion of 2-year notes. The coupon rate for the notes will
be determined after tenders are allotted. Additional amounts of the notes may
be issued at the average price of accepted tenders to Government accounts and to
Federal Reserve Banks for themselves and as agents of foreign and international
monetary authorities.
„ Jh<Eo^ Wlli bS Treasury Notes of Series 1-1977 dated May 27, 1975, due
y
» *I
i C U S I P N O ' 9 1 2 8 2 ? E N 8 ) w i t h i n t e r e s t P ^ l e °" a semiannual basis
on November 30, 1975, May 31 and November 30, 1976, and May 3L 1977. They will
Soi,83,™ ^ * e g ^ e r e d ^ b e a r e r f o r m ± n denominations of $5,000, $10,000, •
$100,000 and $1,000,000, and they will be available for issue In book-entry form.
throuIn^vV^V116 n°teS mUSt b6 made °n May 27> 1975' Payment may not be made
through tax and loan accounts. Definitive notes in bearer form will be delivered
on or about June 4, 1975. Purchasers of bearer notes may elect to receive interim
certificates on May 27, which shall be bearer securities exchangeable at face
value for Treasury Notes of Series 1-1977 when available.
Wedne^^ay^ "at'anf FelerV, '^ Vi EaSt6rn Dayllght S^ «-• •
the Public Debt, Washington
tntlT ^ f J * " " * 3 n d
P

tenders will b ^ c S 8 S f . r . l i l y ^ . . e _ ^ i n ^ ^

h0,

^? ,

at the Burea

that n

" •«* • I

nCOm

Petiti-

t0
under a postmark no later t h a ^ e s c S May 13 1*1%™;?*
TSUCh agenCy •
mUSt be ln the amount
of $5,000 or a multiple thereof *nS _i'i t A
the
if a competitive tenae.,'__*___'t__m ^
:
~
^
yield desired,
n
com etl
Fractions may not be used in t-*n,w= °" P tive
if a noncompetitive tender.
n tatl n TENDER
should be printed at _ h f w r £ T f
?
°
°
™ TREASURY NOTES"
oe printed at the bottom of envelopes in which tenders are submitted.

Place8T"tTl_e1S8ir8_nbte 6XPrTed iR temS °f annUal
and noncom^titive'tenir w i n T "
* P f "*

yield in

*-o decimal
TenderS at the lowest
yields,

amount offered
After a d; t Irmina^-o C C e P d /° th * 6 X t e n t r e q u i r e d t o a t t a i n the
a coupon yield witl". J e S S S T t o ^ h . " ^ . 8 ! / . iTT.TT
**' " " ^
nec 88a
make the average accepted price 100.000 or .ess
That will h ^ H
!
7.to

2£ romp^.i.-rte^L'a^oSeV^n-b T^ ^^££ "0^.^
bidder will Pay t J r S c ^ i S i S L T t o ^ S ' S S d " , . __? SpC-eSSfUJ T P e t l t i V e
will be carried to three decimal nl««. 9

*-«...

yIeld ttat

l? I

„in

(OVER)

produce

P r x c e ca

lculations

."£_•_.:',£ 117

-2or less will be accepted in full at the average price of accepted competitive
tenders, which price will be 100.000 or less.
Commercial banks, which for this purpose are defined as banks accepting demand
deposits, and dealers who make primary markets in Government securities and report
daily to the Federal Reserve Bank of New York their positions with respect to
Government securities and borrowings thereon, may submit tenders for the account of
customers, provided the names of the customers are set forth in such tenders. Others
will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from commercial and other banks for
their own account, Federally-insured savings and loan associations, States, political
subdivisions or instrumentalities thereof, public pension and retirement and other
public funds, international organizations in which the United States holds membership,
foreign central banks and foreign States, dealers who make primary markets in Government securities and report daily to the Federal Reserve Bank of New York their
positions with respect to Government securities and borrowings thereon, Federal
Reserve Banks, and Government accounts. Tenders from others must be accompanied by
payment of 5 percent of the face amount of securities applied for. However, bidders
who submit checks in payment on tenders submitted directly to a Federal Reserve
Bank or the Treasury may find it necessary to submit full payment for the notes
with their tenders in order to meet the time limits pertaining to checks as hereinafter set forth. Allotment notices will not be sent to bidders who submit
noncompetitive tenders.
Payment for accepted tenders must be completed on or before Tuesday, May 27,
1975, at the Federal Reserve Bank or Branch or at the Bureau of the Public Debt in
cash, in other funds immediately available to the Treasury by May 27, or by check
drawn to the order of the Federal Reserve Bank to which the tender is submitted, or
the United States Treasury if the tender is submitted to it, which must be received
at such bank or at the Treasury no later than: (1) Wednesday, May 21, 1975, if
the check is drawn on a bank in the Federal Reserve District of the Bank to which
the check is submitted, or the Fifth Federal Reserve District in the case of the
Treasury, or (2) Monday, May 19, 1975, if the check is drawn on a bank in another
district. Checks received after the dates set forth in the preceding sentence
will not be accepted unless they are payable at a Federal Reserve Bank. Where
full payment is not completed on time, the allotment will be canceled and the
deposit with the tender up to 5 percent of the amount of notes allotted will be
subject to forfeiture to the United States.

FOR IMMEDIATE RELEASE

May 8, 1975

RESULTS OF AUCTION OF 30-YEAR TREASURY BONDS

The Treasury has accepted $0.75 billion of the $ 1.8 billion of
tenders received from the public for the 30-year bonds auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 8.25% 1/
Highest yield
Average yield

8.32%
8.30%

The interest rate on the bonds will be 8-1/4%. At the 8-1/4% rate,
the above yields result in the following prices:
Low-yield price 100.000
High-yield price
Average-yield price

99.232
99.450

The $0.75 billion of accepted tenders includes 55% of the amount of
bonds bid for at the highest yield and $0.1 billion of noncompetitive
tenders accepted at the average yield.
In addition, $0.85 billion of tenders were accepted at the average-yield
price from Government accounts and from Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities.
1/ Excepting 2 tenders totaling $13,000

ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
^
BEFORE
')
THE TORONTO SOCIETY OF FINANCIAL ANALYSTS
HAY 8, 1975

PRESIDENT WILSON, MEMBERS OF THE TORONTO SOCIETY OF FINANCIAL
ANALYSTS, AND DISTINGUISHED GUESTS:

I WELCOME THIS OPPORTUNITY TO RETURN TO CANADA AND
SPEAK WITH OLD FRIENDS ABOUT THE NEW PROBLEMS THAT WE FACE
TOGETHER. I WAS LAST HERE IN MARCH WHEN I HAD THE PRIVILEGE
OF MEETING WITH FINANCE MINISTER TURNER AND OTHER LEADERS IN
YOUR GOVERNMENT, AND YESTERDAY AFTERNOON I HAD AN EXTREMELY
CORDIAL MEETING WITH MR. TURNER IN MY OFFICE IN WASHINGTON.
THUS, I FEEL ON FAMILIAR AND FRIENDLY GROUNDS AS I COME
BEFORE YOU TONIGHT.

WE RECOGNIZE, AS DO YOU, THAT THE ECONOMIES OF THE
UNITED STATES AND CANADA ARE AMONG THE MOST HIGHLY INTERDEPENDENT IN THE WORLD. EACH COUNTRY IS THE OTHER'S BEST

CUSTOMER.

CANADA CONTINUES TO SEND ALMOST TWO-THIRDS OF ITS

EXPORTS TO THE UNITED STATES, AND OVER TWO-THIRDS OF YOUR
IMPORTS ORIGINATE IN OUR COUNTRY. AT THE SAME TIME YOU ARE
THE LARGEST PURCHASER OF OUR EXPORTS AS WELL AS OUR CHIEF
SUPPLIER OF FOREIGN GOODS. ABOUT A FIFTH OF OUR EXPORTS
COME HERE, AND ABOUT A FIFTH OF OUR IMPORTS ORIGINATE HERE.
CANADIANS ARE ALSO REGULAR AND LARGE BORROWERS IN OUR LONGTERM

CAPITAL MARKETS.

GIVEN THESE INTERRELATIONSHIPS, IT IS TO BE EXPECTED
THAT WHEN THE UNITED STATES EXPERIENCES THE WORST PEACETIME
INFLATION IN ITS HISTORY FOLLOWED BY THE MOST SEVERE RECESSION
IN A QUARTER OF A CENTURY, THE CANADIAN ECONOMY MIGHT ALSO
BE DAMAGED. CLEARLY THE RECESSION HAS DAMPENED UNITED
STATES DEMANDS FOR CANADIAN GOODS AND HAS THUS DEPRESSED
YOUR EXPORT POSITION. AT THE SAME TIME, I SHOULD POINT OUT
THAT CANADA HAS TAKEN ACTIONS WHICH CUT BACK EXPORTS OF ENERGY
WHICH POSE DIFFICULT PROBLEMS FOR THE UNITED STATES.

y°d
WE R E M A I N F U L L Y

CONFIDENT, HOWEVER, THAT OUR DIFFERENCES

CAN BE AMICABLY RESOLVED.

IT IS MY HOPE THAT WE CAN ALWAYS

TALK FRANKLY AND OPENLY WITH EACH OTHER ~
FRIENDS.

AS EQUALS AND AS

AFTER ALL, IF TWO OF THE OLDEST AND CLOSEST PARTNERS

IN THE WORLD CANNOT WORK TOGETHER, WHO CAN?

NOR SHOULD WE

FORGET THAT THAT WHICH UNITES US REMAINS STRONGER THAN THAT
WHICH DIVIDES.

BY ANY OBJECTIVE STANDARD THE STATE OF U.S.-CANADIAN
RELATIONS REMAINS BASICALLY HEALTHY.

THAT IS ATTESTED TO

EVERY YEAR BY OUR GROWING TRADE -- OVER 40 BILLION DOLLARS
LAST YEAR ~

AND BY THE TENS OF MILLIONS OF OUR CITIZENS

CROSSING THE BORDERS ON BUSINESS AND PLEASURE. THE DECEMBER
MEETING BETWEEN PRESIDENT FORD AND PRIME MINISTER TRUDEAU
DEMONSTRATED THE SATISFACTION OF OUR LEADERS WITH THE GENERAL
STATE OF OUR RELATIONSHIP AND OUR MUTUAL DETERMINATION TO
MAINTAIN IT THAT WAY.

I MIGHT ADD THIS WAS UNDERSCORED BY

MY OWN IMPRESSIONS DURING MY RECENT OTTAWA VISIT WITH

- « - ••

-"E*f <<

FINANCE MINISTER TURNER. ALL OF US SHARE THE SENTIMENT
EXPRESSED BY EXTERNAL AFFAIRS MINISTER MACEACHEN IN HIS
WlNNEPEG SPEECH ON RELATIONS BETWEEN OUR COUNTRIES. "WE
ARE EACH OTHERS BEST FRIEND," HE SAID, "BY CHOICE AS WELL
AS CIRCUMSTANCE."

ENDING THE RECESSION
OUR MOST IMMEDIATE MUTUAL CONCERN IS TO END THE RECESSION
THAT IS AFFLICTING BOTH OF OUR ECONOMIES. FORTUNATELY, BOTH
OF us APPEAR TO BE MAKING SIGNIFICANT PROGRESS.

TEN DAYS AGO I RETURNED FROM AN EXTENDED TRIP AROUND
THE WORLD THAT ENABLED ME TO SPEAK WITH FINANCE MINISTERS
AND SEVERAL HEADS OF STATE ON A WIDE RANGE OF ECONOMIC
ISSUES. ONE OF THOSE MEETINGS WAS IN PARIS WHERE I CONFERRED
WITH THE FINANCE MINISTERS FROM THE OECD NATIONS, .-._

-5-

. °9 \\

IT WAS THE NEAR UNANIMOUS VIEW AMONG THOSE
MINISTERS THAT THE WESTERN WORLD WAS NEARING THE END OF THE
CURRENT RECESSIONARY CYCLE.

IN THE UNITED STATES, THERE ARE SOLID GROUNDS FOR
BELIEVING THAT AS MUCH AS 75 PERCENT OF THE RECESSION IS
ALREADY BEHIND US. BECAUSE OF THE SIGNIFICANCE THAT OUR OWN

\r\ CoLnaday
RECOVERY MAY HAVE HERE/\ I WOULD LIKE TO DWELL ON THAT SUBJECT
FOR A FEW MOMENTS.

IN MY VIEW, TWO FACTORS HAVE BEEN ESPECIALLY IMPORTANT
IN BRINGING US CLOSE TO THE END OF OUR RECESSION. ONE HAS
BEEN THE RAPID LIQUIDATION OF INVENTORIES, WHICH REACHED A
RECORD LEVEL IN THE FIRST QUARTER OF THIS YEAR. THE IMPORTANCE
OF THIS LIQUIDATION PROCESS IS THAT IN MANY INDUSTRIES
SALES ARE MOVING AHEAD MORE RAPIDLY THAN PRODUCTION. As
THAT CONTINUES, WE CAN EXPECT AN INCREASE IN PRODUCTION IN ORDER

TO MEET DEMAND.

AND AS THAT HAPPENS, OF COURSE, WE WILL BE

ENTERING UPON THE RECOVERY.

THE INVENTORY LIQUIDATION REFLECTS ANOTHER FACTOR OF
EQUAL IMPORTANCE: THE TURNAROUND IN OUR RETAIL SALES. EVEN
APART FROM THE INFLUENCE OF PRICE REBATES ON AUTO SALES,
RETAIL SALES ROSE BY A TOTAL OF 3~L/2 PERCENT IN THE FIRST
QUARTER OF THIS YEAR AND APPEAR TO HAVE INCREASED A BIT
FURTHER IN APRIL.

THERE WAS ALSO ENCOURAGING NEWS IN THE EMPLOYMENT
FIGURES OUR GOVERNMENT RELEASED LAST FRIDAY. WHILE THE
RATE OF UNEMPLOYMENT ROSE TO 8.9 PERCENT, THE HIGHEST LEVEL
OF THE POST-WAR PERIOD, THE INCREASE WAS A SMALL ONE AND —
MORE IMPORTANTLY — A.PRIL ALSO BROUGHT THE FIRST INCREASE IN
OVERALL EMPLOYMENT IN HALF A YEAR. THERE HAS ALSO BEEN A
SLIGHT REDUCTION IN THE RATE OF JOB LAYOFFS, WHICH HAS A

-1

^fl

CRUCIAL IMPACT NOT ONLY ON UNEMPLOYMENT BUT ALSO UPON
PUBLIC CONFIDENCE.

THERE ARE SEVERAL OTHER SIGNS THAT ARE ALSO POINTING IN
THE DIRECTION OF RECOVERY:

-- FOR ONE THING, OUR INFLATION RATE HAS FALLEN FASTER
AND FURTHER THAN ANYONE THOUGHT POSSIBLE. IN THE THREE
MONTHS ENDING IN FEBRUARY, THE CONSUMER PRICE INDEX ROSE AT
AN ANNUAL RATE OF 6-1/2 PERCENT, COMPARED TO A PEAK RATE OF
15 PERCENT EARLY LAST FALL, AND INDUSTRIAL WHOLESALE PRICES
INCREASED AT A RATE OF LESS THAN 4-1/2 PERCENT IN THE SAME
THREE-MONTH PERIOD, COMPARED TO A PEAK RATE OF ALMOST 40
PERCENT LAST SPRING. BECAUSE OF A JUMP IN FOOD PRICES, THE
OVERALL WHOLESALE PRICE INDEX RELEASED THIS MORNING SHOWED
AN INCREASE, BUT THE INDUSTRIAL WHOLESALE PRICE FIGURES
REMAINED VIRTUALLY UNCHANGED.

y;\y
—

THE REDUCTION IN THE RATE OF INFLATION WILL BRING

AN INCREASE IN REAL EARNINGS, WHICH WILL HELP TO INCREASE
CONSUMER PURCHASING.

—

AS MONETARY POLICY HAS BECOME MORE EXPANSIVE AND

INFLATION HAS SUBSIDED, SHORT-TERM INTEREST RATES HAVE
FALLEN AND FUNDS HAVE BEGUN FLOWING BACK INTO THE THRIFT
INSTITUTIONS.

THIS SETS THE NECESSARY PRECONDITION FOR AN

UPTURN IN THE HARD~HIT HOUSING INDUSTRY.

—

SURVEYS ALREADY SHOW THAT CONSUMER CONFIDENCE IS

PERKING UP.

-- AND THERE HAS BEEN A DEFINITE AIR OF OPTIMISM IN THE
STOCK MARKET, WHERE THE DOW JONES HAS RISEN BY SOME 35
PERCENT SINCE ITS LOW POINT IN 1974.

IN A D D I T I O N

THESE DEVELOPMENTS WITHIN THE PRIVATE

SECTOR, THE GOVERNMENT HAS ALSO TAKEN SEVERAL POSITIVE STEPS
TO ASSIST THE FORCES OF RECOVERY.

AS I MENTIONED, THE

FEDERAL RESERVE HAS ALREADY EASED MONETARY CONDITIONS

SUBSTANTIALLY AND BOARD CHAIRMAN ARTHUR BURNS HAS INDICATED
THAT THE FEDERAL RESERVE WILL CONTINUE TO SUPPORT THE
RECOVERY WHILE AVOIDING EXCESSIVE STIMULATION. AT THE SAME
TIME, THE CONGRESS HAS PASSED.AND THE PRESIDENT HAS SIGNED
THE BIGGEST TAX CUT IN OUR HISTORY. COMBINED WITH A LARGE
FEDERAL DEFICIT, THE TAX CUT WILL GIVE A STRONG BOOST TO THE
ECONOMY.

SUCH CHEERFUL ECONOMIC NEWS IN THE UNITED STATES IS AS
WELCOME AS A SPRING RAIN AFTER A LONG DROUGHT. IN DISCUSSING
IT, HOWEVER, I DO NOT MEAN TO SAY THAT PROSPERITY IS AT
HAND. CERTAINLY ECONOMIC DEVELOPMENTS IN THE UNITED STATES
ARE NOT GOING TO BE A STEADY PATTER OF GOOD NEWS. ECONOMIC
POLICY FACES ENORMOUSLY DIFFICULT CHALLENGES IN THE MONTHS
AND YEARS AHEAD.

OUR UNEMPLOYMENT RATE SHOULD PEAK SOON, BUT EVEN IF THE
RECOVERY PROVES TO BE EXCEPTIONALLY VIGOROUS, UNEMPLOYMENT

WILL REMAIN UNACCEPTABLY HIGH FOR MONTHS TO COME.

FURTHERMORE,

INFLATION IS NOT GOING TO DISAPPEAR. WE WILL CONTINUE TO
MAKE PROGRESS AGAINST INFLATION, BUT WE MUST REMAIN VIGILENT
BECAUSE INFLATION REMAINS OUR MOST SERIOUS LONG-TERM ECONOMIC
CHALLENGE. SIMILARLY, OUR PROBLEM OF EXCESSIVE DEPENDENCE
ON INSECURE AND OVERPRICED SOURCES OF FOREIGN ENERGY WILL
REMAIN SERIOUS FOR SEVERAL YEARS EVEN IF WE TAKE IMMEDIATE
CORRECTIVE ACTION AT HOME — AND SO FAR, THAT ACTION HAS
BEEN PAINFULLY SLOW IN COMING. STILL ANOTHER LONG-TERM
CHALLENGE OF IMMENSE IMPORTANCE IN THE UNITED STATES IS
WHETHER WE WILL BE ABLE TO TRIPLE OUR LEVELS OF CAPITAL
INVESTMENT AS WE MUST DO IN ORDER TO ACHIEVE OUR MOST FUNDAMENTAL
GOALS OF ECONOMIC GROWTH.

THE CHALLENGES WE FACE ARE THUS FORMIDABLE. OUR BASIC
OBJECTIVE FOR THE NEXT SEVERAL MONTHS IS TO ENSURE THAT OUR
RECOVERY IS STRONG ENOUGH TO REDUCE UNEMPLOYMENT BUT DOES
NOT PROCEED SO RAPIDLY THAT WE SACRIFICE THE PROSPECTS FOR

-11 SUSTAINED DURABLE PROGRESS.

ABOVE ALL, WE MUST RESIST THE TEMPTATIONS OF HIGHLY
STIMULATIVE FISCAL AND MONETARY POLICIES. THE TAX REDUCTION
THAT WAS ENACTED, ALONG WITH THE FEDERAL DEFICITS, WILL
PROVIDE A STRONG BOOST TO THE ECONOMY. AT THE SAME TIME,
HOWEVER, A NUMBER OF EXPENSIVE FEDERAL SPENDING PROGRAMS ARE
NOW BEING SERIOUSLY CONSIDERED IN OUR CONGRESS ON THE
THEORY THAT THEY ARE NEEDED TO SPEED UP THE RECOVERY. MOST

-tte effect <&- r t
OFTEN,ANEW SPENDING PROGRAMS

<3/"e flOf 4 ^ / T

FOR A

YEAR

TO EIGHTEEN MONTHS. PROGRAMS ENACTED IN COMING MONTHS WOULD
NOT PUMP STIMULUS INTO THE ECONOMY UNTIL WE ARE ALREADY
MOVING TOWARD FULL CAPACITY, AND THEY WOULD THUS CONTRIBUTE
SIGNIFICANTLY TO NEW INFLATIONARY PRESSURES.

A SECOND DANGER OF OVERSIZED GOVERNMENT DEFICITS WOULD
ARISE, AS YOU KNOW, IN OUR PRIVATE CAPITAL MARKETS.

FOR

9L,PSEVERAL MONTHS, I HAVE BEEN EMPHASIZING THAT DEFICITS IN
THE RANGE OF $50 TO $60 BILLION ~ THE RANGE THAT THE
ADMINISTRATION HAS SET AS A CEILING — WILL CREATE SOME
STRAINS IN OUR FINANCIAL MARKETS, BUT THEY SHOULD BE
MANAGEABLE. HOWEVER, DEFICITS IN THE MAGNITUDE OF $80 TO
$100 BILLION WOULD BE CLEARLY EXCESSIVE AND DANGEROUS. AND
IN MY TALKS WITH FINANCIAL LEADERS, I FIND THAT MOST OF THEM
AGREE WITH THAT VIEW.

IN AN ORDINARY RECESSION, LARGE-SCALE FEDERAL BORROWING
CAN BE ACCOMMODATED IN THE PRIVATE MARKETS BECAUSE PRIVATE
DEMANDS FOR FUNDS ARE SLACK. IN THIS RECESSION, HOWEVER,
DEMANDS FOR FUNDS REMAIN HIGHER THAN USUAL FOR A NUMBER OF
REASONS, INCLUDING THE EFFECTS OF INFLATION, THE ILLIQUIDITY
AND POOR DEBT STRUCTURE OF MANY OF OUR FINANCIAL AND NONFINANCIAL INSTITUTIONS, THE ACTIONS OF SOME CORPORATIONS
THAT ARE INCREASINGLY FEARFUL OF FUTURE INFLATION, AND THE

STRAINED FISCAL POSITIONS OF MANY OF OUR STATE AND LOCAL
UNITS OF GOVERNMENT. AS A RESULT OF ALL OF THESE FACTORS,
WE ARE ALREADY EXPERIENCING SOME DIFFICULTIES IN THE CAPITAL
MARKETS AND INTEREST RATES HAVE NOT DECLINED AS FAR AS THEY
NORMALLY WOULD DURING A RECESSION.

THE MORE SERIOUS DANGER, HOWEVER, WOULD ARISE NOT THIS
YEAR BUT NEXT WHEN THE RECOVERY WILL TAKE HOLD AND WE WILL
HAVE A RISING TIDE OF PRIVATE AND PUBLIC DEMANDS FOR FUNDS.
IT IS WELL TO REMEMBER THAT WHILE OUR RECESSION IS 75 PERCENT
OVER, THE BORROWING TO FINANCE OUR DEFICITS IS ONLY 25 PERCENT
COMPLETED. BASED ON THE PRESIDENT'S BUDGET AND CURRENT

- MORE -

ENACTMENTS, WE EXPECT THAT THE T REASURY WILL NEED TO BORROW
SOME $75 BILLION IN FUNDS THIS" CALENDAR YEAR — A BILLION
AND A HALF DOLLARS A WEEK. IN 1976, IF THE OUTLAY TOTALS
PROJECTED IN OUR CONGRESS ARE AN ACCURATE PROJECTION AND IF
THERE IS AN EXTENSION OF MAJOR TAX PROVISIONS, niJR BORROWING
NEEDS NEXT YEAR COULD REACH $84 BILLION.

THE IMMEDIATE IMPACT OF HUGE FEDERAL DEMANDS DURING A
PERIOn OF RECOVERY WOUL^ DEPEND, OF COURSE, UPON TME MONETARY
POLICY OF THE FEDERAL RESERVE, INDEED, MONFTARY POLICY IS
GOING TO BE A CRITICAL ELEMENT IN SHAPING O'P FCONOf'IC
PROSPECTS BOTH NOW AND IN THE FUTURE. IF OVERSIZFD FEDERAL
DEFICITS CREATE STRONG COMPETITION FOD FUNDS AMD THE
FEDERAL PESF.RVE PURSUES A MODERATE POLICY, THERE IS
A POSSIBILITY THAT WF WOULD DRIVE MP INTERFST RATFS AND
ABORT THE PROCESS OC RECOVFRY. THE OTHER ALTERNATIVE IS

05Y
THAT THE FEDERAL RESERVE MIGHT SEEK TO ACCOMODATE THE
ENORMOUS BORROWING REQUIREMENTS OF THE FEDERAL GOVERNMENT,
AS WELL AS PRIVATE DEMANDS, BY CREATING A MORE RAPID GROWTH
IN MONEY AND CREDIT. THAT MIGHT POSTPONE THE ADVERSE IMPACT
ON THE RECOVERY FOR PERHAPS A YEAR OR TWO, BUT THE CONSEQUENCES
OF THAT ACTION WOULD SOON CATCH UP WITH IIS IN THE FORM OF A
REACCELERATED INFLATION FOLLOWED) BY A MEW RECESSION AND
HIGHER UNEMPLOYMENT. ROTH ALTERNATIVES, THEN, WOULD HAVE
HIGHLY UNDESIRABLE RESULTS, AND IT SEEMS CLEAR THAT WE WOULD
BE FAR WISER TO AVOID POLICY DECISIONS WHICH WOULD FORCE US
TO MAKE SUCH A HOBSON's CHOICE.

LET ME STROMGLY EMPHASIZE THAT I AM NOT PREDICTING THAT
THESE EVENTS WILL TRANSPIRE; RATHER, I AM WARNING OF THE POSSIBLF
RESULTS OF MISGUIDED FISCAL AND MONETARY POLICIES. AND LET ME

ALSO ADD —

AND I KNOW THIS IS IMPORTANT FOR THIS AUDIENCE

THAT I HAVE BEEN HEARTENED BY THE RECENT DEBATES ON THIS
MATTER WITHIN THE CONGRESS AND BY THE EFFORTS TO
•

IMPOSE A CEILING ON THE SIZE OF OUR DEFICITS.

THE STEPS

TAKEN BY THE CONGRESS IN RECENT DAYS REFLECT A GROWING
AWARENESS IN OUR COUNTRY OF THE NEED FOR FISCAL AND MONETARY
RESPONSIBILITY, AND I AM INCREASINGLY HOPEFUL THAT THIS
AWARENESS WILL BE TRANSLATED INTO SOUND POLICIES FOR THE FUTUPE.

POIICTFS FOR THF RLTHRF
I HAVE LONG BELIEVED THAT THE MOST IMPORTANT CONTRIBUTION
THE UNITED STATES CAN MAKE TO INTERNATIONAL ECONOMIC PROGRESS
IS TO MAINTAIN A STRONG, HEALTHY ECONOMY AT HOMC.

,,!

HAT

POLICIES, THEN, SHOULD THE "NITED STATES BE PURSUING, AMD
HOW DO THEY RFLATE TO CANADA?

FIRST, AND FOREMOST, WF WILL CONTINUE TO SUPPORT THE FORCES
OF RECOVERY. IN WARMING UP THE ECONOMY, HOWFVER, WE MUST BE
EQUALLY CAREFUL NOT TO OVFRHEAT IT. As 60 PERCENT OF THE AMERICANS SAID IN

-1?. RECENT GALLUP POLL, INFLATION RRMAIMS O>IR SINGLE MOST
FUNDAMENTAL ECONOMIC PROBLEM. "IT WAS INFLATION THAT HELPED
TO PRODUCE THIS RECESSION, AND IT IS INFLATION THAT COULD
CREATE ANOTHER RFCESSION OP F.VEN GREATER MAGNITUDE IF
WE ADOPT MISGUIDED POLICIES TODAY,

SECOND,, IN OUR EFFORT TO TAKE A LOMGFR LOOK AT OUR
ECONOMIC PROBLEMS, WE MUST MAKE A BASIC SHIFT IN OUR DOMESTIC
POLICIES AWAY FROM OUR OVEREMPHASIS UPON PERSONAL CONSUMPTION
AND GOVERNMENT SPENDING AND TOWARD GREATER EMPHASIS UPON
SAVINGS, CAPITAL FORMATION ANH CAPITAL INVESTMENT, IT IS
AN ECONOMIC FACT OF LIFE THAT INCRFASED PRODUCT.VITY IS THE
ONLY WAY TO INCREASE OUR STANDARD OF LIVING, AND YET THE
RECORD OF CAPITAL INVESTMENT IN THE MNITED STATES IN
RECENT YEARS HAS RANKED 17TH AMONG THE 2^ NATIONS OF THE

OEC".

- 18 THIRD, WE BELIEVE THAT IT IS URGENT THAT ALL OF THE

OIL CONSUMING NATIONS, INCLUDING THE UNITED STATES AND
CANADA, MOVE AHEAD WITH STRONG AND CONSTRUCTIVE PROGRAMS
IN THE FIELD OF ENERGY. WE FULLY

SUPPORT THE DESIRES OF

THE OPEC NATIONS TO ACHIEVE ECONOMIC DEVELOPMENT, BUT THE
PRICES THEY ARE NOW CHARGING FOR THEIR 01L ARE NEITHER
JUSTIFIED NOR ARE THEY SUSTAINABLE.

IT IS IMPORTANT THAT ALL OF US MAINTAIN A BALANCED
PERSPECTIVE WITH REGARD TO OPFC. THIS CARTEL, LIKE ALL
OTHER CARTELS IN THE PAST, IS SUBJECT TO THE LAWS OF SUPPLY
AND DEMAND. WHEN DEMAND FALLS, THE CARTEL HAS NO CHOICE
BUT TO LOWER ITS PRICE OR TO LOWER ITS PRODUCTION. V'E ARE
ALREADY SEEING THIS PROCESS AT WORK: BECAUSE OF REDUCED

3^
WORLDWIDE CONSUMPTION, OPEC HAS NOW CUT ITS

PRODUCTION BY

OVER 12 MILLION BARRELS A DAY — ABOUT ONE THIRD OF ITS CAPACITY —
IN ORDER TO HOLD THE LINE ON PRICES. WLTHIN A FEW MONTHS,
OPEC'S SHUT-IN CAPACITY MAY RISE TO 15 TO 16 MILLION BARRELS
OF OIL A DAY. FURTHERMORE, DURING THE LAST THREE YEARS, AS
THE OPEC MEMBERS RECOGNIZE, SIGNIFICANT DISCOVERIES OF OIL
HAVE BEEN MADE IN SOME 25 TO 30 AREAS OF THE WORLD OUTSIDE
OF OPEC — UNCOVERING RESERVES ESTIMATED AT ROUGHLY 35 BILLION
BARRELS. THESE NEW FIELDS COULD PRODUCE SOME 8 MILLION
ADDITIONAL BARRELS A DAY BY THE EARLY 1980S, AND THIS DOES
NOT INCLUDE NEW PRODUCTION COMING FROM THE UNITED STATES, THE
SOVIET UNION, AND THE PEOPLE'S REPUBLIC OC CHINA.

AS THESE PRESSURES HAVE DEVELOPED, SOME OF THE MEMBERS
OF THE CARTEL HAVE BEGUN SHAVING PRICES AND WE HAVE BEGUN
TO SEE THE FIRST CRACKS IN WHAT MANY.HAVE ERRONEOUSLY

- 20 CLAIMED IS AN INPREGNABLE PRICE WALL.

As I HAVE SAID"""

MANY TIMES IN THE PAST, IT IS NO LONGER A QUESTION OF WHETHER
OIL PRICES WILL COME DOWN, BUT WHEN THEY WILL COME DOWN.

BOTH OF OUR COUNTRIES SHARE A KEEN INTEREST IN THE
LOWERING OF INTERNATIONAL OIL PRICES. THE CANADIAN INTEREST
IS PARTICULARLY PRONOUNCED HERE IN ONTARIO, YOUR INDUSTRIAL
HEARTLAND. CLEARLY, THOSE WHO WILL GAIN THE MOST FROM A
REDUCTION IN THE PRICE OF OIL ARE THE CONGESTED, INDUSTRIALIZED
AREAS OF THE WESTERN WORLD. THUS, WE BELIEVE THAT IT IS IN
THE INTEREST OF BOTH THE UNITED STATES AND CANADA TO WORK
TOGETHER ON ENERGY MATTERS ~ NOT TO SEEK BENEFITS AT THE
OTHER'S EXPENSE.

STILL ANOTHER MAJOR ECONOMIC GOAL OF THE UNITED STATES —
AND THE FINAL ONE THAT I WILL ADDRESS TONIGHT — IS-TO LOWER
THE MANY BARRIERS THAT STILL EXIST IN INTERNATIONAL TRADE.

"3^
THERE IS A CONTINUING DANGER THAT IN TODAY'S ECONOMIC CLIMATE
COUNTRIES MAY TURN INWARD, ERECTING PROTECTIONIST WALLS
THAT SHIELD THEM FROM THE OUTSIDE AND POSSIBLY SETTING OFF
A NEW ERA OF "BEGGAR-THY-NEIGHBOR" POLICIES. IT IS TRUE
THAT THE SOLUTIONS TO EACH NATION'S ECONOMIC PROBLEMS MUST
BEGIN AT HOME, BUT IT IS EQUALLY TRUE THAT SIGNIFICANT
PROGRESS CAN BE MADE THROUGH INTERNATIONAL COOPERATION.

MOREOVER, IT IS NOT UNFAIR TO SAY THAT THE IMPORTANCE
OF CANADIAN EXPORTS TO THE UNITED STATES DERIVES IN PART
FROM THE FACT THAT WE HAVE MAINTAINED RELATIVELY UNRESTRICTED
MARKETS. I ALSO WANT TO MAKE IT CLEAR THAT WE WILL BE
TAKING NO STEPS IN THE FUTURE TO BAR YOUR ACCESS TO OUR
CAPITAL MARKETS. WE HAVE WELCOMED YOU IN THE PAST, AND WE
WILL CONTINUE TO WELCOME YOU IN THE FUTURE.

AT THE SAME TIME, WE HOPE THAT YOU WILL RESIST THE
TEMPTATION TO IMPOSE RESTRICTIONS ON OUR ENTRY INTO YOUR

-22 MARKETS.

y9(f(-

SUCH RESTRICTIONS MAY NOT APPEAR TO YOU TO HAVE A

LARGE IMPACT UPON OUR ECONOMY, BUT IN FACT THEY GREATLY
STRENGTHEN THE PROTECTIONIST FORCES WITHIN THE UNITED STATES
AND MAKE IT MUCH MORE DIFFICULT FOR US TO CONDUCT AN OPEN
AND EVEN-HANDED FOREIGN ECONOMIC POLICY.

WE LOOK FORWARD

TO ACTIVE PARTICIPATION BY CANADA IN THE MULTILATERAL TRADE
NEGOTIATIONS AND AN EVENTUAL LOWERING OF TRADE BARRIERS THAT
WOULD BE TO OUR MUTUAL BENEFIT.

IN CLOSING, LET ME STRESS ONCE AGAIN OUR DESIRE FOR
FRANK AND OPEN DISCUSSIONS WITH YOU-TO RESOLVE THOSE FEW
DIFFERENCES THAT EXIST BETWEEN US.

AS A NATION OF IMMIGRANTS,

WE HAVE LEARNED FROM EXPERIENCE IN THE UNITED STATES THAT
FROM A DIVERSITY OF VIEWS CAN COME GREATER STRENGTH, GREATER
INSPIRATION -- AND GREATER FRIENDSHIP.

IT HAS BEEN SAID THAT CANADA IS "BOUNDED ON THE NORTH
BY GOLD, ON THE WEST BY THE ORIENT, ON THE EAST BY HISTORY

- 23 AND ON THE SOUTH BY FRIENDS." WE HOPE AND TRUST THAT WILL
ALWAYS BE TRUE.

THANK YOU.

# # # #

^y
Hello, I'm delighted to be with you today.

And

I like the subjects I've been asked to talk about —
which are women and the economy. That's a nice, wide
variety.
Variety is what women are all about. And "all
about" is where we are these days.
We are mopping kitchen floors, raising families,
living in communes, robbing banks, trying for the
executive suite, and in general being as good, bad,
smart, silly and cantankerous as men.
Fifty percent of women between 18 and 65 are
currently working. We're as well educated as men but,
on the average, we earn only three-fifth's of a man's
salary. There are many reasons for this and one —
the main reason — is that many women work only on a
part-time basis. For many women, jobs are secondary
to their careers as wives and mothers.

Remarks by the Honorable Francine I. Neff, New Jersey Federation of Republican Women, Atlantic City, New Jersey on
May 8, 1975

Politics, of course, is one area that attracts /
women. Mrs. Ella Grasso is now Connecticut's governor while Mary Ann Krupsak is the Lieutenant Governor
of New York. A number of new women entered Congress
this year, including your own Representative Millicent
Fenwick who has, in the words of this week's Washington Post, become "a star of the 94th Congress freshman
class." As you know, Mrs. Fenwick was once a member
of the New Jersey State Assembly, and I loved her reply
to a male colleague after she had proposed an Equal
Rights Amendment. The man said, "I just don't like
this amendment, because I've always thought of women
as kissable, cuddly and smelling good."
Mrs. Fenwick replied, "That's the way I feel about
men too. I only hope for your sake that you haven't
been as disappointed as often as I have."
Other women politicians that quickly come to mind
are that good friend of all of us, Mary Louise Smith,
first woman chairman of the Republican National Committee, and Mrs. Carla Hills, our new Secretary of Housing
and Urban Development, and the third woman cabinet
officer in history.
In other areas, American women are scoring other
gains. Congress outlawed credit discrimination based
on sex last year. The Bank of America settled a class
action suit on behalf of its female employees, which
will mean about $10 million in additional income to women.

31*
And the First Women's Bank —

that's the name

—

is now organized in New York City, to become the first
female-run and female-oriented bank in the country.
. About 15 more banks are somewhere in the
process of being organized.

First Women's

plans to set up a consumer finance library and investment and counseling services to help women with financial planning.
Nov/, I've been talking about working women -- and
automatically we think of paid jobs.
put in a good word for volunteers.
important to our society.
mostly women —

But I'd like to
They are terribly

Some 7 0 million people --

have volunteer jobs, and they contri-

bute an estimated $50 billion a year to America's
"gross national product."
I am a wife, mother and dedicated believer in the
value of volunteers.

For the first quarter century of

my adult life, I volunteered for everything from the
PTA to the GOP.

I was privileged to learn many techniques

and skills this way, because a willing volunteer can
often work with top people.

I personally feel my route

to a career was via the way of the volunteer.
Today, I work full time as the United States
Treasurer and as National Director of the Savings
Bonds Division.

I am heartened to know that 97 per-

cent of the people who help sell bonds are volunteers.

37
I suspect — I hope — that some of you.; are among
those workers in our program.
Our National Savings Bonds goal for 1975 is 6.8
billion dollars in bond sales, and at least 2.4 million
new or increased savers.
New Jersey did very well in 1974 Bond sales,
ranking 7th in dollar sales in the Nation.

And that

was a 13 percent increase over 1973.
New Jersey has always been a leader —
only in Savings Bonds.

and not

I learned the other day that

New Jersey was the first state in the Nation to give
women the right to vote.
1790's.

That was way back in the

However, some all-male legislature took it

away in 1807 and the reason for this —
clenched teeth —
the state."

I quote with

was "the good order and dignity of

Well, no comment.

Meanwhile —

back to Bonds -- where we do have

good leadership right from the top.

I was privileged

to visit with President Gerald Ford a few weeks ago.
He is a regular Savings Bonds buyer, and he told me
that this year he is increasing his payroll deduction.
Just last week, in fact, he bought the first $200
Bicentennial-design bond.
I certainly don't need to tell you ladies all the
advantages of Savings Bonds.
of them.

You already know most

Bonds are a safe, convenient, painless way

to save, with a very attractive 6 percent interest
rate. A banker friend of mine has added up figures
which show that over the last 5 years $7 5 invested
monthly in bonds is worth more today than the same
amount invested in stocks on the Moody's Industrial
Index.
Bonds also have tax advantages which can increase
that 6 percent rate substantially.
Finally, Savings Bonds help the nation. They
put more of the Federal debt into the hands of longterm savers. They remain outstanding, on the average,
for six years, while other marketable instruments turn
over in three years or less. Almost a quarter of our
publicly held national debt is in the form of Savings
Bonds.
So, our Bonds are good for America and good for
Americans. Sales of series E and H bonds were at a
29-year high in 1974. And, so far this year, sales
are even higher. In this period of inflation and
recession, the proven performance of United
States Savings Bonds is very appealing.
Let's talk a little more about inflation and recession, and some of the other shocks that have hit
our economy this past year.
Since last May —
— We have experienced the highest rate of inflation in our peacetime history.

—

Our economy is in the worst slump in years.

— Oil prices have quadrupled.
— And $100 million of the world's wealth has
been transferred to a small band of developing nations.
These stories all made the headlines. But another
story — equally as important — did not. And that is
the story of how well our economic system has operated
under conditions of extraordinary stress.
Throughout 1974, the prophets of doom announced
that our Ship of State was halfway under water and
sinking fast.
That isn't true and it won't be true. America
is alive and well. The Ship of State still sails;
the flag still flies; and most of us still live and
love and fight with our husbands.
Let's look at the record of some of the predictions, and then let's see what actually happened.
— Prices on foreign oil jumped sky-high in 1974,
and it was said that the international financial system
might collapse, as massive sums of money were transferred.
In fact, the financial institutions responded with
considerable skill. OPEC funds were rather widely
disbursed. And the oil consuming nations are presently
working on new international agreements for future
emergencies.

Further, new oil discoveries outside of the OPEC
nations, and new production in the United States and
elsewhere will eventually result in lowered prices.
For another example, let's consider the fears of
some people that we are heading into another Great
Depression.
Of course, we've had a recession, but it did not
come close to the conditions of the 1930's.

Unemploy-

ment figures in 1975 are well under half of the 1930's
figures, and there are such safety nets as Social Security, medicare, unemployment payments, and food stamps.
Treasury Secretary William Simon correctly predicted
some months ago that the economic slide would bottom out
during the middle months of this year, and that prediction is being widely borne out.
Our free enterprise system still functions, and the
laws of supply and demand still work.

But, too often

•

71C

We suffered an oil embargo, and oil prices today
are high.
But more fundamentally, we have for years abused
our economic system.

The fact that it still functions

so well is a great tribute to its basic strength.
Our growing Federal government puts enormous
demands on the economy.
The proliferation of government regulations burdens both business and the consumer.

Federal regula-

tions, for example, added $320 to the price of a 1974
car.
And, our national habits of encouraging consumption
and federal spending at the cost of savings and investment is a very serious concern.

Capital investment in

the United States in recent years has been the lowest of
any industrial nation in the free world.
Secretary Simon and other government officials
are working to turn some of these trends around.

They

feel, and I agree, that
—

We must restore greater discipline to our finan-

cial affairs.
r-- We must lighten the hand of government in many
areas.
-- And we must encourage savings, investment and
capital formation.

Finally, we must turn away from the doomsayers.
/

Despite our problems, we have an incredibly strong
nation, both in spirit and in material goods. Now
we need to speak to the good in each other.
But we need to do more than speak — we need
to act.
As parents, we need to instruct our children
in economics. We must transfer to them our knowledge
of the supply and demand system; our belief in the
free marketplace; and the legitimacy of profit.
As business people, it is incumbent on us to
take our knowledge and expertise into the classrooms,
by actually serving as speakers and lecturers, and by
seeing that our elected school board members transmit
the need for sound economic education to the teachers.
As citizens, we must demand that the news media
make some effort to understand our economic system.
As Republicans, we must make certain we do our
work well. We must see that the voting public has a
choice of candidates on election day. We must convince
good people to run for office, we must then support
them with our money, our volunteer time and efforts.
We must conduct vigorous and effective registration
campaigns, voter preference polls, get-out-the-vote
campaigns and ballot security schools. Then after the
elections are over, we must make certain our elected

- ^n
officials understand that good economics is gooa politics.
As Americans, we must build on our strengths once
more. Let us look back at our 200 years of history.
Then let us look forward with confidence as we go about
doing our jobs, raising our families and helping society.
Thank you.

EXCERPTS FROM THE REMARKS OF
EDGAR R. FIEDLER
ASSISTANT SECRETARY FOR ECONOMIC POLICY
U. S. DEPARTMENT OF THE TREASURY
at the
CONFERENCE ON RECESSION AND INFLATION
IN AN INTERDEPENDENT WORLD
UNITED STATES EMBASSY, LONDON
May 9, 19 75
The tide of economic affairs in the United States seems
to be turning. That tide has been running against economic
progress so strongly and for so long it is a bit difficult
to accept the idea of a turn for the better. Nevertheless,
that is what seems to be happening at the moment.
One key development is that the recession is ending.
We do not yet have what lawyers would call hard evidence of
the turn in the form of a change of direction in the statistics
on production and employment or other measures of total business activity. There are, however, enough "recovery preconditions" in place, and the process of cyclical reversal is
far enough along, to support a tentative conclusion that
economic recovery is now underway.
At the same time, the rate of inflation has subsided.
This improvement has come about for two reasons. First, the
impact of the transitory elements that pushed the U. S. inflation rate above the double-digit mark last year is almost
entirely behind us now -- the quadrupling of crude oil prices,
the food price explosion arising from the very short crops
of 1972 and 1974, the price impact of dollar devaluation,
and the temporary burst of price and wage increases that
followed the end of the controls program (except for petroleum
products) just a year ago.
Second, the steep recession and
the economic slack it created have pulled down the prices of

WS-296

-2many raw materials and other cyclically sensitive commodities,
and slowed the rate of increase in other areas. As a result,
the consumer price index has risen at an annual rate of 6%
percent in the 3 months ending in February, as compared to a
peak rate of 15 percent early last fall, and industrial
wholesale prices have increased at a rate of less than 4%
percent in the 3 months ending February, compared to a peak
rate of almost 40 percent last spring.
Thus we are now seeing some cheerful economic news in
the United States and it is as welcome as rain after a drought.
In pointing out this turn for the better, however, I do not"
want to suggest that we are all going to live happily ever
after if we will only sit back and enjoy it. Certainly the
economic news in the United States is not going to be a steady
diet of pleasant reading from now on. Clearly, economic
policy faces enormously difficult challenges in the months
and years ahead.
Unemployment should start to decline before too many
months have passed, but even if the recovery proves to be
exceptionally vigorous, unemployment is going to remain unacceptably high for a long time. Furthermore, inflation is
not going to disappear. I think further progress is possible,
but inflation will be an even more stubborn adversary from here
on in. Similarly, the problem of excessive dependence on
insecure energy supplies will remain serious for years to
come, even if we take meaningful steps to curb our consumption
and encourage new domestic development — and thus far action
of that sort has been slow in coming. Another long-term
problem in the U. S. economy that is of particular concern is the
likelihood of an inadequate rate of capital formation.
Our problems are thus many and formidable. In meeting them,
the basic challenge for policymakers is to make sure that our
economic recovery is vigorous enough to insure substantial
progress in reducing unemployment, but without proceeding so
rapidly that we sacrifice the prospects for sustainable
prosperity with low inflation through the years. In particular,
we must avoid getting back on the boom-and-bust roller coaster
that has been our fate in recent years. To do so would only
bring forth a new round of double-digit inflation and another
recession subsequently.
I worry that we are now sowing the seeds of just such
an unhappy harvest several years down the road. A very large

tax cut has been enacted to foster a healthy economic recovery.
At the same time, however, a surfeit of those ever-popular
Federal spending proposals — public works and every other
sort of program — are being rushed through Congress on the
rationale that they are needed to strengthen the recovery.
If this flood of spending bills is not held in check, they
will further bloat the already alarming momentum of the growth
in government spending. This would, in turn, make it impossible to adequately throttle down the fiscal stimulus as the
economy moves back toward full prosperity, and would turn a
healthy recovery into an unrestrained boom. Such a development must be avoided if we are to attain steady, sustainable
economic progress. We must prevent the expansion that lies
ahead from becoming just a brief respite between bouts of
economic overindulgence and debilitating inflation.
Lessons of Our Recent Experience
In our efforts to achieve sustained prosperity, we
should be guided by experience. Surely the economic difficulties of the past decade have taught us a number of very
basic and important economic lessons.
One such lesson that both forecasters and policymakers
surely must have learned is humility. The limitations to
our understanding of how modern economies work and the inadequacies of our forecasting tools should be clear to all.
The same can be said even more emphatically about our economic
policy tools and our inability to "fine tune" the economy.
The Costs of Fixed Exchange Rates. A second lesson of
the experience of recent years is the heavy costs that are
imposed when governments intervene too closely or for too
long in the day-to-day workings of the economy. When I was
here early last year, I discussed the two and one-half year
U. S. effort at comprehensive, mandatory price and wage
controls. On other occasions I have considered the problems
of excessive industry regulation in such areas as transportation and natural gas. Today I would like to spend a few
minutes on this same general theme in a territory I am
usually careful to avoid: international economics.
From September 1974 to late February 1975 the dollar
weakened progressively in the foreign exchange markets. On
a trade-weighted basis, the decline of the value of the
dollar was not all that substantial — a bit less than 5
percent. Against a few individual currencies, however, the

-4dollar dropped precipitously; in the neighborhood of 20
percent against the Swiss franc, for example.
This development brought forth some mutterings of discontent about the floating exchange rate system. Those
mutterings have subsided in recent days, but they are sure
to surface again, and when they do I hope we will not forget the costs of a fixed exchange rate system.
What I have in mind specifically is the enormous cost
to the U. S. economy that is traceable directly to the
maintenance of an overvalued dollar from the middle 1960s
until August 1971. That cost was paid in 1973 and 1974, I
contend, in the form of a serious loss of production and
employment and a worsening of inflation.
During the boom year of 1973, the U. S. economy reached
the limits of its physical capacity at a much earlier point
than many students of the business cycle had expected.
Unemployment averaged 4-9 percent for 19 73, and the unemployment rate for married men averaged 2.3 percent. By
contrast, the previous boom year for the economy, 19 68, saw
an average unemployment rate of 3.6 percent, and for married
men, 1.6 percent. Thus the economy hit its capacity limits
in 1973 at a level that was more than one-third worse in
terms of unemployment than in 1968.
On further analysis, the reason for the early bump
against our expansion ceiling turned out to be a series of
bottlenecks in those industries that process basic materials,
such as steel, nonferrous metals, paper, lumber, cement,
textiles, and chemicals. We had not run out of the capacity
to produce automobiles and clothing and machine tools and
other finished goods, but our capacity to produce steel,
paper and other basic materials was definitely being utilized
at its limit.
The point of this is that these basic materials are in
most cases internationally traded commodities. In the late
1960s, with the dollar becoming increasingly overvalued under
the fixed exchange rate system, the United States had been
obtaining a larger and larger part of its needs for basic
materials from abroad. Foreign suppliers had a relative
price advantage in U. S. markets over our domestic producers,

whose prices and profits were thus held down. New investment in these industries was thereby inhibited, and our
domestic capacity failed to keep pace with the growth of
the economy. In August of 1971 the value of the dollar was
lowered, but at the same time price controls were imposed,
which continued the downward pressure on the prices and
profits and new investment of those industries that process
basic materials.
By the time the boom of 1973 arrived, four things had
happened: (1) we were short of domestic capacity of basic
materials relative to our own needs, (2) the simultaneous
worldwide boom then in being meant that pressure on capacity
was global, with no excess available anywhere, (3) foreign
demand for our basic materials increased sharply because
the shift in exchange rates made America an especially
favorable place for the rest of the world to buy.those
hard-to-get materials, and (4) our domestic price contrpls
provided a special incentive for U. S. firms to sell in
the export markets. As a result, the U. S. economy ran
into severe supply bottlenecks of basic materials before it
reached its capacity limits in other respects. Economic
expansion ground to a halt. Production and employment were
irretrievably lost. And inflationary pressures were raised
still further.
*
>

•. .•

I do not want to suggest that the fixed exchange rate
system and the maintenance of an overvalued dollar were
responsible in the entirety for the premature halt to the.
U. S. economic expansion of the early 1970s or for the
explosion of inflation that occurred during that period.,;
Nor do I want to suggest that the economy would have smoothly
expanded throughout 1973 to a much higher level of output. r.
Too many factors contributed to our troubles of the past
couple of years for us to pick out a single dominant source
of the trouble. The virtues of humility I mentioned earlier
should keep us from drawing conclusions that are too firm.
But I do want to suggest that the continually overvalued
dollar of the late 1960s, although it brought us some
temporary benefits at the time in terms of increased domestic
availability of goods, carried heavy longer run costs and made
a substantial contribution to our economic troubles of 1973
and 19 74. It is ironic that many people blame the devaluations of the dollar for generating domestic inflation, whereas
in reality it was the failure to adjust exchange rates in the
1960s that made the eventual impact in the 1970s so severe.

- 6 The Resiliency of Our Economic Systems. A third
lesson that we should draw from the economic troubles of
the past decade is the extraordinary ability our economies
have demonstrated to adjust to severe outside shocks.
The disastrous crop production years of 1972 (worldwide)
and 1974 (U. S.) and the quadrupling of crude oil prices
have certainly taken their toll in terms of both economic
activity and inflation. But the more instructive point
about these episodes, it seems to me, is that they did not
produce the dire consequences that so many people expected
at the outset. The international monetary system did not
collapse under the massive weight of petro-dollars.
Estimates of the future accumulation of funds in the OPEC
nations have been scaled down from $600 billion to something
on the order of $200 to $250 billion or perhaps less. All
of our countries seem to be adjusting to the explosion of
energy prices better than expected. Italy was widely thought,
some time ago, to be "going down the drain". In the United
States forecasts of $1.00 a loaf bread, $1.00 a pound sugar,
arid $1.00 a gallon gasoline received broad circulation and
acceptance. Despite our awful inflation, none of these
has come to pass.
I don't think we ought to congratulate ourselves for
avoiding all the calamities that had been forecast,- but
I do think the recent experience with these massive economic
shocks suggests that — contrary to our usual reaction —
we do not need to consider an emergency, radical restructuring
of society every time such a shock comes along. To me, the
lesson is that our economies have more inherent resiliency
and more ability to absorb these external jolts than we
generally give our systems credit for.
oOo

Contact: L.F. Potts
Ext. 2951
FOR IMMEDIATE RELEASE May 9, 1975

TREASURY ANNOUNCES MODIFICATION OF
DUMPING FINDING ON PIG IRON FROM CANADA
Deputy Assistant Secretary of the Treasury James B.
Clawson announced today a Modification of Dumping Finding
on pig iron from Canada with respect to one company. Notice
of this action will appear in the Federal Register of
Monday, May 12, 1975.
For the reasons stated in the "Notice of Tentative
Determination to Modify or Revoke Dumping Finding" published on November 25, 1974, pig iron from Canada is no
longer being, nor is likely to be, sold in the United States
at less than fair value by the Quebec Iron and Titanium
Corporation, Sorel, Quebec.
Imports of the subject merchandise from Canada during
CY 1974 were valued at approximately $32.6 million.

DepartmentoftheTREASURY I
WASHINGTON, D.C. 20220

TELEPHONE W04-2041

MEMORANDUM TO CORRESPONDENTS:

May 9, 1975

Attached is a letter to the President of the Senate
transmitting a draft bill to modernize and simplify the
procedures of U . S . Customs Service. The proposal is in
line with President Ford's recent initiatives toward
alleviating the growing paperwork burden on American
businessmen and in improving the quality of Federal agency
service to the consumer.
Also attached is a summary of the bill.

Attachments

WS-297

THE SECRETARY OF THE T R E A S U R Y
WASHINGTON

20220

MAY 7 1975

Dear Mr. President:
There is transmitted herewith a draft bill, "To modernize and
simplify customs procedures, and for other purposes."
The proposed bill is the first major piece of Customs modernization and simplification legislation designed to facilitate the
clearance of merchandise and passengers through Customs in almost
20 years. Not since the Customs Simplification Acts of the 1950fs
has the Congress been asked to focus on such measures in a comprehensive bill. In the past 18 years the number of persons processed
by Customs has doubled, increasing from 129,002,691 (1956) to
259,618,811 (1974), and the number of formal entries of merchandise
processed has tripled, from 1,073,990 to 3,206,000. As the Bicentennial
Anniversary of this nation approaches, we anticipate that the number
of international travelers to be served by Customs and the number
of importations of a commercial and non-commercial nature will increase
dramatically.
As the oldest agency in the Government, the Bicentennial Anniversary
has a special significance for the Customs Service because many of
the practices and procedures that are applicable today can be traced
back to the first Congress of the United States. Consequently, the
Customs Service, in a technological age, is operating under some laws
which reflect foreign commerce as it existed at the beginning of the
19th century. The specificity of certain of these antiquated laws
prevents Customs from adopting modern business methods to cope with
20th century conditions and from efficiently and effectively utilizing
its personnel.
The proposed bill would amend various provisions of the Customs
laws and certain navigation laws to permit the application of
accepted, modern business techniques to the processing of passengers
and imported merchandise and the collection of duties. In addition,
the legislation contains proposals which would permit the simplification
of many existing procedures and practices by introducing greater
flexibility, into the law which will result in cost reductions and
the more efficient deployment of existing personnel.

3f/
There are enclosed an analysis explaining the provisions of
the draft bill and a comparative type showing the changes that
would be made in existing law.
It will be appreciated if you will lay the enclosed draft bill
before the Senate. A similar proposal has been transmitted to the
House of Representatives.
The Department has been advised by the Office of Management and
Budget that there is no objection to the submission of this proposed
legislation to the Congress and that its enactment would be consistent
with the Administration's program.

Sincerely your^,

William E. Simtof-

The Honorable
Nelson A. Rockefeller
President of the Senate
Washington, D. C. 20510
Enclosures - 3

yi 5
CUSTOMS MODERNIZATION AND SIMPLIFICATION ACT
A.

Background

In 1799, the Congress enacted the first U. S. tariff law and
customs procedure. Although business and international trade
practices and patterns have undergone significant change in
the nearly 200 years since then, many of the customs procedures
have failed to keep apace and today still reflect the 19th
Century. The last Customs simplification legislation was
enacted in 1956. In that 20-year period, industry has turned
to computerized assists to simplify operations, administration,
and management. However, the law has not permitted the Customs
Service to take advantage of these modern technological developments.
Customs is a major business organization employing over 15,000
people. In 1974, 259,618,811 people and 3,206,000 formal entries
were processed by the Customs Service, twice the number of people
and three times the number of formal entries than were processed
in 1956. Nevertheless, the Customs Service was unable to adopt
modern business methods to cope with 20th Century conditions in
handling passengers and merchandise or utilize personnel in an
efficient and effective manner.
B.
Bill legislation attempts to remedy this situation by
The The
proposed
building flexibility into the existing customs law to permit
the Customs Service to adopt the technology of the 20th Century
and modern business techniques. The legislation would permit
the Customs Service to: (1) increase productivity of the Customs
work force to meet the continuing demands of increased workload,
(2) increase the response of the Customs Service to the needs
of the importing community by instituting modern business procedures and methods in the merchandise processing and financial
aspects of importing, and (3) insure compliance with customs
laws through modern audit techniques so that more thorough and
equitable application of such laws can be enforced in the protection of the revenue.
The bill is divided into three major titles.
Title I would permit Customs to institute up-to-date business
methods and adopt accepted financial practices in conjunction
with computerized techniques to the processing of importations.
Key features of Title I are:

(1) The procedure for entering merchandise would be modified
to permit the filing of entries at places other than a customhouse, and within a time period to be established by the Secretary of the Treasury.
(2) The duty collection procedure could be separated from
the entry procedure which would permit Customs to implement
an accounts receivable system keyed to importations occurring
during a specified period.
(3) A system akin to the Internal Revenue Service "returns"
system could ultimately be established.
(4) Improved verification procedures would be possible because
the bill would require that importers keep books and records.
(5) Customs officers would be given broader authority to
question importers and inspect their books and records.
(6) Sanctions would be strengthened to compel recalcitrant
importers to testify and to permit inspection of books and
records.
Title II would simplify and update certain sections qf the
customs law to facilitate the processing of international
travelers and low value importations, and would introduce
greater flexibility into the law where such flexibility would
result in cost-saving efficiencies. Among the many amendments
included are:
(1) A flat rate of duty of 10 percent would apply to personal
articles and gifts accompanying a person arriving in the United
States.
(2) The duty-free provision for gifts arriving by mail would
be increased from $10 to $25; for personal or household articles
accompanying a person not entitled to an exemption, from $10
to $25; for any other case, from $1 to $5.
(3) Authority to sell forfeited liquor—under existing law
it must be destroyed.
(4) An increase in the informal entry limit from $250 to $500.
(5) Authority to grant a limited exemption from trademark
restrictions for merchandise accompanying persons arriving
in the United States.

yd.
(6) Repeal of navigation fees and authority to charge a fee
commensurate with the services rendered.
(7) Expanded arrest authority for Customs officers.
Title III would modernize the procedures for licensing and
regulating customhouse brokers, which for 60 years would have
been almost unchanged despite the dramatic changes that have
occurred in the brokerage industry. Included are amendments
which would:
(1) Establish a nationwide licensing system.
(2) Establish a permit system for multi-district operations.
(3) Reduce the number of individually licensed brokers needed
to qualify a corporation for a corporate brokers license.
(4) Substitute an independent hearing examiner for the Customs
officer who now conducts the hearing.
(5) Introduce a monetary penalty as a disciplinary measure
to be imposed when a violation warrants more than a reprimand
but less than revocation of the license.
(6) Permit imposition of a monetary penalty pursuant to a
summary procedure, subject to court review.
(7) Provide for insurance or a bond to protect clients of
the broker against bankruptcies or defalcations.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR IMMEDIATE RELEASE
Friday, May 9, 1975

9£
FOR INFORMATION CALL:
(202) 456-6757

COMMENTS OF THE
COUNCIL ON WAGE AND PRICE STABILITY
REGARDING PROPOSED NOISE EMISSION STANDARDS
OF MEDIUM AND HEAVY TRUCKS
Attached is a filing by the staff of the Council on Wage
and Price Stability before the Environmental Protection
Agency regarding proposed regulations to reduce medium and
heavy truck noise from the current 86 decibels to 75 decibels
by 1983. A copy of the technical attachment referred to in
the text is available at the Council's Public Affairs Office,
o 0 o
Attachment
CWPS-42

BEFORE THE

ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF NOISE ABATEMENT

TRANSPORTATION EQUIPMENT NOISE EMISSION
FOR MEDIUM AND HEAVY DUTY TRUCKS
DOCKET No. ONAC 74-1

COMMENTS OF THE COUNCIL ON WAGE AND PRICE STABILITY
REGARDING PROPOSED NOISE EMISSION STANDARDS
OF MEDIUM AND HEAVY- TRUCKS
In its notice of October 15, 1974, the U.S.
Environmental Protection Agency (EPA) announced proposed noise regulations for medium and heavy trucks.
See 39 Federal Register 38338. That notice requested
that comments on these proposed rules be submitted by
December 16, 1974. The Council on Wage and Price
Stability (the "Council") requests that EPA waive this
filing date with respect to the following comments,
which present the Council staff's independent analysis
of the costs and benefits that would result from the
proposed regulations. The staff of the Council has
been informed by members of the EPA staff that EPA

- 2 -

has not to date taken final action on its proposal,
and would be able to consider these comments.
The proposed regulations require the noise
emission levels of these trucks to be lowered in accordance with the following timetable: 83 dB(A) in 1977,
80 dB(A) in 1981, 75 dB(A) in 1983. The current noise
emission level for these trucks is 86 dB(A). Considerable information has been received by the staff of the
Council regarding the economic impact of these regulations. In addition to the EPA background document, we
have examined information from the U.S. Department of
1/
Transportation (DOT) and General Motors (GM).
The
data that we have received reveal considerable discrepancies between estimates of both benefits and costs
to be derived from the proposed regulations. The
character of these discrepancies is delineated most
sharply by the various estimates of the changes in
heavy diesel truck prices that will result from the
additional hardware necessary to achieve the proposed
noise levels. DOT estimates the cost of this hardware

1/ For specific sources see the references included
in Attachment I.

IU
at $1,075, the EPA estimate is $1,130, and the GM esti-

1/
mate is $4,450.
Of particular concern to us is the relative
lack of attention that has been paid to evaluating the
benefits of what is certain to be an extremely costly
regulation. In its background document to the proposed
standards (pp. 6/1-40), EPA has measured benefits in
terms of the number of people who will obtain annoyance relief from the reduced noise levels proposed in
3/
the regulationGeneral Motors, in its December
1974 response to the proposed standards (page VIII-3),
has measured the benefits in terms of a reduction in
the number of "impacted environmental situations" that
will no longer be subjected to noise levels in excess
of these same benchmarks. Comparing the costs of a

2/ We consider GM's estimate to be unrealistically
high. In determining hardware costs, GM included in
its sample truck models that represent only 47 percent 6f its heavy truck sales. One of the models
included by GM in developing its estimates had a
sales volume in 1974 of 447 units — only 3.2 percent
of GM's diesel powered heavy truck sales.
3/ EPA has also offset against costs the fuel savm g s which are claimed to result from implementation
of the regulations.

- 4 -

proposed regulation against the number of people who
would no longer be annoyed if the regulation were
promulgated is like comparing apples with oranges.
Difficult though it may be, some way has to be found
to determine the value that these people place upon
their quieter environment- Only DOT has attempted
to do this through a sponsored research project
directed by Jon Nelson at The Pennsylvania State Uni-

1/
versity.
We also discover major differences of opinion
concerning the technological feasibility of attaining
the noise levels proposed in the regulation. EPA

4/ Nelson used the changes in residential property
value associated with changes in noise level as his
measure Of the benefits of noise abatement. To obtain
his estimates he used the impacted population data in
the EPA background document (reference 7 in Attachment
I). For the low estimate (used in our analysis) Nelson
included only the marginally remaining impacted population as the noise level declined toward 7 5 dB(A).
He then annualized the capitalized value of the property benefit per household to the year 2000 and
arrived at the annual flow. This estimate of the capitalized benefit per household was obtained from a sample
taken in the Washington, D.C. area which measured the
covariation between differential levels of residential
property values and differential levels of air or noise
pollution. While we consider such estimates to be a
rather slender reed upon which to base standard settings,
they appear to be the best that are presently available.
Certainly we consider their use to be more justified than
the setting of such standards with no reference to the
value of noise abatement to the affected population.
For more specific details, see reference 4 in Attachment I.

states in its Federal Register announcement that these
levels can be attained using presently available technology. However, both DOT and GM have raised serious
doubts about the validity of this contention. In
particular, DOT reports that, in its "Quiet Truck Program," only one of the three contractors was able to
5/
attain the 75 dB(A) level.
In view of these various discrepancies and
conflicting assertions, we have performed our own
benefit-cost analysis in order better to determine the
extent to which these proposed regulations are econonomically justified. Details of this analysis appear
in Attachment I.
Our analysis incorporates data from all the
sources submitted to us. We made every effort to give
the proposed regulations the benefit of any doubt.
Consequently, we believe that, if anything, we have
understated the costs and overstated the benefits.
As shown in Table I of Attachment I, we

5/ W.H. Close, Office of Noise Abatement, Department
of Transportation, Testimony at Public Hearings of
U.S. Environmental Protection Agency on Proposed Noise
Emissions Standards for New Products — New Medium and
Heavy Duty Trucks, p. (T.
"

- 6 -

estimate that by the year 2000, EPA's proposed regulations, Scenario III, will generate total benefits
of $46.5 billion and total costs of $44.5 billion.
Discounting each benefit stream at 10 percent, the
present value of benefits is $10.4 billion; the pressent value of costs, $8.4 billion; giving a ratio of
discounted benefits to discounted costs of 1.246.
It might appear from this analysis that the
proposed regulations can be considered as economically
justified. This is not the case. To see this, it
must be realized that what EPA is proposing is, in
fact, three separate regulations — 83 dB(A) by 1977,
80 dB(A) by 1981, and finally 75 dB (A) by 19 83..
Economists are quite familiar with the phenomenon of
increasing marginal costs and decreasing marginal
benefits as more resources are expended in a particular activity. For example, it should be expected that
the benefits of reducing truck noise from its current
level of 86 dB(A) to 83 dB(A) would be both more
valuable to society and less expensive to achieve
than would a further reduction from 83 dB(A) to 80 dB(A)
and from 80 dB(A) to 75 dB(A).
To highlight these all important marginal

effects, we have broken the EPA proposal into three
components. Scenario I assumes that a reduction of
truck noise to 83 dB(A) is achieved by 1977 and that
no reductions are achieved thereafter. In this
scenario, total benefits by the year 2000 are $53.4
billion and total costs are $9.7 billion. Discounted
benefits and costs are $11,5 billion and $2.25 billion
respectively, for a discounted benefit-cost ratio of
5.11. As expected, this is considerably higher than
the average discounted benefit-cost ratio of 1.245 in
Scenario III.
Scenario II assumes that both the 83 dB(A)
and 80 dB(A) targets are achieved as scheduled. Total
benefits achieved by the year 2000 under this scenario
are $51.04 billion and total costs are $26.17 billion.
Discounted benefits and costs are $11.15 billion and
$5.38 billion respectively. The discounted benefitcost ratio is 2.073, less than half the ratio of
Scenario I, but still more than twice the ratio of
Scenario III.
However, it is important to note what has
happened to total benefits and costs between Scenario
and Scenario II. Discounted benefits have actually

- 8 -

6/
fallen by $.34 billion,
while discounted costs have
7/
risen by $3.13 billion.
Comparing Scenario II with Scenario III in
which all three targets are met allows us to determine

6/ The apparent anomaly of discounted benefits
actually dropping as the standard moves from 83 dB(A)
to 80 dB(A) is accounted for by the fact that the
improvement in fuel economy at 80 dB(A) as compared
with the current 8 6 dB(A) level is actually less than
the improvement in fuel economy at the 83 dB(A) level.
We have followed DOT's procedure in treating improved
fuel economy as a benefit. Alternatively, the reduction in improved fuel economy could have been treated
as an increase in cost. If this had been done, discounted benefits would indeed have gone up, but discounted costs would have increased even more. The
net change is not affected by the procedure.
7/ As discussed in more detail in Footnote 5 .of
Attachment I, the marginal costs of going from the
current 86 dB(A) level to 83 dB(A) may have been
understated and the benefits, overstated. This is
because if manufacturers knew that the 80 dB(A) level
must be reached within a relatively short time after
meeting the 83 dB(A) standard, they are likely to
install clutch fans at the time they are trying to comply with the 83 dB(A) standards. The installation of
clutch fans accounts for the primary fuel economy
benefit which is the major source of benefits in moving from 86 dB(A) to 83 dB(A). Our scenarios assume
that clutch fans will be installed in meeting the
83 dB(A) standard, although this installation likely
would not be required to enable trucks to meet the
standard.

^9
the marginal costs and benefits of going from 80 dB(A)
to 75 dB(A). Discounted costs rise by $3.0 billion; discounted benefits fall by $0.71 billion.
To conclude, we have little doubt that a move
from 86 dB(A) to 83 dB(A) is economically justified-

Al-

though our analysis indicates that a further move to 80 dB(A)
may not be justified, we believe the cost interdependencies
referred to in Footnote 5 above may be such as to render
this result suspect.

We have no doubt, however, that the

proposed eventual lowering of the standard to 75 dB(A) is
economically unjustified based upon the evidence we have seen.
We urge EPA to more carefully examine the costs
and benefits of the proposed 80 dB(A) and 75 dB(A) standards.
In particular, we believe that EPA should consider whether,
in light of our analysis, either should be adopted.

we have already noted, we believe that the case for 80 dB(A)
perhaps can be made.

We are extremely suspicious that the

75 dB(A) target can be justified.
Respectfully submitted,

George C. Eads
Assistant Director for
Government Operations
and Research

Vaughn C. Williams
General Counsel
May 9, 1975

SIMON ANNOUNCES MEETING OF
U.S.-ISRAELI JOINT COMMITTEE
Treasury Secretary William E. Simon announced today
that the U.S.-Israeli Joint Committee for Investment
and Trade will meet in Washington, May 12-13. The Joint
Committee, which was established during Secretary Simon's
visit to Israel in July 1974, is co-chaired by Secretary
Simon and Israel's Minister of Finance, Yehoshua
Rabinowitz.
"These meetings," Simon said, "are an important part
of continuing U.S. efforts to create a constructive
economic climate in the Middle East which would facilitate
U.S. relations with countries of the area.
"During the meetings we will continue negotiations
towards a new tax treaty and discuss means of expanding
mutually beneficial trade and investment ties between
the U.S. and Israel," Simon added.
Specialized joint subcommittees on a broad range of
economic issues, including capital investment, trade, raw
materials and industrial research and development, held a
series of meetings last fall in preparation for the
ministerial-level meetings.
The U.S. delegation is made up of senior representatives
from the Departments of State, Treasury, Commerce,
Export-Import Bank, OPIC, and other U.S. Government agencies.
The Israeli delegation includes senior economic officials
from the Israeli Embassy in the United States and the
Ministries of Finance and Commerce and Industry in Israel.
-0O0-

WS-298

ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE
THE BUSINESS COUNCIL
HOT SPRINGS, VIRGINIA MAY 10, 1975
I WELCOME THIS OPPORTUNITY TO MEET AGAIN WITH OLD FRIENDS
AND TO TALK WITH YOU ABOUT A SUBJECT OF CONSUMING INTEREST TO
US ALL:

THE FUTURE PROSPECTS FOR OUR ECONOMY,

FOR SEVERAL MONTHS, ECONOMIC POLICY MAKERS IN WASHINGTON
HAVE BEEN PREOCCUPIED WITH THE PROBLEMS OF ENDING THE RECESSION
AND SLOWING THE RATE OF INFLATION. H IS FAIRLY APPARENT
NOW THAT WE ARE COMING TOWARD THE END OF THE DOWNWARD SLIDE.
PERHAPS AS MUCH AS 75 PERCENT OF THE RECESSION IS ALREADY
BEHIND US. I NEED NOT BURDEN YOU WITH ALL OF THE STATISTICS,
BUT IF YOU LOOK AT SOME OF THE MOST IMPORTANT INDICATORS ~
THE INCREASE IN OVERALL EMPLOYMENT REPORTED LAST WEEK, THE
RAPID LIQUIDATION OF INVENTORIES, THE INCREASE IN RETAIL

- 2SALES OVER THE LAST THREE MONTHS, THE SUBSTANTIAL REDUCTION
IN INFLATION RATES, THE FLOW OF MONEY BACK INTO THE THRIFT
INSTITUTIONS, AND OTHERS — YOU CAN FIND CLEAR AND CONVINCING
EVIDENCE THAT THE RECESSION IS BOTTOMING OUT. I BELIEVE IT
IS A FAIRLY UNANIMOUS VIEW THAT WE WILL BE ON THE ROAD TO
RECOVERY BEFORE THE END OF THE YEAR.

AS WE EMERGE FROM THE RECESSION, IT IS ESPECIALLY
IMPORTANT THAT WE NOW BEGIN TO CHANGE FOCUS ~ THAT WE BEGIN
TO TAKE A LONGER VIEW OF OUR ECONOMIC FUTURE AND DIRECT
GREATER PUBLIC ATTENTION TO OUR MORE FUNDAMENTAL NEEDS.
WHILE THE PROCESS OF RECOVERY WILL CONTINUE TO REQUIRE
CAREFUL AND VIGILANT MANAGEMENT, WE MUST DETERMINE NOW
WHETHER THE PERIOD OF RECOVERY AND BEYOND WILL BRING DURABLE
ECONOMIC PROGRESS OR A SORROWFUL REPETITION OF THE BOOM AND
BUST CYCLES OF THE PAST.

-3,

3ft

IT IS ESSENTIAL THAT WE PUT THE ECONOMY ON A LONG-TERM
COURSE THAT IS SUSTAINABLE BOTH POLITICALLY AND ECONOMICALLY.
»

WE MUST FINALLY BREAK THE HABIT OF RESORTING TO SHORT-TERM
PALLIATIVES — PALLIATIVES THAT GIVE US AN ILLUSORY SENSE
OF PROSPERITY AT THE EXPENSE OF LONG-TERM DAMAGE TO OUR
ECONOMY ~ AND INSTEAD TAKE THOSE STEPS WHICH WILL CORRECT
THE DEEP-SEATED IMBALANCES IN OUR ECONOMY AND OVERCOME THE
SCOURGE OF INFLATION. WlTH BOTH THE RECESSION AND INFLATION
NOW RECEDING, WE FINALLY HAVE A GOLDEN OPPORTUNITY TO SHAPE
OUR POLICIES TO MEET OUR LONG-TERM NEEDS. IT WOULD BE A
TRAGIC MISTAKE TO PASS IT BY.

NEEDLESS TO SAY, IT WILL BE UP TO ALL OF US HERE AT
THIS CONFERENCE TO LEAD THE WAY, BECAUSE IF WE DON'T WHO WILL?

RESPONSIBLE FTSCAI AND MONETARY POLICIES
MY MOST IMMEDIATE CONCERN — AND ONE THAT I HAVE EXPRESSED
ON SEVERAL OCCASIONS — IS THAT WE WILL BECOME OVERLY IMPATIENT

- i* WITH THE PACE OF RECOVERY AND ENORMOUS POLITICAL PRESSURES
WILL BE GENERATED TO SPEED IT UP THROUGH HIGHLY STIMULATIVE
FISCAL AND MONETARY POLICIES, INCREASINGLY, WE HEAR IN THE
CONGRESS AND ELSEWHERE THAT AS OUR FIRST PRIORITY, WE SHOULD
END THE RECESSION AS QUICKLY AS POSSIBLE AND THAT WE SHOULD
IGNORE THE INFLATIONARY CONSEQUENCES UNTIL NEXT YEAR OR
BEYOND.

I AGREE WITH THE DESIRE TO END THE RECESSION QUICKLY
BUT I STRONGLY DISAGREE THAT WE SHOULD IGNORE THE INFLATIONARY
CONSEQUENCES BECAUSE THOSE ARE PRECISELY THE WRONG-HEADED
POLICIES THAT LED US INTO THIS THICKET. CLEARLY, WE NEED A
LARGER THAN NORMAL FEDERAL DEFICIT NOW IN ORDER TO SUPPORT
THE FORCES OF RECOVERY, BUT TIMING IS EQUALLY CRITICAL.
SINCE MOST FEDERAL PROGRAMS TAKE A YEAR TO 18 MONTHS TO
BEGIN PUMPING STIMULUS INTO THE ECONOMY, WE SHOULD NOT ENACT
STIMULATIVE MEASURES THAT WILL IMPACT UPON THE ECONOMY AT
THE SAME TIME WE ARE MOVING TOWARD FULL CAPACITY.

-»-

AFTER CONTINUAL REPETITION, I THINK THE ADMINISTRATION
AND MANY BUSINESS LEADERS ARE BEGINNING TO GET THROUGH TO
MEMBERS OF CONGRESS AND TO THE PUBLIC THAT FEDERAL BUDGET
DEFICITS OF $80 TO $100 BILLION COULD BE EXTREMELY DANGEROUS.
PEOPLE ARE WAKING UP TO THE FACT THAT HUGE DEFICITS COULD
TOUCH OFF ANOTHER EXPLOSION IN PRICES AND THEN ULTIMATELY LEAD
TO ANOTHER RECESSION. AND EVEN HIGHER UNEMPLOYMENT.

THE PROBLEMS

THAT LARGE SCALE FEDERAL DEFICITS WOULD GENERATE IN OUR
CAPITAL MARKETS DURING A RECOVERY PERIOD ARE PERHAPS MORE
DIFFICULT TO UNDERSTAND, BUT I'M BEGINNING TO SENSE A GREATER
APPECIATION OF THAT AS WELL.

I HAVE BEEN PARTICULARLY

HEARTENED BY THE GROWING AWARENESS IN CONGRESS OF THESE
DANGERS AND BY THE INITIAL CONGRESSIONAL. EFFORTS TO IMPOSE
CEILINGS ON THE FEDERAL DEFICITS.

WHILE THE CEILINGS THAT

WERE VOTED ARE HIGHER THAN WE BELIEVE TO BE PRUDENT, THEY
NEVERTHELESS REPRESENT A POSITIVE STEP FORWARD AND WE REMAIN
HOPEFUL THAT GROWING CONGRESSIONAL SENTIMENT AGAINST IRRESPONSIBLE
DEFICITS WILL TRANSLATE INTO SOUND POLICIES FOR THE FUTURE.

- 6LAST WEEK ARTHUR BURNS MADE ANOTHER VALUABLE CONTRIBUTION
TO OUR ECONOMIC DIALOGUE WHEN HE-ANNOUNCED MONETARY GROWTH
TARGETS OF BETWEEN

5 AND 7.5 PERCENT FOR THE YEAR ENDING

NEXT MARCH. WITH GROWTH TARGETS NOW OUT IN THE OPEN, I WOULD
HOPE THAT WE CAN MORE EASILY DRIVE HOME THE MESSAGE THAT EXCESSIVE
MONETARY POLICIES — POLICIES ON THE UPPER END OF THOSE
TARGETS ~ ALSO CARRY A HIGH RISK OF IGNITING A NEW ROUND OF
INFLATION. LET US RECOGNIZE AS WELL THAT MONETARY POLICY
DOES NOT OPERATE IN A VACUUM. HUGE BUDGET DEFICITS COULD
PRESENT THE FEDERAL RESERVE WITH THE EXCRUCIATING ALTERNATIVES
OF EITHER ABANDONING THEIR MONETARY GROWTH TARGETS OR ALLOWING
A CREDIT CRUNCH WHEN PRIVATE LOAN DEMAND STARTS TO SWELL.
THUS, IN ORDER TO ACHIEVE DURABLE GROWTH, IT IS ESSENTIAL
«

THAT WE PURSUE BALANCED, RESPONSIBLE POLICIES ON BOTH THE
FISCAL AND MONETARY SIDE.

~~ 3 f T
CAPITAL INVESTMENT — THE GREAT CHALLENGE AHEAD
AS WE DEBATE FISCAL AND MONETARY QUESTIONS IN COMING
MONTHS, THERE IS ANOTHER SUBJECT WHICH I HOPE THAT ALL OF
YOU HERE WILL HELP TO KEEP AT THE FOREFRONT OF PUBLIC
CONCERN, FOR IT IS PERHAPS EVEN MORE CRUCIAL TO OUR LONG
RANGE HOPES. IT IS AN ECONOMIC FACT OF LIFE THAT INCREASED
PRODUCTIVITY IS THE ONLY WAY TO INCREASE OUR STANDARD OF
LIVING, AND YET IN RECENT YEARS THE UNITED STATES HAS NOT
ADEQUATELY MET THE CAPITAL INVESTMENT REQUIREMENTS THAT ARE
NECESSARY TO SUPPORT STEADY INCREASES IN PRODUCTIVITY. THE
NEED FOR GREATER CAPITAL INVESTMENT HAS NOW BECOME ONE OF
OUR MOST FUNDAMENTAL CHALLENGES FOR THE COMING DECADE.
HISTORY WILL ULTIMATELY JUDGE US, I BELIEVE, NOT ON OUR
SUCCESS IN DEALING WITH SHORT-TERM PROBLEMS SUCH AS RECESSION
BUT IN MEETING THE LONG-RANGE GOALS OF GREATER SAVINGS AND
INVESTMENT AS WELL AS ALLOCATION OF RESOURCES. TH IS MATTER
IS OF SUCH OVERRIDING CONCERN THAT I WOULD LIKE TO DEVOTE
THE REST OF MY REMARKS TO IT HERE THIS MORNING.

- 8THE BEGINNING POINT FOR OUR CONSIDERATION OF CAPITAL
INVESTMENT — AND ONE THAT SHOULD BE OF KEEN INTEREST HERE ~
t

IS THE PATTERN OF ECONOMIC GROWTH DURING THE DECADE OF THE

1960s, THE AVERAGE ANNUAL RATE OF REAL ECONOMIC GROWTH DURING
THAT PERIOD FOR THE TWENTY NATIONS BELONGING TO THE ORGANIZATION
OF ECONOMIC COOPERATION AND DEVELOPMENT

(OECD) RANGED FROM

A HIGH OF 11,1 PERCENT FOR JAPAN, TO A MEDIAN OF ABOUT
5 PERCENT FOR AUSTRALIA, THE NETHERLANDS AND NORWAY/ TO A LOW
OF 2.8 PERCENT FOR THE UNITED KINGDOM. THE UNITED STATES DURING
THIS TIME EXPERIENCED AN AVERAGE GROWTH RATE OF 4 PERCENT
A

YEAR — 17TH AMONG THE 20 NATIONS.

ECONOMISTS GENERALLY AGREE THAT THE FACTORS AFFECTING
GROWTH INCLUDE: (1) THE ACCUMULATED BASE OF CAPITAL GOODS;
(2) THE CURRENT PACE OF NEW CAPITAL INVESTMENTS; (3) THE
EFFECTIVE APPLICATION OF NEW TECHNOLOGY; W THE QUALITY OF
THE NATIONAL LABOR FORCE ~ ITS EDUCATION, TRAINING, DISCIPLINE

-.- 3 f f
AND COMMITMENT; (5) THE INFRASTRUCTURE OF TRANSPORTATION,
COMMUNICATION, FINANCIAL AND SERVICE FACILITIES; (6) ACCESS
TO INDUSTRIAL RAW MATERIALS; (7) MANAGERIAL SKILLS; AND (8)
THE ORGANIZATION OF THE ECONOMIC SYSTEM.

THE MIX OF THESE BASIC

ECONOMIC VARIABLES VARIES FROM COUNTRY TO COUNTRY AND CHANGES
OVER TIME.

IT IS ALSO POSSIBLE TO SUBSTITUTE ONE, OR A

COMBINATION, OF THESE PRODUCTIVITY VARIABLES FOR SPECIFIC
INADEQUACIES.

HOWEVER, IT IS CLEAR THAT A STRONG RATE OF NEW

CAPITAL INVESTMENT IS REQUIRED TO GENERATE SUSTAINED GROWTH.
IN FACT, THE EFFECTIVENESS OF ALL OF THE OTHER FACTORS THAT
DETERMINE PRODUCTIVITY ARE HEAVILY DEPENDENT UPON THE QUANTITY
AND QUALITY OF CAPITAL GOODS MADE AVAILABLE BY NEW INVESTMENT.

FOR MANY YEARS OUR ADVANTAGEOUS RATIO OF CAPITAL TO LABOR
HAS BEEN ACKNOWLEDGED AS THE BASIS OF THE REMARKABLE RISE OF THE
U.S. ECONOMY.

B U T EVEN THOUGH PLANT AND EQUIPMENT EXPENDITURES

WILL CONTINUE IN THE FUTURE AS THE ECONOMY GROWS, IT IS
UNREALISTIC TO ASSUME THAT THE HISTORICAL PATTERNS OF INVESTMENT

- 1U AND PRODUCTIVITY WILL BE ADEQUATE TO MEET THE PRIORITIES OF
THE FUTURE. AND I CERTAINLY AM NOT SUGGESTING THAT WE CAN
FULFILL EVERY CLAIM PRESENTED BY SOCIETY. THE DISAPPOINTING
RECORD OF FEDERAL DEFICITS IN FOURTEEN OF THE LAST FIFTEEN
YEARS ENDING WITH FY 1975 ~ OR FORTY OUT OF THE LAST FORTY-EIGHT
YEARS — AND THE UNFORTUNATE BOOM AND BUST PATTERN OF ECONOMIC
PERFORMANCE OVER THE PAST DECADE INDICATE THAT WE HAVE NOT
BEEN ABLE TO EFFECTIVELY IDENTIFY AND MANAGE OUR NATIONAL
ECONOMIC PRIORITIES.

ALTHOUGH THE AMOUNTS OF CAPITAL INVESTMENT CONTINUE TO
INCREASE IN THE UNITED STATES AND OUR CAPITAL"TO-LABOR RATIO
IS STILL RELATIVELY HIGH, OTHER NATIONS DURING RECENT YEARS
HAVE ALLOCATED A SUBSTANTIALLY LARGER SHARE OF THEIR RESOURCES
TO NEW CAPITAL FORMATION. FURTHERMORE, THE GAP BETWEEN THE
U.S. LEVEL OF INVESTMENT, MEASURED AS A SHARE OF NATIONAL
OUTPUT, AND THE COMMITMENTS OF OTHER LEADING INDUSTRIAL
NATIONS HAS INCREASED. TOTAL U.S. FIXED INVESTMENT AS A SHARE

Q ^l1

OF NATIONAL OUTPUT DURING THE TIME PERIOD 1960 THROUGH 1973
WAS 17.5 PERCENT. THE U.S. FIGURE RANKS LAST AMONG A GROUP
OF ELEVEN MAJOR INDUSTRIAL NATIONS; OUR INVESTMENT RATE WAS
7.2 PERCENTAGE POINTS BELOW THE AVERAGE COMMITMENT OF THE
<

••

ENTIRE GROUP.

ECONOMISTS OFTEN POINT OUT THAT THERE ARE SEVERAL FACTORS
WHICH ACCOUNT FOR OUR POOR PERFORMANCE IN CAPITAL INVESTMENT AND,
IN THEIR VIEW, CAST IT IN A MORE FAVORABLE LIGHT. . FOR EXAMPLE,
BECAUSE OF THE UNUSUALLY LARGE SIZE OF OUR ECONOMY AND OUR
RELATIVELY ADVANCED STAGE OF DEVELOPMENT, THEY SAY IT IS ONLY
TO BE EXPECTED THAT OUR RATE OF ADDITIONAL GROWTH MIGHT BE
LOWER THAN OTHER COUNTRIES. A RELATIVELY LARGER SHARE OF
OUR INVESTMENT MUST ALSO BE USED FOR REPLACEMENT AND MODERNIZATION OF EXISTING FACILITIES. WHILE THIS PROCESS DOES NOT
NECESSARILY INCREASE THE PRODUCTIVE CAPACITY OF OUR ECONOMY,

- 12 IT DOES PROVIDE A CONTINUING OPPORTUNITY TO INTRODUCE
NEW TECHNOLOGY IN THE U.S. ECONOMIC SYSTEM.

IN MY EXPERIENCE, THERE HAVE BEEN TWO OTHER FACTORS THAT
HAVE BEEN EVEN MORE IMPORTANT THAN THE TWO I HAVE MENTIONED IN
INFLUENCING OUR INVESTMENT PATTERNS — NAMELY, THE STRONG
ORIENTATION WITHIN OUR SOCIETY TOWARD PERSONAL CONSUMPTION
AND TOWARD GOVERNMENT SPENDING. THE EMPHASIS ON CONSUMER
SPENDING HAS UNDOUBTEDLY CAUSED MUCH OF THE RAPID DEVELOPMENT
OF OUR ECONOMY BECAUSE IT HAS CREATED A STRONG DEMAND FOR
GOODS AND SERVICES NEEDED TO SUSTAIN OUTPUT, EMPLOYMENT AND
INVESTMENT. AT THE SAME TIME, HOWEVER, IT HAS ALSO LED TO
A LOWER ACCUMULATION OF GROSS SAVINGS FLOWS THAN IN OTHER
COUNTRIES. AS TO THE IMPACT OF THE GOVERNMENT, IT IS CLEAR
THAT HIGH LEVELS OF GOVERNMENT SPENDING HAVE DIVERTED FUNDS
AWAY FROM PRIVATE INVESTMENT. GOVERNMENT SPENDING AT

ALL LEVELS NOW REPRESENTS APPROXIMATELY ONE-THIRD OF OUR
GROSS NATIONAL PRODUCT, AND IF RECENT TRENDS PREVAIL, IT
COULD RISE AS HIGH AS 60 PERCENT BY THE END OF THE CENTURY.
SUCH HEAVY GOVERNMENTAL DOMINATION WOULD NOT ONLY FRUSTRATE
OUR HOPES FOR FUTURE CAPITAL INVESTMENT BUT IT WOULD ALSO
SEVERELY JEOPARDIZE OUR ECONOMIC AND PERSONAL FREEDOMS.

WHILE THESE VARIOUS MODERATING FACTORS MAY HELP TO
EXPLAIN WHY THE U.S. RECORD OF CAPITAL INVESTMENT IN RECENT
YEARS HAS BEEN LOWER THAN OTHER MAJOR INDUSTRIALIZED NATIONS,
THEY DO NOT, IN MY VIEW, CONTRADICT THE CONCLUSION THAT OUR
INVESTMENT LEVELS HAVE BEEN INADEQUATE. EXPERIENCE HAS AMPLY
DEMONSTRATED THAT OUR INFLATION AND UNEMPLOYMENT PROBLEMS OF
TODAY HAVE BEEN CREATED IN PART BY CAPACITY SHORTAGES, ESPECIALLY
THE STRAINS THAT DEVELOPED IN EARLY 1974 IN ENERGY AND RAW
MATERIALS. THE CONTINUOUS DETERIORATION OF OUR INTERNATIONAL
TRADE BALANCE DURING THE 1960S, WHEN THE DOLLAR WAS OVERVALUED,
WAS ALSO AT LEAST PARTLY THE RESULT OF THE LOSS OF COMPETITIVENESS

-14 FOR U.S. PRODUCTS AND INCREASED RELIANCE ON FOREIGN SOURCES
OF GOODS. WE SHOULD ALSO RECOGNIZE THAT THE COSTS OF CAPITAL
AND ITS AVAILABILITY FOR PRIVATE SECTOR NEEDS ARE HEAVILY
DEPENDENT ON THE FISCAL AND MONETARY ACTIONS OF THE GOVERNMENT.
WHILE THE FINANCIAL MARKETS REMAIN VERY RESILIENT AND RESPONSIVE
TO CHANGING CREDIT AND EQUITY NEEDS, THEY HAVE NOT BEEN
IMMUNE TO THE DISRUPTIVE AND INFLATIONARY IMPACT OF GOVERNMENTAL
POLICIES.

A SLOW RATE OF CAPITAL INVESTMENT FOR AN EXTENDED
PERIOD OF TIME CAN ALSO CAST A LONG SHADOW OVER A NATION'S
ECONOMIC FUTURE. AS SHOWN BY A NUMBER OF STUDIES, THERE IS A
CLOSE RELATIONSHIP BETWEEN CAPITAL INVESTMENT AND VARIOUS
MEASURES OF ECONOMIC GROWTH AND PRODUCTIVITY. A DYNAMIC
ECONOMY IS NEEDED TO CREATE JOBS BY APPLYING NEW TECHNOLOGY
AND EXPANDED PRODUCTION CAPACITY. A PRODUCTIVE LABOR FORCE
IS ALSO NECESSARY FOR PRODUCING GOODS AND SERVICES TO MEET

- 15 -

Is ('•
'

RISING DEMANDS FOR AN IMPROVED STANDARD OF LIVING AS A MEANS
OF HOLDING DOWN INFLATION. IT IS NO ACCIDENT THAT THE
UNITED STATES — WITH ONE OF THE WORST RATES OF CAPITAL
INVESTMENT AMONG WESTERN NATIONS ~ HAS ALSO HAD ONE OF THE
POOREST RECORDS IN PRODUCTIVITY GAINS. DURING THE PERIOD FROM
1960 THROUGH 1973, PRODUCTIVITY INCREASES IN THE MANUFACTURING
SECTOR AVERAGED 10.5 PERCENT A YEAR IN JAPAN, APPROXIMATELY
6 PERCENT IN FRANCE AND WEST GERMANY, 4 PERCENT IN THE UNITED
KINGDOM, AND HERE IN THE UNITED STATES -- THE ECONOMIC .
LEADER OF THE WORLD — ONLY 3.3 PERCENT.

FUTURE CAPITAL INVESTMENT REQUIREMENTS
LET'S TURN NOW FROM THE INVESTMENT NEEDS OF THE PAST TO
THOSE OF THE FUTURE. ECONOMIC PROJECTIONS ARE ALWAYS DIFFICULT,
BUT ESTIMATING FUTURE CAPITAL NEEDS IS PARTICULARLY UNCERTAIN
AT THIS TIME BECAUSE COSTS AND PRIORITIES CONTINUE TO CHANGE
RAPIDLY. IT IS OBVIOUS, HOWEVER, THAT FUTURE CAPITAL REQUIREMENTS

- 16 WILL BE ENORMOUS ~ LARGER THAN ANYTHING WE HAVE EVER FACED
BEFORE. CLEARLY WE WILL NEED TO INCREASE THE QUANTITY AND
QUALITY OF HOUSING; DEVELOP NEW ENERGY RESOURCES; IMPROVE THE
QUALITY OF OUR ENVIRONMENT; REHABILITATE THE EXISTING
TRANSPORTATION SYSTEM AND DEVELOP A BETTER URBAN TRANSPORTATION
SYSTEM; CONTINUE THE MECHANIZATION OF AGRICULTURE; CONSTRUCT
NEW OFFICE BUILDINGS, COMMUNICATIONS SYSTEMS, MEDICAL FACILITIES,
SCHOOLS AND OTHER FACILITIES; AND MEET THE MASSIVE NEEDS FOR
NEW PLANT AND EQUIPMENT. IN ALL OF THESE SECTORS WE MUST NOT
ONLY REPLACE AND MODERNIZE EXISTING FACILITIES BUT ALSO ADD
NEW CAPACITY, PARTICULARLY IN MANY OF OUR MOST BASIC INDUSTRIES,

THE DEPARTMENT OF COMMERCE ESTIMATES THAT CAPITAL
REQUIREMENTS FOR PRODUCERS' DURABLE EQUIPMENT AND NONRESIDENTIAL
STRUCTURES WILL TOTAL $3.4 TRILLION DURING THE 1974 TO 1985
PERIOD. IF ANNUAL OUTLAYS FOR RESIDENTIAL CONSTRUCTION,
WHICH HAVE AVERAGED $50 BILLION DURING THE PAST FOUR YEARS, ARE
ADDED TO THIS FIGURE, THE TOTAL CAPITAL NEEDS RISE TO WELL
OVER $4 TRILLION.

L/6%
- 17 A SIMILAR STUDY PERFORMED BY THE GENERAL ELECTRIC
COMPANY CONFIRMS THE MASSIVE SIZE OF FUTURE CAPITAL REQUIREMENTS.
ASSUMING A REAL GNP GROWTH RATE OF 4 PERCENT AND AN INFLATION
RATE OF 5 PERCENT, GENERAL ELECTRIC EXPECTS GROSS PRIVATE
DOMESTIC INVESTMENT, INCLUDING RESIDENTIAL HOUSING, TO
TOTAL $4-1/2 TRILLION OVER THE 1974 TO 1985 TIME PERIOD.

BOTH ESTIMATES ARE LIMITED TO PRIVATE INVESTMENT AND
EXCLUDE THE LARGE GOVERNMENT EXPENDITURES REQUIRED FOR ROADS,
DAMS, GOVERNMENT FACILITIES, SCHOOLS, POLLUTION ABATEMENT
OUTLAYS, AND MANY OTHER PROJECTS.

ASSUMING, THEN, THAT THE CUMULATIVE INVESTMENT NEEDS
BETWEEN 1974 AND 1985 WILL RANGE FROM $4 TO $4-1/2 TRILLION,
THE POINT TO REMEMBER IS THIS: OVER THE MOST RECENT PERIOD
OF THE SAME LENGTH, 1962 THROUGH 1973, OUT TOTAL OUTLAYS FOR
CAPITAL INVESTMENT IN THE UNITED STATES WERE $1-1/2 TRILLION.
THUS, OUR CAPITAL INVESTMENT NEEDS IN COMING YEARS WILL BE

- 18 APPROXIMATELY THREE TIMES THE LEVEL OF THE RECENT PAST. IN
THE ENERGY INDUSTRY ALONE, OUR BEST ESTIMATE IS THAT OUR
NEEDS WILL TOTAL ABOUT $1 TRILLION, STATED IN CURRENT DOLLARS
TO INCLUDE THE EFFECTS OF INFLATION. THE REQUIREMENT THAT
WE TRIPLE OUR OVERALL INVESTMENT LEVELS IS PERHAPS THE BEST
MEASURE OF OUR CHALLENGE AHEAD.

GOVERNMENT POLICIES AND CAPITAL INVESTMENT
WHILE OUR ECONOMY IS CAPABLE OF FINANCING ITS LARGE
PRIVATE CAPITAL INVESTMENT REQUIREMENTS, OUR SUCCESS IN MEETING
THAI GOAL WILL BE HEAVILY DEPENDENT UPON THE SHAPE OF GOVERNMENT
POLI:IES. IT IS ABSOLUTELY IMPERATIVE THAT

GOVERNMENT POLICIES

BECOME MORE SUPPORTIVE. A CONTINUATION OF THE SEVERE FISCAL
AND MONETARY DISTORTIONS OF THE PAST DECADE WOULD UNDOUBTEDLY
PRESENT THE ACHIEVEMENT OF OUR BASIC GOALS. INFLATION MUST
BE (ONTROLLED, AND THE GOVERNMENT MUST AVOID DISRUPTING THE
CAPITAL MARKETS AS IT HAS IN THE PAST. IN FACT, PUBLIC

i9
- 19 -

' U i

OFFICIALS MUST BALANCE THE FEDERAL BUDGET OVER TIME AND
RECORD OCCASIONAL SURPLUSES IN ORDER TO FREE UP CAPITAL
RESOURCES TO FULFILL EXISTING PRIVATE INVESTMENT CLAIMS.

FUTURE REQUIREMENTS FOR CAPITAL INVESTMENT CLEARLY INDICATE
THAT FEDERAL TAX POLICIES SHOULD BE EXTENSIVELY REVIEWED.

JUST

SUCH A REVIEW HAS BEEN UNDERWAY IN THE DEPARMENT OF THE TREASURY
IN PREPARING FOR THE TAX LAW CHANGES COMPLETED LAST MONTH AND
IN ANTICIPATION DURING COMING MONTHS OF A JOINT REVIEW WITH THE
CONGRESS OF POSSIBLE TAX REFORM INITIATIVES.

I DO NOT WANT

TO SUGGEST ANY SPECIFIC RECOMMENDATIONS THIS MORNING BECAUSE
WE ARE STILL WORKING ON OUR ANALYSIS.

I WILL MERELY REFER TO

SOME OF THE POLICY AREAS THAT NEED TO BE REVIEWED:

CORPORATE INCOME TAX —

CORPORATE INCOME TAXES

DIRECTLY INFLUENCE THE CASH FLOW AVAILABLE FOR INVESTMENT.
RATE HAS VACILLATED SLIGHTLY ABOVE OR BELOW THE 50 PERCENT

THE

- 20 LEVEL FOR MANY YEARS. WHILE A REDUCTION IN THE RATE OF
TAXATION WOULD PROBABLY BE THE MOST STRAIGHT-FORWARD APPROACH
TO ENHANCING INVESTMENT INCENTIVES, ANY CHANGE WOULD REPRESENT
A MAJOR SHIFT IN POLICY AND WOULD REQUIRE EXTENSIVE CONGRESSIONAL
CONSIDERATION.

AS PART OF THIS ON-GOING REVIEW OF TAX POLICIES WE NEED
TO CONSIDER THE INFLUENCE ON INVESTMENT OF OUR TWO~TIER
SYSTEM OF CORPORATE TAXATION IN WHICH INCOME IS TAXED ONCE
AT THE CORPORATE LEVEL AND AGAIN AT THE SHAREHOLDER LEVEL.
THIS APPROACH DISCRIMINATES AGAINST CORPORATE INVESTORS
GENERALLY AND SMALL EQUITY INVESTORS PARTICULARLY. WE SHOULD
KEEP IN MIND THAT OUR SYSTEM OF TAXATION BEARS MORE HEAVILY
ON CORPORATIONS THAN DO THE TAX SYSTEMS OF ALMOST EVERY OTHER
MAJOR INDUSTRIAL NATION. IN THE LAST FEW YEARS OUR MAJOR
TRADING PARTNERS HAVE LARGELY ELIMINATED THE CLASSICAL TWO-TIER
SYSTEM OF CORPORATE TAXATION. THROUGH A VARIETY OF MECHANISMS

^ 6S
u

- 21 -

THEY HAVE ADOPTED SYSTEMS OF "INTEGRATING" THE PERSONAL
AND INDIVIDUAL INCOME TAXES SO THAT THE DOUBLE TAXATION
ELEMENT IS RADICALLY LESSENED.

INVESTMENT TAX CREDIT (ITC) —

BUSINESS FIRMS HAVE

STRONGLY SUPPORTED THE INVESTMENT TAX CREDIT AS A MAJOR
STIMULUS TO ADDITIONAL CAPITAL INVESTMENT AND THE TAX REDUCTION
ACT OF 1975 WHICH INCREASED THE CREDIT TO 10 PERCENT FOR TWO
YEARS AND REMOVED THE LOWER PERCENTAGE LIMITATION FOR UTILITIES.
UNFORTUNATELY, THE INVESTMENT TAX CREDIT HAS HAD AN UNCERTAIN
STATUS SINCE IT WAS INITIATED JANUARY 1, 1962 AND BUSINESSMEN
ARE JUSTIFIABLY CONCERNED ABOUT THE STABILITY OF AN INCENTIVE
WHICH HAS ALREADY BEEN REMOVED TWICE AND THEN REINSTATED.

3. DEPRECIATION GUIDELINES — THE AMOUNT OF CAPITAL
RECOVERY CHARGES PERMITTED FOR TAX PURPOSES ALSO INFLUENCES
THE AFTER-TAX EARNINGS AVAILABLE FOR PRIVATE INVESTMENT. IN
1954 THE INTERNAL REVENUE TAX CODE WAS CHANGED TO PERMIT
DEPRECIATION CHARGES TO BE MADE ON AN ACCELERATED BASIS.

- 22 THE OFFICIAL GUIDELINES WERE AGAIN LIBERALIZED IN 1962.
AND IN 1971 THE ASSET DEPRECIATION RANGE (ANR) — ALONG
WITH THE INVESTMENT TAX CREDIT ~ WAS ADDED TO THE REGULATIONS.

DESPITE THESE ADJUSTMENTS. AMERICAN BUSINESSES COMPLAIN
WITH GOOD REASON THAT THEY HAVE A COMPETITIVE DISADVANTAGE
COMPARED WITH SOME OTHER NATIONS. VARIOUS BUSINESS GROUPS
HAVE PROPOSED FURTHER LIBERALIZATION, SUCH AS A WIDER ADR
PERCENTAGE, BUT FURTHER CONSIDERATION SHOULD BE PART OF THE
GENERAL TAX REFORM ANALYSIS INVOLVING THE DEPARTMENT OF THE
TREASURY AND THE CONGRESS.

4. SPECIAL INCENTIVFS — THE GOVERNMENT IS FREQUENTLY
ASKED TO PROVIDE SPECIAL INCENTIVES IN THE FORM OF REDUCED OR
DELAYED TAXES, ACCELERATED DEPRECIATION SCHEpULES, CAPITAL GRANTS
OR OTHER BENEFITS TO ENHANCE THE RATE OF RETURN ON CAPITAL
INVESTMENTS. WHILE SUCH INCENTIVES ARE FREQUENTLY REOUESTED
DN THE BASIS THAT THEY WILL CONTRIBUTE TO THE ACHIEVEMENT

EC
- 23 OF SOME NATIONAL PRIORITY, IT IS USUALLY DIFFICULT TO
JUSTIFY SUCH SPECIAL TREATMENT. WHEN SPECIAL ADVANTAGES ARE
GIVEN TO A SPECIFIC INDUSTRY OR GEOGRAPHICAL REGION, OTHERS
BECOME RELATIVELY DISADVANTAGED AND IT IS VERY DIFFICULT FOR
GOVERNMENT AUTHORITIES TO DETERMINE WHICH CLAIMS SHOULD.BE
FAVORED, PARTICULARLY IN A DYNAMIC ECONOMY WHERE PRIORITIES
CAN CHANGE RAPIDLY. WHILE THERE MAY BE A FEW SPECIFIC
SITUATIONS WHERE THE GOVERNMENT SHOULD INTERVENE IN THE
ALLOCATION OF RESOURCES WHICH IS NOW HANDLED EFFICIENTLY BY
THE PRIVATE MARKETS, MY OVERWHELMING PREFERENCE IS TO AVOID
THE ECONOMIC DISTORTIONS WHICH ARE FOUND TO OCCUR.

CORPORATF

PROFITARII

TTY

THE FINAL AREA OF CONCERN THAT I WANT TO ADDRESS HERE IS
THE FUTURE OUTLOOK FOR CORPORATE PROFITABILITY. SUCH PROFITS
ARE, OF COURSE, _____ MAJOR INCENTIVE FOR ADDITIONAL INVESTMENT
AND AN IMPORTANT SOURCE OF FUNDS FOR FINANCING OUTLAYS, ALONG
WITH VARIOUS EXTERNAL SOURCES.

- 24 UNFORTUNATELY, CORPORATE PROFITS ARE TOO OFTEN THOUGHT
t

OF AS AN UNNECESSARY CLAIM REQUIRED BY GREEDY BUSINESSMEN
RATHER THAN THE BASIC INCENTIVE IN OUR ECONOMIC SYSTEM. ACTUAL
EARNINGS OF BUSINESS FIRMS ARE FAR BELOW WHAT THE GENERAL
PUBLIC — AND SOME MEMBERS OF CONGRESS — PERCEIVE THEM TO
BE. IN FACT, CORPORATE PROFITS WILL HAVE TO IMPROVE
SUBSTANTIALLY IN ORDER TO PROVIDE THE NECESSARY INCENTIVES
AND TO MAKE THE NECESSARY CONTRIBUTION TO FUTURE INVESTMENT
OUTLAYS. MY CONCERN IS THAT THE NEGATIVE ATTITUDES ABOUT
PROFITS HELD BY MANY AMERICANS MIGHT BECOME AN UNFORTUNATE
PART OF PUBLIC POLICY. WE MUST AVOID LEGISLATION AND REGULATION
THAT IS PUNITIVE OF PROFITS HONESTLY EARNED. THE RESULT COULD
ONLY BE THAT CAPITAL FORMATION WOULD BE -INHIBITED, AND THE
REAL PURCHASING POWER OF WAGE EARNERS WOULD RISE MORE SLOWLY.
WE MUST ALWAYS BE ALERT TO THE FACT THAT PROFITS TRANSLATE
INTO JOBS, HIGHER WAGES, AND AN INCREASED STANDARD OF LIVING
FOR ALL OF OUR PEOPLE.

- 25 CONCLUSION
STANDING BACK FOR A MOMENT, WHAT, THEN DO WE SEE;?

—

A NATION THAT IS STILL INCREDIBLY STRONG, POWERED

BY THE LARGEST AND MOST DYNAMIC ECONOMY IN THE WORLD;

—

BUT A NATION THAT IS BEGINNING TO SUFFER ECONOMICALLY

BECAUSE IT IS DIVERTING SO MANY OF ITS RESOURCES INTO NONPRODUCTIVE USES AND SO FEW INTO INCREASING ITS OWN PRODUCTIVE
CAPACITY AND CREATING NEW JOBS FOR ITS PEOPLE;

—

AND A NATION WHOSE FUTURE GROWTH AND PROSPERITY WILL

REQUIRE IT TO TRIPLE ITS LEVEL OF CAPITAL INVESTMENT.

SOME OBSERVERS HAVE CONCLUDED THAT IT WILL NOT BE
POSSIBLE TO MEET OUR FUTURE CAPITAL INVESTMENT NEEDS. I
DISAGREE. WITH AN ECONOMY AS POWERFUL AS OURS AND WITH
OUR TRADITION OF SOUND ECONOMIC MANAGEMENT, I FIRMLY BELIEVE
THAT WE ARE CAPABLE OF ACHIEVING OUR BASIC INVESTMENT GOALS.

- 26 I ALSO BELIEVE, HOWEVER, THAT WE HAVE OUR WORK CUT OUT
FOR us.

OUR INVESTMENT NEEDS REPRESENT ONE OF THE

MOST

FORMIDABLE ECONOMIC CHALLENGES OF OUR LIFETIME. TWO DAYS
AGO, I TESTIFIED BEFORE THE SENATE FINANCE COMMITTEE ON THESE
NEEDS, MAKING MANY OF THE SAME POINTS THAT I HAVE STATED HERE,
AND I FOUND THERE AS I HAVE FOUND ELSEWHERE IN THIS CONGRESS
A DEGREE OF AWARENESS AND APPRECIATION FOR OUR CAPITAL
INVESTMENT NEEDS THAT MIGHT SURPRISE MANY OF YOU. YET IT IS
EQUALLY CLEAR THAT THE INCENTIVES THAT MUST EXIST FOR THE
BUSINESS AND FINANCIAL COMMUNITIES TO RESPOND TO THIS CHALLENGE
WILLNOT BE UNILATERALLY CREATED IN THE HALLOWED CHAMBERS OF
OUR CONGRESS. THE MANTLE OF RESPONSIBILITY IN OUR FREE
ENTERPRISE SYSTEM STILL RESTS WHERE IT BELONGS ~ ON THE SHOULDERS
OF MEN LIKE US.

IN THE RECENT PAST, AMERICA HAS SUFFERED MORE THAN ITS
SHARE OF DEFEATS. SOME OF THEM WERE PERHAPS EXPECTED, OTHERS

-27-

f^/fif

WERE NOT. IT TROUBLES ME DEEPLY, HOWEVER, THAT SOME OF OUR
GOALS WERE GIVEN UP WITH SO LITTLE PUBLIC CONCERN. THAT
MUST NOT BE THE CASE IN OUR EFFORT TO ACHIEVE GREATER ECONOMIC
GROWTH. WHAT IS AT STAKE IS NOT SIMPLY OUR STANDARD OF LIVING
BUT OUR WHOLE ECONOMIC SYSTEM, AND INDEED, A VERY LARGE
MEASURE OF OUR FREEDOM. SURELY, THAT EFFORT DEMANDS OUR
UNFLINCHING SUPPORT.

THANK YOU.

# if # #

i
.1

AGREED STATEMENT FOR THE PRESS
^ — — m — m — m m — ^ — m m m m m ^ i m — ~ — — — m — — m — ~ — — >

The Joint US-USSR Commercial Commission, meeting in
Moscow for its fifth annual session, has completed a wideranging review of trade issues and has renewed the
determination of both governments to remove the barriers which
prevent full development of trade between them.

,* •

-During the two days in which the Commission was meeting,
the leader of the U.S. delegation. Treasury Secretary
William E. Simon and- Acting Commerce Secretary John K. Tabor
were received by Leonid Brezhnev, General Secretary of the
Communist Party of the USSR.

The leader of the Soviet delega-

tion. Minister N. S. Paiolichev, took part in the meeting.
Both parties in the commission meetings expressed their
regret that it has not yet been possible to bring into force
the 1972 Trade Agreement, complicating efforts to strengthen
their trade and economic relationships.

The Soviet Section,

under the chairmanship of Mr. N. S. Patolichev, Minister of
Foreign Trade of the USSR, stressed that maximum development
of trade would depend upon the normalization of trade and
financial relations.

The U.S. Section affirmed the determina-

tion of the U.S. Administration to work with the American
Congress in obtaining enactment of legislation to hasten the
.normalization of trade and financial relationships between
the U.S. and the USSR.
At the same time, both delegations expressed satisfaction
that, despite the difficulties Qf the past year, bilateral trade

- 2 continues at a high level. While Soviet agricultural imports
declined in 1974, the overall volume of trade last year was
approximately $1 billion -- four times what it was in 1970.
The general expectation of the commission was that bilateral
trade would reach at least $1 billion in 1975 and might well
exceed that figure. Both sides agreed that in the near future
they would start work on the preparation of targets for the
next three to five year period.
Another advance noted in the discussion was the progress
made under the Long Term Economic Agreement of June 29, 1974
The purpose of that agreement is to assist appropriate
organizations, enterprises and firms of both countries in
identifying the fields of cooperation most likely to provide a
basis for mutually beneficial contracts An Experts Working
Group established under that Agreement has already met once in
Moscow (February 12-14) and exchanged information and forecasts
of the basic economic, industrial and commercial trends in the
two countries. Because the results of that meeting proved to be
highly fruitful, the Commission was agreed to schedule a second
meeting in Washington during the first six months of 1976. In
addition there was agreement on the need to exchange information
on economic, industrial and foreign trade trends in the two
countries during the first half of 1975, and also to organize
in 1975 seminars and joint specialized meetings to exchange
information on the organizational and legal aspects of trade
between the Soviet Union and th.e United States.

3 -

In addition, during the two-day session, the Commission:
— 'Heard reports and exchanged viev/s on the status of
discussions between Soviet foreign trade organizations and US
companies on a number of cooperation projects, including those
such as exploration for oil and gas, expansion of the pulp and
paper industry, machine-building, and the manufacture of
energy-consuming products;
0

—

Heard a report from the US-USSR Trade and Economic

Council on its efforts in assisting business circles in both
countries in identifying possibilities for expanded trade and
economic cooperation;
— Reaffirmed its intention to facilitate, as appropriate,
the issuance of visas including multiple entry visas, to
representatives of organizations, enterprises and firms and
their travel for business purposes; and
— Agreed to promote trade and cooperation between the
civil aviation industries of the two countries by favoring
acceleration of arrangements for negotiations on a Bilateral
airworthiness agreement.
Xn general, the sessions were marked by a belief that
bonds between the two countries were gathering strength and by
a mutual determination to overcome the remaining impediments to
the normalization of trade. Both delegations also agreed that
despite occasional strains during the past year, the meeting in
Moscow has helped to generate a new sense of forward momentum
in trade relations between their countries.

-*4 -

The Commission expressed satisfaction with the results
of the Sth session, considering that discussion that took place
would help to normalize and develop long term and mutually
beneficial trade and economic relations.
An understanding was reached to conduct the next (sixth)
session of the Commission in 1976 in Washington.
The US Delegation expressed sincere gratitude for the
warm hospitality extended to it by the Soviet side during its
stay in the USSR..

I can't tell you what a thrill it is for me to be
here at Cottey today. It's a double thrill since I
was able to bring my Cottey roommate of 29 years ago,
Earlene Lorette Herman, back with me.
Earlene and I see many changes as we walk around
the campus. "Old Main" and Neale Hall, and PEO Hall
are familiar to us, but the other buildings are new.
All of "our" faculty are gone, of course, and some of
the old rules and regulations have disappeared as well,
although who knows, with the current craze for nostalgia,
they may be back in style some day.
I remember that in the "old days" -- they were our
young days -- Earlene and I were required to wear hats
and gloves even when we walked to downtown Nevada. And
I received more than a few demerits for wearing trousers
to study in the library on weekends.

Remarks by the Honorable Francine I. Neff, Cottey College,
Nevada, Missouri, on May 11, 1975.

Well, times change, as I learned when my daughter
Sindle went to Cottey 19 68-197 0. But the feeling you
have now hasn't changed — the feeling that graduation
is a formal turning point in your lives -- and the ques9

tion is what will happen next?
After today, all of you, and I, too, will go our
separate ways. But for this moment we are together,
sharing our common bond: as Cottey graduates or about-tobe-graduates. So in this time together, I would just
like to talk with you about some of the things Cottey
gave me that I still value after more than a quarter of
a century of life "afterwards."
High on my list of benefits would have to be enduring
friendships. My former roommate Earlene, is now living
in the same apartment building in V7ashington, D.C. And
another Cottey roommate is today a prize-winning painter
in San Antonio, Texas, where I visited her about a month
ago.
Because ours is a small, closely-knit school, I
think that you, too, will maintain contact through the
years with your special friends from here. Cherish
them well, because you never really lose your youth
as long as you have old friends from your young days
who remember you not as you are, but as the skinny
funny girl that you were.

A second reason I loved Cottey is that it prepared
me to study and to grow intellectually. I came from a
very small town in New Mexico, and Cottey helped me to
make the transition from my hometown to a large state
university. I doubt if I could have done nearly as well
without this cultural, social and scholastic enrichment.
Third, Cottey developed my intellect. Through books,
it introduced me to some of the world's great thinkers.
Through music and art, it introduced me to the so-called
finer things of life. And through contact with the faculty,
it stimulated my desire to learn.
I know it is fashionable among some people today to
ridicule the whole idea of higher education. One writer
has remarked that an A.A. degree means only that you have
mastered the first letter of the alphabet. And the
author Caroline Bird, in her recent book, "The Case
Against College" refers to higher education as "voluntary servitude" in a "padded playpen."
I vehemently disagree. I am happy to note that
enrollment in American colleges and universities doubled
in the last 15 years. But I am disturbed that in our
national quest for a quantity of degrees, we are losing
out on quality. I was, for example, sorry to read the
other day that some college textbooks have been rewritten
in a simpler language because so many college students
today cannot read at the traditional college level. And

I'm told that at the University of California, almost
half of the freshman class take remedial English.
Cottey has prepared you well for further academic
work — and you will find this a daily help and pleasure
wherever you go.
A greater understanding and respect for other women
is another legacy. Earlene and I were students years
before women's lib or Equal Rights Amendments or International Women's Year came along. But we had so-called
"role models" — achieving women — here on campus to
observe, and we had opportunities to become leaders
ourselves in a supportive environment. I'm pleased
that women's colleges everywhere are staging a quiet
comeback.
Cottey also helped to shape my feeling that I
owed my community something in the way of return volunteer service. Studies show, in fact, that graduates
of small, liberal arts colleges are those who, in later
life, are most actively involved in community affairs.
As a young wife and mother I volunteered my services
for everything from the P.T.A. to the GOP. I had been a
volunteer for all kinds of causes for over 25 years when
I was asked to become United States Treasurer. I accepted
the new role -- my children were grown and my household
was more or less running itself -- after considerable
hesitation. But I felt I could make an honest contri-

• *

bution to our government from my viewpoint as a wife
and mother.

And, after I had urged other women to

use their talents, how could I back down when this
splendid offer came?
I have been Treasurer for almost 11 months now,
and my days are a race between exhilaration and exhaustion.

In addition to the traditional jobs, I am

the first woman National Director of the United States
Savings Bonds Division.
Our Division has less than 4 60 full-time employees,
but we have thousands of unpaid volunteer Savings
Bonds workers all over America.
with them —

And I enjoy working

I feel at home with them -- because of

my many years of volunteer service.
Since my swearing-in last June, I've traveled
to 27 states on business; been given the keys to the
cities of St. Louis, San Diego, Albuquerque, and Dayton,
Ohio; and received an honorary Doctor of Humane Letters
from a New York college.

I've been greeted at airports

by everything from red carpets and military escorts to
announcements that my plane will be three hours late
and they can't find my bags.
In between business trips, I work many ten-hour
days in Washington.

I enjoy most of my new life --

and especially this weekend at Cottey.

I look upon

myself as a wife, mother and citizen who took the volunteer route to a career.

And I thank Cottey for encourag

me to feel a deep concern for my community.
Finally, Cottey gave me a firmer perspective on
my own life and personal values. Like you, I was concerned with self identity and similar questions. I
do not believe I could have coped with life nearly
as well at a large school. The cry of the young —
for a sense of selfhood, for a human-size community
— is the very cry that small colleges can best answer.
Discipline, knowledge, friendship and a concern
for others are some of the lasting benefits I took
with me from Cottey, and I think they will be yours as
well.
But today, you are more concerned with the future.
As you sit here, all alike in your white caps and gowns,
but so individual underneath these graduation clothes,
you naturally wonder where you will go — what you will
do — who you will be — now that these Cottey days are
over. You wonder how life will change you and whether
your mind or your waistline will expand the most.
I've been searching my mind to decide what I could
say about your future that would be helpful. I've found
that my thoughts aren't very original. But, for whatever
they're worth, here is the most honest advice I can offer.
First, have a goal -- your own goal, not necessarily
that of your teachers or parents. Your goals will change,
as you grow and change. But believe in something, or

f; f
happiness will never have a chance to warm your life.
Keep your goals flexible.
lifetime scenerios in advance.

We seldom know our
When my friend Earlene

graduated from Cottey, she took an office job, married,
had children, and then, after many years, went back to
school, received a master's degree and is now in my
office in Washington.
In my case, I never dreamed that volunteer work
would lead to signing my name on our dollar bills.
But every small step along the way led to another step
and another goal.

Something similar will happen to you.

Work hard at whatever you choose.

Build castles

in the air, and then put foundations under them.

I'm

thinking now of one of my Cottey classmates, Dr. Barbara
Lagerstedt Knudson, who was the first dean of University
College at the University of Minnesota.

And of Dr. Dora

Strather, class of '41 at Cottey, who was the first
woman to earn a Ph.D. in aeronautical education and who
set world records in flying? and of Kelly Smith Tunney,
class of '60, who was a well-known Associated Press
writer until she opted for marriage and children and a
home in Hong Kong.

None of them settled for a life

that was either second-hand or second-best.
If you have a career —

do a terrific job.

choose marriage and motherhood —

If you

give that your best.

if 10
And by the way, I'd like to put in a few good words
for that much maligned institution right now.
Marriage and motherhood are not for all women,
just as marriage and fatherhood are not for all men.
But no matter how many communes are formed, marriage
and the family keep coming back in style.
I personally wouldn't have it any other way.

27 years with a terrific husband are still exciting,
except maybe for mopping the kitchen floor.

And my

two children, now in their twenties, have given me
more laughter and tears than any two people alive.
Never stop growing.

Life is not a station

arrive at, but a way of traveling.
go all the way.

you

Go first class, and

Be one person today, and another person

five years from now when you come back for a class reunion.
Life i^s change —

but you can determine a great deal

about which way you change.
Continue to cherish people.

Seek the friendship

of people you can relate to in happiness and respect,
and give your own friendship generously.

I am blessed

at this time in my life because I am living and working
with not only Earlene, my Cottey friend, but another
roommate sorority friend from the University of New
Mexico, and still a third friend from Albuquerque. Altogether they represent 64 years of friendship.

• - - y>/
Don't forget the moral basics of life. I do not
know what you expect of yourself. But what God expects of you can be summed up in one line from the
Bible, when the prophet Micah says, "For what doth
the Lord expect of thee but to do justice and to love
mercy and to walk humbly with thy God?"

That one sen-

tence is a whole moral philosophy.
Finally, laugh a lot.

Today we are sometimes

made to feel that happiness is selfish, as though
our '.laughter and enjoyment diminish other people.
it's exactly the opposite.

But

Laughter is life-giving.

It is joy, rather than anguish, we should seek as the
ideal.
I have mentioned very little about war, hatred,
or economic upsets.

These are the daily staples of

the nightly newscasts; and it is true that if you want
a quiet, uneventful life, then .you are living in the
wrong century.
But I have wanted to talk with you of other things
just as important, but seldom discussed.

I have wanted

to remind you again that the world holds love and laughter,
and wonderful opportunities to use every ounce of your
brains and heart and spirit for the rest of your long
lives.

-10-

If the new life you are about to start is kind,
rejoice and enjoy and help others.
If life hands you a lemon instead, then go make
lemonade — and make the best darn lemonade in town.
Cottey has given you all it can.
Now go on to learn more, give more, laugh more
and live more elsewhere.
And know that you go with my very best hopes and
prayers for your future.
Thank you.

FOR IMMEDIATE RELEASE

APRIL 11, 1975

PLANS ANNOUNCED FOR SPECIAL PAYMENTS TO
SOCIAL SECURITY AND RAILROAD RETIREMENT BENEFICIARIES
The Treasury Department today announced that planning
has been completed for the special, one-time payments of $50
authorized for recipients of social security, supplemental
security income, and railroad retirement benefits under the
Tax Reduction Act of 1975, Public Law 94-12. The Social
Security Administration and the Railroad Retirement Board are
cooperating with the Department in the special payment program.
The $50 payments will be issued to the more than 34 million
individuals under the above programs who are paid a regular
benefit for the month of March 19 75. Those individuals who
receive benefits under two or more of the programs will be
entitled to only one $50 payment. The conventional green
Treasury checks will be used for these payments.
Treasury disbursing offices will begin issuing the special
payments in early May 19 75, subject to enactment of appropriations by the Congress as required by the Act, but.due to heavy
workloads resulting from tax rebates to individual taxpayers
authorized under the same Act, will not complete the mailing
until about June 20. Recipients should not be concerned,
therefore, if their checks do not arrive during the latter part
of May or early June. However, if a payment does not arrive
by June 30 individuals entitled to the special payments should
contact their regular benefit office.
Attached are questions and answers containing additional
information.
oOo
Attachment
Note to Correspondents
Press contacts:
Disbursing Matters (Tsy) - James Abbott, tel: 202/964-2601
Benefit Matters (SSA)
- Michael Naver, tel: 301/594-2200

WS-278

- 2 -

iy
QUESTIONS AND ANSWERS ON SPECIAL $50 PAYMENT
QUESTION:

Is the special $50 payment a social security
benefit?

ANSWER:

No. Under the Tax Reduction Act of 1975, Congress
emphasized that the $50 payments to people who
get social security, supplementa 1 security income,
and railro ad retirement benefits are not social
security b enefits. Rather, they are intended to
give aged, blind, and disabled p eople a payment
comparable in nature to the tax rebates which the
new law pr ovides to those who ar e working.
Why did Congress vote this payment?

QUESTION
ANSWER:

QUESTION

Congress has stated that the purpose of the special
$50 payment is the same as that of the tax rebates—
to inject new spending money into the economy to
help the nation's economic recovery.
Where does the money for the special payment come
from?
The payments are financed from general, revenues of
the U.S. Treasury. They do not come from social
security trust funds.
Can I receive both the special $50 payment and a
197^ tax rebate?

ANSWER:

Yes, as long as you meet the eligibility requirements
for each.

QUESTION

When will my $50 special payment come?

ANSWER:

Assuming enactment of the necessary appropriation,
the majority of the payments will be mailed out
by the Treasury Department beginning in early May
and continuing to about June 20. The payment will
come automatically. You don't need to apply.
V/hat do I do if I haven't received my check by about
June 20?

QUESTION
ANSWER:

Please wait until the end of June before you do
anything. Your check may be on its way to you.
If you get social security or SSI, and the special
$50 payment has not arrived by the en.1 of June,
call your local social security office. Railroad
retirement beneficiaries should pet in touch wiu,
the nearest Railroad Retirement Boar.: Office.

- 3 7-

QUESTION:

How will I recognize my special $50 payment?

The $50 special payment will be paid in a green
U.S. Treasury check mailed in a brown envelope.
A notice inside the envelope will tell you what
the check is for.
The questions and answers given below apply to railroad
retirement benefits as well as social security benefits.

ANSWER:

QUESTION

My husband and I both get social security.
we each get $50.

ANSWER:

Yes.

QUESTION

I'm a widow with eight children and we get social
security. Do I get a separate $50 payment for
myself and $50 for each child?
Yes. You will get a $50 check for yourself and
another check which will include a $50 payment for
each of the children.
Will my $50 payment be included with my social
security check?

ANSWER:

10. QUESTION

ANSWER:

No. The $50 payment will come in a separate check

11. QUESTION

Will the payment count as income to reduce my SSI,
food stamps, Medicaid, or any other assistance I
may be getting?
No. The Tax Reduction Act expressly provides that
the payments will not be counted as income or
resource for calendar year 1975"for purposes of
such assistance programs. Also, the payments will
not count as taxable income.
I applied in March for social security, but they
told me that I wouldn't get my check until June.
Do I get the $50 special payment?

ANSWER:

12. QUESTION

ANSWER:

13 . QUESTION

- 4-

14.

15.

ANSWER:

No. The social security check you received in April
is payment for March. Under social security your
April 3 check is payment for the previous month.

QUESTION:

I received my first SSI check in April for the month
of April. Does this entitle me to the $50 payment?

ANSWER:

No. Since entitlement to SSI benefits is based on
need, the check comes in the same month as the month
of eligibility to meet current needs. You would
have had to get an SSI check for March, issued by
August 31, 1975, to be eligible for the $50 special
payment.
I receive both social security and SSI. Does this
mean I will get two $50 payments?
,
No. Each eligible person gets only one $50 payment.

QUESTION:
ANSWER:

16.

QUESTION: I get a special age 72 payment from social security
each month. Do I get a $50 payment too?
ANSWER:

17.

18.

19.

Yes.

QUESTION: I'm eligible for social security but I didn't.get
a check for March because I was working- Am I
eligible?
No. People whose social security check for March
ANSWER:
was withheld because of work do not get the $50
special payment.
QUESTION: I get social security, but I didn't get a check
for March because I owed the Government for a
previous month's overpayment. Am I eligible?
Yes. Although you did not receive a check,
ANSWER:
you were, in effect, paid for March.
QUESTION:

ANSWER:

20.

J(V<

QUESTION:

I am eligible for social security because I am a
widow with minor children in my care. However,
the children were not in my care in March. Am
I eligible?
If you did not receive a check for the month of
March because the children were not in your care,
you will not receive the $50 special payment.
I think I am eligible for social security, but my
case is being appealed. Will I get the special
payment?

- 5 -

21.

22.

ANSWER:

Only if you receive a check for the month of March
issued by August 31.

QUESTION

I applied for social security in March because I
was eligible, but I decided not to take my first
check until May. Will I get the special payment?

ANSWER:

If you change the month in which you elect your
benefits to start from May to March you can get
the special payment. See your social security
office.
I got a social security payment for March but it
was reduced because of my work. Do I still get
the $50 special payment?
As long as you received a social security check
for March, no matter how small, you are eligible
for the $50 special payment.
As of March, I am entitled to social security
father's benefits based on the Supreme Court
decision in March. Will I also get the special
payment?
Yes, if you applied before April 1 and if your March
check is issued by August 31. Even if you applied
before April 1 only for lump sum death benefits, that
application holds for all social security benefits
due you, including the new court-ordered father's
benefits.
You said the special payments will be mailed out
by June 20. How do I get mine if my eligibility
is not established until July or August?
After June 20, the special, payments will be sent
out monthly as the lists are updated. If you
receive in August a social security check for the
month of March, chances are your special payment
will arrive by the end of August or the middle of
September.
Row will the special payment affect the benefit
increase social security beneficiaries are supposed
to get this year?
The special payment will have no effect on any
future benefit increases.

QUESTION

ANSWER:

QUESTION

ANSWER:

24.

QUESTION

ANSWER:

25.

QUESTION

ANSWER:

"'^T9¥
EOR IMMEDIATE RELEASE

May 12, 1975

COINAGE STUDY CONTRACT AWARDED BY MINT ( TREASURY )

Director of the Mint Mary Brooks announced today that a contract
to conduct a comprehensive review of U. S. coinage requirements to the
year 1990 has been awarded to Research Triangle Institute of Park,
North Carolina.
The study will examine methods for projecting long and short
range coin requirements, and the system for production, inventory,
and distribution needed to meet these demands. Consideration will be
given to options for changes in coin denominations, including size, shape
and composition of future coins. Public acceptability and the economic
effects of following different coinage options will be a primary part of
the study.
Ten bids were received for this project. The winning bidder,
Research Triangle Institute, is experienced in demand forecasting and
other economic projections, as well as analysis of production inventory
and distribution systems, and market research. The company is also
highly qualified in metallurgy and other technical skills required to assess
alternative materials for coin composition.
The study will begin immediately and is scheduled for completion
in twelve months. Project Manager is M r . John Buck, of the Treasury's
Office of Management and Organization.

-oOo-

Department of theTREASURY
WASHINGTON, DC. 20220

TELEPHONE W04-2041
/789

TUK

J.WJvUiU±AT^ K1S±_JSA&__,

ciy J.*, x

STATEMENT OF THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE HOUSE BANKING CURRENCY AND HOUSING COMMITTEE
WASHINGTON, D.C., MAY 12, 1975
Mr.

Chairman and Members of the Committee:

Before commenting specifically on H.R. 6676, I would
like to express my appreciation to the Chairman and the
Committee for these hearings which will help focus attention on a matter of vital importance to our financial system and, indeed, to our economic system.
As the Committee will recall, I have testified previously about my deep concerns with the philosophy of
credit allocation. I would like to refer to a portion of
the testimony I gave on H.R. 212 the so called "Lower
Interest Rate Act of 1975."
"Americans have always relished their freedoms,
and building upon those freedoms we have created
an incredibly complex and innovative economy. Our
economy is not only the largest but the most sophisticated in the world. We have an estimated
35,000 financial institutions in this country employing hundreds of different credit instruments
within the almost as many different financial
markets. No one knows Precisely how many loans
are made each year, but the figure must be in the
billions and the number of different credit transactions
must honestly
run intobelieve
the trillions.
Does
anyone
that government
bureaucrats -- counting the best and the brightest
among them -- can or should be the ultimate arbiters of how each of these loans is to be made?
Within the words of this statute, how could we
trust a federal official, however well-intentioned,
to answer the questions that would quickly pile
up in Washington?"

VS *99

- 2 I am sure that supporters of H.R. 6676 will argue that
the present bill is not a credit allocation act because it
merely sets up a data collection system for the reporting
of credit extensions by commercial banks categorized by
certain broad national priority uses.
I disagree. I consider the potential and implied
threats posed by this bill to be as severe as the threat
which was embodied in H.R. 212.
By its own statement of purpose, this is a bill "to
maximize the availability of credit for national priority
uses." Is it not reasonable to conclude that commercial
banks reporting credit extensions not included in the
specified national priority list will be under pressure to
conform and if conformity is not forthcoming, that quotas
will be established for so-called national priority uses?
There is no way that I can interpret subsection 2e
except as an effort to exercise direct Congressional control
over specific uses of bank credit, with the Federal Reserve
System serving as an intermediary. Even assuming that I
am in error and that the intent is only to assure that the
Congress is fully informed as to the uses of our limited
supply of credit, H.R. 6676 will not serve that purpose.
In fact, the information that would be collected would
be largely meaningless. In the first place, money is
fungible. Ultimately, there is no way for a lender to be
certain of the end use of the proceeds of any particular
borrowing.
Secondly, the wording of the eight national priority
categories calls for value judgments on the part of the
Federal Reserve Board and the reporting banks. I sincerely
doubt whether there would be agreement, even among the
members of this Committee, as to whether any given loan
for capital investment was for "productive" or non-productive
purposes or whether equipment purchased was "essential."
Who is to say what constitutes a "normal" working capital
need in an economic environment where change and flexibility
are the rule rather than the exception? This attempt to
describe in a few simple definitions what are essentially
complex value judgments seems to me to be of questionable
value, even assuming the best efforts at good faith compliance.

0*
Moreover, in focusing on commercial bank loans, this
bill ignores substantial and important sources of credit
for all of the national priority purposes which it has
identified. It does not inquire into the lending of savings
banks, which provide a large part of housing credit and
also make other loans; by credit unions, which are important
consumer lenders but also make investments; by insurance
companies, both life and casualty, which are important
sources of funds for a wide range of activities; and by
other financial intermediaries.
An additional problem presented by H.R. 6676 is the
uncertainty that it may generate among borrowers who perceive that specific credit allocation is certain to follow.
In order to obtain protection from such an eventuality,
they may rush to obtain funds for purposes which we believe
to be outside the boundaries of this legislation. This
would divert funds from the purposes which the drafters of
this bill are seeking to support, and thus could partially
frustrate the basic intent of the legislation.
But let me raise even more fundamental questions. If
one assumes that the eight categories of loans are meaningful
— and I do not -- it is still highly questionable whether
this approach would solve the problems of the allocation of
credit resources among all the competing demand more efficiently
than our free market system.
The bill speaks about national priority uses and asks
for reports of the amount of credit devoted to each. Presumably the Committee will attempt to evaluate those reports
as though there were some optimum amount of credit that
ought to be allocated to one use or another. The Committee
knows, however, that such absolutes do not exist. Rather,
the question is whether the particular amount shown in each
category is the proper amount. How can aggregated and partial
statistics help to answer this question?
This Government has already experimented with credit
allocation on a very large scale. Indeed, in the current
fiscal year and in the next fiscal year, about 50 cents out
of every credit dollar will, in effect, be allocated by the
Federal Government -- either borrowed directly to finance
Government spending and lending or indirectly channeled to
particular uses through guarantees to private borrowers.

- 4 One of the most useful things this Committee could do
would be to investigate the consequences of this massive
allocation of credit by the Federal Government.
All of us must ask whether these programs have provided
adequate benefits for those thev are intended to help and
whether these benefits outweiqh the costs of divertinq funds
from other, often more productive uses. In most instances
the Federal credit allocation which already exists has been
away from productive investment and toward uses in which
productivity is low. As a result we may have sacrificed
real national qrowth which would have provided greater
benefits for everyone.
Mr. Chairman and Members of the Committee, H.R. 6676
is unworthy of this Committee's support. I urge that you
disapprove it and instead turn your energies to the consideration of other measures which will strengthen our
economy and thereby contribute to our nation's future prosperity and liberty.

Department of theTREASURY
TELEPHONE W04-2041

. D C 20220

IKl
/y

FOR IMMEDIATE RELEASE

May 12, 1975

RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2.8 billion of 13-week Treasury bills and for •* 2.8 billion
of 26-week Treasury bills, both series to be issued on
May 15, ±975,
were opened at the Federal Reserve Banks today. The details are as follows:
26-week bills
maturing
November 13, 1975

RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing August 14, 1975

High
Low
Average

Price

Discount
Rate

Investment
Rate 1/

Price

98.693
98.689
98.690

5.171%
5.186%
5.182%

5.33%
5.34%
5.34%

97.250 a/
97.211
97.229

Discount
Rate
5.440%
5.517%
5.481%

Investment
Rate 1/
5.69%
5.77%
5.73%

a/ Excepting 1 tender of $300,000
Tenders at the low price for the 13-week bills were allotted 100%.
Tenders at the low price for the 26-week bills were allotted 78%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District

Received

Boston
$
40,385,000
New York
4, 755,680,000
Philadelphia
64,510,000
Cleveland
78,650,000
24,115,000
Richmond
Atlanta
31,510,000
468,690,000
Chicago
56,695,000
St. Louis
22,550,000
Minneapolis
44,910,000
Kansas City
33,770,000
Dallas
San Francisco 803,835,000
TOTALS$6,425,300,000

Accepted
$

24,280,000
2,034,730,000
23,485,000
32,475,000
18,940,000
25,380,000
36,545,000
24,195,000
5,600,000
29,485,000
18,770,000
530,120,000

Received
$

22,880,000
3,969,540,000
11,470,000
54,515,000
39,590,000
47,920,000
234,830,000
46,740,000
25,610,000
23,040,000
26,200,000
328,535,000

$2,804,005,000 W$4,830,870,000

Accepted
$

7,595,000
2,328,840,000
11,090,000
52,315,000
30,770,000
32,635,000
121,255,000
36,540,000
22,610,000
17,080,000
18,760,000
120,655,000

$2,800,145,000 c/

2J Includes $366,600,000 noncompetitive tenders from the public.
SJ Includes $156,235,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506

FOR RELEASE UPON DELIVERY
Monday, May 12, 1975

FOR INFORMATION CALL:
(202) 456-6757

REMARKS OF ALBERT REES
DIRECTOR OF THE
COUNCIL ON WAGE AND PRICE STABILITY
BEFORE THE
SPRING BOARD MEETING OF THE
NATIONAL CANNERS ASSOCIATION
WILLIAMSBURG, VIRGINIA
MAY 12, 1975
From the beginning of our current efforts to bring inflation under control,
we in the Council on Wage and Price Stability have had a special interest
in the price of food. It is for that reason that I am particularly glad
to be able to meet this morning with representatives of such an important
segment of the food industry.
As you know, the recent news on food prices for consumers has been very
good. In March, the Consumer Price Index for food, seasonally adjusted,
was down 0.5 percent, and for food consumed at home it was down 0.9 percent.
We know that further price reductions have taken place in April and May,
and that canned foods have participated in these price declines.
The Council on Wage and Price Stability has helped to restrain the cost
of canned foods. In our discussions with the steel industry last December,
we persuaded several companies to roll back a large part of their announced
price increases for tinplate, the material from which food cans are made.
We have also been making a study of the can manufacturing industry, which
will be completed very soon. Finally, we held hearings on the price of
sugar that helped to mobilize consumer resistance to high sugar prices,
and, as you all know, the price of sugar has since fallen substantially.
This is good news for canners of fruit and other sweetened products.
But, although the news about food prices has been good in recent weeks,
there are threats on the horizon that could produce higher food prices
in the future. One of these was the farm bill passed by the Congress
last month, which would have raised loan and target prices for crops
very substantially. This could have resulted in the diversion of acreage
from badly needed food to cotton, which is already in substantial surplus.
Fortunately, President Ford has vetoed this bill and we feel confident
that his veto will be sustained.
CWPS- 44

(more)

- 2 A second threat to lower prices that is always present is bad weather.
If the United States or other major food producing countries have smaller
than normal crops in 1975, this could send food prices upward again.
The final threat is the possibility of sharply higher costs of food distribution which could raise the margin between farm prices and retail prices.
These farm-to-market spreads, which rose substantially in 1974, have narrowed
in recent weeks, but long-run forces are tending toward further increases.
The costs of food processing and distribution include payments by processor
and distributors for fuel, interest, transportation, local taxes, and, most
importantly, wages. If wages rise faster than productivity, unit labor
costs must rise, and this must ultimately be reflected in retail food
prices. I am disturbed both by the size of some recent wage settlements
and by new impediments to the improvement of productivity.
Some recent collective bargaining agreements in the retail food industry
have provided for increases in wages and benefits in the first year of
12 to 16 percent. Some of these increases can be explained as catching
up with previous increases in the cost of living or as correcting inequities between crafts or between geographical areas. But, however they are
explained, the customer must pay for them in higher food prices. Management
spokesmen tell me that they feel powerless to resist what they regard as
excessive wage demands and some call for changes in labor laws to rectify
alleged imbalances in bargaining power. Perhaps such changes should be
considered. However, I am not convinced that management is generally
using its present powers effectively. Too often there is little unity
among the mangement parties to the same negotiation, and too often management waits until the last possible moment to do realistic bargaining. In
too many cases, management is being outgunned and outmaneuvered by able
union leaders who know their business and work hard at it.
The rapid rise in wages would be far less disturbing if there were also
rapid rises in productivity, but recently productivity in the nonfarm
economy has been falling. The short-run drop in productivity is, of course,
an effect of the recession and will be reversed during the coming recovery.
But even the longer run trends in productivity have been somewhat
disappointing.
One of the major sources of gains in productivity is technological change,
and few technological changes in food distribution have the potential for
increasing productivity as much as the automated checkstand in retail food
stores, where a laser beam reads quickly and accurately the Universal
Product Code which all of you print on your labels. This device improves
inventory control, saves labor, and speeds the customer through the checkout with an itemized receipt listing every item purchased and its priceMuch of the labor is saved because the Universal Product Code makes it
unnecessary to mark or stamp the price on every can or package. Unfortunately,
food chains that are attempting to test consumer acceptance of this system
are being picketed by consumer groups
(more) and unions, so that a fair test has
not yet been possible.

Because of the high turnover of personnel in retail food stores, the labor
saved by the automated checkstand can be saved through attrition, and no one
needs to be laid off. Nevertheless, it is understandable that unions oppose
the device. What I cannot understand is why consumer groups oppose it; and
why, even before the system has had a fair trial, they sponsor legislation
to require price markings on cans and packages. To give shoppers the
ability to read the price in the brief time after the can has been taken
from the shelf and before it has been checked out, the consumer organizations are apparently willing to sacrifice some of the labor cost savings
that make possible a system which will bring not only cheaper food, but
speedier service and accurate charges. I find it difficult to believe
that this represents the true preferences of their own members, but I would
be happy to consider evidence that I am wrong, I hope that our legislators will be willing to give the new system a fair trial, and will not
rush to pass laws that will permanently raise food costs and prices.
A second potential source of productivity gain in food distribution is the
elimination of empty backhauls by private motor carriers. Here again
recent news has not been good. The Interstate Commerce Commission currently
prohibits one subsidiary of a corporation from hauling freight for either
the corporate parent or for another subsidiary of the same corporation
except on a gratuitous basis. If even an "accounting price" is charged,
the service is considered to be "common carriage" subject to ICC rate
and entry controls. There is strong evidence that this policy substantially
impairs the productivity of private trucking fleets and wastes scarce fuel.
In January, the Council on Wage and Price Stability filed a statement with
ICC in support of a request by the Private Carrier Conference of the
American Trucking Association that this ICC policy be modified. As yet,
no decision has been made on this request.
Another cause of empty backhauls is the interpretation of the Robinson
Patman Act by the Federal Trade Commission which suggests that backhaul
allowances based on actual freight costs might not be consistent with the
Act. This unfortunate interpretation has recently been restated by FTC in
reply to a letter from Consumers Union. Our legal staff believes that
Robinson Patman permits differences in prices and rates when based on
costs, and believes that actual cost backhaul allowances meet this test.
However, if FTC is going to continue to interpret the Act so as to
encourage higher prices for food and the waste of precious fuel, it is my
personal view that the Act should be amended or repealed.
I have been talking so far about matters that directly affect the food
industry. In the time remaining, I should like to broaden my focus. First,
I think that the outlook for price stability on a broader front is very
encouraging, although I should warn you that the record of the economics
profession in forecasting prices, my own included, is not a good one.
My forecasts are not based on any formal econometric model, but rather on
(more)
our day-to-day work in price monitoring. Several weeks ago, I said that
I expected the rate of increase in the Consumer Price Index during 1975

- 4 to be no more than 8 percent, and during the fourth quarter no more than
6 percent. With each passing day, this prediction looks safer, and the
chance that we will do even better grows. Moreover, I do not see any
reason to expect the acceleration of price increases in the first part
of 1976. We feel confident that by then we will be well into a vigorous
economic recovery. But there will still be slack in the economy, and
productivity will be rising rapidly. Both of these forces will contribute
to price moderation. Some private forecasters are predicting a decline in
the rate of inflation throughout 1976, and they could well be right.
Let me also touch on the prospects for renewed wage and price controls.
Last week, the Senate passed by a vote of 67 to 20 a bill to extend the
Council on Wage and Price Stability Act. This bill, as introduced in
January, contained several features for delay powers over wage and price
increases that were a step back toward controls. Not one of these features
survived in the bill passed by the Senate. There simply is no substantial
sentiment for controls or anything resembling controls in Congress at
this time. The bill passed by the Senate would give the Council on Wage
and Price Stability subpoena powers. If this provision is enacted into
law, we would plan to use these powers very sparingly, and only in unusual
circumstances.
Despite what has happened in Congress, I keep hearing from people in
business the view that controls are coming back, and that prices must
be kept up to prevent their being frozen at low levels. I cannot imagine
where these totally unfounded reports originate. The only possibility
of renewed price controls would arise if businesses raised prices without
strong reasons based on costs and demand conditions, or failed to pass on
decreases in costs to their customers. Then the fear of controls could
become a self-fulfilling prophecy. I remain confident that this is not
going to happen.
o 0 o
CWPS- 44

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C 20506

]

May 12, 1975

For Information Call:
(202) 456-6757

MEMORANDUM FOR CORRESPONDENTS;
Attached for your information is a letter from
George Eads, Assistant Director of the Council on
Wage and Price Stability for Government Operations
and Research, to Roger Strelow, Assistant Administrator of the Environmental Protection Agency, in
response to an April 22 letter from Mr. Strelow
regarding the Council's staff's April 7th filing
before the Federal Aviation Administration regarding the EPA's proposed aircraft noise retrofit
regulations.
o 0 o
CWPS-43

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL ON WAGE AND PRICE STABILITY
WASHINGTON, D.C. 20506

May 9, 1975

Mr. Roger Strelow
Assistant Administrator for
Air and Waste Management
U. S. Environmental Protection Agency
Washington, D. C. 20460
Dear Mr. Strelow:
Thank you for your letter of April 22, discussing some of the points
we raised in our filing before the Federal Aviation Administration Rules
Docket regarding the Environmental Protection Agency's proposed aircraft
noise retrofit regulations. We have reviewed your comments as you requested but find no reason to change the recommendation stated in our
April 7, filing.
Your letter presents no additional analysis or evidence of which we
had not already taken account in the April .7, filing. Ho.vever, perhaps
some clarification of the points you raised in the April 2?, letter
would improve the understanding of our analysis and recommendations.
1. First, on the Significance of Health and Welfare.
The EPA presents no evidence that anyone living around an airport has suffered hearing damage as a result of aircraft noise. As you
know, your Leq of 70 dB standard is based on adjustments ana extrapolations from a standard of 73 dB for workplace exposure, a figure 12 dB
below the eight hour workplace standard proposed by EPA to the Occupational Safety and Health Administration and 17 dB below the standard
currently used by OSHA. And, as you may know, the standard of 73 dB has
been rejected by the Secretary of Labor as "a criterion for 'material
impairment1 which can neither be subjectively observed nor instrumentally
measured." (See 40 Federal Register 12337.)
Second, we are in full agreement with you that a broad view of
what "health" means should be used in evaluating public policy. We agree
that "annoyance" to aircraft noise might affect the "Public Health and
Welfare" but we reject the notion that annoyance must be reduced at all
costs. This is because of the tradeoffs involved. The reduction of
this annoyance imposes costs in a world of limited resources that reduces
the health and welfare society derives from the other goods, services,
and amenities that must be sacrificed to produce the reduction in noise.
A further consideration is that according to recent polls the main
"annoyance" cited by the majority of Americans is inflation. Certainly
a broad view of the public health is necessary to effective public policy
making.

- 2 -

On the Number of Persons Affected by Aircraft Noise.

In questioning our "statement" that "approximately 2-1/2 percent
of the population lies within the NEF 30 dB noise contours." Your letter
claims that our figure is incorrect and that actually 7.5 million and
3-3/4 percent are the correct figures. In quoting our statement you left
out the word "presently" after "population" and referred to the 7.5
million figure which presumably is from your Project Report, page 10-16,
figure 10. This figure, however, refers to the 1972 baseline estimate
while we clearly were discussing 1975. As pointed out both in your
project report and our filing, the number of people affected by aircraft
noise has been declining since 1972 and will continue even with a "do
nothing" strategy.
FAA estimates that about 4.9 million people live within the 30
NEF contour. Our estimate of "approximately 2-1/2 percent" implies 5.3
million people given our present 212 million population.
Also note that the 16 million figure quoted in the next paragraph
of your letter again refers to 1972. Furthermore, both the FAA and the
Department of Housing and Labor Development use the 30 NEF (Ldn 65) noise
contours as their acceptability standard.
Our point that noise pollution as distinguished from many other
types of pollution that accumulate in the environment over time is a
transitory phenomenon, we think, is a valid one. If one used the criteria
outlined in your letter it would preclude defining any phenomenon as transitory.
3. The Regulation Mainly Accelerates Benefits That Would Accrue
Eventually.
Evidently you do not disagree with this point, but only with the
timing. Here we only had the data presented in your Project Report,
Figure 13, table 10-20. Observing the warning not to extrapolate between
points on the graph, we calculated the time difference between the only
two points that could be used. To the extent that your data are correct
our analysis is correct. The data presented by your letter are. of course,
new to us since they were not presented in your Project Report. They do
seem a little startling to us in light of the previous evidence. For
example, if one violates the warning and linearly extrapolates the 2segment line to the 39% benefit level, the time difference is just a
little over three years, not ten as stated in your letter.
Nevertheless, whatever the proper time frame our major point as
illustrated by Figure 1 remains correct. The benefits provided by the
proposed retrofit regulations simply speed up benefit levels that will

-3-

occur naturally with a "do nothing" policy. The benefits as depicted on
figure 1 is what EPA should be attempting to measure.
In questioning our statement, you raised the point that the 2-segment
landing approach is "uncertain at this point." If this is indeed the case,
your cost-effectiveness analysis should be recalculated to take this development into account. The 2-segment approach is relatively cost-effective
and when both the cost and benefits of this approach are added to the
costs and benefits of the retrofit approach, the cost-effectiveness or
desirability of retrofitting is overstated.
Finally, the discussion of the costs of the "do nothing" alternative
reveals a misunderstanding of the benefit-cost analysis of public policy.
It is true that "enormous capital investment will be required to replace
the old, noisy airplanes" but this is not a social cost to society when
made in accordance with good business practices and profit maximizing
behavior. There always comes a point when replacing old capital equipment with more efficient new equipment is less costly than continuing to
operate the old.
Your point that the retrofit regulations would prolong the life of
the old noisy airplanes and that this would indeed be good public policy
is incorrect on both counts. The retrofit regulations shift the relative
cost differential between new quiet and old noisy aircraft in favor of
the new quiet aircraft. This result is the opposite phenomenon of the
air pollution control devices on new cars leading to higher-used car
prices. Thus the retrofit regulations can be expected to speed up the
shift to newer aircraft. This shift will be aided by the highly developed
used aircraft market among foreign airlines not impacted by the regulations.
The increase in cost per retrofitted plane is not inconsequential but over
$444,000 per plane (800 million ; 1800 planes). This estimate coupled
with your estimate of an average $8 million cost per new plane (which
neglects the trade-in value of the old planes) indicates that rapid
replacement of the older aircraft is likely.
On the second count, a good case cannot be made for encouraging the
U. S. airlines to retain and retrofit the old airplanes if the new planes
are more cost-effective than the old planes (including the additional
costs of retrofit). A movement toward cost-effectiveness is anti-inflationary even if it increases spending.
4. Cost-Benefit Analysis.
In quoting our discussion of EPA's cost-effectiveness analysis
you left out crucial parts of our sentences. We are well aware that EPA
attempted to measure benefits by the percentage of people removed from
certain noise contours. Indeed, this method was what we were criticizing.

- 4 -

As the information on page 4 of your letter illustrates, different contour levels provide different results, and there seem to be as many
different contour levels as there are investigations. (Note the disagreement on the Washington National Airport contours between the
Department of Transportation study and EPA, mentioned on page 5 of your
letter.) There is no meaningful way of comparing the number of people
brought under a Ldn 80 contour with those brought under a Ldn 60 contour
and then relating this to costs.
The attempt to measure benefits by measuring the costs of alternative
ways of accomplishing the same goal is a very poor second best solution.
First, it is a cost-effectiveness technique, not a cost-benefit technique.
Second, the method implicitly assumes that the benefits are infinite and
therefore any costs can be justified with just the actual method of
accomplishment in doubt. Clearly, the economic reasonableness doctrine
indicates that this was not Congress' intent. Third, to be of any use,
the alternative least cost method must be the benchmark technique. In
the aircraft noise abatement case, the alternative method chosen appears
to be one of the highest alternative cost approaches. For example,
curfews or restrictions on nighttime operations for certain airports
might well be both less costly and achieve greater NEF dB reductions
than retrofit regulations. Other methods not considered are various
tax schemes on the operations of the greatest noise offenders at the
most vulnerable airports. This scheme might lead airlines to reallocate
fleet operations in the most cost-effective way. Note that we are not
recommending any of these methods, only posing them as examples.
The parts left out of the quote on page 5 again distort our statement. In relative terms, the measurement of the costs of noise pollution
is highly developed. Among economists the techniques employed to measure
noise pollution are "generally acceptable" and have also been used in
many other applications. The FAA has also adopted this approach to
measuring noise abatement benefits while the BLS, DOT, and HUD, among
others, have recently used hedonic price equations to measure the costeffectiveness of public policy. We did not cite all of the literature
on the subject only the best and most recent of which we were aware.
Furthermore, PhD dissertations are in the open literature, are summarized
in various scientific periodicals, and are available on request from
University Microfilms, Ann Arbor, Michigan. Indeed PhD dissertations,
especially from the top universities, are frequently more up to date and
of higher quality than the average journal article.
One advantage of the technique (the hedonic price equation approach)
is that it separately prices out the various characteristics of a plot
of property such as environmental noise level, proximity to airports,
proximity to the central business district, quality of the schools,
property taxes, etc. In other words, these multiple regression models
attempt to hold other factors constant allowing the investigator to

"- 9C
focus in on the policy relevant variable. Outside of controlled experiments, this technique is the only one available that can perform such a
function.
5. The Fallacy of "Distributional Inequities.'1
We strongly disagree with your statement that:
"While the inequitable distribution may in fact
occur, that is completely irrelevant to the
question of providing an environment free from
noise that jeopardizes health and welfare."
Providing an environment free from noise is a laudatory goal but in
accomplishing that goal as in implementing any public policy action, the
distributional effects should be carefully considered. In this case it
is clear that property owners around airports both new and old stand to
benefit while air travelers stand to pay. Equity considerations alone
should not dictate public policy but should be combined with efficiency
and other evaluative criteria.
6. Where is the Inflationary Impact Analysis?
We were quite surprised to read that question because that was
the question that our filing asked of the Environmental Protection Agency.
According to Executive Order 11821 dated November 27, 1974/ the Agency
proposing the regulations is supposed to accompany the regulations with
an Inflationary Impact Statement. A mandated expenditure of over $800
million is inflationary if it produces benefits in smaller amounts than
the costs. In our filing we asked if EPA disagreed with our conclusions,
that they provide us with analyses that would clearly demonstrate that
the benefits of the proposed regulations justified their costs.
It is for the above reasons that we reaffirm our original recommendations.
Sincerely,
r

•

Georae/Lads
Assistant Director
Government Operations & Research

FOR RELEASE
2:00 P.M., E.D.T.
Monday, May 12, 197 5
CONTACT: Priscilla R. Crane (202) 634-5248
In a Memorandum of Agreement signed today, the U.S.
Treasury Department's Office of Revenue Sharing and the
Office for Civil Rights of the Department of Health,
Education and Welfare established procedures for cooperative
civil rights compliance efforts. The agreement was signed
for the Treasury Department by Graham W. Watt, Director of
the Office of Revenue Sharing. Mr. Peter Holmes, Director
of the Office for Civil Rights and Special Assistant to
the Secretary represented the Department of Health, Education,
and Welfare.
The agreement states that its purpose is "... to establish
certain procedures which will help to avoid duplication of
investigative activity, provide for the timely exchange of
information, and encourage joint action to secure voluntary
compliance where appropriate.11
Where the Office for Civil Rights of the Department of
Health, Education and Welfare determines that a recipient
of Federal financial assistance is not in compliance with
non-discrimination requirements of law, it will notify the
Office of Revenue Sharing in the event the recipient may also

-more-

-2-

be benefitting from entitlement funds.

The Office of Revenue

Sharing, on its part, will notify the Office for Civil Rights
of any failure to comply with the civil rights provisions
of the State and Local Fiscal Assistance Act of 1972
(revenue sharing law).
The parties to the agreement will keep each other informed of investigative activities of mutual concern and
of legal proceedings instituted upon a determination of
noncompliance.

Where appropriate and consistent with statutory

and regulatory authority, each party will join in any proceeding initiated by the other.
The two agencies agreed to initiate further discussions
to determine whether investigative responsibilities and related
administrative activities could be shared.
Title I of the State and Local Fiscal Assistance Act of
1972, which established the General Revenue Sharing program,
provides that "No person in the United States shall on the
grounds 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 activity
funded in whole or in part with ... (general revenue sharing
funds)."
To assist in monitoring compliance with the civil rights
and other provisions of revenue sharing law, the Office of
Revenue Sharing has developed an innovative system which enlists
the assistance of other Federal and State agencies whose responsibilities relate to revenue sharing compliance activities.
-more-

(J---? -n
-3-

9) \

It is the policy of the Office of Revenue Sharing to
draw on resources and expertise already in place, rather
than to duplicate what already exists.

Cooperative working

agreements have been concluded with the U. S. Equal Employment
Opportunity Commission, State audit agencies in nearly all
States, and with the Maryland Commission on Human Relations.
The agreement with Maryland's civil rights agency, concluded
April 28, 1975, is the first of a series of comparable arrangements to be made with State civil rights agencies throughout
the country.
Revenue sharing law authorizes the distribution of $30.2
billion to nearly 39,000 states, counties, cities, towns, townships Indian tribes and Alaskan native villages over a five
year period that ends with December 1976.
Some $18.9 billion has been distributed to date.

The

next quarterly payment of shared revenues will be made in
July 1975.
On April 25, 1975, President Ford proposed that General
Revenue Sharing be continued past its presently-authorized
deadline, through September 1982.

-30-

(J 9 v
7

? J

ADDRESS BY THE HONOf'ABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE US-EUROPEAN SEMINAR
WASHINGTON, D.C., MAY 13, 1975
MR. FOWLER, MR. BRADLEY, DEAN OSGOOD, AND DISTINGUISHED
DELEGATES TO THE SECOND ANNUAL U.S.-EUROPEAN SEMINAR:

I WELCOME THIS OPPORTUNITY TO TALK WITH YOU TODAY AND
ESPECIALLY TO SEE SO MANY OLD FRIENDS.

YOUR MEETINGS THIS YEAR COME AT A TIME WHEN THE INTERNATIONAL COMMUNITY IS FACING ITS MOST SERIOUS CHALLENGES
IN MORE THAN A DECADE.

MAJOR ECONOMIC AND POLITICAL EVENTS
»

HAVE CROWDED SO RAPIDLY ONTO THE INTERNATIONAL STAGE THAT
THERE IS A SENSE OF CONFUSION AND UNCERTAINTY ABOUT THE
FUTURE.

OUR FRIENDS AND, OF COURSE, OUR ADVERSARIES ARE

QUESTIONING WHETHER THE UNITED STATES REMAINS STEADFAST IN
PURPOSE AND WHETHER WE ARE WILLING TO STAND BY OUR COMMITMENTS
TO A STABLE WORLD ORDER.

_ 9 IN THESE CIRCUMSTANCES, IT IS ESSENTIAL THAT WE THINK
CLEARLY AND ACT DECISIVELY IN OUR RELATIONS ABROAD. WE MUST
RECOGNIZE THAT OUR FOREIGN ECONOMIC POLICY MUST ADDRESS NOT
ONE BUT A SERIES OF PROBLEMS. THOSE PROBLEMS ARE BOTH
COMPLEX AND INTERRELATED, SO THAT PROGRESS IN ONE FIELD MAY
HINGE UPON PROGRESS IN ANOTHER. SlMPLY STATED, THE CENTRAL
CHALLENGES OF OUR INTERNATIONAL ECONOMIC POLICY ARE THREEFOLD:

-- FIRST, TO RESTORE ECONOMIC GROWTH AND PRICE STABILITY
WITHIN THE INTERNATIONAL COMMUNITY;

-- SECOND, TO ADAPT TO THE ENERGY SHOCK IN WAYS THAT
WILL SUPPORT A PATTERN OF ORDERLY GROWTH; AND,

-- THIRD, TO ADJUST OUR TRADE AND FINANCIAL POLICIES SO
THAT THEY WILL STRENGTHEN THE ABILITY OF THE INTERNATIONAL
ECONOMIC SYSTEM TO ACCOMMODATE LARGE FINANCIAL FLOWS AND
WILL ENCOURAGE THE PRODUCTION OF FOOD AND RAW MATERIALS ON
TERMS^ACCEPTABLE TO BOTH PRODUCING AND CONSUMING NATIONS.

-3-

9 9
^y i

WE KNOW FROM EXPERIENCE THAT WE CANNOT SINGLE-HANDEDLY
SHAPE THE COURSE OF WORLD EVENTS, JUST AS NO OTHER NATION
CAN, BUT OUR ACTIVE PARTICIPATION IN PROMOTING GREATER
INTERNATIONAL COOPERATION AND HARMONY WILL BE INDISPENSABLE
TO FINDING SOLUTIONS.

THE FULL FORCES OF OUR GOVERNMENT ARE BEING MOBILIZED
IN THIS EFFORT.

PRESIDENT FORD, THROUGH A SERIES OF MEETINGS

WITH FOREIGN LEADERS BOTH HERE AND ABROAD, IS PLAYING A
VITAL LEADERSHIP ROLE IN SEEKING POLITICAL AND ECONOMIC
PROGRESS.

I HAVE RECENTLY RETURNED FROM AN EXTENDED TRIP

AROUND THE WORLD WHICH ENABLED ME TO SPEAK WITH A NUMBER OF
FINANCE LEADERS AND HEADS OF STATE, INCLUDING GENERAL
SECRETARY BREZHNEV, ON ISSUES AFFECTING THE INTERNATIONAL
ECONOMY.

IN THE NEXT FOUR WEEKS, I PLAN TWO ADDITIONAL

- 4TRIPS TO EUROPE AND WILL MEET WITH THE GOVERNORS OF THE
INTER-AMERICAN DEVELOPMENT BANK IN SANTO DOMINGO. SECRETARY
KISSINGER, OF COURSE, IS ALSO PLAYING AN IMPORTANT ROLE IN
OUR FOREIGN ECONOMIC POLICY, AND, IN FACT, WILL BE SETTING
FORTH SEVERAL INITIATIVES WITH REGARD TO COMMODITIES IN
A SPEECH IN KANSAS CITY TONIGHT.

ACHIEVING STARIF, DURARIF GROWTH
THE SINGLE MOST IMPORTANT CONTRIBUTION THAT THE UNITED
STATES CAN MAKE TO INTERNATIONAL ECONOMIC PROGRESS IS TO
ACHIEVE STABLE, DURABLE GROWTH HERE AT HOME. YOUR INVITATION
THAT MY TALK HERE TODAY DWELL ON PROSPECTS FOR THE U.S.
i

ECONOMY REFLECTS THAT VIEWPOINT.

WHILE THE UNITED STATES

ECONOMY NO LONGER REPRESENTS THE SAME FORCE IN THE WORLD
ECONOMY THAT IT ONCE DID, IT STILL RETAINS A STRONG
INFLUENCE. OUR GROSS NATIONAL PRODUCT AMOUNTS TO OVER ONE
QUARTER OF THE WORLD TOTAL, AND WE ARE THE WORLD'S LARGEST
IMPORT MARKET, TAKING SOME 14 PERCENT OF WORLD EXPORTS. IF

OL
7
t

WE ARE SUCCESSFUL IN RESTORING ECONOMIC GROWTH WITHOUT
REFUELING INFLATION, WE WILL HAVE SERVED NOT ONLY OURSELVES
BUT THE REST OF THE WORLD AS WELL.

FORTUNATELY, THERE ARE NOW SOLID GROUNDS FOR BELIEVING
THAT THE WORST OF THE RECESSION IS ALREADY BEHIND US IN THE
UNITED STATES. LET ME DWELL on THIS FOR A FEW MOMENTS.

IN MY VIEW, TWO FACTORS HAVE BEEN ESPECIALLY IMPORTANT
IN BRINGING US CLOSE TO THE END OF OUR RECESSION. ONE HAS
BEEN THE RAPID LIQUIDATION OF INVENTORIES, WHICH REACHED A
RECORD LEVEL IN THE FIRST QUARTER OF THIS YEAR. THE
IMPORTANCE OF THIS LIQUIDATION PROCESS IS THAT MANY
INDUSTRIES SALES ARE MOVING AHEAD MORE RAPIDLY THAN
PRODUCTION. AS THAT CONTINUES, WE CAN EXPECT AN INCREASE
IN PRODUCTION IN ORDER TO MEET DEMAND. AND AS THAT HAPPENS,
OF COURSE, WE WILL BE ENTERING UPON THE RECOVERY.

• - 6THE INVENTORY LIQUIDATION REFLECTS ANOTHER FACTOR OF
EQUAL IMPORTANCE: THE TURNAROUND IN OUR RETAIL SALES. EVEN
APART FROM THE INFLUENCE OF PRICE REBATES ON AUTO SALES,
RETAIL SALES ROSE BY A TOTAL OF 3 PERCENT IN THE FIRST
QUARTER OF THIS YEAR AND APPEAR TO HAVE INCREASED A BIT
FURTHER IN APRIL.
4

THERE WAS ALSO ENCOURAGING NEWS IN THE MOST RECENT
EMPLOYMENT FIGURES RELEASED BY THE GOVERNMENT. WHILE THE
RATE OF UNEMPLOYMENT ROSE TO 8.9 PERCENT, THE HIGHEST LEVEL
OF THE POST-WAR PERIOD, THE INCREASE WAS A SMALL ONE AND —
MORE IMPORTANTLY -- APRIL ALSO BROUGHT THE FIRST INCREASE IN
OVERALL EMPLOYMENT IN HALF A YEAR. THERE'HAS ALSO BEEN A
SLIGHT REDUCTION IN THE RATE OF JOB LAYOFFS, WHICH HAS A
CRUCIAL IMPACT NOT ONLY ON UNEMPLOYMENT BUT ALSO UPON PUBLIC
CONFIDENCE.

:,. E M
THERE ARE SEVERAL OTHER SIGNS THAT ARE ALSO POINTING IN
THE DIRECTION OF RECOVERY:

-- THE REDUCTION IN THE RATE OF INFLATION WILL BRING AN
INCREASE IN REAL EARNINGS, WHICH WILL HELP TO INCREASE
CONSUMER PURCHASING.
4

-- AS MONETARY POLICY HAS BECOME MORE EXPANSIVE AND
INFLATION HAS SUBSIDED, SHORT-TERM INTEREST RATES HAVE
FALLEN AND FUNDS HAVE BEGUN FLOWING BACK INTO THE THRIFT
INSTITUTIONS. THIS SETS THE NECESSARY PRECONDITION FOR AN
UPTURN IN THE HARD-HIT HOUSING INDUSTRY.

-- SURVEYS ALREADY SHOW THAT CONSUMER CONFIDENCE IS
IMPROVING.

-- AND THERE HAS BEEN A DEFINITE AIR OF OPTIMISM IN
THE STOCK MARKET, WHERE THE DOW JONES HAS RISEN BY SOME 35
PERCENT SINCE ITS LOW POINT IN 1974.

- 8IN ADDITION TO THESE DEVELOPMENTS WITHIN THE PRIVATE
SECTOR, THE GOVERNMENT HAS ALSO TAKEN SEVERAL POSITIVE
STEPS TO ASSIST THE FORCES OF RECOVERY. As I MENTIONED,
THE FEDERAL RESERVE HAS ALREADY EASED MONETARY CONDITIONS
SUBSTANTIALLY AND BOARD CHAIRMAN ARTHUR BURNS HAS INDICATED
THAT THE FEDERAL RESERVE WILL CONTINUE TO SUPPORT THE
RECOVERY WHILE AVOIDING EXCESSIVE STIMULATION. AT THE
SAME TIME, THE CONGRESS HAS PASSED AND THE PRESIDENT
HAS SIGNED THE BIGGEST TAX CUT IN OUR HISTORY. COMBINED
WITH A LARGE FEDERAL DEFICIT, THE TAX CUT WILL GIVE
A STRONG BOOST TO THE ECONOMY,

SUCH CHEERFUL ECONOMIC NEWS IN THE UNITED STATES
IS AS WELCOME AS A SPRING RAIN AFTER A LONG DROUGHT.
IN DISCUSSING IT, HOWEVER, I DO NOT MEAN TO SAY THAT PROSPER
IS AT HAND. CERTAINLY ECONOMIC DEVELOPMENTS IN THE
UNITED STATES ARE NOT GOING TO BE A STEADY FLOOD OF

L c

! !i'

-9-

/ ' L^

GOOD NEWS. ECONOMIC POLICY FACES ENORMOUSLY DIFFICULT
CHALLENGES IN THE MONTHS AND YEARS AHEAD.

OUR UNEMPLOYMENT RATE SHOULD PEAK SOON, BUT EVEN IF THE
RECOVERY PROVES TO BE EXCEPTIONALLY VIGOROUS, UNEMPLOYMENT
WILL REMAIN UNACCEPTABLY HIGH FOR MONTHS TO COME. FURTHERMORE,
it

INFLATION IS NOT GOING TO DISAPPEAR QUICKLY OR EASILY, WE
WILL CONTINUE TO MAKE PROGRESS AGAINST INFLATION, BUT WE
MUST,REMAIN VIGILENT BECAUSE IT REMAINS OUR MOST SERIOUS
LONG-TERM ECONOMIC CHALLENGE. SIMILARLY, OUR PROBLEM OF
EXCESSIVE DEPENDENCE ON INSECURE AND OVERPRICED SOURCES OF
FOREIGN OIL WILL REMAIN SERIOUS FOR SEVERAL YEARS EVEN IF WE
TAKE IMMEDIATE CORRECTIVE ACTION AT HOME — AND SO FAR, THAT
ACTION HAS BEEN PAINFULLY SLOW IN COMING, STILL ANOTHER
LONG-TERM CHALLENGE OF IMMENSE IMPORTANCE IN THE UNITED STATES
IS WHETHER WE WILL BE ABLE TO TRIPLE OUR LEVELS OF CAPITAL

- 10 INVESTMENT AS WE MUST DO IN ORDER TO ACHIEVE OUR MOST
FUNDAMENTAL GOALS OF ECONOMIC GROWTH.

THE CHALLENGES WE FACE ARE THUS FORMIDABLE. OUR
BASIC OBJECTIVE FOR THE NEXT SEVERAL MONTHS IS TO ENSURE
THAT OUR RECOVERY IS STRONG ENOUGH TO REDUCE UNEMPLOYMENT
BUT DOES NOT PROCEED SO RAPIDLY THAT WE SACRIFICE THE
PROSPECTS FOR SUSTAINED, DURABLE PROGRESS.

ABOVE ALL, WE MUST RESIST THE TEMPTATIONS OF HIGHLY
STIMULATIVE FISCAL AND MONETARY POLICIES. THE TAX REDUCTION
THAT WAS ENACTED, ALONG WITH THE FEDERAL DEFICITS, WILL
PROVIDE A STRONG BOOST TO THE ECONOMY. AT THE SAME TIME,
HOWEVER, A NUMBER OF EXPENSIVE FEDERAL SPENDING PROGRAMS
ARE NOW BEING SERIOUSLY CONSIDERED IN OUR CONGRESS ON
THE THEORY THAT THEY ARE NEEDED TO SPEED UP THE RECOVERY.
MOST OFTEN, THE EFFECTS OF NEW SPENDING PROGRAMS ARE
NOT FELT FOR A YEAR TO 18 MONTHS. PROGRAMS ENACTED IN

-ii-

c h

COMING MONTHS WOULD NOT PUMP STIMULUS INTO THE ECONOMY UNTIL
WE ARE ALREADY MOVING TOWARD FULL CAPACITY, AND THEY WOULD
THUS CONTRIBUTE SIGNIFICANTLY TO NEW INFLATIONARY PRESSURES.

A SECOND DANGER OF OVERSIZED GOVERNMENT DEFICITS WOULD
ARISE IN OUR PRIVATE CAPITAL MARKETS. FOR SEVERAL MONTHS, I
4

HAVE BEEN EMPHASIZING THAT DEFICITS IN THE RANGE OF $50 TO
$60 BILLION -- THE RANGE THAT THE ADMINISTRATION HAS SET AS
A CEILING -- WILL CREATE SOME STRAINS IN OUR FINANCIAL
MARKETS, BUT THEY SHOULD BE MANAGEABLE, HOWEVER,- DEFICITS IN
THE MAGNITUDE OF $80 TO $100 BILLION WOULD-BE CLEARLY EXCESSIVE
AND DANGEROUS.

THE DANGER WOULD ARISE NOT THIS YEAR DURING A PERIOD OF
ECONOMIC SLACK BUT NEXT YEAR WHEN THE RECOVERY TAKES HOLD
AND WE HAVE A RISING TIDE OF PRIVATE AND PUBLIC DEMANDS FOR
FUNDS. IT IS WELL TO REMEMBER THAT WHILE OUR RECESSION

- 12 IS 75 PERCENT OVER, THE BORROWING TO FINANCE OUR DEFICITS IS
ONLY 25 PERCENT COMPLETED. BASED ON THE PRESIDENT'S BUDGET
AND CURRENT ENACTMENTS, WE EXPECT THAT THE TREASURY WILL
NEED TO BORROW SOME $75 BILLION IN FUNDS THIS CALENDAR
YEAR -- A BILLION AND A HALF DOLLARS A WEEK. IN 1976, IF
THE OUTLAY TOTALS PROJECTED'ON OUR CONGRESS ARE AN ACCURATE
PROJECTION AND I_F THERE IS AN EXTENSION OF MAJOR TAX PROVISIONS,
OUR BORROWING NEEDS COULD REACH $84 BILLION. I OFTEN HEAR
THAT WE SHOULD IGNORE THE CONSEQUENCE OF INFLATIONARY
POLICIES UNTIL NEXT YEAR OR THEREAFTER. I CANNOT IMAGINE A
MORE SHORT-SIGHTED APPROACH: BY NEXT YEAR, IT MIGHT BE TOO
LATE. THE DECISIONS THAT WILL DETERMINE THE SHAPE OF OUR
ECONOMY TOMORROW ARE BEING MADE IN WASHINGTON TODAY, AND
WE SHOULD NEVER FORGET THAT.

THE IMMEDIATE IMPACT OF HUGE FEDERAL DEMAND DURING
A PERIOD OF RECOVERY WOULD DEPEND, OF COURSE, UPON THE
MONETARY POLICY OF THE FEDERAL RESERVE. INDEED, MONETARY

91
POLICY IS GOING TO BE A CRITICAL ELEMENT IN SHAPING OUR
ECONOMIC PROSPECTS BOTH NOW AND IN THE FUTURE. IF OVERSIZED
FEDERAL DEFICITS CREATE STRONG COMPETITION FOR FUNDS AND THE
FEDERAL RESERVE PURSUES A MODERATE POLICY, THERE IS A
POSSIBILITY THAT WE WOULD DRIVE UP INTEREST RATES AND ABORT
THE PROCESS OF RECOVERY.

JHE OTHER ALTERNATIVE IS THAT THE

FEDERAL RESERVE MIGHT SEEK TO ACCOMODATE THE ENORMOUS
BORROWING REQUIREMENTS OF THE FEDERAL GOVERNMENT, AS WELL AS
THOSE OF THE PRIVATE SECTOR, BY CREATING A MORE RAPID GROWTH
IN MONEY AND CREDIT.

THAT MIGHT POSTPONE THE ADVERSE IMPACT

ON THE RECOVERY FOR PERHAPS A YEAR OR TWO, BUT THE CONSEQUENCES
OF THAT ACTION WOULD SOON CATCH UP WITH US. IN THE FORM OF
A REACCELERATED INFLATION FOLLOWED BY A NEW RECESSION AND
HIGHER UNEMPLOYMENT.

BOTH ALTERNATIVES, THEN, WOULD HAVE

HIGHLY UNDESIRABLE RESULTS, AND IT SEEMS CLEAR THAT WE WOULD
BE FAR WISER TO AVOID POLICY DECISIONS WHICH WOULD FORCE US
TO MAKE SUCH A HoBSON's CHOICE.

- 14 LET ME EMPHASIZE THAT I AM NOT PREDICTING THAT
THESE EVENTS WILL TRANSPIRE; RATHER, I AM WARNING OF THE
POSSIELE RESULTS OF MISGUIDED FISCAL AND MONETARY POLICIES.
AND LET ME ALSO ADD THAT I HAVE BEEN HEARTENED BY THE
RECENT DEBATES ON THIS MATTER WITHIN THE'CONGRESS AND BY THE
EFFORTS TO IMDOSE A CEILING ON THE SIZE OF OUR DEFICITS. THE
4

STEPS TAKEN BY THE CONGRESS IN RECENT DAYS REFLECT A GROWING
AWARENESS IN OUR COUNTRY OF THE NEED FOR FISCAL AND MONETARY
RESPONSIBILITY, AND I AM INCREASINGLY HOPEFUL THAT THIS
AWARENESS WILL BE TRANSLATED INTO SOUND POLICIES FOR THE
FUTURE.

THE PATTERN OF RECENT PROGRESS IN THE1 UNITED STATES IN
COMBATING THE FORCES OF RECESSION AND INFLATION HAVE BEEN
MIRRORED BY PROGRESS IN SEVERAL OTHER INDUSTRIALIZED COUNTRIES.
ONE OF THE MEETINGS THAT I RECENTLY ATTENDED WAS IN

- 15 -

ft;

PARIS WHERE I CONFERRED WITH THE FINANCE MINISTERS FROM THE

OECD NATIONS. IT WAS THE NEAR UNANIMOUS VIEW AMONG THOSE
MINISTERS THAT THE WESTERN WORLD WAS NEARING THE END OF THE
CURRENT RECESSIONARY CYCLE, I MUST ALSO TELL YOU, HOWEVER,
THAT THERE WAS ALSO SOME CONCERN THERE ABOUT THE POSSIBLE
RESURGENCE OF INFLATION. . T-HUS, ALL OF US FACE THE PROBLEM
OF RESTORING ECONOMIC GROWTH WITHOUT SETTING OFF A NEW ROUND
OF INFLATION.

ADAPTING TO THE ENERGY SHOCK
AS I NOTED EARLIER, THE SECOND MAJOR CHALLENGE TO
FOREIGN ECONOMIC POLICY IS TO ADJUST TO RADICALLY DIFFERENT
CONDITIONS IN THE FIELD OF ENERGY,

ALTHOUGH THERE IS WIDESPREAD ACKNOWLEDGEMENT OF THE
GENERAL NEED TO CONSERVE ENERGY AND THE PARTICULAR NEED TO
REDUCE PETROLEUM IMPORTS, IT IS DIFFICULT TO CHANGE

- 16 COMFORTABLE HABITS DEVELOPED DURING DECADES OF CHEAP OIL.
THE EASIEST WAY IS TO ACCEDE TO A MANANA PHILOSOPHY, BUT
STRONG ENERGY MEASURES HAVE NOW BECOME IMPERATIVE. NEITHER
WE NOR OTHER MAJOR CONSUMER NATIONS CAN LONG AFFORD THE
OUTFLOW OF FUNDS AND THE THREAT TO OUR NATIONAL SECURITY
THAT IS INHERENT IN AN OVER DEPENDENCE UPON FOREIGN SOURCES
OF OIL.

MOREOVER, THE DEMONSTRABLE EFFECTS OF DEMAND AND
SUPPLY UPON THE OPEC CARTEL SHOULD GIVE US HEART TO REDOUBLE
OUR EFFORTS. THIS CARTEL, LIKE ALL OTHERS -IN THE PAST, MUST
RESPOND TO THE PRESSURES OF THE MARKETPLACE. WE ARE ALREADY
SEEING THIS PROCESS AT WORK: BECAUSE OF REDUCED WORLDWIDE
CONSUMPTION, OPEC HAS NOW SHUT IN A THIRD OF ITS PRODUCTIVE CAPACITY — OVER 12 MILLION BARRELS A DAY ~ IN ORDER TO HOLD
THE LINE ON PRICES. WlTHIN A FEW MONTHS, OPEC'S SHUT-IN CAPACITY
MAY RISE TO 15 - 16 MILLION BARRELS OF OIL A DAY. FURTHERMORE,

- 17 -

DURING THE LAST THREE YEARS, AS THE OPEC MEMBERS RECOGNIZE,
SIGNIFICANT DISCOVERIES OF OIL HAVE BEEN MADE IN SOME 25 30 AREAS OF THE WORLD OUTSIDE.OPEC — UNCOVERING RESERVES
ESTIMATED AT ROUGHLY 35 BILLION BARRELS, THESE FIELDS
COULD PRODUCE SOME 8 MILLION ADDITIONAL BARRELS A DAY BY THE
EARLY 1980S, AND THIS DOES NOT INCLUDE NEW PRODUCTION
COMING FROM THE UNITED STATES, THE SOVIET UNION, AND THE
PEOPLE'S REPUBLIC OF CHINA. .

AS THESE PRESSURES HAVE DEVELOPED, SOME OF THE MEMBERS
OF THE CARTEL HAVE BEGUN SHAVING PRICES AND THE FIRST
CRACKS HAVE BEGUN TO APPEAR IN THE OPEC WALL.
•

AN IMPORTANT FIRST STEP IN REDUCING DEPENDENCE ON
OPEC WAS TAKEN LAST FALL WHEN THE MAJOR CONSUMER NATIONS

- 18 AGREED ON A PROGRAM TO LIMIT THEIR VULNERABILITY DURING
EMERGENCIES CREATED BY SUPPLY INTERRUPTIONS. THAT AGREEMENT
COMMITS MEMBER NATIONS TO BUILD A COMMON LEVEL OF EMERGENCY
SUPPLIES THAT WOULD ALLOW THEM TO SURVIVE FOR DESIGNATED
PERIODS, TO DEVLOP STAND-BY EMERGENCY CONSERVATION PROGRAMS
THAT COULD BE IMPOSED IN THE EVENT OF ANOTHER EMBARGO,
AND -- IN THE EVENT OF AN EMERGENCY ~ TO ALLOCATE AVAILABLE
OIL IN A WAY THAT SPREADS SHORTFALLS AMONG ALL PARTICIPATING
NATIONS.

IN MOST CONSUMER NATIONS, DEMAND FOR OIL HAS EITHER
LEVELED OFF OR FALLED DUE TO HIGHER PRICES, CONSERVATION,
AND THE EFFECTS OF RECESSION. .

IT IS PERHAPS IN THE UNITED STATES THAT THE LARGEST
PROBLEMS REMAIN. THERE SEEMS TO BE A STUBBORN DETERMINATION
TO HOLD DOWN DOMESTIC OIL PRICES AS IF IT WOULD BE A NATIONAL
TRAUMA TO PAY MORE THAN 60£ PER GALLON FOR GAS, EVEN THOUGH
EUROPEANS ARE ALREADY PAYING TWO OR THREE TIMES THAT MUCH.

EE
THIS FOOT-DRAGGING HELPS TO EXPLAIN WHY GERMANY, RELYING ON
THE PRICE-MECHANISM, CUT BACK ITS OIL CONSUMPTION 10 PERCENT
LAST YEAR, AND FRANCE, BY LIMITING ITS IMPORTS, CUT CONSUMPTION
BY 14 PERCENT, WHILE THE UNITED STATES REDUCED ITS CONSUMPTION
BY ONLY 3 PERCENT. WHILE DISAGREEMENTS CONTINUE TO EXIST
WITH THE LEGISLATIVE BRANCH, WE ARE WORKING CLOSELY WITH THE
CONGRESS AND WE REMAIN HOPEFUL THAT A NATIONAL ENERGY POLICY
CAN BE HAMMERED OUT. IN THE FINAL ANALYSIS, HOWEVER, IF THE
CONGRESS DOES NOT ACT SOON, THE PRESIDENT WILL HAVE NO
CHOICE BUT TO ACT DECISIVELY.
ADAPTING TRADF AND PAYMENT POLICIES
THE THIRD CHALLENGE TO OUR FOREIGN ECONOMIC POLICY -AND ONE THAT I WILL DISCUSS ONLY BRIEFLY BECAUSE IT WILL BE
ADDRESSED BY SO MANY OTHER SPEAKERS AT THIS SEMINAR -"IS TO
BOLSTER OUR INTERNATIONAL TRADE AND PAYMENTS SYSTEM SO THAT
IT CAN ACCOMODATE THE MASSIVE FLOWS OF FUNDS IN INTERNATIONAL
FINANCE AND ENCOURAGE THE PRODUCTION OF FOOD AND OTHER RAW
MATERIALS ON TERMS THAT ARE ACCEPTABLE TO PRODUCERS AND

- 20 THE SHIFT IN INTERNATIONAL PAYMENTS PATTERNS THAT
RESULTED LAST YEAR FROM THE SHARP INCREASE IN OIL PRICES WAS
THE LARGEST AND MOST ABRUPT THAT THE WORLD HAS EVER'
EXPERIENCED. ALTHOUGH ORIGINAL PREDICTIONS ABOUT THE EVENTUAL
ACCUMULATIONS OF FUNDS BY THE OPEC NATIONS HAVE BEEN CON"
SIDERABLY REDUCED, THESE SHIFTS CONTINUE TO POSE MAJOR
PROBLEMS WITHIN THE INTERNATIONAL COMMUNITY.

THE MOST FUNDAMENTAL CHALLENGE IS TO ENSURE THAT LARGE
TRADING DEFICITS IN THE INDUSTRIAL NATIONS DO NOT LEAD THE
WORLD INTO A SPIRAL OF RESTRICTIVE TRADE MEASURES. SO FAR,
WE HAVE ACHIEVED A LARGE MEASURE OF SUCCESS IN THIS REGARD.
LAST YEAR, FOR INSTANCE, THE

OECD NATIONS PLEDGED TO ABSTAIN

FROM RESTRICTIVE TRADE ACTIONS AND ARTIFICAL AIDS TO EXPORTS.

- 21V
LOOKING BEYOND THIS ISSUE., IT IS IMPORTANT TO MOVE
NOW TOWARD FURTHER LIBERALIZATION OF TRADE THROUGH MULTILATERAL TRADE NEGOTIATIONS.

FOR BOTH DEVELOPED AND DEVELOPING

COUNTRIES, THE RAPID GROWTH OF TRADE EMANATING FROM PROGRESSIVE
LIBERALIZATIONS OF TRADE SINCE WORLD WAR II HAS BEEN A POWERFUL
ENGINE OF ECONOMIC GROWTH.

TRADE NEGOTIATIONS HAVE NEVER BEEN

MORE TIMELY, AND THE UNITED STATES WILL PLAY AN ACTIVE ROLE IN
SEEKING A LIBERAL, EXPANDED WORLD ORDER FOR TRADE AND INVESTMENT.

ANOTHER TASK FACING US TODAY IS TO ENSURE THAT OUR
FINANCING MECHANISMS ARE ADEQUATE TO COPE WITH THE ALTERED
PATTERNS OF INTERNATIONAL CAPITAL FLOWS.

SO FAR, WE HAVE RELIED

PRIMARILY UPON PRIVATE FINANCING CHANNELS, AND THEY HAVE PROVED
TO BE BOTH FLEXIBLE AND EFFECTIVE.

THE PRIVATE MARKETS AND

NEWLY CREATED FINANCING MECHANISM HAVE SERVED US WELL DURING
THE PAST YEAR.

- 22 NEVERTHELESS, WE ALSO BELIEVE THAT THE TIME HAS COME TO
SUPPLEMENT EXISTING ARRANGEMENTS WITH AN INSURANCE MECHANISM
THAT WILL PROVIDE THE SYSTEM WITH THE ADDITIONAL CONFIDENCE
THAT IT NEEDS. TO THIS END, WHILE I WAS IN PARIS, I AND THE
OTHER OECD FINANCE MINISTERS SIGNED AN AGREEMENT SETTING UP
A $25 BILLION SAFETY NET, TO BE AVAILABLE TO PARTICIPATING
COUNTRIES WHICH COOPERATE IN ENERGY AND OTHER ECONOMIC
POLICIES. THIS AGREEMENT-WILL SOON BE SUBMITTED TO THE
CONGRESS FOR APPROVAL. LIKE AN INSURANCE POLICY, WE HOPE
THAT THIS NEW SUPPORT FUND WILL NEVER BE NEEDED, BUT PRUDENCE
DEMANDS THAT WE HAVE IT AVAILABLE JUST IN CASE. THE REACTION
OF THE CONGRESS TO THIS PROPOSAL WILL INEVITABLY BE REGARDED
BY THE REST OF THE WORLD AS A MAJOR INDICATION OF OUR
COMMITMENT TO SOLVING THE WORLD'S ECONOMIC PROBLEMS IN A
COOPERATIVE MANNER.

H
WE BELIEVE THAT THE ABILITY OF THE SYSTEM TO ADAPT TO
THE MASSIVE CAPITAL FLOWS SO FAR HAS UNDOUBTEDLY BEEN ENHANCED
BY THE WIDESPREAD ADOPTION OF FLOATING EXCHANGE RATES.

BECAUSE

COUNTRIES HAVE NOT SOUGHT TO MAINTAIN RIGIDLY FIXED RATES OF
EXCHANGE FOR THEIR CURRENCIES, THE SYSTEM HAS BEEN MORE
FLEXIBLE AND COULD AVOID THE HUGE AND DESTABILIZING RESERVE
MOVEMENTS AND EXCHANGE MARKET CRISES OF EARLIER YEARS.
MOREOVER, ON A TRADE WEIGHTED BASIS VIS-A-VIS MAJOR

U.S.

TRADING PARTNERS, THE DOLLAR HAS BEEN ONE OF THE MOST STABLE
OF THE MAJOR CURRENCIES.

OVER THE PAST TWO YEARS, IT

FLUCTUATED WITH IF A RANGE OF 10 PERCENT AND NOW, HAVING
RISEN OVER 2 PERCENT SINCE LAST FEBRUARY, STANDS AT
APPROXIMATELY THE LEVEL OF TWO YEARS AGO, WHEN GENERALIZED
FLOATING WAS INITIATED.

AMONG THE MAJOR CURRENCIES,

ONLY THE CANADIAN DOLLAR HAS SHOWN LESS FLUCTUATION.

- 24 -

I ALSO WANT TO EMPHASIZE HERE, AS I HAVE IN OTHER
FORUMS, THAT WE WELCOME FOREIGN INVESTMENT IN THE UNITED
STATES, INCLUDING INVESTMENT FROM

OPEC

NATIONS.

LONG AS

FOREIGN NATIONS DO NOT SEEK TO CONTROL INDUSTRIAL SECTORS
4

THAT ARE VITAL TO OUR NATIONAL SECURITY -- AND FOR THAT
PURPOSE WE HAVE MANY SAFEGUARDS BUILT INTO THE SYSTEM ~
WE SUPPORT AND WILL CONTINUE TO SUPPORT AN OPEN DOOR
ON INVESTMENTS. THE UNITED STATES, AFTER ALL, IS THE
LARGEST FOREIGN INVESTOR IN THE WORLD WITH OVER $105 BILLION
IN BOOK VALUE INVESTED ABROAD — SEVERAL TIMES MORE THAN
DIRECT INVESTMENTS HERE BY OTHER COUNTRIES.'

//0
WITH REGARD TO THE FINAL ISSUE THAT I WANT TO ADDRESS
TODAY —

U.S. COMMODITY POLICY —

MANY OF YOU MAY HAVE

NOTICED THAT COMMODITY PRICES HAVE FALLEN SHARPLY DURING
THE PAST YEAR AFTER RISING TO RECORD LEVELS IN EARLY 1974.
DESPITE THE FACT THAT MOST COMMODITY PRICES ARE STILL WELL
ABOVE THE PRE-1972 LEVELS'," MANY OF THE PRIMARY PRODUCING
COUNTRIES ARE CONCERNED ABOUT THE EFFECT OF

FALLING

PRICES ON THEIR BALANCE OF PAYMENTS AND THE SERIOUS THREAT
SUCH PRICES POSE TO THEIR LONG-TERM DEVELOPMENT PLANS.
THE DECLINING PRICES OF THE PRIMARY PRODUCTS WHICH THEY
EXPORT HAVE NOT BEEN MATCHED BY DECREASES IN PRICES OF THEIR
IMPORTS SUCH AS OIL AND MANUFACTURED PRODUCTS.

IN SEVERAL RECENT INTERNATIONAL FORUMS, THE DEVELOPING
COUNTRIES HAVE SOUGHT A REFORM AND RESTRUCTURING OF THE
CURRENT ECONOMIC SYSTEM WHICH WOULD PERMIT THEM TO INCREASE
THEIR SHARE IN THE WORLD WEALTH AND PREVENT DETERIORATION

- 26 IN THEIR TRADE BALANCES. THIS ISSUE REACHED A CLIMAX AT
THE RECENT PARIS MEETING OF OIL PRODUCERS AND CONSUMERS
WHERE THE OPEC NATIONS STEADFASTLY DEMANDED THAT OTHER
COMMODITY PROBLEMS BESIDES OIL SHOULD BE ADDED TO THE
AGENDA.
4 "

THE U.S. AND OTHER INDUSTRIALIZED NATIONS ARE SENSITIVE
TO THESE CONCERNS/ AND THEY ARE CURRENTLY STUDYING METHODS
THAT COULD ADDRESS THEM PROPERLY. THE TREASURY DEPARTMENT
IS CHAIRING AN INTER-AGENCY TASK FORCE, UNDER THE AUSPICES
OF THE ECONOMIC POLICY BOARD AND THE NATIONAL SECURITY
COUNCIL, TO STUDY THE PROBLEM AND TO FORMULATE RECOMMENDATIONS
FOR U.S. COMMODITY POLICY. OUR GENERAL POLICY APPROACH IS THAT

WE ARE WILLING TO CONTINUE DISCUSSING PROPOSALS FOR INDIVIDUAL
COMMODITY ARRANGEMENTS ON A CASE-BY-CASE BASIS AND WE ARE
ALSO WILLING TO CONSIDER OTHER ALTERNATIVES.

CQHCJLUS.LfiW_
LADIES AND GENTLEMEN, IN REVIEWING THE FULL SWEEP
OF INTERNATIONAL ECONOMIC AFFAIRS, IT IS APPARENT THAT WE
HAVE REACHED ANOTHER CRITICAL JUNCTURE IN OUR RELATIONS
ABROAD. MANY OF THE ECONOMIC ARRANGEMENTS FORGED IN THE
AFTERMATH OF WORLD WAR II HAVE SERVED US EXTREMELY WELL, BUT
THEY ARE NO LONGER WHOLLY ADEQUATE TO MEET TODAY'S NEEDS.
WE HAVE EMERGED INTO A NEW, MORE COMPLICATED WORLD, AND
WE NOW FACE THE FUNDAMENTAL QUESTION OF WHETHER WE WILL GO
FORWARD WITH NEWS FORMS OF INTERNATIONAL COOPERATION AND
BUILD A MORE STABLE WORLD ORDER OR WHETHER WE WILL RETREAT
INTO A NEW ISOLATIONISM.
i

BECAUSE INTERDEPENDENCE BETWEEN NATIONS HAS BEEN TRANSFORMED
FROM THEORY INTO REALITY, I BELIVE THAT THE MUTUAL PROSPERITY
NOW DEPENDS MORE HEAVILY THAN EVER BEFORE ON MUTUAL COOPERATION.
AND IT IS EQUALLY CLEAR, I BELIEVE, THAT THE WORLD WILL MAKE
SIGNIFICANT ECONOMIC PROGRESS ONLY IF AMERICA IS AN ACTIVE,

- 23 DYNAMIC PARTNER — ECONOMICALLY STRONG AT HOME AND RESOLUTE
ABROAD.

IN COMING MONTHS, THE PRESIDENT AND OTHER LEADING
MEMBERS OF THE ADMINISTRATION WILL BE SPENDING A MAJOR
PORTION OF OUR TIME IN PROMOTING GREATER INTERNATIONAL
4

COOPERATION ON ECONOMIC ISSUES. WE RECOGNIZE THIS AS ANOTHER
TIME OF TESTING FOR THE- UNITED STATES. AMERICANS HAVE
ALWAYS RISEN TO MEET NEW CHALLENGES IN THE PAST, AND WE ARE
CONFIDENT OF OUR SUCCESS IN THE FUTURE, BUT TO ACHIEVE THAT
SUCCESS WE MUST ONCE AGAIN COUNT UPON THE HELP AND SUPPORT
OF LEADING CITIZENS IN THE PRIVATE SECTOR — MEN AND WOMEN
I

SUCH AS YOU WHO ARE DEVOTED TO AN OUTWARD-LOOKING, STRONG
FOREIGN POLICY. I URGE YOU TODAY TO JOIN US IN THAT CAUSE.

THANK YOU.

# # tr a

U.S.-ISRAEL JOINT COMMITTEE FOR INVESTMENT AND TRADE
WASHINGTON, D.C.
May 13, 1975
JOINT STATEMENT
The U.S.-Israel Joint Committee for Investment and
Trade, established during the July 1974 visit to Israel of
U.S. Secretary of the Treasury William E. Simon, met in
Washington, D.C. on May 12-13, 1975- The meeting was
chaired jointly by Secretary Simon and Minister of Finance
Yehoshua Rabinowitz. Other senior officials of the two
governments also participated. (A list of senior participants is attached.)
The meeting, which continued the dialogue established
during Secretary Simon's visit to Israel in July 1974,
underscored the warm and friendly relationship between the
countries and helped broaden the ties between them.
During the meeting, the Israeli members of the Joint
Committee briefed the U.S. Delegation on the current economic
situation in Israel, Israel's development plans and its
economic forecasts. The U.S. members reviewed current economic developments in the U.S. and explained recent policy
proposals aimed at achieving greater stability within the
U.S. economy. Mr. Avraham Agmon, Director General of the
Ministry of Finance, and Assistant Secretary of the Treasury
WST301
i

- 2 -

Gerald L. Parsky briefed the Joint Committee on the work
of the Subcommittees on Capital Investment, Trade, Raw
Materials, and Research and Development, which had
met in Washington in September 1974 and in Jerusalem in
October 1974. Secretary Simon and Minister Rabinowitz
expressed their satisfaction with the work of the four
joint subcommittees, which served as a basis for the
Committee's deliberations.
At the conclusion of the Committee's session the
Minister of Finance and the Secretary of the Treasury, as
co-chairmen, announced their agreement on a number of
principles and programs aimed at expanding economic cooperation between the two countries particularly by increasing the opportunities for trade and investment and
for cooperation in research and development.
The Committee agreed that measures designed to expand
4*

cooperation between Israel and the United States are consistent with both countries' deep interest in achieving
a just and lasting peace in the Middle East. The Committee felt that its deliberations and conclusions should
increase and broaden the interest of U.S. private business
enterprises in participating in Israel's economic development and in seeking out new opportunities to expand the
economic relationship between the U.S. and Israel.
I." Economic Cooperation
The Israeli members described the favorable environmc

for foreign investment in Israel and reaffirmed
their interest in U.S. investments in Israel and
in acquiring U.S. technology through U.S. business
participation in industrial projects in Israel.
The U.S. recognized the importance of U.S. and other
foreign investment to the economic growth of Israel
and pointed to a number of additional factors that
could further improve the investment climate. The
U.S. and Israel recognized that investment in Israel
serves the common interest of the U.S. and Israel.
The Joint Business Council which the parties
agreed to seek to establish will be broadly based
and will be charged with enhancing the participation
of U.S. business in Israel's industrial development.
The Council would identify projects which appear
feasible for U.S. private sector investments and
joint ventures, arrange business symposia and visits
in both countries, and participate with other interested/ parties in disseminating information on business
opportunities in both countries.
The members of the Committee reaffirmed the
policies of their governments to oppose restrictive trade practices or boycotts against
countries friendly to either. The U.S. side noted

President Ford's February 26 statement that religious
or ethnic discrimination is totally contrary to the
American tradition and has no place in the free commerce
of the United States.
II. Treaty to Avoid Double Taxation
Minister Rabinowitz and Secretary Simon initialed
today a treaty on the avoidance of double taxation. The
treaty recognizes Israeli compulsory loans as creditable
taxes for U.S.- income tax purposes and incorporates a
new rule on the treatment of Israel Government grants to
U.S. investors. Both parties agreed to present the treaty
for ratification, according to each country's constitutional
procedures, as soon as possible. The Committee members
expressed their confidence that the tax convention initialed
by the Ministers would contribute toward reducing obstacles
to trade and investment.
III. Encouragement of Investment
The Joint Committee noted with satisfaction efforts by
the U.S. Overseas Private Investment Corporation (OPIC) to
promote investment ties between the two countries. The
Committee noted that OPIC is prepared:
(a) to guarantee loans to qualified investment projects in Israel involving U.S. companies, or their subsidiaries;

(b)

to participate, where appropriate, in financing

industrial projects in Israel sponsored by U.S. investors
through purchase of subordinated convertible debentures
issued by such enterprises in Israel; and
(c) to include in its publications information about
investment opportunities in Israel, incentives, economic
data, and other information of interest to potential investors.
The U..S. also indicated its willingness to use its
other resources, particularly the facilities of the Department of Commerce, to facilitate investments in Israel, and
among other things to publicize within the U.S. business
community information on investment opportunities in Israel,
specific incentives offered by the Government of Israel, and
other forms of assistance to investors available from both
U.S. Government agencies and Israeli authorities. The
Department of Commerce will also organize, seminars in the
United States and sponsor missions to Israel of prominent
U.S. industrialists and businessmen. The promotion of trade
missions will be a major target.
IV. Development of Trade
The Joint Committee noted the growth of trade between the two countircs and emphasized the importance of
a continued increase in mutual trade opportunities. The

- 6 -

Committee agreed on the desirability of further promoting
trade between the two countries by expanding the dissemination of information on bilateral trade opportunities through
the programs of the U.S. Department of Commerce and the
Israel Ministry of Commerce and Industry, and through national
s

and binational organizations.
The Israeli members of the Committee noted with appreciation the assistance accorded to Israel through the use of
the facilities of the Export-Import Bank. The Committee
expressed its satisfaction with the harmonious relationship
Eximbank has enjoyed with Israel since the founding of the
State, and Israel's excellent record in meeting its obligations. The U.S. members reaffirmed Eximbank1s current
policy of providing financing for U.S. exports to Israel
within the limits permitted by the Bank's resources.
The U.S. members provided clarification of Eximbank
policies on other issues of particular concern to Israel.
It was agreed that the facilities of the Eximbank will continue to be available and active in financing U.S. exports
to Israel. The U.S. delegation noted that Eximbank is
also prepared to guarantee to a U.S. lessor payments by
Israeli lessees for U.S. equipment provided to Israel under
leasing agreements.

9.-~
The Committee welcomed passage by the U.S. Congress
of the Trade Act of 1974 which provides the basis for trade
negotiations between the United States and Israel in the
context of the multilateral trade negotiations (MTN).

The

parties noted that U.S. authority under the Act allows the
reduction to zero of most duties of 5 percent or less and
reduction of up to 60 percent on most higher duties.
Israel's negotiating authority also will be sufficient to
allow the elimination or reduction of tariffs on a range of
items of interest to U.S. suppliers.

During the Committee

sessions, an exchange of views occurred on tariff and nontariff barriers which were likely to be negotiated in the
MTN.

The Committee discussed the provisions of the Act

concerning the Generalized System of Preferences and agreed
that the two governments will hold early consultations with
the view of extending such preferences to Israel, consistent
with the provisions of the Act.
Israel has been approved as a supplier of AID-financed
commodities and services and as a supplier for off-shore
procurement of Department of Defense (DOD); Israel will be
informed about further opportunites.
A procedure has been developed to assist Israeli producers to sell products and spare parts to DOD suppliers,

- 8 -

and DOD will facilitate such purchases and take measures to
assure Israeli producers that they will get full and fair
consideration in bidding for DOD procurement contracts
within opportunities permitted under present legislation.
The Committee agreed that Government officials of
both parties engaged in promotion of foreign trade, including the commercial attaches of both countries will meet
from time to time to discuss in detail ways and means to
generate export promotion activities of all kinds to be
organized in both countries, review the effectiveness of
current promotion activities and recommend new promotion
programs where needed.
The Committee took note of the U.S. Department of
Commerce's planned "Intellectual Assets" Trade Mission, to
be composed of U.S. executives interested in commercial,
Trade and technology transfer.
V. Supply and Storage of Raw Materials '
The members of the Committee recognized the special
circumstances that characterize Israel's trade, particularly
in food and feedgrains, and the importance of assuring
Israel's access to raw materials. In order to meet Israel's
special needs and circumstances to the maximum extent
feasible, the Department of Commerce will use its good

i\yt

offices as appropriate to facilitate Israeli purchases of
essential raw materials from U.S. private sources.

The

Israeli Government will send a mission to acquaint itself
with these sources, and discuss contingent plans to assure
supply.

The Government of Israel will submit to the U.S.

Government a detailed annual plan of its grain and raw
material purchases in the United States.
In the event that it becomes necessary for the USG to
impose short-supply export controls, these purchase plans
will enable the U.S. to give sympathetic consideration to
Israel's situation and allow Israel equitable access to U.S.
supplies of commodities and raw materials during the period
of short supply.
The Committee noted that a procedure has been developed
to provide for potential purchases by Israel directly from
the excess stockpile administered by the General Services
Administration (GSA) .

The Committee also took note of Israel's need to expand
and modernize its food and raw material storage and warehousing facilities.

The Committee recognized the need to

attract investment and technology for the expansion of
storage facilities and recycling plants in Israel and agreed
to consider ways of facilitating these activities.

To this

- 10 -

end, a U.S. technical team will visit Israel shortly for
an on-site survey of Israel's existing storage facilities
and will help develop a construction plan for additional
facilities. An Israeli mission will also visit the United
States to study U.S. storage technology.
VI. Scientific Cooperation

The committee reviewed favorably the progress achieved
under the jointly funded U.S.-Israel Binational Science
Foundation which had been established in 1972. Both sides
agreed that the Foundation has played a useful role, and
that it would be desirable to strengthen our scientific
relations. It was agreed, subject to any required legislative approval, to explore means to widen the scope of operations of the foundation and strengthen its financial basis.
Negotiations to this end will take place soon and the conclusions and recommendations will be submitted to the
Committee at its next session.
The Committee reviewed the status of ,the proposed
joint water desalting project, which has undergone a lengthy
e

period of evaluation.

The Committee noted that the Congress

has previously authorized and appropriated up to $20 million
as the American share of the capital and initial operating
costs of the project. Both sides agreed that it was now
feasible to proceed with the arrangements for the design,

construction and initial operation of a large-scale
prototype plant and to negotiate a technical agreement
subject to the necessary consultations with the Congress.
A U.S. technical mission will visit Israel in the near
future.
VII. Industrial Research and Development
The Committee discussed the importance of expanding
industrial research and development in Israel. The United
States Department of Commerce and the Israel Ministry of
Commerce and Industry were designated as focal points to
facilitate cooperative industrial research and development
activities. These agencies will encourage direct contact
between departments of the two Governments and bodies in the
private sectors, such as the Industrial Research Institute
and the Licensing Executive Society; will assist in defining
possible cooperative ventures; and will promote the exchange
of technical information between American.and Israeli
organizations in the science and technology field.
The Joint Committee agreed to establish a U.S.-Israel
Steering Committee for Industrial Research and Development
composed of representatives from interested agencies of the
two Governments. This Steering Committee will outline
policies and formulate priorities to enhance mutual research
and development efforts with specific industrial applications.
The members of the Committee agreed that the two Governments will undertake to encourage the dissemination of

- 12 -

information on Israel's research and development potential
and capacity within professional and industrial organizations
in the U.S., especially through greater exchanges of people
and information between Israel and the United States.
The Joint Committee also welcomed a United StatesIsrael Industrial Research and Development Council in which
United States representation would be from the private
sector. The Council, which would include leading R&D
executives, scientists and engineers, would assist in promoting closer links between United States and Israeli enterprises in the science and technology area.
The parties agreed on the desirability of developing
a program to support mutually beneficial industrial research
and development activities in Israel. To this end, it was
agreed that the two governments would begin as early as
possible discussions to formalize the program's scope and
organization, and to determine the financial arrangements
that the two governments would undertake in support of the
program and its management.
VIII. Future Meetings
The members of the Committee decided that future
meetings of the Joint Committee for Investment and Trade
should take place at least once each year to review issues
affecting the economic relationship between the two

countries and to develop means of expanding economic cooperation between the two governments as well as between
the people of both countries, including exploring the
possibility of entering into appropriate, formal arrangements which will regulate the various joint activities and
define broad principles of coopdration. The next meeting
of the Joint Committee will be held in Jerusalem.
The Committee announced establishment of a Joint
Steering Group to oversee implementation and coordination
of the measures agreed upon by the Committee. The Steering
Group, which will report to the co-chairmen of the Joint
Committee, has also been charged with the responsibility of
investigating possible new cooperative efforts and reviewing
outstanding bilateral economic issues. In addition, it will
undertake preparations for future meetings of the Joint
Committee.

Chairman of the Israeli Chairman of the United States
Delegation
Delegation

Yehoshua Rabinowitz William E. Simon
Minister of Finance
Secretary of the Treasury

SENIOR PARTICIPANTS
US-ISRAEL JOINT COMMITTEE
FOR INVESTMENT AND TRADE
May 12-13, 1975
Washington, D.C.
United States . s
William E. Simon, Secretary of the Treasury, Co-chairman
Charles W. Robinson, Under Secretary of State for Economic
Affairs
John Tabor, Under Secretary of Commerce
Gerald L. Parsky, Assistant Secretary of the Treasury for
Trade, Energy and Financial Resources Policy Coordination
Alfred L. Atherton, Jr., Assistant Secretary of State for
Near Eastern and South Asian Affairs
Marshall T. Mays, President, Overseas Private Investment
Corporation (OPIC)
Walter C. Sauer, First Vice President and Vice Chairman,
Export Import Bank of the United States
Israel
H. E. Yehoshua Rabinowitz, Minister of Finance, Co-chairman
H. E. Simcha Dinitz, Ambassador to the United States
Avraham Agmon, Director-General, Ministry of Finance
Dr. Moshe Mandelbaum, Director-General, Minister of
Commerce and Industry
General (Res.) Moshe Goren, Director, Israel Investment
Authority
Ze'ev Sher, Economic Minister, Embassy of Israel

FOR IMMEDIATE RELEASE

MAY 13, 1975

SECRETARY SIMON AND ISRAEL MINISTER
OF FINANCE RABINOWITZ INITIAL DRAFT
INCOME TAX TREATY
Secretary of the Treasury William E. Simon and
Israel Minister of Finance Yehoshua Rabinowitz today
initialed a draft income tax treaty between the United
States and the State of Israel. As soon as conformed
English and Hebrew translations are prepared, the formal
agreement will be signed, transmitted to the United
States Senate for ratification, and released.
The primary objective of the convention is to
promote economic and cultural relations between the
two countries by removing tax barriers to the flow of
goods and investment and the movement of businessmen,
technicians and scholars. It provides also for
nondiscriminatory tax treatment and reciprocal
administrative cooperation to avoid double taxation
and to prevent tax avoidance.
In general, the convention is similar to the
approximately twenty-five U.S. tax conventions already
in effect. It provides that business profits of a
resident of one Contracting State shall be exempt from
tax by the other Contracting State unless such profits
are attributable to a "permanent establishment", e.g.,
a fixed place of business, located in that other
Contracting State. Generally, residents of one
Contracting State are taxable by the other Contracting
State on their personal services income only if physically
present in that other Contracting State for more than 183
days during the taxable year. Special rules are provided
for teachers, students and trainees to encourage academic
and scientific exchanges. The convention also establishes
the maximum rates of tax which may be assessed at the
source on dividends, interest and royalty income.
WS-302
(more)

2
The convention contains several special provisions
which are intended to clarify the interaction of U.S. and
Israeli tax laws in particular circumstances. It specifies
that for United States tax credit calculations compulsory
loans to the Israeli Government will be treated as income
taxes in the year incurred with appropriate adjustments
to tax upon repayment. Since Israel anticipates a
governmental grant program to stimulate certain types of
economic development, the convention clarifies the
characterization and treatment of those grants for U.S.
tax purposes, generally treating qualifying grants as
nontaxable capital contributions.
Upon ratification by the U.S. Senate, the convention
will take effect on the first day of the second month
following the exchange of instruments of ratification with
respect to withholding taxes, and in the year following
such exchange with respect to other taxes.
-0O0-

<J C u
Colorado's Thanks to Banks Day.

Hello, I'm delighted to be here today. Colorado is
my second favorite state — after New Mexico — and it
has been for years. My father was born in Cripple Creek,
and my husband Ed and I have a terrific summer home in
Creede, where we love to fish and "get away from it all."
I would be very happy if President Gerald Ford made Vail
his summer White House, and moved official Washington
out here when it's "springtime in the Rockies."
I'm also pleased to be here because I enjoy being
with bankers. I have enormous respect for your work,
because you bankroll the improvements that come to America.
Banks and bankers have been part of America's life
since the beginning. When our pioneer ancestors moved
out to Colorado and New Mexico, the cast of characters
who won the West always included the cowboy, the xancher,
the banker , and the dance hall girl — not necessarily

Remarks by the Honorable Francine I. Neff before a group
of leading Colorado bankers, Colorado Springs, Colorado
on May 13, 1975.

a u

follov/ing each other in that order. Your predecessors, who
started the little banks needed by miners, farmers and
ranchers, were a vivid part of America's early life. And
today you remain a vital part of the nation because your
services are basic to society and our free enterprise system.
Speaking of free enterprise, you are no doubt aware
that the First Women's Bank —

that's the name —

will

open soon in New York City, as the first really womanoriented bank in the nation.

I understand that about 15

other women-run banks are being organized everywhere from
Maine to Oregon.

I admire the courage of these bank or-

ganizers in this time of investment money dry-up, and I
think it's a fine example of the free enterprise spirit.
I feel strongly about free enterprise, but I must
admit I came to this feeling via my husband Ed.

For 27

years I have been the wife of a Certified Public Accountant
with his own business, and this long and close exposure to
the business world gave me a strong belief in our marketplace economy.
I know this belief is not shared by everyone.

Most

Americans fly the flag for free speech and a free press,
but somehow free enterprise doesn't rate as many cheers.
And yet this system gives us the greatest mass prosperity -the highest standard of living —

of any major nation of

the world.
To bring it down to basics, I see the free enterprise
story as having three "sides" or viewpoints —

that of

d9x
the consumer, the worker, and the businessman, who, of
course, is also a worker.
We are all consumers, and we know very well that the
consumer's viewpoint is "keep down prices on goods and
services."
The worker's viewpoint is also well known.

Worker

and labor unions very legitimately desire higher wages,
job retention rights, and more fringe benefits.
But where do we see the third viewpoint —
the businessman —

that of

except perhaps on the back pages of

the financial section of the newspaper?

Who gives John

Q. Public, and his children, an informed or sympathetic
insight into what the businessman thinks or expects, or
what his problems are?
You can look a long

time before you find a friendly,

front-page story about the problems, or current low profits of corporations. These are complex problems; they
are harder to understand then high prices or loss of a
job, so most Americans shrug and pass them by.
One result is that American adults, in an opinion
poll, said they thought corporations today reaped average
profits of 2 8 percent-

In reality, it averages around

5 percent, and the trend is downward, with real, aftertax profits dropping some 50 percent since 1965.
I became personally aware of the distorted view of
profits when my son and daughter were teenagers a few years
ago.

I would talk before teenage groups in different

schools, and I discovered that most of these boys and

girls thought businessmen made a profit of around 40

(j /

to 50 cents on the dollar. These were bright kids —
yours and mine — but they were convinced they were right,
and they all but called me a liar when I explained the facts.
Economics is not a sexy subject; but I suggest there
is something wrong when we fail to provide our children with
a reasonable view of their own economic system. We would
have better citizens, and better public servants, if our
children understood the basics of their marketplace economy.
Many banks are concerned about this. I spoke before
the Oklahoma City Chamber of Commerce earlier this mont^i, and
was pleased to discover that one of their city's large banks
now donates a considerable sum of money to help teenagers
demonstrate the feasibility of their own ideas by starting
their own businesses. It's no coincidence, I'm sure, that
the state of Oklahoma requires all of its schools to include
economics in their cirriculum.
I have not mentioned government's role in the economy,
although of course we know it holds various safety nets
under both the worker and the businessman. There is, I feel,
a very negative side to government, in terms of too much control and too large a slice of the GNP going for government
spending. However, in the interest of time, I would like to
bypass this and expand a little more fully on the question of

dy
financing the national debt.
f | ^
It is likely that our budget this year will reach
and perhaps exceed $365 billion dollars.

That's a billion

dollars a day, every day of the year, your government
will be spending to pay its bills.
Depending on what bills pass in Congress, our deficit for the coming fiscal year alone could exceed $80
billion.

And this does not represent the outer limits

of what may actually develop as Congress passes new legislature

now under consideration.

The Treasury Department will have to borrow 36 to
38 billion dollars for the first six months of calendar
year 19 75, with an anticipated $40 billion for the remainder of this year.

In the week just past, Treasury entered

the capital markets for $5 billion in financing, which
was a cutback from the planned May-June borrowing.
The Treasury Department is well aware that borrowing very large sums of money may cause strains in the
private financial markets.

Although financial conditions

normally ease during a recession, this time there may be
difficulty financing our current large federal deficits
for several reasons.
For one, since the current recession came after a
considerable period of inflation, private financing
demands are heavier than usual.

Further, state and local

governments have had their tax receipts reduced by the
recession, and they will need to borrow substantial sums.
Governments at all levels —

local, state and Federal

will borrow an estimated 80 to 85 percent of new funds
available this year, leaving less than one dollar out of
every five for investment in private enterprise.
Several possibilities may occur.

An unhealthy compe-

tition between the government and private borrowers might
develop for capital funds.

Or the Federal Reserve could

accommodate these enormous borrowing requirements by
creating a more rapid growth in money and credit.

In our

view, this latter step could mean a re-accelerated inflation followed by a new recession.
Because our economy is currently depressed, the
capital market might be able to absorb the combined needs
of government and the private sector this year, and then
face the real crunch next year, when the economy has
gathered steam and the private sector is looking for more
money.

Thus, if runaway Federal spending programs, com-

bined with permanent tax cuts, become a way of life in
America —

and the trend has been this way —

then we

could be in for a lot of future economic trouble in the
form of an unstable economy and accelerated inflation.
It isn't much fun being a financier these days, but
maybe there's hope as long as we can laugh.

Someone said

to me the other day that the Biblical Noah was our first
financier because he floated a limited company when all
the rest of the world was in liquidation.
Now, to change the subject somewhat, a number of
people have asked me, "How strong is the American dollar
internationally?"

p^a, since my name is on your dollar,

-7I have a very personal interest in this question.
The Treasury's view is that the only long range

way to maintain a strong dollar is to put our own economic
house in order. With that in mind, we believe dollar
prospects are good for several reasons.
First, the U.S. lead in reducing interest rates —
which weakened the dollar last fall — may be ending.
As the recession bottoms out, incentives for interestsensitive flows could be reversed by a further change
in the international interest rate differentials.
Second, while oil producers are diversifying their
enormous investments, the United States will continue
to receive a very significant share of these investments.
And finally, our competitive position in world markets remains strong. Bad as our inflation is, it is still
better than that of many other countries. Further, oil
imports to the United States dropped sharply in March,
for the second consecutive month, and we posted a surplus
of 1.3 8 billion in our balance of trade.
In the long run, of course, our national economic
policy must shift towards more savings and investment and
towards less government spending. We have lived too long
upon the momentum of past growth. Now we must think in
terms of our children's future and plan for the longer run.
But despite all the problems of inflation, recession,
and too much Big Government, our free enterprise system
still functions and the laws of supplv and demand still
operate. Further, the Ship of State still sails — the

-8sky hasn't fallen — and most of us even continue to love
and live and fight with our own husbands and wives.
Since Ifm an official of the Big Government I've just
criticized, you may wonder how I reconcile these personal
feelings with my position as United States Treasurer.
I can do this because my job also includes the directorship of the United States Savings Bonds Division. And
I like the Savings Bonds Program for at least three reasons
It is not Big Government.
It is good for America.
And it is good for Americans.
U.S. Savings Bonds are the nongovernmental government program, because 9 7 percent of people working in the
program are unpaid volunteers. Even our advertising program is donated by the National Ad Council. And I feel
right at home with volunteers like yourselves, because
I was one myself for many years. In fact, I was selling
War Bonds way back, several wars ago, in my adolescence.
Savings Bonds are also good for the country, because they are far and away the most stable part of the
national debt. E and H Bonds remain outstanding, on the
average, for more than six years, as compared to less than
3 years for other marketable instruments. This reduces
the job and the cost of refinancing the debt.
Further, Bonds are good for the individual. They
teach the basic habit of thrift, and they pay a very competitive 6 percent interest. Banker Tom Prideaux of the

y5
National Bank of Oregon notes that $75 invested in Savings
Bonds monthly since December of 1968, is worth more than
$75 invested monthly in stocks-making up Moody's industrial
index.

Further, there are some tax advantages; in fact,

I sometimes call our bonds the working man's legal tax
shelter.
Savings Bonds sales in 19 74 were the highest since
World War Two, and this year is even better.
Here in Colorado, El Paso is one of 35 counties

your state that topped its 19 74 goals. So far this year,
El Paso has attained almost 25 percent of its campaign
goal, with sales of more than $1,392,000.
You have terrific results like this because you
are terrific volunteers.

You know, sometimes at Treasury

we think our nation's wealth is buried at Fort Knox.

But

our real wealth is very much alive; it is people like you
who bring the nation something money can't buy —

and

that's your time and devotion for worthwhile causes. One
of my personal satisfactions as United States Treasurer
is the opportunity to thank men and women like you for
your contributions to America —

and I mean both the

Savings Bonds Program and your many other worthy programs.
Our country will always have problems because that's
the nature of life.

But with men and women like you work-

ing to solve them, t