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LIBRARY
N0V9 1977
ROOM 5004
TREASURY DEPARTMEN
PRESS RELEASES |
WS-1106
TO
LIBRARY
WS-1237
N0V9 1977
ROOM 5004
REASURY DEPARTMEN
OCTOBER 1, 1976
THROUGH
DECEMBER 31, 1976
DepanmentoftheTREASURY
OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20226
TELEPHONE 634-5248
FOR IMMEDIATE RELEASE
FRIDAY, OCTOBER 1, 1976
CONTACT: PRISCILLA CRANE (202) 634-5248
The U.S. Treasury Department's Office of Revenue
Sharing paid $1.6 billion to 35,125 units of State and
local government today, in the 17th regular payment of
general revenue sharing funds made since the program was
authorized in 1972.
Of the amount released today, approximately $1.3 billion
was paid to more than 18,000 places using electronic funds
transfer and direct deposit procedures.
Today's distribution represents the first of two
regularly-scheduled payments of funds allocated for the
seventh and final entitlement period of the presentlyauthorized General Revenue Sharing Program.
Including the amount released today, the Office of
Revenue Sharing has paid $28.3 billion to nearly 39,000
states, counties, cities, towns, townships, Indian
tribes and Alaskan native villages since the first
checks were mailed in December 1972.
WS-1106
-2-
Approximately $20 million in money authorized to
be paid today is being held for 3,000 local governments
which have not reported their planned and actual uses of
revenue sharing funds to the Office of Revenue Sharing.
These reports are required by Section 121 of Title I of
the State and Local Fiscal Assistance Act of 1972 (P.L.
92-512, revenue sharing law).
Funds owed to these and other delinquent governments
will be paid after the required reports have been received
and accepted by the Office of Revenue Sharing.
A special
payment will be made November 12, 1976 to governments which
have filed properly executed reports with the Office of
Revenue Sharing by November 5, 1976.
Governments which
need replacement forms, may obtain them from the Office
of Revenue Sharing.
Legislation to extend the General Revenue Sharing
Program past the scheduled expiration date of December 31,
1976 is now before the Congress.
he Department oftheJREASURY
\SHINGTON, D.C. 20220
TELEPHONE 964-2041
Contact: J.C.Davenport
Extension 2951
FOR IMMEDIATE RELEASE
October 1, 1976
TREASURY ANNOUNCES TENTATIVE NEGATIVE
DETERMINATION IN ANTIDUMPING INVESTIGATION ON
FULLY AUTOMATIC DIGITAL SCALES FROM JAPAN
Under Secretary of the Treasury Jerry Thomas announced
today a tentative negative determination in the investigation of fully automatic digital scales from Japan under
the Antidumping Act, 1921, as amended. Notice of this
decision will appear in the Federal Register of October 4, 1976.
Comparisons based on purchase price and home market
price during the period July 1, 1975-February 29, 1976 have
yielded no margins.
The investigation was initiated March 31, 1976, following the receipt of a petition in proper form from counsel on
behalf of the Reliance Electric Company, Cleveland, Ohio,
a domestic manufacturer of the subject scales. A final
determination in this case is due within 3 months.
For purposes of this investigation the term "fully
automatic digital scales" means such scales that display
weight, unit price and total price having a weight measuring
capacity of 25 pounds or less.
Imports of the subject merchandise from Japan amounted
to approximately 1800 units, valued at roughly $1.3 million
f.o.b. Japan, uuring 1975.
*
WS-1107
*
*
ie DepartmentoftheJR[/[$URY
.SHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
October 1, 1976
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 $5,900 million, or
thereabouts, to be issued October 14, 1976, as follows:
91-day bills (to maturity date) in the amount of $2,400 million, or
thereabouts, representing an additional amount of bills dated July 15, 1976,
and to mature January 13, 1977 (CUSIP No. 912793 D9 4), originally issued in
the amount of $3,503 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $3,500 million, or thereabouts, to be dated October 14, 1976,
and to mature April 14, 1977 (CUSIP No. 912793 F6 8).
The bills will be issued for cash and in exchange for Treasury bills maturing
October 14, 1976, outstanding in the amount of $5,916 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $3,076 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
one-thirty p.m., Eastern Daylight Saving time, Friday, October 8, 1976.
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
WS-1108
(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
the face amount of bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust companyPublic 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 $500,000 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 or at the Bureau of the Public Debt
on October 14, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing October 14, 1976,
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
JheDepartmentoftheJREASURY
r„Tj
TELEPHONE 964-2041
WASHINGTON, D.C. 20220
^H
October 1, 1976
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,500 million of 13-week Treasury bills and for $3,500 million
of 26-week Treasury bills, both series to be issued on October 7, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
26-week bills
maturing April 7, 1977
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing January 6, 1977
Price
High
Low
Average
98.719
98.711
98.714
Discount
Rate
5.068%
5.099%
5.087%
Investment
Rate 1/
5.:
5.24%
5.23%
Price
Discount
Rate
97.342 a/ 5.258%
97.337
5.267%
97.338
5.265%
Investment
Rate 1/
5.48%
5.
5.
a/ Excepting 3 tenders totaling $3,500,000
Tenders at the low price for the 13-week bills were allotted 40%.
Tenders at the low price for the 26-week bills were allotted 56%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
. Received
| Accepted
$
24,000,000 $
20,000,000
Boston
3,094,570,000
1,923,570,000
New York
20,580,000
20,580,000
Philadelphia
27,985,000
27,985,000
Cleveland
20,090,000
13,090,000
Richmond
23,520,000
22,725,000
Atlanta
298,115,000
204,385,000
Chicago
47,845,000
31,845,000
St. Louis
31,950,000
9,950,000
Minneapolis
20,995,000
20,995,000
Kansas City
23,725,000
19,125,000
Dallas
188,035,000
San Francisco 284,635,000
TOTALS* 3 ' 9 1 8 ' 0 1 0 ' 0 0 0
Received
Accepted
$
68,280,000 $
4,280,000
6,703,665,000
3,225,895,000
12,110,000
7,110,000
275,215,000
109,215,000
55,060,000
9,060,000
28,140,000
18,000,000
348,040,000
22,840,000
72,290,000
39,715,000
44,755,000
3,755,000
14,680,000
13,055,000
37,095,000
23,095,000
474,450,000
24,050,000
$2,502,285,000 b/$8,133,780,000
$3,500,070,000 c/
b/Includes $278,735,000 noncompetitive tenders from the public.
c/Includes $150,045,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.
WS-1109
le DepartmentoftheJREASURY
SHINGTON, D.C. 20220
TELEPHONE 964-2041
October 1, 1976
FOREIGN PORTFOLIO INVESTMENT REPORT
Copies of the Treasury Department's "Report to
the Congress on Foreign Portfolio Investment in the
United States," are available from the Superintendent
of Documents, U.S. Government Printing Office,
Washington, D. C. 20420, at a price of $2.80 per copy.
Also available in a separate volume from the
Superintendent of Documents at a price of $5.70 per
copy, is "Appendixes F and G" to the report, which
is a reproduction of a study on institutional and
legal aspects of foreign portfolio investment in the
United States. The latter was done for the Department
by private contract.
#
WS-1110
#
#
le Department of theTREASURY
SHINGTON, D.C. 20220
TELEPHONE 964-2041
REMARKS BY THE HONORABLE GEORGE H. DIXON
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
NATIONAL BANKERS ASSOCIATION 49TH ANNUAL CONVENTION
RICHMOND, VIRGINIA
OCTOBER 1, 19 76
Ladies and Gentlemen, thank you for your warm welcome.
I am honored to be with you and delighted to address your
Annual Convention here in Richmond, Virginia. It goes without
saying—but let me do so anyway—the Treasury Department, and
I personally, admire your membership and your contributions to
banking and to society.
Let me also be the next in a long line of Treasury officials
who have had the pleasure of coming before you and stating
publicly that we heartily endorse, strongly support, and try
to work hard to foster the Minority Bank Deposit Program.
As LeRoy Thomas noted in his gracious introduction, I
have been a member of the Treasury team but a relatively short
time. Less than a year ago I, too, used to sit in audiences
much like this one, listening to some Washington bureaucrat,
and recall the wisdom of Will Rogers, who used to say, "I don't
tell jokes--I just watch the government and report the facts."
Now that I'm no longer just watching the government, the
wisdom of Will Rogers seems somehow less compelling. It's
remarkable what a few months in Washington will do to one's
perspective about the legislative process, about that great
gray faceless bureaucracy, and many other things.
It is, after all, not an easy thing to be a professional
politician. Just think how difficult it would be to place
yourself in the position of straddling a fence while keeping
one ear to the ground. Or recall Groucho Marx's definition
of politics. He said it was "the art of looking for trouble,
finding it everywhere, diagnosing it incorrectly, and then
applying the wrong remedies." But I trust that this Administration's interest and the Treasury Department's leadership
in advancing the objectives of the Minority Bank Deposit
Program don't conform to Groucho's definition.
WS-1111
- 2 As you know, six years ago, in October 1970, the Minority
Bank Deposit Program was announced in a joint statement issued
by the Departments of Commerce and Treasury. The object of
that program can be simply stated—to stimulate the formation
and growth of minority banks as part of an overall effort to
expand the opportunities for minority business enterprise.
Looking back over the program's six-year history, we
believe that it has been very successful. The credit for that
success must be shared by all of the participants. Your institutions have engaged in aggressive marketing and provided needed
services that are efficient and competitive in every respect.
We hope that it is fair to say that the activities of the
Treasury and Commerce Departments have reinforced your own
efforts and have assisted in achieving our mutual goals.
Thirty-one banks with total deposits of about $400 million
were initially included in the program. The goal for its first
year was to increase deposits by $100 million. A two-part
approach was adopted: the first, directed by the Department
of Commerce, aimed at increasing deposit flows from the private
sector by $65 million; the second step was to increase Federal
government deposits in minority banks by $35 million, not
counting tax and loan account deposits which have always been
considered separately.
At your 44th Annual Convention, held in Washington, D.C.
in 19 71, former Deputy Secretary Charls Walker gave you a
progress report in which he stated that the first year's goals
had been met—in fact they had been exceeded. Total deposits
in minority banks had increased by $155.5 million between
September 19 70 and September 19 71. Government deposits in
minority banks increased by $40 million during that year.
At your 45th Convention, in Houston, Texas, former General
Counsel Sam Pierce commented that minority bank deposits had
increased to $875 million—an increase of 120 percent in just
two years. Because the figures were not available at the time,
Mr. Pierce did not mention that during the same period Federal
deposits had increased another $45 million to $85 million.
The October 19 73 progress report was brought to your 46th
Convention in Chicago, by Bill Simon, who then was Deputy
Secretary. As of June that year, deposits in minority-owned
banks had surpassed $1 billion. Again, lack of reporting data
prevented him from telling the Convention that on September 30,
1973, government deposits reached almost $89 million.
What has happened since Bill Simon's 1973 report? Total
deposits in minority banks have continued to grow. They now
- 3exceed $1.4 billion, an increase of $1 billion in the six
years since the Minority Bank Deposit Program began.
The number of minority banks also has continued to increase—from those original 31 banks in 1970, serving 24
communities, up to 50 banks in 1973 serving 42 communities,
and to the 79 banks of today, which serve 58 American communities. That's the good news.
The bad news is that after Secretary Simon's report to
you in 1973 government deposits declined, reaching a low point
of about $65 million for the quarter ended September 30, 19 74.
This was mostly due to more sophisticated cash management
practices throughout the government, including the increased
use of letter of credit funding techniques and to cutbacks in
some programs which had contributed sizable balances.
As taxpayers, we have to be in favor of anything which
reduces the cost of government, and that of course includes
good cash management. But even so, with your help we have been
working to reverse the trend and increase deposits. Among other
initiatives, last October President Ford sent a memorandum to
the heads of all Departments and Agencies asking them to renew
their efforts in support of this important program, and urging
them to examine what new approaches, consistent with good cash
management, they could take to further its objectives.
I am very pleased to announce that these efforts have been
successful. With one small agency yet to report, government
deposits at June 30, 1976 totaled $89,499,000, again excluding
tax and loan account balances. Since September 1974, over
$24 million of government deposits have been added, to achieve
a new all-time high for the program.
While we are pleased with those results—as we hope you
are—there is clearly much more we can do. In looking ahead,
in setting goals within the Treasury for the next fiscal year
which begins today, we have established an objective to increase
government deposits in minority banks to $100 million.
We realize, of course, that as Henry Ford said, "You can't
build a reputation on what you are going to do." We have no
crystal ball to tell us if this goal can be accomplished. We
will follow the approach that worked well when the program was
first getting started—that is, having Treasury employees meet
with local Federal officials in cities where minority banks are
located in an attempt to communicate the government's overall
commitment and to find opportunities where new banking relationships can be established.
- 4 Such meetings were held in New York and San Francisco in
the past year. During the coming year we will give special
attention to those cities where Federal deposits seem to be
lagging, including St. Louis, Cleveland, Memphis, Pittsburgh,
Houston, Albuquerque, Chicago, and Los Angeles. Now this is
no breakthrough in innovative ideas, but at this stage of the
minority banking build-up effort, there is probably no better^
alternative than just plain "beating the bushes for business."
Treasury will do its best to make the program as widely known
and understood as our resources will permit and to encourage
all Federal agencies to use minority banks wherever there is
a choice.
One of the best ways for us to promote the program is by
example. On June 30, 1976, the Treasury had noninterest-bearing
time deposits of $3,434,000 with 26 minority banks. These
balances serve as compensating balances to reimburse the banks
for collecting the deposits of various Federal agencies
through what are known as Treasury's General Accounts, and
remitting those funds to various Federal Reserve Banks and
branches.
This $3.4 million in Treasury compensating balances which
are on deposit at minority banks represents about 13 percent
of the total amount of such balances everywhere in the United
States. Included in the total, therefore, are balances which,
for various reasons, are not maintained with minority banks.
For example, balances held by banks in cities and towns where
there are no minority banks; balances held by banks providing
services overseas; and balances related to a few extremely highvolume accounts where the selection of banks is under competitive
bidding procedures.
After eliminating those types of balances, minority banks
hold 40 percent of our compensating deposits. This percentage
has been achieved because we in Treasury, in reviewing agency
requests to establish General Accounts in cities where minority
banks are located, have required that the agency involved consider opening the account at a minority bank. Given the large
geographical areas of some cities, this approach does not always
result in the selection of a minority bank—but it is successful
on enough occasions to serve as reinforcement of our efforts.
The tax and loan account system represents another area
where Treasury exercises some direct control, even though it
is not a part of the Minority Deposit Program. As you know,
all commercial banks are eligible for tax and loan accounts.
Deposit volume in these accounts is not within the Treasury's
control although we have actively encouraged corporations to
- 5 use minority banks in making their tax payments. Deposit
duration is within our control and is the same for all banks,
minority or nonminority. Banks are divided into three classes
which we imaginatively call A, B, or C, based on the dollar
volume of deposits received. "A" banks have the lowest amount
of deposits, and the "C" banks the highest. But for the "C"
banks, the average life of tax deposits during Fiscal Year 1976
was 9/10 of a day, whereas it was 3.7 days for "B" banks, and
7.9 days for "A" banks.
It will come as no surprise to any of you that these figures
represent the shortest average deposit life in the history of
the program. On a consolidated basis tax deposits remained in
the banking system for an average of 2.2 days during Fiscal Year
1976 as compared to 3 days in 19 75, 6.9 days in 1974, and
11.1 days in 1973.
As I implied earlier, we don't want to apologize for these
improvements in our cash management techniques. They are, after
all, just an application of the same concepts you recommend to
your customers and which you utilize in your own institutions.
In this era of burgeoning Federal deficits we can do no less
for the taxpayer than to assure that his funds are utilized
in the most effective possible manner.
Nevertheless, progress in cash management has resulted
in some new problems which we recognize and are committed to
address. Reducing average daily balances so dramatically has
produced a situation where many banks are not being adequately
compensated for the services that they perform for the government. We cannot expect that banks will continue to participate
in the tax and loan system under those conditions.
The tax and loan system is probably the best cash collection
system in the world today. Its effectiveness is directly related
to the fact that almost every bank in the country is a collection
point. It minimizes collection time, eliminates mail delays,
and provides immediate access to tax payments. Given those
advantages, it simply would not be in the public interest to
pursue policies which could lead to a reduction in its
efficiency.
In 1975 we proposed legislation to the Congress which would
permit the government to invest its tax deposits in short term
assets. As a practical matter, this means that all tax and loan
balances would be invested in Federal funds at the bank of account
and we would pay banks on a per item basis for services rendered.
By adjusting the interest we collect and the service charges that
we pay, we can assure that all banks are treated equitably regardless of whether they have a high dollar volume and low
- 6 activity, or a low dollar volume but high activity. At the
same time we can maximize the use of funds for the taxpayer.
During hearings on this legislative proposal before both
the House and the Senate, your Association presented persuasive
testimony that the bill would have a potentially disproportionate and adverse impact on minority owned banks. Because
of your success in soliciting tax payments from private corporations, your balances have been approximately ten times
higher than nonminority banks of comparable size. The Department of Treasury agrees with your concern and recognizes that
implementation of the legislation could have a substantial
negative impact on the earnings of minority banks. The Banking
Committees of both the House and the Senate have also recognized
the problem, and the congressional intent that the bill's impact
should be softened for minority banks is firmly imbedded in the
legislative history. We have proposed a procedure to solve the
problem. It would authorize placing a special Treasury demand
deposit with each bank participating in the Minority Bank
Deposit Program. The amount of that deposit would be related
to the bank's average daily tax and loan balance during 19 76 or
whatever year would be appropriate. The special deposit would
be reduced each year and would be withdrawn at the end of five
years. Since a separate account would be utilized, it would not
affect the ongoing operations of the tax and loan account in
minority banks. In accordance with the legislation, tax and
loan balances would be invested in Federal funds and fees would
be paid for services rendered.
As you probably know, the tax and loan account legislation
passed the House of Representatives last December by a vote of
391-0 with one abstention. The Senate Banking Committee has
also considered the bill, but it was not acted upon. As often
occurs in the closing days of any legislative session, the bill
was amended to include several provisions which were not germane
to its original objectives. These amendments were controversial
and led to a decision by the Senate to table the bill rather than
consider it. In view of the overwhelming support which the bill
enjoyed in both the House and the Senate as originally proposed,
we expect that it will be passed next year by the 95th Congress
as one of the first items of business.
In summary, we believe the Minority Bank Deposit Program
has been successful. Most of that success can be attributed to
your own efforts in support of the Program and in helping us to
improve it. Neither of us are totally satisfied with the results
and there is much more that we can do. We look forward to workin
- 7 with you individually and through your Association in
developing ways to improve the Program. I have appreciated the opportunity of speaking with you today and look
forward to working with you next year. And if that sounds
like an expression of optimism from a public servant
appointed by President Ford, you're right—it is!
0O0
FOR IMMEDIATE RELEASE
Contact: Richard B. Self
Extension: 8256
October 4, 1976
TREASURY ANNOUNCES
PRELIMINARY COUNTERVAILING DUTY DETERMINATION
AGAINST IMPORTS OF
CERTAIN FISH FROM CANADA
Under Secretary of the Treasury Jerry Thomas announced
today a preliminary determination that imports of certain
fish from Canada receive "bounties or grants" within the
meaning of the U.S. Countervailing Duty Law (19 U.S.C. 1303).
Notice to this effect will be published in the Federal
Register of October 7, 1976.
Under the Countervailing Duty Law, the Secretary of
the Treasury is required to assess an additional (countervailing) duty that is equal to the amount of the bounty
or grant that has been found to be paid or bestowed. The
investigation, which is confined to fresh, chilled, or
frozen flounder and cod, ievealed that direct payments
by the Government to fishermen and processors under the
"Groundfish Temporary Assistance Program", constitute the
payment or bestowal of a bounty or grant. Payments to
fisnermen for construction of fishing vessels under the
"Fishing Vessel Assistance Program" were determined at
this stage not to be bounties. Interested parties will
be given a period of 30 days after publication of this
Notice in which to express written views on this preliminary determination.
During 1975 imports of fresh, chilled, or frozen
flounder and cod classifiable under Tariff Schedule
Item Numbers 110.3560, 110.3565, and 110.5545 were
$3.2 million.
* * *
WS-1112
FOR IMMEDIATE RELEASE
October 14, 1976
TREASURY SECRETARY WILLIAM E. SIMON NAMES JOHN WEBSTER
SPECIAL ASSISTANT TO THE SECRETARY FOR CONSUMER
AFFAIRS
Treasury Secretary William E. Simon has named John Webster
a Presidential Interchange Executive on leave from the IBM
Corporation, as Special Assistant to the Secretary for Consumer
Affairs.
Mr. Webster who is 35 years old is a public affairs program
administrator at IBM and holds advanced degrees from Pennsylvania
State University and the University of Pittsburgh. The Presidential
Interchange Program arranges for managers from both the private
and public sectors to work in the opposite sector for a year to
gain mutual understanding and appreciation of one another's areas.
At the Treasury Department, Mr. Webster, who reports directly to
Treasury Secretary Simon, will be responsible for carrying out the
Department's Consumer Representation Plan.
During Mr. Webster's career at IBM he coupled a successful
sales record at the corporation with a leave of absence to earn
his Ph.D. in the Environmental Influence on Business. While
doing so, he taught consumerism and related courses at Pennsylvania
State University where he coordinated a wide range of student
consumer projects. During this period he and a colleague lectured
on consumerism to a variety of public service groups and conducted
special seminars for improving the shopping habits of elderly,
low-income consumers. He also served as Regional Director of the
National Affiliation of Concerned Business Students where his
principal responsibility was to promote social policy research
and dialogue between corporations and business students.
In 1974, Mr. Webster returned to IBM as a program administrator in public affairs where his major responsibilities were
monitoring and evaluating social issues and recommending specific
programs to deal with them. His responsibilities included speaking
to IBM audiences on consumerism and developing a case study for use
in management training programs.
In addition to Mr. Webster's work for IBM, he taught Business
and Society in the University of Connecticut's graduate business
program. He has special training in attitude measurement and
change and has co-authored five public issue socio-dramas for
WS-1113
industrial use.
t
- 2-
In a statement prepared for the Subcommittee on Oversight
of the House Committee on Ways and Means, Mr. Webster said "I
have had the opportunity to review Treasury's existing consumer
plan...it zeroes in squarely on the need to plug the consumer
view into the decision-making process and it places responsibil
where .it must be--in the hands of the Secretary and his bureau
and office heads."
Mr. Webster told the Subcommittee he planned to review the
Treasury program thoroughly to determine where it can be
strengthened. He added that a key element in the plan is the
Secretary's support for his right to oppose him publicly if
circumstances warrant.
Mr. Webster lives with his wife and two children in
Bethesda, Maryland.
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::edercd financing bank
WASHINGTON, D.C. 20220
• h 'i
October 1, 1976
FOR IMMEDIATE RELEASE
SUMMARY OF LENDING ACTIVITY
September 1-September 15, 1976
The Federal Financing Bank activity for the period
September 1 through September 15, 1976, was announced as
follows by Roland H. Cook, Secretary:
The Federal Financing Bank made the following loans
to utility companies guaranteed by the Rural Electrification
Administration:
Interest
Amount
Maturity
Borrower
Date
Rate
9/1
9/1
9/2
Oglethorpe Electric
Membership
$5,792,000 12/31/10
8.048%
Cooperative Power
Association
7,000,000 12/31/10
8.048%
United Power Association
7,000,000 12/31/10
8.037%
9/7
Brookville Telephone Co.
866,000
9/2
Southern Telephone Co.
347,000 12/31/10
8.029%
9/8
Colorado-Ute Electric
Association
8,500,000 12/31/10
8.019%
55,000 12/31/10
8.036%
9/7/78
6.6 89%
9/10
Seminole Telephone Co.
9/10
Western Farmers
Electric
8,000,000 12/31/10
8.036%
Cooperative Power
Association
6,000,000 12/31/10
8.018%
9/13
Central Iowa Power Corp.
1,585,000 12/31/10
8.018%
9/14
Tri-State Generation $
Transmission Association
6,832,000 12/31/10
8.038%
9/13
Interest payments on the above REA loans are made on a
quarterly basis.
WS-1114
'l
—
- 2On September 1, the Export-Import Bank borrowed
$121 million from the Federal Financing Bank. The loan
matures September 1, 1986, and bears interest at a rate
of 7.895%. The proceeds of the loan were used partially
to repay $337 million in principal and $77 million in interest due to the FFB on September 1.
On September 3, the FFB purchased from the Department
of Health, Education and Welfare (HEW) Series E notes in the
amount of $1 million. The notes mature July 1, 2000, and
bear interest at a rate of 7.985%. HEW had previously acquired
the notes which were issued by various public agencies under
the Medical Facilities Loan Program. The notes purchased by
the FFB are guaranteed by HEW.
On September 3, the Bank made an advance to the Chicago,
Rock Island and Pacific Railroad Company in the amount of
$1,900,000.00. The maturity is June 21, 1991, and the interest
rate is 8.005%. The loan is guaranteed by the Department of
Transportation.
The General Services Administration made the following loans
from the Federal Financing Bank:
Interest
Date
Series
Amount
Maturity
Rate
9/3
M
$1,572,744.69
7/31/03
8.111%
9/14
L
1,096,734.70
11/15/04
8.090%
On September 3, the FFB advanced $34,109,645.85 to the
Government of Korea. The loan matures June 30, 1984, and bears
interest at a rate of 7.412%. The borrowing is guaranteed by
the Department of Defense under the Foreign Military Sales Act.
The Student Loan Marketing Association (SLMA) rolled
over the following principal amounts on loans previously made
by the Federal Financing Bank:
Interest
Date
Amount
Maturity
Rate
9/7
$20,000,000.00
12/7/76
5.350%
9/14,
25,000,000.00
12/14/76
5.362%
SLMA borrowings are guaranteed by the Department of
Health, Education and Welfare.
- 3 The National Railroad Passenger Service (Amtrak) made
the following drawings from the FFB:
Interest
Date
Note #
Amount
Maturity
Rates
9/13 7 $100,000,000 12/13/76 5.349%
9/15
8
5,000,000
12/15/76
5.374%
Amtrak borrowings from the Bank are guaranteed by the
Department of Transportation.
Federal Financing Bank loans outstanding on September 15,
1976, totalled $25.0 billion.
mbepartment of theTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE MONDAY, OCTOBER 4, 1976, 11 P.M. EDT
STATEMENT BY THE HONORABLE WILLIAM E. SIMON
THE SECRETARY OF THE TREASURY
OF THE UNITED STATES OF AMERICA
AT THE 197 6 ANNUAL MEETINGS
OF
THE BOARD OF•GOVERNORS OF THE
INTERNATIONAL MONETARY FUND AND
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
MANILA, THE PHILIPPINES
TUESDAY, OCTOBER 5, 1976
Mr. Chairman, Mr. Witteveen, Mr. McNamara, Fellow
Governors, Ladies and Gentlemen:
Once again, it is a distinct honor for me to address this
distinguished body. We are fortunate to meet in this beautiful
land, a nation known for its traditions of warm hospitality and
a nation with which the United States has long maintained the
strongest of ties and the warmest of friendships.
There is an old Chinese saying, eloquent in its simplicity,
which merely says: "May you live in interesting times." Without
a doubt, we who are gathered here today have lived through some
very interesting times together. The period since I joined the
U.S. Treasury nearly four years ago has been one of extreme
tension, even danger, in international economic affairs.
Repeated shocks threatened the traditions of cooperation that
are the foundation of world trade and investment, as well as
general monetary stability. Differences among nations over
principles and objectives brought into question our ability to
preserve a free and open international trade and investment system.
We have witnessed the development of an inflationary
virus stubbornly resistant to our attempted remedies; we
have experienced an oil embargo and price increases that
disrupted the world economy; and, we have lived through the
deecest international recession of the oostwar era.
WS-1115
- 2 We have done much to meet these challenges—but even
more remains to be.done. Today I would like to discuss
both the progress we have made and the challenges we still
face.
One of the characteristics that marked this troubled
period was a growing recognition of our mutual interdependence. More than ever before, people around the world
began to understand that the economy is at the heart of
the body politic and that every shock it receives will
ultimately be felt in terms of social and political--as
well as economic—instability. The result of this new
understanding has been that, despite all of the divisive
economic pressures unleashed on the international scene
in the last four years, international cooperation has not
broken down and indeed, in one important area, major
reform has been achieved—the first comprehensive
reform of the international monetary system since Bretton
Woods. '
The international economic system is now truly universal, involving all countries, large and small. Between
1950 and 1975, the level of trade among market economies
increased from $50 billion to $800 billion. This dramatic
expansion of the world economy has coincided with the
creation of scores of new nations and new centers of
economic power. The'price and supply of energy, the conditions of trade and investment, the expansion of world food
productionf the technological base for economic development
are today the shared concern of every nation. And it is
clear to me that we .will either move forward with trust and
cooperation or we face the dangers of retreating into
economic instability and nationalistic conflict.
So far, we have followed the correct course of cooperation. And much of our progress is the result of the efforts
of the men and women gathered here today. Speaking for
myself, I am grateful for the chance that has been mine to
serve with you — on behalf of my government but also on
behalf of the ideals we all share -- during this period of
re-examination and searching, I am also grateful for the
education afforded me over the past four years — for both
the many lessons learned willingly and the few learned not
so willingly. But, above all, I am thankful for the high
rewards of personal contact and friendship with you, my
colleagues, and for the sense of genuine accomplishment
that has grown out of our work together.
This brings me to the work that remains to be done.
The task before us is a four-fold one:
-- We must
restore
and maintain
in our
domestic
economies;economic stability
- 3 —
We must make the reformed international monetary
system work;
— We must tackle with increased courage and
understanding the difficult problems of
development; and
— We must continue to work for a free and open
world trade and investment order that is
essential to a shared prosperity to all.
As we work together to achieve international economic
progress each nation must follow responsible domestic
policies to avoid disrupting both its own economy and
inevitably those of other countries. Because of its size,
this is particularly true of the U.S. economy. Following
the most severe economic recession of the postwar era, the
U.S. is now 1-1/2 years into a healthy and balanced economic
expansion. If erratic shifts and excesses of government
actions are avoided, this expansion will continue well
beyond 1976, although the rate of growth will naturally tend
to moderate.
The strength of the current expansion, that began in
the spring of 1975, is indicated by the increase in real
output of goods and services which has averaged 7 percent
during the last four quarters. The rate of inflation, as
measured by the GNP price deflator, has dropped from a peak
of over 12 percent in 1974 to the 5 to 6 percent zone throughout 1976. Employment is at a record level of 88 million
workers and 4 million new jobs have been created since the
upturn in the economy although the unemployment rate
remains far too high reflecting the lagged effect of the
recession and the extraordinary surge of new workers into
the labor force. Despite the wide fluctuations in
quarterly statistics, it is clear that a healthy expansion
can be continued if policies focus on the longer-term goals
of reducing both inflation and unemployment.
As expected, personal consumption has provided the
basic thrust for
growth throughout the current recovery.
Business spending did not accelerate as quickly as
originally anticipated, but outlays for plant and
equipment now appear to be improving and inventory buying
is up to expectations. Government spending at all levels
seems to be better controlled, and the strength of export
sales has continued, although imports are now rising more
rapidly.
This has resulted in a
views
swing
1975 to
in
this
aour
substantial
shift
balance
withof
deficit
equanimity
trade in
from1976.
because
a massive
TheweUnited
surplus
recognize
States
in
- 4 that it reflects the sharp increase in imports that has
occurred as our economy has moved from recession to expansion. This adjustment is a proper reaction to changing
economic conditions that the international monetary system
can handle well if we do not seek to offset the effect of
natural market forces.
The recovery to date has remained well balanced. It
was never anticipated that specific sectors of the economy —
such as autos or housing — would dominate the recovery,
although sales of domestic cars have been somewhat stronger
than expected, which partly explains the accelerated pace
of spending early in the year. Nor have widespread capacity
constraints or severe raw material shortages appeared at this
stage of the recovery.
Best of all, fiscal and monetary policies have been
carefully monitored to prevent
the excesses that led
to renewed overheating of the economy following the
temporary benefits of faster growth.
While many called for more government spending and
significantly faster expansion of the money supply in 1975
and even this year, the President strongly resisted. As a
result, the recovery has proceeded to this point without
building up excessive demand pressures for increased output
or fiscal and monetary policies which would lead inevitably
to a repetition of the familiar boom-and-recession sequence.
This unfortuante pattern could be repeated, of course, if
unwise policy adjustments are made to turn the economy toward
excessive near-term growth. But this negative result can
be avoided if responsible policies are followed. We
fully intend to guard against a return to the stop-and-go
policies that have disrupted the U.S. economy in the past.
Looking to the future, we expect the economic expansion
in the United States will continue in 1977, but at a somewhat
reduced pace. This is a proper pattern because continuation
of the rate of output gains in the 6 to 7 percent zone over
an extended period of time would inevitably overheat the U.S.
economy, once again leading to a new round of inflation;
followed soon afterwards by recession and unemployment.
Output gains in 1977 should be in the 5 to 6 percent zone
as the output of the economy gradually returns to its loncterm rate of growth.
Personal consumption will continue to be the basic
strength of the U.S. economy, since it comprises two-thirds
of the total GNP, but the rate of increase in this sector
will undoubtedly slow down. Business investment and continued
modest gains in housing construction will provide most of
next year's thrust for additional growth.
-5We expect inflation to remain at the 5 to 6 percent zone.
This is a most unsatisfactory level of price increase and our
nation must not and will not accept it. Employment growth
should continue, although not as rapidly as during the last
eighteen months, and the unemployment rate will continue to
decline, particularly as the extraordinary growth in the labor
force slows down.
In summary, while there are several worrisome problems
to contend with, the likely overall course for the U.S. economy
is favorable, assuming fiscal and monetary policies remain
responsible. The key to achieving this relatively optimistic
goal will be how well inflation is controlled. A resurgence
of inflation would quickly erode both consumer confidence and
actual purchasing power, which would restrict the personal
spending that creates the driving force for the entire economy.
In turn, business firms would curtail their spending plans which
would erode current economic growth and delay the capital
investment necessary for achieving our national goals, particular
the creation of new jobs.
In short, we must guard against a resurgence of inflation
if we are to avoid a premature disruption of the economic
expansion. This fundamental approach is not based on any
obsession with a particular goal but is a realistic recognition
that inflation destroys economic stability and leads to recession
and unemployment. There never was and is not now a choice
between inflation and unemployment. That concept is a fallacy.
The real choice is between making steady progress on both
inflation and unemployment or of returning to the stop-and-go
economic policies that have failed to provide the needed
stability
in the past.Monetary
Every nation
The
New International
System faces this same problem
and we must all strive for more responsible solutions.
I have said in the past that the most important single
price in the U.S. is the price of our dollar. The same is true
of every national currency. The foreign exchange value of a
country's currency plays a significant role in determining
what is produced -- exports and imports, the location of
production facilities, and capital flows. All of these vital
economic factors are, to varying degrees, a function of the
exchange rate -- the price of a nation's money. This is why it
is important, especially during a period marked by pressures for
income redistribution, and a period dominated by industrial,
corporate, and national drives for more,that we develop a
well-functioning monetary
- 6 system rather than a series of makeshift, ad hoc
arrangements.
A system means an agreed charter -- a basic
understanding among nations on the principles of
behavior — that provides the framework within which we
operate. But such a charter is only the beginning. Over
time, the development of a system also involves the development
of a code of behavior based on generally agreed-upon
principles. Such a code must adapt to changing circumstances,but in any case must always adhere to the agreed broad
principles.
What are the alternatives to this type of system? One
alternative involves specific rules but no agreement on
underlying principles. In the absence of any anchor of
principles, this would mean a process of continuous
negotiations and new rules. Another alternative would be
to have no agreement on either principles or codes. In
the U.S. this is referred to as the "law of the jungle."
It is not naive to believe in the need for an operating
monetary system. It is not even idealistic. To me, it is
the essence of pragmatism. Some of you can recall the
disastrous process of competitive devaluation so prevalent
in the '30's that became enshrined in the phrase "beggarthy-neighbor." We have learned and relearned that the law
of the jungle means that we all lose, regardless of
size, power, or efforts at isolation.
We all recognized this at Jamaica. That was why we
agreed on a system. Before describing the results of our
efforts and discussing implementation of the system, I
think it would be useful to review what we want from a
monetary system — what should it provide? There are three
overall objectives.
First, the system has to be designed so that it facilitate
the international flow of goods, services, and capital. It
should be an open, liberal system that enables all nations to
capture the benefits of international trade, the paramount
benefit being the higher living standards for all that result.
It should facilitate the transfer of capital, and insure its mo
efficient use, the end result again being higher living
standards for all. Most importantly, the system has to
operate continuously. Its success must not depend on
just the right combination of favorable circumstances. It
must be more than a fair weather system. It must be able
to function in the economic and financial equivalent of
hurricane weather.
Second, the system in both its design and its operatic:.
must have a built-in equilibrium. It should encage forces
- 7 that reduce tendencies toward permanent disequilibrium,
in the form of structural surpluses or structural deficits
in current accounts. The symmetry of which I speak cannot
simply be designed — it must be operational. A system that
looks perfect on the drawing board but fails in actual
performance is no answer.
Third, the system must help rather than hinder
individual efforts toward economic stabilization — it
must encourage stability rather than foment instability.
The efforts of this group have, for almost four years,
been concentrated on designing an international monetary
system that will meet these objectives. We have now
completed that work. The framework is built. The architecture
is complete.
Together we have constructed an international monetary
system that is sound in structure, right in approach, and
complete in a constitutional sense. That system remains
firmly centered on the IMF, and firmly based on the liberal
trade and payments philosophy of Bretton Woods. It remains
a global system, in which all members subscribe to the
same standards of responsible international behavior, and
in which all members are treated uniformly. We now have a
system which has flexibility and resilience, and which can
function well in the years ahead without further structural
amendments.
We have changed, and changed profoundly, both monetary
doctrine and the structure of the monetary system, in a way
which better conforms to present objectives. Three
fundamental alterations can be highlighted — the approaches
toward adjustment, exchange stability, and gold.
Influenced heavily by the imperatives of experience,
we have come to realize that exchange stability cannot be
imposed or forced on nations by the establishment of fixed
exchange rates. We have embraced the concept that stability
will result only from responsible management of underlying
economic and financial policies in our countries. We see
more clearly that market forces must not be treated as
enemies to be resisted at all costs, but as the necessary
and helpful reflections of changing conditons in a highly
integrated world-economy with wide freedom for international
trade and capital flows. We recognize -- as proved by
events in many countries in recent years — that without
stable underlying economic and financial conditions, no
amount of exchange market intervention will assure stability,
but that with stable conditions, little or no such market
intervention would be needed.
The
calls for
of our to
nations,
largenew
andsystem
small,thus
developed
and each
developing,
concentra:e or.
- 8 achieving sound, non-inflationary -economic growth. There
is no other answer to our desire for stability. Also, we
must each permit our performance in domestic policy to show
through — to assure that governmental efforts to resist
or moderate the operations of market forces do not distort
our relative economic positions and become a source of
instability once again. This applies of course to
avoidance of the use of controls over international trade
and payments, long a basic object:-ve of the Bretton Woods
system. But it also applies as much or more to governmental
action to restrict the operations of market forces through
the exchanae rate mechanisms.
In short, a country with an unsustainable deficit should
resort to internal stabilization accompanied by exchange rate
change in response to market forces; a country with a tendancy
toward surplus should not simply accumulate reserves but should
allow its exchange rate to move in order to accommodate these
fundamental adjustments of others. Only then can we have
effective international adjustment and the built-in equilibrium
and stabilization which an international monetary system
requires. The inexorable fact is that the implementation of
our new system — or any system — will succeed or fail as a
consequence of the soundness and prudence of the policies our
individual governments pursue. There is no other source of
stability, no external entity to which nations can turn as they
address the challenges they face today.
Our historic decision to phase out the monetary role
of gold and to provide for a greater r^le for the SDR,
also is a source of strength in the ieiormed system. By
doing so, we eliminate a major element of instability in
the monetary system. Removing gold from the center of the
system, eliminating the requirement that gold be used in
IMF transactions agreeing to initiate the process of
disposing of IMF gold, the G-10 agreement to c.void pegging
the price of gold or increasing total geld
holdings are
all steps toward realism, and a more rational as well as
stable monetary system.
While we have made fundamental changes, the Jamaica
agreements constitute a reform and not a revolution. Our
changes ore less of a grand design than Bretton Woods, and
appropriately so. We have not discarded all the concepts
or replaced the institutions of the Bretton Woods order.
Most importantly the IMF retains a unique and indiscer.sac.;
role in the provision of conditional credit. It is a
different role from that of 3u years ago, reflecting the
different world of today, and the growth and development
of private international capital markets which now do and
should orovide the bulk of international lendinc. The
- 9 fund's financing is today more clearly a supplement to
other sources. But the conditionally of IMF lending places
on that institution a special role and special responsibilities
which are critical to international adjustment and a smoothly
operating international monetary system.
It is to the operation of our monetary system that we
must now shift our attention. The construction of the
system, the architecture, has been an essential step. It
has been an intellectually stimulating exercise. But we
must move ahead to the operational stage. We must, on the
basis of the principles of our new constitution, develop
workable operating practices. No aspect of the IMF's
work is more important.
A central feature in the operation of our new monetary
system is the IMF's surveillance of members' exchange rate
policies. The new Article IV places heavy emphasis on IMF
surveillance to assure that members comply with Fund
obligations and that they avoid manipulative exchange rate
practices. It is essential to the successful functioning
of the system that this surveillance be performed in a
sensible and effective manner. Working out the techniques
of surveillance is the Fund's next major task.
Some have said that precise guidelines for IMF
surveillance of members' exchange rate policies should have
been delineated in the Articles. I disagree. The Articles,
after all, are meant to serve as an international constitution,
not a commercial contract. Even if we were agreed on precise
guidelines, it would be wrong to incorporate them in the
Articles — we learned from Bretton Woods the difficulties
of a charter containing detailed rules.
But more importantly, it is neither appropriate nor
possible to undertake this important job of Fund surveillance
through the application of detailed rules and formulas.
Such formulas cannot be equitably applied to economies
that differ as profoundly as in the IMF membership. Where
the largest member has a gross national product some
60,000 times larger than the smallest; when some have no
capital markets while others have highly developed and
sophisticated markets; where price elasticities and income
elasticities can vary widely, rigid formulas simply won't
work.
Similarly, I do not agree with those who would call on
the fund to delineate hard and detailed rules by which each
member country's performance with respect to exchange rate
policies would be judged. We do not have the capability,
the experience, or the knowledge, to develop such a set of
rules to be applied across a broad spectrum of individual
national situations.
- 10 Nor would I agree with those who would call on the Fund
to attempt to determine a set of "target" exchange rates
toward which each nation's policies should be directed.
There are those who believe that a comparison of statistical
data on prices or costs in individual countries can reveal
appropriate exchange rates. That approach is subject to
insurmountable difficulties, both theoretical and practical.
While it may indicate that some rates are inappropriate,
it.cannot be depended on to indicate what rates are proper.
It is tantamount to continuous renegotiation of a par
value system, based on statistics which are of necessity
both partial in coverage and backward-looking in approach.
In practice, it may prove to be nothing more than a veiled
approach to a return to fixed rates.
There are those who are nostalgic for the good old days
and may translate this nostalgia into a desire to return to
the par value system, thinking that fixed rates would bring
stability. I would suggest that such beliefs are an
illusion. Think again of the chaos and disorder of the
closing years of the Bretton Woods system. Think back
to those days of market closures which disrupted trade and
commerce. Remember, too, the hurried attempts to patch
together some solution so that markets might open again.
Think back to the duration and difficulty of the Smithsonian
negotiations and the tensions associated with those negotiations.
Then think back over the last four years of unparalleled
flows of money, massive increases in oil prices, inflation,
recession, balance of payments problems. Just imagine the
old par value system trying to accommodate those strains.
The Fund should, in its surveillance of members'
exchange rate policies proceed by a careful and evolutionary
approach. It should cultivate more fully its consultative
processes, and refine its procedures for monitoring
countries' behavior. Rather than adopting a sweeping
pre-conceived, rigid economic code, we need to construct,
through a case-by-case approach, a common law based on
case history. If we proceed in this manner, we will be
able to delineate broad principles of behavior that can be
elaborated on the basis of experience. The development -and the acceptance — of these principles cannot be
forced. But over time workable codes can be expected to
emerge, through consultation with members and through the
monitoring of their activities.
I urge the Fund to proceed cautiously in this work.
The world faces a new situation, in some ways a dramatically
different situation from the past. In this case the lamp
of history may not provide the best light to guide us in
the be
future.
Our
experience
is drawn
fromto
adistill
past
may
more
experience
not
harmful
fullyinto
relevant,
tnan
detailed
helpful.
andblueprints
our
attempts
for
the
futurethat
may
this
be
- 11 The adjustment process is another area in which
action is imperative. The international financial
system has performed that task of recycling funds from
surplus countries to deficit countries with efficiency.
The elasticity of our financial system has provided us
with the time to correct structural maladjustments. This
time must not be wasted. Recycling of funds from surplus
countries to deficit countries can continue only to the degree
that countries borrowing to finance external deficits can
obtain credit. This in turn can persist only so long as
lenders remain confident that borrowing countries can
repay specific obligations on schedule and service their
overall debts.
-12Frankly, we have not made sufficient progress toward
adjustment. Although there have been cases of countries
adjusting to higher oil prices and global recession, a
substantial number of countries have preferred to delay
adjustment and borrow abroad to finance consumption, and
have thus continued to run the large external deficits which
first appeared three years ago.
Unless there is some dramatic change in the outlook,the world payments pattern next year will strikingly resemble
that of 1974 — the first year of abnormally high oil prices.
Indeed if the oil producing nations take, as is now rumored,
the dangerous step of again raising the price of oil, it
would seriously aggravate an already troublesome economic
and financial situation. Even without an increase in oil
prices, the aggregate OPEC surplus in 1977 will again be
$50 billion or more, while deficits in the industrial OECD
countries would be on the order of $35 billion, and the oil
importing developing countries in the range of $12 to $15 billion.
The 1974 deficits were successfully financed — to the
surprise of many doomsday forecasters — as the international
financial system displayed unprecedented flexibility and
resourcefulness. However, we are approaching 1977's lookalike payments numbers under substantially different circumstances.
Aggregate OPEC surpluses of nearly $150 billion from the
beginning of 1974 to the present have been reflected in
increased external debt by oil importers. The bulk of the
heavy international borrowing has been of short- to mediumterm maturity, and will in many cases need to be rolled over
or refinanced. And as debt grows to finance the continuing
deficits, an increasing number of countries which have
delayed adjustment will approach limits beyond which they
cannot afford to borrow and beyond which prudent creditors
will not lend to them. This is a serious matter and it
cannot be ignored by lenders or borrowers.
There is still time to act, but we must be cognizant of
the choices. One unrealistic possibility that has been
mentioned involves widespread debt forgiveness or rescheduling.
In reality, this is no choice at all. From time to time
circumstances may require a debt rescheduling on the part of
an individual country. But a wide scale approach of this
type involving a number of countries or even several in a
group can only result in substantial damage to practically
all international borrowers. Lenders would regard — I
think appropriately — such an approach as ipso facto increasing
the risk attached to new lending operations. The result
would inevitably be a reduction in the availability of
private credit to broad categories of countries, a reduction
effect
that would
on economic
inevitably
activity.
have a widespread contractionary
-13Another dangerous alternative that has been mentioned
by some would be to create large amounts of new official
liquidity — a kind of international monetary printing
press. Ironically, this would have the same effect — it
would ultimately be contractionary, although in the first
instance it might have an expansive effect. Eventually,
and probably with more speed than many suspect, the creation
of excessive international liquidity would destroy the
stabilization efforts which many of us have underway. For,
in the United States, and I believe in many other countries,
we have found that a high rate of inflation and prosperity
are mutually exclusive.
The third course — and the only one which I believe
holds the promise of success — involves a combination of
adjustment by individual countries, some slowing in the rate
of private international lending, and moderate provision of
official financing on a multilateral and conditional basis.
Fortunately, a floating exchange rate system can respond to
changes in underlying economic and financial conditions in a
climate devoid of crisis. The resultant flexibility provides
a useful tool for adjustment. But it is only effective when
linked with meaningful programs of domestic economic and
financial stabilization. There is no substitute for such
adjustment, and countries that do adjust can look forward to
durable, non-inflationary growth. The IMF can contribute to
this process of adjustment. The Fund has both the expertise
and the financial resources to assist in the development of
overall stabilization programs and provide conditional
credit to bridge the time from the start of an individual
country's stabilization effort to its favorable end results.
It seems to me the only way that we can proceed without
damaging ourselves and our friends and neighbors is to hold
to this third course and immediately introduce where needed
appropriate policies for adjustment.
DeveloDment
*•
Our approach to the international monetary system has
placed responsibility for the achievement of international
monetary stability on the domestic policies pursued in each
country. Our approach to economic development also places
primary emphasis on the policies and efforts of each individu
developing country.
-14At the heart of our policy is the concept of shared
prosperity. This concept involves a mutually beneficial
approach to development in today's interdependent world. In
application, this approach means not only direct aid but,
most importantly, a liberal trading and investment system.
We do not regard indirect resource transfer schemes —
such as generalized debt rescheduling, price indexing, and
commodity funds — as the best means to provide resources to
the developing world. To the contrary, such proposals are
likely to lead to inefficiencies and distortions which will
make most (if not alDworse off.
I have already commented on the likely adverse impact
of broad debt rescheduling schemes. With respect to commodity
policy, we have stated on many occasions that we favor a
case-by-case approach to the problems of individual commodities,
and in particular a careful examination of the applicability
of the buffer stock approach. Specifically we must ascertain
whether the operation of a buffer stock is likely to lead to
improved market operations or to a structurally higher level
of prices for the commodity involved.
If it leads to structurally higher prices it helps a
few countries, including those developed countries that are
producers, but it hurts the larger numbers of consuming
countries, both developed and developing. Even in the case
of developing countries that produce the commodity, the
"help" provided has a high cost. Funds used to finance the
build-up in inventories could have been used for development
purposes. To the degree that an artificial price level
results, incentives to develop and use substitutes increase.
Perhaps most important, the producing country allocates
labor and capital to production on the basis of an artificially
high and unsustainable price.
In the area of direct resource transfers, the United
States has long been in the forefront of those assisting in
the economic and social progress of the developing world.
Much of what we have done has been governmental — through
our bilateral as well as multilateral aid programs such as
IDA.
I can assure you that the United States will continue
its leadership in this area. Not only will we continue, but
we will strengthen our bilateral aid program, and we will
continue our strong support for the international development
banks. Our commitment to IDA and to a financially
- 15 strong IBRD cannot be questioned. With respect to the
regional banks, I am pleased that we have just received
funds from the Congress to join the African Development
Fund. We are now participating in a major new replenishment
in the IDB. Here in Manila — the home of the Asian Development
Bank — it is particularly gratifying to reiterate U.S.
support for that institution. I was pleased to note, in a
recent Development Committee report, that loan commitments
in all these banks will increase from $8.3 billion to about
$12.6 billion from 1975-1980, or 50%, with the concessional
share of the total increasing* also.
The American partnership with developing countries and
development prospects of all countries depends even more
importantly on our trade and investment links. The worldwide demands for capital in the period ahead will be massive
and the competition fierce. Countries which wish to attract
investment capital will find that establishing the proper
domestic climate is essential. Countries which raise impediments
to capital flows will simply not be able to meet the competition.
The experience of many countries illustrates how this can
properly be done. Countries and peoples as varied as the
Taiwanese, the Brazilians and the South Koreans have dramatically
raised their living standards and expanded their economic
base. They have done so not only because of the amount of
help they received, but because of the care and self-discipline
they used in putting that help to work. Others can do the
same, but only with the realization that developmental help
involves a partnership and — like all partnerships —
requires the best intentions and the best efforts of both
partners in order to succeed.
We must all recognize that individual national economies
can best achieve the goal of sustained non-inflationary
growth in a free and open international trading system. We
need an open world market to allocate raw material and
capital resources efficiently in order to supply abundant
goods and services to all of our people at non-inflationary
prices. All the aid we can give will not help if it does
not foster a prosperity shared by all. Achieving such a
prosperity will require the close cooperation of both industrial
and developing nations. We must, therefore, join together
aggressively in the Multilateral Trade Negotiations to take
concrete and significant steps to eliminate tariff and nontariff barriers to trade.
As these areas for cooperation between developed and
developing countries evolve toward greater mutual advantage,
we must preserve the fundamental principles — such as
- 16 reliance on market forces and the private sector — on which
our common prosperity depends. Solutions must be dynamic
and have widespread benefits. Thus, we must seek increased
production and improved efficiency, not just transfer of
wealth. Development assistance should be thought of, not as
an international welfare program to redistribute the world's
wealth, but as an important element of an international
investment program to increase the rate of economic growth
in developing nations and to provide higher living standards
for the people of every nation.
In a sense this can be thought of as a process by which
developed countries devote a portion of their savings to
developing countries. The impact of this type of direct
transfer depends on the amounts involved, the uses to which
these funds are put, and the effectiveness with which the
recipient countries implement development efforts. If these
funds are devoted to financing a higher level of consumption
than a given country can earn, it means only a short-lived
improvement in living standards; if these funds are devoted
to investment, the result will be a permanent gain in well
being. This is especially the case in a system which allocates
financial resources to areas of maximum benefit.
More specifically, in considering how the present
system might be improved to the mutual benefit of all
nations, we should be guided by the following principles:
— Development by definition is a long term process;
increased productivity, stemming from capital formation and
technological advance, is the basis of development, not
transfers of wealth which can only be one time in nature.
Foreign aid can help, but such aid can only complement and
supplement those policies developing countries adopt, which
in the end will be decisive.
-- The role of the private sector is critical. There
is no substitute for a vigorous private sector mobilizing
the resources and energies of the people of the developing
countries.
— A market-oriented system is not perfect, but it is
better than any alternative system. In general the effort
should be to improve conditions for the developing countries —
both internally and externally — by removing unnecessary
and burdensome government controls, not by imposing additional
barriers and impediments to market forces.
-- A basic focus must be on increasing savings and
making the institutional and policy improvements which will
- 17 enable the financial markets to channel those savings into
activities that enhance the opportunities for people to live
better lives.
The World Bank Group
With these principles in mind, let me turn now to
issues concerning the World Bank Group. These institutions
play a central role in international cooperative efforts to
promote economic progress and development. While their role
as suppliers of development capital is a very important one,
their contribution to the development process itself is
equally important. Economic policies in developing countries —
with widely different economic regimes — have greatly
benefited not only from the financial support but also from
the advice, encouragement and technical expertise of the
World Bank Group. To the degree that these institutions are
successful in helping to bring about sounder, more consistent,
and more effective domestic policies in countries to which
they are lending, they multiply their effectiveness as
development organizations. Strong and clear U.S. support
exists for the institutions which comprise the World Bank
Groups not only because their objectives are laudable, but also
because they have proven themselves to be effective agents
of policy improvement in the countries in which they work.
In looking at recent developments among the member
institutions of the group, I am greatly pleased by the
agreement providing for a capital increase for the International
Finance Corporation. The key role of the private sector in
the developing countries underscores the importance of this
proposal. As President McNamara pointed out yesterday, the
poorest countries of the world have financed almost 90 percent
of their development investments out of their own meager
incomes. The capital increase will enable the IFC to expand
greatly its ability to encourage private capital flows in
these poor countries. As we all know, IFC's participation
in projects has a considerable multiplier effect — $4 for
every $1 of its own — through the associated private investment.
The capital increase implies about $5 billion in cumulative
commitments over the next ten years in the private sectors
of the developing world. I hope tht the IFC capital increase
can be formally ratified by the Board of Governors quickly
to permit this expansion to begin.
I am pleased also by the agreement reached on a
selective capital increase for the World Bank. The Bank
is a unique financial institution — publicly capitalized
- 18 but privately financed for the major portion of its lending
operations. While the paid-in and callable capital from its
member governments are important assurances of solvency to
its creditors, the Bank is able to operate actively and
extensively on its own footing. In our view, the excellent
reputation of the Bank and its sound financial condition
give it the capacity to raise very substantial sums in
private capital markets for relending to its borrowers. We
are pleased that, in the course of the negotiations on a
selective capital increase, agreements were reached on the
lending program and the lending rate which I believe will
continue to strengthen the financial position of the Bank.
During those negotiations, it was agreed that Bank
commitments would not be increased above the level which
could be sustained indefinitely without a further capital
increase. I do not believe that this important principle
should now be redefined.
With regard to the lending rate formula, I realize the
temptation that exists to hold rates and charges on Bank
loans to a minimum, but in the long run neither the interests
of the Bank nor those of its borrowers would be well served
by such a policy. Continued sound financial practices by
the Bank are the best guarantee that it will maintain the
reputation which gives it the very favorable access to
capital markets that it enjoys. Thus, the Bank will remain
in a position to be responsive to its clients' needs tomorrow.
Also, as Bank reserves continue to grow, the time will
certainly come when increased transfers or its earnings can,
and should, be made through IDA for the benefit of its
poorer member countries.
I should note at this point that we remain very interested
in the Bank's continued study of the lending formula. While
we believe the current formula is sound, we are prepared to
consider an improved version. I might add that the United
States supports the use of the lending rate formula, not
only in the World Bank, but in the regional banks as well.
The Inter-American Development Bank recently approved a
similar mechanism; and the Asian Bank has taken an interim
step leading toward a final decision early next year.
I would like to turn now to the question of the future
of the Bank, which I believe quite properly is now on
the international agenda. In thinking about the future
of the Bank as a development institution, the continued
strength of the Bank as a financial institution must be
- 19 given paramount importance. The Bank is now entering a new
financial era as its disbursed loans outstanding have begun
to reflect the rapid growth in commitments since 1969. The
financial consequences of an expansion of annual loan commitments
from less than a billion dollars in 1968 to this year's
$5.8 billion are substantial. Even holding that commitment
level constant indefinitely, loans disbursed and outstanding
will grow from $13.6 billion on July 1 of this year, to some
$26 billion in 1980 and to over $40 billion by 1985. To
finance this expanded portfolio, the funded debt of the Bank
must grow accordingly. This is the financial challenge the
Bank faces. I know how demanding this challenge will prove
as the Bank continues its preeminent position in the world's
capital markets.
The Bank has in the past made an invaluable contribution
to qualitative improvements in the development efforts of
its borrowers. Key development problems — restraining
population growth, improving the efficiency and equity of
domestic tax collections, bringing small farms more fully
into the growth process, and others — remain unsolved in
many countries. The success of the Bank in encouraging
policy improvements in such areas will have a substantial
impact on the productivity of Bank lending. The Bank needs
to monitor its own policy and practices to make sure that
its effectiveness in this objective is maintained.
The current situation also presents an excellent
opportunity for the Bank to expand its role in generating
complementary financing for its projects. In the future the
Bank might well play a role of decisive importance by helping
to mobilize substantially increased long-term development
credits from the private sector. I see untapped potential
for the Bank in this direction and I would urge that intensified
work on this issue be promptly initiated.
The United States in no sense envisages a static role
for the Bank, which we believe can and should remain the
leading development institution in the world. We are prepared
to take an active and constructive part in a frank dialogue
on the future role of the Bank. I would urge that in
considering the Bank's place in a world that is changing
rapidly, our intellectual net be cast wide enough to capture
significant new directions of Bank activity. In this process,
we are committed to doing everything we can to assume that
the Bank meets the challenges of today and tomorrow. I am
confident that by addressing the important questions forthrightly,
the Bank can assure itself for many years to come of a continuation • of the leading role in the international cooperative
effort to promote growth and progress in developing nations.
- 20 Also, the future of the International Development
Association is of critical importance. Now that our Congress
has acted favorably on our fiscal 1977 appropriation request
for IDA, the United States is in a position to participate
actively in negotiating an IDA-V agreement. I am confident
that with good will and understanding these negotiations can
be successfully concluded during this next year and I am
fully confident that my government will be a generous participant
in any arrangements agreed upon.
We recognize the urgency of the IDA problem, and our
commitment to IDA can't be called into question. Certainly
the replenishment of IDA funds, which support the poorest
nations
remains a priority concern of my government. Of
special concern to us is the fact that IDA's commitment
authority will end after June 30, 1977.
While progress has been made in international discussions,
we have not reached an agreement on an IDA-V package,
including magnitude, shares, voting rights, and sign-up
procedures. Reaching such international agreement will take
time. Moreover, the United States is not alone in having
legislative procedures for subsequently ratifying such
international agreements that will also take time.
While it is important to push forward on these negotiations
of IDA-V — and we intend to intensify our negotiating
efforts — we must recognize that the completion of these
negotiations and the necessary legislative action in all our
countries by July 1, 1977 cannot be assured. Therefore, in
order to avoid a gap in IDA's commitment authority next
year, and to inject some momentum into the IDA negotiations,
I would propose that not later than January, we negotiate a
bridge agreement which may be considered a precommitment to
IDA-V, and I would hope that prospective new members of IDA
will voluntarily make contributions to this bridge agreement.
In my view, this should be a primary subject of discussion
at the Kyoto meeting of IDA Deputies next week so that IDA
does not run out of money next June.
Conclusion
In meetings such as this we naturally and inevitably
concentrate our attention on international issues of
great significance — providing for a reformed international
monetary system, or determining future policies of important
institutions such as the IMF and the World Bank. In the
final analysis, however, what really counts for each of
- 21 our countries and for the world economy is how efficiently
we all manage our own domestic affairs. International
cooperation provides a framework of opportunity; individual
countries in various ways and to varying degrees seize that
opportunity. In all countries — developed and developing,
industrial and agricultural oil-rich and resource-poor —
economic policymakers are confronted with many similar kinds
of issues and dilemmas. A country's performance is not
predetermined by its level of income or stage of development
alone. Just as pertinent is how the tough issues of economic
policy that we all face are resolved.
Unfortunately, good economics is not always perceived
to be good politics. My experience has been that politics
is an art with a high rate of discount. And while the
payoff to good economics is real, it takes time. This lag,
as the economists call it, is a politician's nightmare.
Fortunately, I think that more and more people now understand
that this is the case — and I sense growing suspicion of the
proposed instant solution, the quick fix. In a world of
unlimited demands and limited resources, finance ministers
not only are inevitably unpopular, but indeed cannot afford
to be popular. We are frequently required to be the bearers
of bad tidings to our political masters — to reiterate the
unpleasant but inescapable fact that resources are scarce
while wants are limitless. It is our lot, whatever our
country's economic system and whatever its circumstances, to
speak out for financial responsibility — to call for prudence
in an age of fiscal adventure.
Announcement of dramatic new programs is greeted with
great fanfare; the management of sustained, stable growth is
a bit like watching the grass grow. Yet, in the end, it is
sustained, stable growth that does the most good.
To be sure, for a time an increased inflow of real
resources from abroad may enable a country to postpone the
hard choices among competing domestic claims, in the process
running down assets and/or accumulating debts abroad. But
sooner or later, the bills come due — the adjustment I
have spoken of earlier has to be made. There simply is no
substitute for the hard decisions and the careful*husbanding
of resources that finance ministries traditionally espouse.
As we meet today we can point to tangible evidence
that we have been more than nay-sayers over this past
year and more. In the monetary area, through our collective
efforts, we have put into place a new structure for the
- 22 international monetary system, one with the flexibility to
accomodate rather than impede, the efficient working of the
international economy so that trade and capital can serve
their full role as engines of economic growth and progress.
In trade we have made progress in the Multilateral Trade
Negotiations to reduce barriers and insure fair and orderly
rules for the international trading system. In energy, the
industrial countries have joined together to coordinate
efforts to reduce our dependence on imported oil. We have
also established a framework of cooperation with the oil
producing countries. In the relations between developed and
developing countries, we are fashioning positive cooperation
that will further strengthen the world economy. Finally, we
have all avoided restrictions on the free flow of capital at
a time when pressures existed to create impediments.
In my stay at Treasury, I have seen the world economy
pass through some extremely rough weather. Our management,
though imperfect, has enabled us to survive — and a bit
more.
We survived in the sense that our economies did not
collapse, markets continued to function, and we avoided a
wave of restrictions on flows of goods and capital among
nations. This achievement in itself was considerable. But
beyond that, the foundation we have laid can lead to a great
deal more — if we do the right things from here on.
We all know that the present situation has both risk
and opportunity. We should not fear the risk and we must
not fail to grasp the opportunity. Much has been accomplish
much remains to be accomplished. With determination, we can
now strengthen the foundation of individual economic stabili
With courage, we can eliminate restrictions on trade and
investment, in recognition of our interdependence. With
patience, we can work together and find the proper balance
of opportunity and responsibility for rich and poor alike
that is essential in today's world.
Let us commit ourselves here in Manila to this effort.
As we do, I believe we can all look to the future — a
future of shared prosperity for all — with confidence.
oOo
FOR IMMEDIATE RELEASE
TREASURY ACTS TO REVISE
FOREIGN CURRENCY FORM
October 5, 1976
The Treasury has taken action under the President's
Program for Reduction in Public Reporting to relieve an
estimated 120 nonbank firms of the necessity of reporting
foreign currency positions on Form FC-3, Gerald L. Parsky,
Assistant Secretary (International Affairs) announced today.
The revisions to Foreign Currency Form FC-3, as approved
by the Office of Management and Budget, will reduce the
number of firms required to report by exempting small businesses
employing under 100 persons and raising reporting thresholds
to $2 million equivalent for U.S. firms and $400,000 for the
principal respondent and its domestic branches, partnerships,
and subsidiaries. The present thresholds are $1 million for
U.S. firms and $200,000 for their domestic branches, partnerships, and subsidiaries. Other revisions exclude investment
in majority-owned foreign subsidiaries from the category of
"Other Assets" and change the definition of spot foreign
exchange contracts.
The amendment to the Treasury Regulations was published
in the October 4, 1976 issue of the Federal Register and
will take effect on November 1, 1976. The requirement for
separate filing on Form FC-3a has been deleted by this amendment.
In October, supplies of the revised forms will be mailed
to all firms currently reporting on Form FC-3/3a. Reports
by nonbanking firms in the United States are required to be
submitted on the revised form concerning data as of the last
business day of November 1976.
oOo
For information call Thomas H.E. Moran
Ext. 8085
IVS-2016
Jhe DepartmentoftheTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
Contact: J.C. Davenport
Extension: 2951
October 6, 1976
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES TWO ACTIONS
UNDER THE ANTIDUMPING ACT
The Treasury Department announced today two actions
under the Antidumping Act. In the first action, Acting
Assistant Secretary Peter 0. Suchman announced the
initiation of an investigation with respect to imports
of parts for self-propelled bituminous paving equipment
from Canada. Notice of this action will be published in
the Federal Register of October 7, 1976.
The announcement of the initiation of the investigation
followed a summary investigation conducted by the U.S.
Customs Service after receipt of a petition in proper form
alleging that dumping was occurring in the United States.
The information received tends to indicate that the
prices of the merchandise exported to the United States
are less than the prices of such or similar merchandise
sold in the home market.
Imports of the subject merchandise enter under a
basket provision of the tariff schedules; those imports
from Canada are estimated to be approximately $2 million
annually.
In the second action, under Secretary of the Treasury
Jerry Thomas announced an extension of the investigatory
period with respect to metal-walled above-ground swimming
pools from Japan. Because of the complicated nature of
the case, &ie investigatory period is being extended
from 6 months to 8 months. Notice of this action will
also appear in the Federal Register of October 7, 1976.
A tentative decision was to have been made by October 21,
1976, but will now not have to be made until
December 21, 1976.
Imports of the subject articles from Japan amount to
roughly $4.5 million annually.
* * *
WS-2017
FOR RELEASE UPON DELIVERY
REMARKS OF J. ROBERT VASTINE
DEPUTY ASSISTANT SECRETARY OF THE TREASURY
FOR TRADE AND RAW MATERIALS POLICY
BEFORE
THE AMERICAN SOCIETY OF AGRICULTURAL CONSULTANTS
HOUSTON, TEXAS
OCTOBER 7, 1976
The Challenge of a Global Food Economy
for American Agriculture
I welcome the opportunity to meet today with such
a knowledgeable and distinguished audience. You have
asked me to talk about the global food economy from the
vantage point of the Treasury Department, and to discuss
in particular how our international economic policies,
including particularly international monetary policies,
affect U.S. agriculture.
I would like to begin by contrasting the domestic
agricultural policies and the international monetary and
trade system which affected our agricultural trade prior
to 1970, with the "system" with which we are operating
today, and on which we intend to build. The essence of
the difference is that we have moved generally from
government intervention in markets to implementation of
an open market philosophy. We believe this philosophy
is more consistent with the needs of a rapidly changing
international economy, and more apt to improve efficiency,
increase production, and stimulate growth for the benefit
of all nations.
The "Old" System
The international framework for trade and monetary
relations at the beginning of the 1970's was based upon
two major understandings which were developed in the
aftermath of World War II at a time when stability and
economic recovery were our major goals for the world
economy. The Bretton Woods understanding governed
international monetary relations among the industrialized
nations; the General Agreement on Tariffs and Trade (GATT)
governed our trading relations.
WS-1118 NOTE: Due to error, Treasury Releases 2000 through
2017 should be renumbered 1100 through 1117.
This
release,
Treasury No. 1118, starts the
correct
sequence.
- 2 On the monetary side, the Bretton Woods system
fundamentally sought to promote stability through the
maintenance of relatively fixed rates of exchange among
the currencies of member countries. Monetary authorities
were to keep the exchange rates within one percent of the
par value by buying or selling their currencies, and to
pursue domestic policies that would facilitate the
maintenance of these par values, borrowing from the IMF
where necessary. The par value itself was not altered
unless and until it became inescapably clear that a
fundamental change in economic relationships had occurred.
Even these changes were made with great difficulty and
inevitably were the cause of disturbed and disrupted
markets. Too often, countries tried vainly to forestall
exchange adjustments by imposing restrictions and export
subsidies, thereby creating the very distortions that the
"stable" Bretton Woods system was supposed to prevent.
On the trade side, the GATT established a basic
system of rules regulating government intervention in
international trade, together with a schedule of tariff
commitments on individual goods. If these commitments
were violated, GATT provided certain rights of compensation or retaliation to the exporting nation. The basic
principle of the trading system was equal treatment for
all nations (or most-favored-nation treatment). Agriculture,
however, had always been treated as a special case. Tariff
reductions mainly affected industrial goods. And
agriculture was significantly excepted from some of the
major GATT regulations — notably prohibitions on export
subsidies and import quotas. The situation for agriculture
was made more difficult by the building during the 1960s
of the CAP, which the "Kennedy Round" trade negotiations were
unable to affect.
As a result, all the major agricultural producers
were free to pursue domestic agricultural policies which
incorporated a high degree of government intervention.
Our domestic grain policies were a good example of what
was happening in other countries. We supported farm
prices at home through government purchases of surplus
production, resulting in the accumulation of massive stocks.
To reduce excess production, we developed land diversion
programs and even paid farmers not to plant on certain
acreage. Internationally, our Government had to offer
export subsidies and impose import restraints to cushion
the influence of world price changes on farm returns.
- 3 For many years this system worked reasonably well.
There was an unprecedented growth in world trade. We
were able to liberalize and expand substantially trade
in industrial products. Our farm prices at home were
fairly stable and predictable. We became accustomed
to assuming a fairly constant and substantial share of
foreign markets for our agricultural products — though
often not as large as we would have liked.
Response to New Economic Events
In the early 1970's all of this changed dramatically
in reflection of major changes in underlying economic
and political forces, some of which had been at work for
well over a decade:
the recovery of Europe from the devastation
of World War II, and the emergence of Japan as a major
world economic power.
massive "dollar glut" abroad and a balance of
payments deficit for the United State of $30.5 billion
in 1971 alone,
recurrent monetary crises,
increased use of controls on capital and trade
movements to maintain exchange rate stability, and rising
protectionist sentiment.
These and other developments were ample evidence that
postwar monetary arrangements designed at Bretton Woods
to promote growth in a liberal trading and financial
environment were breaking down. On August 15, 1971, the
United States closed the gold window and thus signaled
the beginning of a major reform of the international
monetary system.
You are all well aware of the series of major and
unexpected agricultural developments during this period:
Massive grain crop failures coincided with the failure of
the Peruvian anchovy catch; increased incomes translated
into a higher demand for meat (and hence multiplied
world demand for grain); the Soviet Union decided to
increase livestock production to satisfy new consumer
demands and entered our markets for substantial purchases
of grains; other nations, too, stepped up their imports;
world stocks fell precipitously and commodity prices
skyrocketed.
- 4 To add to the uncertainty in world markets following
1973, the world experienced a quadrupling of oil prices,
rapid and widespread inflation, recession, unemployment,
and intense pressures to impose unilateral trade restraints
to protect domestic producers. What would these mean for
our agricultural trade?
The turmoil and rapid change of the early 1970's
taught us a major lesson: the world economy was no
longer the stable, predictable one that postwar economic
arrangements had attempted to construct. It had become
inescapably clear that basic changes in our policies were
required to deal with the everyday realities of world
markets. These changes took place in new monetary
arrangements, through trade negotiations, and were
reflected as well in new domestic agricultural policies.
International monetary negotiations commenced soon
after the U.S. introduced its New Economic Policy in
August 1971. The Smithsonian Agreement in December of
that year effected a realignment of exchange rates and
initiated discussions on longer term reform through the
International Monetary Fund. These rates were again
changed in February 1973 and by mid-March 1973 all of
the major world currencies were floating, with rates
determined principally by market forces. This system
has been in place since, and a major effort of the U.S.
has been to perfect it. Indeed a central purpose of the
annual meeting of the IMF/IBRD, which has just concluded
in Manila, was to create new mechanisms to help assure
that this new system works.
A new round of international trade negotiations
was formally opened in Tokyo in the fall of 1973. And
domestically the U.S. made bold changes in its agricultural
policies to meet the demands of a dramatically different
economic climate.
- 5 The Situation Today
Today we seek to implement international economic
policies that are aimed at creating a more open, more
efficient domestic and world economy based on international cooperation.
The agreed new international monetary system is a
sound basis for moving us toward this goal. It provides
for greater flexibility, resilience, and increased
reliance on market mechanisms by permitting nations to
adopt a range of exchange rate practices; (including
floating, arrangements like the EC snake, and pegging
to another currency, a basket of currencies, or the SDR)
provided, however, that nations fulfill certain general
obligations directed at achieving orderly underlying
economic conditions and avoid the manipulation of exchange
rates to gain unfair competitive advantage.
We will no longer attempt to impose monetary
stability upon nations from without, through fixed
exchange rates. Indeed, our new system recognizes that
exchange rates will move in response to market forces,
and that efforts to postpone adjustment by managing or
fixing exchange rates will almost surely fail under the
pressure of rapidly changing events. The forces of
change are too strong, and the cost of intervention too
high to maintain an exchange rate that is consistently
out of line with market forces.
The emphasis of the new monetary system is on
achieving external stability through sound domestic economic
and financial policies. The rate at which a nation's
currency is exchanged reflects its underlying economic
stability and health. A healthy domestic economy should
result in exchange rates that are strong and realistic.
If monetary reform has been the first pillar of our
international reform efforts, trade negotiations to open
up international markets for all products are the second
pillar. During the 1960's, we made very substantial
progress in liberalizing industrial trade through tariff
reductions. Now in the 1970's we intend to carry this
effort further. These negotiations, the U.S. insists,
- 6 must result in substantial benefits for agriculture as
well as industry. And progress on the agricultural side
has now clearly become the crux of the negotiations.
It is the area of the most pronounced difference between
the U.S. and the European Community. It impairs many of
the areas of nontariff work, and threatens the success
of the entire exercise.
The challenge for both sides is to muster the will
and the imagination to resolve our differences in
agriculture and to do it soon.
The United States, for its part, has already taken
major steps unilaterally to open up our agricultural
system to market forces. New emphasis has been placed
on producing for the market, bringing set-aside acreage
back into production to meet the higher levels of world
food demand and enabling farmers to decide for themselves
what and how much to produce. We have eliminated export
subsidies on all agricultural products.
One of the great accomplishments in domestic economic
policy during the last few years has been a strong
movement toward getting government out of agriculture.
Government expenditures on agricultural support programs
have fallen from an annual average of $3.4 billion in 19661969 to $503 million in FY 1976. Our farmer now relies
on a freer world market for income, not on a network of
government programs and controls.
The U.S. in a Global Food Economy
In sum, we have moved over the past few years to a
more flexible and market-oriented monetary system. We
are engaged in negotiations to open up world trade in
agriculture and industry alike by reducing or eliminating
both tariff and nontariff barriers to trade. And we have
substantially opened up our own farm production and export
system at home to the play of market forces.
What do all of these changes mean for U.S. agriculture?
And what do they imply for the future? They have, above
all, brought home to U.S. farmers and U.S. consumers alike
a new reality in food production and prices. U.S. farmers
are now clearly producing for both the world and the U.S.
market — and without a buffer in the form of massive
- 7grain reserves and export subsidies. Agricultural supply
and demand have become truly global in nature. In
responding to this global food economy, U.S. farmers and
consumers are now much more exposed to sharp shifts in
demand and supply due to changes in weather, diets, and
stock levels abroad.
The Bretton Woods monetary system had meant that U.S.
farmers and exporters generally didn't have to worry about
the value of the U.S. dollar abroad in terms of prices of
the goods they exported, although their export market
could be suddenly disrupted by sporadic exchange rate
crises. It also meant that as U.S. deficits grew our
currency — and our agricultural products — became
overvalued, decreasing our competitive position in foreign
markets, and improving the competitive position of foreign
products in our market. Our overvalued dollar served as
an implicit tax on our exports and made agricultural
imports more attractive. In short, the world competitive
position of American agriculture was hurt by an unrealistic
exchange rate.
The new monetary system means our dollar will no
longer be consistently overvalued, which means a realistic,
strong world competitive position for our dynamic
competitive farm producers. It means that there may be
some uncertainty in the final price of our exports in
terms of foreign currencies, but we seem to have adjusted
to these uncertainties fairly well. It means that currency
values should change gradually on a day-to-day basis,
but that they should be considerable over a longer term.
Exchange rate flexibility should, when fully operative,
aid those who are competitive, efficient producers of
agricultural commodities.
But the new monetary system does not mean that we
now live in a completely open and free international
market. Just as some nations seem reluctant to permit
a free movement of exchange rates, nations continue to
use trade restraints to influence trade flows. Changes
in government support policies, variable levies on
agricultural imports, quotas, export subsidies, and other
- 8 less visible but equally insidious nontariff barriers
to trade can serve to frustrate or prevent adjustment
in the agricultural sector of foreign economies, and
thereby continue to impede our exports. We believe the
best way to achieve a more open world market for our
agricultural products is through negotiations which
reduce or eliminate restraints on trade. An open monetary
system should make such liberalization easier, for ideally
there should no longer be balance of payments "reasons"
for maintaining or creating trade restraints. Monetary
and trade reform must go hand-in-hand if we are to have
a more open, more efficient world economy.
Worldwide inflation and recession have had sharp
impacts on farmers. Inflationary increases in their
costs of production and living have worked against farm
profits. Our fight to check inflation and excessive
Government expenditures will be critical to the ability
of our farmers to retain their position among the world's
most competitive producers.
As domestic acreage has been taken out of set-aside
to produce for the world market, our margin of land
reserves for increased production in the future has
dropped sharply. We are now producing at almost full
capacity. We are exporting about 60 percent of our
wheat, 50 percent of our rice and soybeans, 35 percent
of our sorghum, and 25 percent of our corn. We are
assured of fairly steady markets for these commodities
in certain key importing countries. Japan has indicated
that it would like to purchase about 14 million tons of
grain and soybeans from us in each of the next three
years. Israel would like to buy 1.7 million tons of U.S.
farm products in each of the next three years, Poland
plans to purchase 2.5 million tons of grain annually
during the next five years. The Soviet commitment to
purchase at least six million tons of U.S. corn and
wheat annually is well known.
These understandings give us some assurance of
minimum markets abroad in the future, but they do not
guarantee market access for our commodities. Openinq
and sustaining world markets for our agriculture is
one of the most important of our international economic
policy objectives.
- 9Some Challenges for the Future
In brief, the actions we have taken in recent years
and the more open world economy we seek for the future
mean that our farmers can no longer count on static shares
of world markets. We will be constantly challenged to
maintain our competitive position, to be flexible in our
response to the market, and to improve our technology.
These are positive challenges and I am convinced that the
ingenuity and energy of our system can meet them.
In closing, however, I would like to leave for your
consideration a problem which you as agricultural consultants
are perhaps uniquely qualified to assess and perhaps resolve.
This is demonstrated in the attached chart showing total
world grain production and consumption (including rice) for
the past 15 years. The chart shows a striking^consistent
upward trend in both production and consumption through
1973-74. This trend was followed by a sharp reduction in
world supplies which necessitated a drastic reduction in
world consumption as well. The world is producing this
year at record levels, but we are still not back to the
earlier trend.
Two conclusions are prompted by these facts:
First, in order to get consumption back up to trend,
we will have to increase substantially world production.
Much of this is going to have to come from the developing
countries -- where the opportunity for increasing yields
is greater than in the U.S. The United States has played
an active and leading role in international efforts to
improve agricultural production in the developing nations,
to increase support for agricultural research, and to
develop programs for nutritional improvement. The World
Food Conference, held at U.S. initiative in November 1974,
was the first big step in bringing food problems to the
forefront of the international agenda. One of our major
accomplishments since then has been the creation of an
International Fund for Agricultural Development, supported
by funds contributed by all major industrialized nations as
well as the newly rich oil-producing ones. These activities
are designed to help meet expanding global food demand. We
do not expect them to adversely affect markets for U.S.
products abroad. To the contrary, if the data are correct,
we will have to do much more, at home and abroad, in order
to feed the world.
- 10 -
Second, the data indicate that we should renew efforts
to obtain a greater margin of food security in the form of world
grain reserves to guard against unexpected shortages. Such a
system should include all the world's major producers and
consumers, including developing countries. The operational
elements of such a system -- the size of the reserves, the
mechanism for releasing them to markets, and other problems -remain to be resolved. If the data are correct, we must
redouble efforts to obtain agreement on such a global food
reserve system.
Governments have major roles to play in the effort
to increase world food production, but change will mainly
depend upon private technology and management skills.
Government actions, above all, must not interfere with the
basic goal of achieving more open markets and improved
efficiency of production. The responsibility of government
is to provide a sound framework within which private
enterprise can best function. Our government will persist
in implementing the major monetary reforms of the past
several years. W e will persist in our effort to open up world
markets for our farm products through the multilateral
trade negotiations, and we will persist in efforts to adopt
market-oriented farm programs. For we are convinced that the
private sector is best capable of generating the ideas and the
expert knowledge that will make the open world economy we
seek a world without hunger or starvation.
ALL GRAIN - INCLUDING RICE
World Production/Consumption
1960-61 to 1976-77
13
(in 100 million metric tons)
Production
12
Consumption
11
10
V/
8
J
I
60/61
62/63
64/65
66/67
68/69
70/71
L
72/73
74/75
76/77
he Department of theTREASURY
*SHINGTON, D.C. 202,,
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
October 7, 1976
TREASURY1S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice, invites tenders
for $3,062 million, or thereabouts, of 364-day Treasury bills to be dated
October 19, 1976, and to mature October 18, 1977 (CUSIP No. 912793 H5 8 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
October 19, 1976.
This issue will not provide new money for the Treasury as the maturing
issue is outstanding in the amount of $3,062 million, of which $1,945 million
is held by the public and $1,117 million is held by Government accounts and
the Federal Reserve Banks for themselves and as agents of foreign and international
monetary authorities. Additional amounts of the bills may be issued to Federal
Reserve Banks as agents of foreign and international monetary authorities.
Tenders from Government accounts and the Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities will be accepted
at the average price 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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
one-thirty p.m., Eastern Daylight Saving time, Wednesday, October 13, 1976.
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
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. Tenders will be received without deposit from
incorporated banks and trust companies and from responsible and recognized
WS-1119.
' '
(0VER)
-2dealers 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 $500,000
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.
Settle-
ment for accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank or Branch
on October 19, 1976,
or at the Bureau of the Public Debt
in cash or other immediately available funds or in a
like face amount of Treasury bills maturing October 19, 1976.
exchange tenders will receive equal treatment.
Cash and
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 pruchase, 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, or from the Bureau of the Public Debt.
0-0
ederal financing bank
WASHINGTON, D.C. 20220
October 7, 1976
FOR IMMEDIATE RELEASE
SUMMARY OF LENDING ACTIVITY
September 16-September 30, 1976
The Federal Financing Bank activity for the period
September 16 through September 30, 1976, was announced as
follows by Roland H. Cook, Secretary:
The Federal Financing Bank made the following advances
to borrowers guaranteed by the Department of Defense under
the Foreign Military Sales Act:
Interest
Maturity
Borrower
Date
Amount
Rate
9/16
Government of
China
$
100,722.50
12/31/82
7.1691
9/16 Government of
Brazil
81,935.04 6/30/83
7.257%
9/17 Government of
Brazil
971,155.89 10/01/83
7.265%
9/17 Government of
the Phillipines 40,000.00 12/31/81
7.003%
9/17 Government of
Korea
501,805.03 6/30/84
7.335%
9/17 Government of
Korea
1,542,150.00 6/30/84
7.266%
9/29 Government of
Israel
20,624,917.03
6/30/06
7.934
On September 30, the Bank purchased a $187,260,000
thirty-year Certificate of Beneficial Ownership from the Rural
Electrification Association. The maturity is September 30,
2006; and the interest rate is 8.100%.
On September 22, the FFB purchased debentures from Small
Business Investment Companies totaling $4,550,000.00. The
debentures mature September 1, 1986, and bear interest at a
rate of 7.755%.
WS-1120
- 2The FFB made the following loans to utility companies
guaranteed by the Rural Electrification Administration:
Date
Borrower
9/20
South Mississippi
Electric Power
9/21 Dairyland Power
Cooperative
Amount
$ 6,000,000
Interest
Maturity
Rate
9/25/78
6.453%
15,000,000 12/31/10 7.942%
9/23 Big Rivers Electric
Corporation
2,173,000 12/31/10 7.901%
9/24 Ponderosa Telephone
Company
200,000 12/31/10 7.911%
9/24 Western Farmers
Electric
21,000,000 12/31/10 7.911%
9/29 Seminole Electric
Cooperative
270,000 12/31/10 7.92t9%
9/29 United Power Assn.
3,500,000 12/31/10 7.929%
9/29 Arizona Electric
Power Corporation
7,515,000 12/31/10 7.929%
9/30 Southern Illinois
Power Corporation
3,540,000
9/30/78 6.473
Interest payments on the above REA loans are made on a
quarterly basis.
On September 27, the Bank loaned the U.S. Railway
Association (USRA) $1,075,000 against Note #6. The maturity
of the loan is December 26, 1990; and the interest rate is
8.055%, set at the time of the first advance. USRA borrowings
from the FFB are guaranteed by the Department of Transportation
On September 28, the National Railroad Passenger Service
(Amtrak) made a drawing from the FFB against Note #8 in the
amount of $6,300,000. The loan matures November 11, 1976;
and bears interest at a rate of 5.301%.
- 3The Student Loan Marketing Association (SLMA) rolledover the following principle amounts on loans previously
made with the Federal Financing Bank:
Interest
Date
Amount
Maturity
Rate
9/21
$20,000,000.00
12/21/76
5.288%
9/28
25,000,000.00
1/04/77
5.334%
SLMA borrowings are guaranteed by the Department of Health,
Education, and Welfare.
On September 30, the Tennessee Valley Authority (TVA)
borrowed from the FFB $160 million. The loan matures
December 30, 1976, and bears interest at a rate of 5.332%.
On the same day, the Bank purchased a $400 million Series B
Power Bond at an interest rate of 7.97%. The maturity of the
bond is November 30, 2001. TVA used the proceeds of these
loans to repay $420 million in notes maturing with the Bank.
On September 30, the United States Postal Service made
the following borrowings from the Federal Financing Bank:
,s Interest
Amount
Note #
Maturity
Rate
$375,000,000
125,000,000
8
9
5/30/01
5/30/81
7.800%
6.850%
Note #8 will be repaid in 25 serial installments commencing on May 30, 1977 and ending May 30, 2001. Note #9
will be repaid in 5 serial installments commencing May 30, 19
and ending May 30, 1981.
Federal Financing Bank loans outstanding on September 3
1976 totalled $25.9 billion.
#
0
MEWB n
Comptroller of the Currency
Administrator of National Banks
Washington, D.C. 20219
For For Release
Date: October 13, 1976
Past-due loans on the books of the country's 4,700 national banks have dropped
to both the lowest absolute level and to the lowest proportion of outstanding
total loans recorded in the past year and a half, according to Robert Bloom,
acting Comptroller, of the Currency.
He described the development as part of a trend toward continued improvement
in the. economy, coupled with sounder credit extension and better collection
efforts by the banks.
As of June 30, 1976, national bank reports of condition showed that the proportion of past-due loans to total loans outstanding was 4.8 percent. Mr.
Bloom said that ratio was the lowest recorded since January 31, 1975, and
represents a drop of four-tenths of a percentage point from the 5.2 percent
ratio recorded as of March 31, 1976. The mid-year ratio, Mr. Bloom noted,
represented a reduction of approximately $700 million in loans past due at the
same time that total loans outstanding rose some $7 billion to a $294 billion
total. The decline of four-tenths of a percentage point in the total proportion
of loans past due, Mr. Bloom noted, "is the sharpest movement in that ratio
between report
dates since these data were first collected for November, 1974."
Loans are considered past-due if payment is more than 30 days late for installment paper and more than 5 days late for single-payment loans. National banks
have been required to report such lapses since November, 1974, first on a bimonthly basis until September, 1975, and on a quarterly basis since that time.
With the establishment of this data base, Mr. Bloom said the office expects to
report periodically in the future on past-due loan ratios. While the national
banks reporting these ratios represent only about 32% of the total number of
commercial banks in the country, their total loans amount to approximately 57%
of all bank loans in the United States.
Preliminary data for mid-1976 indicate that both the absolute dollar volume of
past-due loans held by national banks, as well as the proportion of loans pastdue to total loans outstanding, declined significantly from the previous quarter,
Mr. Bloom said. He noted that this decline occurred in each of the four broad
loan categories (real estate, commercial, personal, and other) for which data
are reported. He said that real estate loans past due still remain higher than
those in the other categories, despite a half-point decline in that ratio from
the previous quarter.
(more)
-2The table below shows the comparative trend in past-due loan categories for
all four classes of credit in the first two quarters of 1976.
PERCENT PAST DUE
Decline
March 1976
June 1976
Real Estate
7.6
7.1
0.5
Commercial
4.5
4.2
0.3
Personal
3.1
2.9
0.2
Other
5.6
4.9
0.7
Total
5.2
4.8
0.4
####
r*4T o^ /;
the Department of theTREASURY
WASHINGTON, D.C. 20220
LTi
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
October 8, 1976
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,400 million of 13-week Treasury bills and for $3,500 million
of 26-week Treasury bills, both series to be issued on October 14, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing January 13, 1977
High
Low
Average
Price
Discount
Rate
Investment
Rate 1/
98.765
98.757
98.760
4.886%
4.917%
4.905%
5.
5.05%
5.04%
26-week bills
maturing April 14, 1977
Price
Discount
Rate
Investment
Rate 1/
97.474
97.450
97.460
4.996%
5.044%
5.024%
5.20%
5.25%
5.23%
Tenders at the low price for the 13-week bills were allotted 37%.
Tenders at the low price for the 26-week bills were allotted 24%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
. Received
|
Accepted
Received
\ Accepted
47,070,000
92,070,000 $
22,385,000 s
79,235,000 $
Boston
$
2,620,705,000
4,457,905,000
2,051,425,000
New York
4, 274,545,000
9,640,000
27,260,000
28,235,000
11, 640,000
Philadelphia
120,740,000
58,370,000
144,170,000
120,740,000
Cleveland
61,275,000
17,630,000
34,630,000
81, 275,000
Richmond
14,815,000
27,115,000
29,615,000
15,415,000
Atlanta
124,750,000
43,890,000
377,120,000
283,950,000
Chicago
19,890,000
19,745,000
47,415,000
41,890,000
St. Louis
10,950,000
5,910,000
10,910,000
30, 950,000
Minneapolis
21,400,000
39,680,000
42,760,000
21,400,000
Kansas City
30,385,000
27,940,000
51,090,000
41, 385,000
Dallas
418,310,000
60,450,000
522,110,000
San Francisco 299,145,000
90,000
90,000
95,000
95,000
Treasury
TOTALS$5,418,965,000 $2,401,895,000a/$5,720,820,000 $3,500,020,000 b/
a/ Includes $380,950,000 noncompetitive tenders from the public.
b/Includes $167,730,000 noncompetitive tenders from the public.
f? Equivalent coupon-issue yield.
WS-1121
Hw
\he Department of theTREASURY
VASHINGTON, D.C. 20220
TELEPHONE 964-2041
REMARKS BY THE HONORABLE JOHN M. PORGES
U.S. EXECUTIVE DIRECTOR, INTER-AMERICAN D E V E L O P M E N T BANK,
BEFORE THE T W E L F T H LATIN AMERICAN FOOD PRODUCTION
CONFERENCE, HOTEL MERIDIEN,
RIO DE JANEIRO, BRAZIL, OCTOBER 12, 1976
I am happy to be in Brazil and the City of Rio de Janeiro. As a
former commercial banker, I have had many business dealings and
associations here. It is a pleasure to be back again.
It is also a pleasure to participate in this 12th Latin American Food
Production Conference. As U.S. Executive Director of the Inter-America
Development Bank, I am directly involved in efforts to increase agricu
production. The Inter-American Development Bank has been, in fact, the
leading source of financing for agricultural development throughout La
America. In the period 1961-1975, the Bank approved agricultural loans
more than $1, 974 million for projects with total costs of $5, 400 million. This
loan figure, on a cumulative basis, represents nearly 23 per cent of our
total lending activity. During the next three years we will try to increase
this percentage figure to 30 per cent.
This afternoon I would like to review with you the record of the Bank's
activity in this very difficult and complex economic sector, touching on some
of the special problems of agricultural finance. I also want to preview
WS-1122
- 2some of our plans and programs for the future, indicating specific
concerns of special interest to us. One of these specific concerns is
also of special interest to you: the possibility of Bank operations in
the fertilizer subsector.
Speaking in very broad terms, the Inter-American Development
Bank has three over-all goals for its work in the agricultural sector.
Taken together, these three goals have both production increase and
rural poverty reduction objectives. They are: (1) acceleration of basic
food production and increased availability of basic food-stuffs in the re
(2) expansion of agricultural exports, both within and outside the region,
(3) improvement of rural incomes, employment and levels of living.
In this context, let me now summarize briefly what we have done
thus far. I mentioned that our total lending for agricultural purposes re
nearly $2.0 billion at the end of 1975. Of this amount, 40 per cent has be
used in the irrigation subsector and 25 per cent has been used for credit
or relending programs for farmers through intermediate credit institution
such as development banks or cooperative associations. By themselves,
these two subsectors account for nearly two-thirds of our over-all
agricultural lending. Another 15 per cent is represented by loans for
integrated agricultural development and colonization and/or reform. In
this particular subsector, we have helped to fund large-scale programs in
the Dominican Republic, Mexico, Venezuela and Colombia. The remainder
- 3of funding has gone for such varied purposes as livestock development,
animal health, marketing and agro-industry and research and extension
services.
In terms of country distribution, 55 per cent of our agricultural
lending has been made in the four largest or relatively more advanced
countries of Latin America (Argentina, Brazil, Mexico and Venezuela).
Mexico, in view of its extreme climatic problem regarding rainfall, has
received the greater part of our financing for irrigation. This particula
distribution pattern reflects large rural populations in these four count
and the relatively greater capabilities of the governments, compared to t
of our other member countries, to initiate loan proposals. Speaking
frankly, we would prefer a better balance of agricultural infrastructure
lending among all of our countries, including the smallest and least
developed. We have, as a matter of fact, already achieved a more evenlydistributed country pattern for our agricultural relending programs.
Within Brazil, Bank lending for agriculture has amounted to more
than $200 million. It is spread over a number of subsectors. In terms of
funds made available, the largest of these is the credit subsector which
received $106 million. Other subsectors receiving financing from the Bank
have included livestock development ($24 million); agricultural research
extension ($10 million); animal health ($13 million) and mechanization
($4 million).
- 4I have visited several farms in the northern part of the State of
Rio de Janeiro which benefitted from our agricultural credit subloans.
I saw that marked improvements had been made in providing pasturage
for cattle and in planting better-yielding fruit trees. Farmer income
was expected to more than double within five years as a result of these
particular subloans.
In addition to its lending, the Inter-American Development Bank
also provides technical cooperation assistance in the agricultural sector.
Since 1961, this has amounted to more than $66.0 million. The emphasis of
these programs is on prefeasibility and feasibility studies which will lea
to loan project proposals by our member countries. The funds are also
used to prepare basic studies and to provide training and advisory service
usually on a non-reimbursable basis. I should mention that we also establis
in 1975 an International Group for Agricultural Development and Food Produ
in Latin America.
This organization includes a small secretariat and functions under
the auspices of the Bank. It has begun work on elements of a general
strategy for agricultural development and increased food production in
Latin America. We hope it will provide much needed consultation, coordinati
and cooperation among different agencies active in this field. In addition,
we also support the International Maize and Wheat Improvement Center
(CIMMIT) in Mexico, the International Center for Tropical Agriculture (CIAT
- 5in Colombia and the International Potato Center (CIP) in Peru. We have
also started assistance programs with a number of national research
centers to facilitate the transfer and adaptation of the international
research work.
So far as the future is concerned, I have already said that the Bank
wants to increase its sectoral concentration in agriculture from 22 to 30
cent of total loans. Our main difficulty lies in obtaining suitable projec
proposals from our member countries. Accordingly, we have for some
time been focusing more effort on the preinvestment and project preparati
element of our technical cooperation programs, especially in our least
developed member countries and those of insufficient market. It is hoped
that we can in this way meet our percentage goals for agricultural lendin
in 1977 and 1978. For 1976, our projects-in-pipeline may be sufficient to
meet our goals.
Let me turn now to some of the problems we face in agricultural
finance. I have said that the agricultural sector in Latin America is diff
and complex. There are, first of all, large numbers of farmers spread
over wide geographic areas of the continent. Many of these farmers are
small in terms of both acreage and production method. They operate, to
a significant extent, outside the market economy with limited or no access
to credit and technical extension services. Frequently, the required
infrastructure, such as roads and transport or storage and market faciliti
- 6are inadequate or lacking entirely. Public institutions, including
various government ministries and development banks, face especially
difficult problems of coordination at both the national and local levels.
At the local level, establishment of cooperatives and farmers' organizatio
is seen as one answer to the coordination problem. However, the task
of establishing these cooperatives and other organizations is, in itself,
a long and difficult process.
I might mention, in this connection, that the Inter-American
Development Bank has been extensively involved with promotion of
agricultural cooperatives. In 1975, approximately $138.7 million was
assigned to cooperatives and similar organizations from Bank approved
loans. It is estimated that over 1.6 million individuals will benefit fro
the work to be undertaken by the cooperative enterprises. Of this figure,
180,000 individuals in Brazil are expected to benefit from a global credi
program for small- and medium-sized agricultural and livestock producers
and their cooperatives. This program, approved by the Bank in September,
1975, cost $80 million and the Bank financed one-half of this amount.
Lending through cooperatives has become a channel that is extremely
important to us. In this way we can reach the poorest elements of the
populations of our member countries. In the future we will be putting
additional emphasis on this aspect of our operations.
- 7Problems of organization and coordination are not limited to our
developing member countries. The international development banks also
have had problems in organizing our efforts in the agricultural sector.
Too often in the past we have simply transferred the technologies of the
industrial countries without considering the different economic and social
situations and experiences of the recipient countries, themselves. Within
the Inter-American Development Bank, we are now preparing a special
procedure to utilize "intermediate" or "most appropriate" types of technol
We want to incorporate different technologies, ones that are not necessari
used in the industrial countries, into all of our loan programs. We expect
that the agricultural sector may be one of the most promising areas.
We hope that by promoting sub-credits to smaller farmers, and even some
minifundistas, we can help expand production through simple and relatively
inexpensive changes in method. Studies show this is a promising approach
because on a simple acreage basis some of the small farmers are more
productive than the larger ones.
In a similar vein, we are revising our technical cooperation support
of both national and international agricultural research institutions. We
want to put more emphasis on "field conditions" as they now exist in Latin
America and less emphasis on ideal or "laboratory type" conditions. This
revision implies a more "experimental" orientation based on observation of
Latin American conditions. In this way, we hope to increase the effectiven
- 8of our long-standing and traditional support for such organizations as
the Corn and Wheat Institute in Mexico, the Potato Institute in Peru
and the Tropical Agriculture Institute in Colombia.
Another concern of the Inter-American Development Bank is the
establishment of more realistic or market level interest rate policies fo
sublending in agriculture as well as in other sectors. The crux of our
concern is the need to assure continuity of credit availability over the
long term, especially to small farmers and to other individuals who have
not had access to credit in the past. This continuity depends mainly, of
course, on the mobilization of domestic resources through the local bankin
system. It also depends on the long-term financial health and viability
of the sublending institutions involved. In the absence of appropriate ra
of interest, domestic funds will not flow for the purposes we seek. Withou
adequate rates of return, the intermediate institutions we now support wil
decapitalize themselves and not survive into the future. Appropriate inter
rates also avoid undesirable distortions of credit markets and promote th
best use of available resources. We are convinced that all farmers, includ
the smaller ones, can pay these appropriate rates of interest. In fact,
under usual arrangements with local money lenders in rural areas, many
small farmers presently pay much higher rates. For these reasons, the
question is of paramount importance and will recieve, I think, increasing
attention in the future.
- 9In this over-all sectoral perspective of progress and problems,
we can consider the fertilizer subsector and prospects for Bank funding.
Let me say at the outset that the Bank is very interested in helping to
finance projects of this kind. We consider chemical fertilizers the single
most important commercial agriculture input for expansion of food
production.
As a matter of fact, we have made several direct loans to help
finance major fertilizer production. In 1965, we made a loan of $9.8 milli
to Argentina for its PETROSUR facility. In 1969, we lent $16.2 million to
Venezuela for its Moron complex. In Brazil in 1974, we helped finance
the ARAXA complex with an $8.1 million subloan from BNDE. There was
a similar operation in Uruguay in 1969. In addition, we estimate that
approximately $80 million of our global agricultural credits have been use
purchasing fertilizer. Our irrigation loans, which amount to more than
$400 million, have also promoted greater use of fertilizers since they are
necessary complement to irrigated agriculture.
During the 10-year period 1963-1973, fertilizer consumption throughout
Latin America tripled from 1.0 million metric tons to more than 3.4 millio
metric tons. This represented an annual rate of increase of 14.2 per cent
compared to the world average of 8.7 per cent. At the end of this period,
use of fertilizer per hectare in Latin America averaged 30.5 kilograms
vis-a-vis a world average of 49.6 kilograms. In the United States, the
- 10 corresponding figure was 81.9 kilograms; in France, 305.4 kilograms and
in Germany, 429.3 kilograms. For Brazil, the average was 36.7 kilograms.
It can be seen, therefore, that the use of fertilizer in Latin America is
below what it could be if parallel progress could be made in expanding cre
programs and extension of technical services. As a general rule, small
farmers use little or no chemical fertilizer. Much more work is
urgently needed to promote domestic consumption by small farmers through
specialized programs of credit and extension services. Such an effort woul
fit very well into the Bank' s general sectoral orientation toward the sma
farmer.
So far as fertilizer production in Latin America is concerned, the
level doubled from 679,300 metric tons in 1966/67 to 1,475,400 tons in
1972/73, an increase of 13.8 per cent per annum. As a whole, the region
became more dependent on imports since during the same period, consumption
was increasing at an annual rate of 17. 3 per cent. One of the reasons for
increased dependence on imports is low utilization of available plant. Reg
capacity in 1972/73 was estimated at 2,518,000 metric tons. However,
the actual production figures of 1, 475, 000 tons indicate a utilization r
of only 60 per cent.
Projections from the Organization of American States (OAS),
nevertheless, show a regional consumption of 7.5 million tons in 1980/81,
compared to a 3.6 million tons in 1974/75. In view of this growth in deman
-11 that is foreseen over the next few years, plans are well advanced in a
number of countries for expansion of capacity. A recent Bank mission to
the Andean Group countries, for example, identified 34 possible operations
for financing. These projects amounted to nearly $2.0 billion in direct
investment as well as an additional $1.0 billion for related infrastructur
such as warehousing, credit, and extension and educational services.
Three of these projects are already under active consideration by
the Bank. They include a Fertilizer Development Plan for Chile, an
ammonia plant in Ecuador and a Phosphate Development Plan for Colombia.
In addition, the first stage of the Bayovar Project in Peru, a large and
comprehensive multi-stage project, is being considered for IDB financing.
At the present time, the Bank is processing a Brazilian request for
a loan of the magnitude of $70.0 million to Petrobras Fertilizantes. Altho
an ammonia and urea facility in Sao Paulo was originally contemplated, fro
certain raw materials, I understand that consideration is now being given
developing another source of raw material. In any event, the Bank should
work closely with Brazil because of its large size, the rapid growth of
its fertilizer market and its determination to be self-sufficient in ferti
in a relatively short period of time. There are good opportunities for bot
phosphate and nitrogen production as well as marketing facilities for all
types of fertilizer. As a follow-up to its reconnaissance mission to the
Andean Group countries, I am hopeful that the Bank will send similar
missions to Brazil and other Bank member countries.
- 12 To sum up, I think there are many opportunities for the Bank
to have a significant impact in this subsector. Our assistance can take
the form not only of loans for specific operations but also for loans for
preinvestment and technical cooperation for country and regional investme
plans. I should emphasize in this connection that regional and subregiona
coordination of production plans is essential. I know that my treatment o
the Bank's work in financing agricultural development has been a broad-
brush one. I hope, however, that some of the subjects touched on have bee
of interest to you. Thank you.
oOo
FOR RELEASE AT 4:00 P.M.
October 12, 1976
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 $5,800 million, or
thereabouts, to be issued October 21, 1976, as follows:
91-day bills (to maturity date) in the amount of $2,400 million, or
thereabouts, representing an additional amount of bills dated July 22, 1976,
and to mature January 20, 1977 (CUSIP No. 912793 E2 8 ) , originally issued in
the amount of $ 3,501 million, the additional and original bills to be freely
int erchangeable.
182-day bills, for $ 3,400 million, or thereabouts, to be dated October 21, 1976,
and to mature April 21, 1977 (CUSIP No. 912793 F7 6 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
October 21, 1976, outstanding in the amount of $5,805 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,993 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
one-thirty p.m., Eastern Daylight Saving time, Monday, October 18, 1976.
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
WS-1123
(OVER)
in Government
-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
the face amount of bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust companyPublic 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 $500,000 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 or at the Bureau of the Public Debt
on October 21, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing October 21, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
oOo
K
Jhe Department of theTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
October 13, 1976
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $3,062 million of 52-week Treasury bills to be dated
October 19, 1976, and to mature October 18, 1977, were opened at the
Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Price
High
Low
Average -
Discount Rate
94.840 5.103%
94.803
5.140%
94.817
5.126%
Tenders at the low price were allotted
Investment Rate
(Equivalent Coupon-Issue Yield)
5.38%
5.42%
5.41%
52%.
TOTAL TENDERS 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
Treasury
$ 129,565,000
4,297,785,000
6,175,000
58,170,000
9,490,000
1,975,000
275,305,000
59,050,000
35,445,000
6,545,000
18,695,000
318,770,000
25,000
$ 107,565,000
2,623,825,000
2,175,000
13,170,000
2,490,000
1,975,000
79,265,000
47,050,000
35,445,000
6,245,000
11,695,000
132,750,000
25,000
TOTAL
$5,216,995,000
$3,063,675,000
The $3,064 million of accepted tenders includes $ 55 million of
noncompetitive tenders from the public and $1,037 million of tenders from
Federal Reserve Banks for themselves and as agents of foreign and
international monetary authorities accepted at the average price.
An additional $ 28 million of the bills will be issued to Federal
Reserve Banks as agents of foreign and international monetary authorities
for new cash.
WS-1124
October 13, 1976
DATE:
TREASURY BILL RATES
52-WEEK
---.
LAST MONTH:
TODAY:
HIGHEST
SINCE:
LOWEST
SINCE:
/
FOR RELEASE AT 4:00 P.M. EDST
REMARKS BY THE HONORABLE WILLI/AM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
NATIONAL SAVINGS & LOAN LEAGUE
SAN FRANCISCO, CALIFORNIA
OCTOBER 19, 1976
THE CHALLENGE OF ECONOMIC LEADERSHIP
I am pleased to address this meeting of savings and
loan association officials representing every sector of
our great Nation. There are many important industries but
few can match your basic role in the economic and social
progress of our country.
— From an industry with total assets of just over
$15 billion in 1950 you have grown into a $350 billion
financial giant that continues to expand in size and scope
of activities.
-- In the process you have become the largest supplier
of residential mortgages accounting for almost one-half of
the credit outstanding and just over two-thirds of the
new loans made in 1975.
— Your industry provides the necessary financial link
between approximately 65 million savers and 13 million
mortgage borrowers.
— Your growth, particularly in the postwar era, has
been a major factor enabling almost two-thirds of American
families to own their own homes.
-- In short, your industry is fundamental to the
economic and social health and progress of America.
But since the mid-1960's the stop-and-go pattern of
economic booms and recessions has severely disrupted your
activities creating wide swings in savings flows and
interest rates. Many of your most pressing problems are
the direct result of government policies. Excessive
spending has triggered general economic instability and
chronic Federal budget deficits. The repeated overheating
WS-1125
-2of the economy created double-digit inflation pressures
rarely experienced in the United States. As these distortions have occurred it has been impossible to sustain
stable monetary policies which have tended to vacillate
between restraint to fight inflation and ease to finance the
artificially inflated pace of economic activity. The
resulting disruptive impact on the nation's financial
markets explains many of your industry's problems.
From these experiences there is one basic conclusion:
Our basic desire for economic progress, through improved
living standards and employment opportunities, will be
frustrated unless we better control the insidious inflation
which has destroyed economic stability and today threatens
not only our goal of sustained growth but the ultimate
survival of all of our basic institutions. When inflation
distorts the economic system and destroys the incentives for
real improvement the people will no longer support that
system and society disintegrates. I am convinced that our
uniquely creative and productive society will also collapse
if we permit inflation to dominate economic affairs. There
is no tradeoff between the goals of price stability and low
unemployment as some critics have erroneously claimed. To
the contrary, the achievement of both goals is interdependent.
If we are to increase the output of goods and services and
reduce unemployment, we must make further progress in reducing
inflation.
The intensity of my feelings about inflation has resulted
in some critics labeling me as obsessed. However, I am not
so much obsessed as I am downright antagonistic toward those
who consistently vote for bigger deficits. We must always
remember that it is inflation that causes the recessions
that so cruelly waste our human and material resources and
the tragic unemployment that leaves serious economic and
psychological scars long after economic recovery occurs. It
is inflation which destroys the purchasing power of our
people as they strive — too often in a losing struggle —
to provide the necessities of food, housing, clothing,
transportation, and medical attention and the desired
necessities of education, recreation and cultural opportunities.
Inflation is not now, nor has it ever been, the grease that
enables the economic machine to progress. Instead, it is
the monkey wrench which disrupts the efficient functioning
of the system. Inflation should be identified for what it
is: The most vicious hoax ever perpetrated for the expedient
purposes of a few at the cost of many. There should be no
uncertainty about its devastating impact, particularly for
lowincome families, the elderly dependent upon accumulated
financial resources
-3and the majority of working people who do not have the
political or economic leverage to beat the system by keeping
their incomes rising even more rapidly than inflation. When
inflation takes over an economy the people suffer and it is
time that this basic point is emphasized by every responsible
citizen and the full brunt is brought to bear on their elected
officials. Let me assure you that regardless of the rhetoric
emanating from Washington, D.C., the spend-spend, elect-elect,
syndrome is alive and well.
Almost buried in that rhetoric are the economic issues
that will ultimately shape the future course of the United
States. The American people must now decide what kind of
economy they want for the foreseeable future. They must
realize that their government's fiscal and monetary policies
and the maze of government programs that increasingly
intervene in their daily lives are the real issues that will
determine their personal welfare:
— whether or not inflation will be effectively
controlled or once again allowed to return to double-digit
levels;
— whether or not capital investment will be adequate to
create meaningful jobs for the growing labor force;
— whether or not government regulation and administrative
controls will be changed to meet current economic realities
to restore productivity and efficiency;
-- whether or not the United States will provide effective
leadership on international monetary, trade and investment
issues.
These are the real issues and each candidate's statements must be judged against the following standard: Do
his policies contribute to sustained and orderly economic
growth or do they merely perpetuate the familiar stop-and-go
patterns of the past involving increased government spending
without regard for the chronic deficits and economic
disruption created, excessive expansion of the money supply,
even more government controls over the private economy and
increased intervention in private wage and price decisions.
The Development of Economic Policies
The proper role of government is to create an
environment for sustained and orderly economic growth through
its fiscal, monetary, and regulatory policies. The
disappointing performance of the U.S. economy during much of
-4the last decade emphasizes the basic need for more stable
policies. In the mid-1960's the United States began an
unfortunate series of exaggerated booms and recessions:
serious overheating of the economy created severe price
pressures; accelerating inflation caused recessions by
restricting housing construction, personal spending and
business investment; the recessions created unwanted
unemployment which wasted resources and caused personal
suffering; rising unemployment too often triggered poorly
planned and ill-timed government fiscal and monetary
policies setting off another round of excessive stimulus
leading again to overheating — inflation — recession —
unemployment — and more government intervention.
Two years ago the pace of economic activity was
deteriorating, inflation was already at double-digit levels
and rising, unemployment was beginning to increase and great
uncertainty prevailed about international trade and monetary
problems. Although others are now anxious to take credit
for the responsible policies he developed, the fact is that
under President Ford's leadership the U.S. economy has
experienced a healthy and balanced economic expansion over
the last eighteen months. This favorable turnaround resulted
from following four basic policy guidelines to break the
vicious circle and return the U.S. economy to full output:
— First, the diversity of problems had to be recognized
to avoid concentrating on a single issue. Inflation,
unemployment, declining output, the availability of
productive resources, international trade and investment all
had to be considered simultaneously to create a balanced
program for recovery. Controlling inflation was the necessary
beginning point to restore consumer purchasing power to
provide needed demand to turn the economy around but the
entire mix of goals was recognized.
— Second, the Administration wanted its policies to
solve more problems than they would create. During a period
of difficulty it is expedient to respond to strident calls
"to do something — anything to demonstrate political
leadership."
But this naively activist approach is the basic
source of problems not the solution. Courage and wisdom
have been required to avoid actions offering the illusion
of short-term benefits in exchange for further erosion of
the free enterprise system that has served this Nation so
well during the last two-hundred years. The conventional
wisdom that a few billion dollars of additional government
-5spending somehow makes the difference between success or
failure of the entire U.S. economy — which is rapidly
approaching an annual level of output of two trillion
dollars — has always amazed me. There is definitely an
important role for governments in protecting public
interests but the claim that governments can or should
control the economy is totally false. We would all be
better off if government officials would admit that the
real creativity and productivity of America depends upon
the private sector.
— Third, the recovery process needed to attack the
basic cause of the recession — the vicious inflation.
From 1890 to 1970 prices in the United States increased
at an annual rate of 1.8 percent. From December 1973 to
December 1974 they jumped 12.2 percent. It seems so obvious
that any long-term solution to our economic problems
required better control of inflation which had distorted
the spending and savings decisions of all /Americans.
Nevertheless, the Administration was accused of having a
single-minded obsession with inflation. To the contrary
it simply recognized inflation for what it is: the greatest
threat to the sustained progress of our economy and the
ultimate survival of all of our basic institutions.
— Fourth, the Administration emphasized the need to
alleviate the transitional problems of moving from recession
to recovery. The automatic stabilizers built into many
government programs were improved to respond to rising
unemployment and sustain the flow of personal incomes.
The positive results of following these policies can
now be evaluated after eighteen months of healthy and
balanced economic expansion. The real output of goods and
services has expanded at an annual pace well above the
long-term capability of the U.S. economy without experiencing
widespread capacity constraints or severe raw materials
problems that were predicted by many analysts. Personal
consumption has provided the basic thrust for the growth
throughout most of the current expansion. Residential
construction has not returned to its pre-recession levels,
although the current pace of approximately 1-1/2 million
starts at an annual rate is well above the recession low
reported in the spring of 1975. Business spending, which
is usually sluggish during the early stages of recovery,
is now beginning to accelerate and business inventory buying
is about at the level expected. Government spending at all
levels continues to grow, but at a more controlled rate,
and the pace of export sales has continued although imports
are
rising
more
rapidly expansion
because of
advanced
status
of the
economic
inthe
therelatively
United States.
-6Looking to the future, we expect the expansion in
the United States will continue in 1977, but at a reduced
pace more consistent with the long-term potential of our
economy. This is a proper pattern because continuation of
the rate of output gains in the 6 to 7 percent zone over
an extended period of time would inveitably overheat the
U.S. economy, once again leading to a new round of. inflation,
followed soon afterwards by recession and unemployment.
Output gains in 1977 should be in the 5 to 6 percent zone
as the economy gradually returns to its long-term potential
annual rate of output.
Personal consumption will continue to be the basic
strength of the U.S. economy, since it comprises two-thirds
of the total GNP, but the rate of increase in this sector
will probably slow down and business investment and continued
modest gains in housing construction will provide most of
next year's thrust for additional growth.
We expect inflation to remain in the 5 to 6 percent
zone. This is not a satisfactory level of price increase and
our Nation must not and will not accept it. Employment growth
should continue, although not as rapidly as during the last
eighteen months, and the unemployment rate should continue to
decline, particularly as the extraordinary growth in the labor
force slows down.
In summary, there are several worrisome problems to
contend with and the future course of each sector of the
economy will not be steadily upward each month, but the
likely overall course for the U.S. economy is favorable if
fiscal and monetary policies remain responsible. The key
to achieving this relatively optimistic goal will be how
well inflation is controlled. A resurgence of inflation
would quickly erode both consumer confidence and actual
purchasing power, which would restrict the personal spending
that creates the driving force for the entire economy. In
turn, business firms would curtail their spending plans
which would further erode current economic growth and
delay the capital investment necessary for achieving our
future national goals, particularly the creation of new jobs.
In short, we must guard against a resurgence of
inflation if we are to avoid a premature disruption of the
economic expansion. This fundamental approcah is not based
on any obsession with a particular goal but is a realistic
recognition that inflation destroys economic stability and
leads to recession and unemployment. There never was and
is not now a choice between inflation and unemployment.
-7that concept is a fallacy. The real choice is between
making steady progress on both inflation and unemployment
or of returning to the stop-and-go economic policies that
have failed to provide needed stability in the past.
Different Approaches to Economic Goals
Although our national goals of stable growth, maximum
employment, more moderate inflation, efficient use of
human and material resources and further progress on
international monetary and trade reform are generally
accepted, there are major disagreements about the policies
necessary to achieve these objectives. There is also a
difference of opinion about the probable time frame of
economic developments and the relative risks of inflation and
unemployment that can be tolerated. These basic differences
should not be confused or concealed by campaign oratory.
The Administration has submitted a detailed plan for
balancing the Federal budget and has identified specific
programs to be delayed or eliminated. The President has
demonstrated the seriousness of this commitment by using
his veto power to restrict the continuous pressures for
more spending. We have strongly supported the independence
of the Federal Reserve System and more stable monetary
policies. We have submitted several legislative initiatives
for regulatory reform and directed internal programs to
eliminate or improve government rules and regulations. Our
prolonged international negotiation efforts have finally
produced significant progress in monetary and trade reform.
In short, the record of accomplishments and policy
recommendations for the future are on the record and they have
not vacillated.
Most important of all, this Administration has
continued to push for a proper balance in the shared
responsibilities of the private and public sectors. This
has been a difficult assignment because of the recent
confusion and pessimistic appraisals of the future caused by
the political and economic shocks that have occurred.
Maintaining and improving the creativity and productivity
of the U.S. economic system against the attacks of critics
who favor a big-government solution for the problems of
society has become our greatest challenge. The simplistic
cure of having government spend ever increasing amounts of
borrowed money has not solved many of our problems but it
has created serious economic distortions that will continue
long into the future. We now have a Federal Government that
is trying to do more than its resources will permit, to do
many things that it cannot do very well, to do some things
-8that it should never do at all, and to do all of these
things at the same time. As a result, we now have more
government than we want, more than we need, and more than we
can afford. Nevertheless, much of the current political
rhetoric continues to claim that we aren't spending enough,
aren't creating enough new government programs, and aren't
pushing enough panic buttons. Despite the unmatched accomplishments
of the U.S. economy these critics attack the free enterprise
system and demand comprehensive governmental control over
economic planning for the allocation of our national resources —
the rationing of capital to selected industries — guaranteed
government jobs for all who want them — increased control
over private economic activities — even a return to the
counter-productive wage and price controls that have always
failed. Although the American free enterprise system feeds,
clothes and houses our people more effectively than any
other system in the world and provides the real basis for
all of our public services, it is increasingly subject to
criticism from those who seem to favor turning to less
efficient approaches which would waste our human and material
resources and eventually erode our economic progress and
political freedoms.
Part of the problem is a matter of image. Those who
support increased government spending and pervasive controls
over our daily lives are often perceived as being more
concerned and socially progressive. Those who allegedly
"care more" are given considerable attention when they call
for more spending to solve the unmet needs of society even
though the growth of big government has become a large part
of the problem not the best solution it is alleged to be.
At the same time, those who favor the free enterprise system
too often converse in simplistic slogans that lack humane
appeal. Worst of all, many businessmen who come to Washington
seem to want to surrender their existing freedoms in exchange
for protection from the competition that has made our system
so dynamic.
It is now time — in fact the need is long overdue —
for those who believe in the free enterprise system to more
effectively promote its basic values. /America has become
the world's premier economy because it provides basic
incentives to its people to work hard and to be creative. To
the individual family this approach leads to a higher
standard of living. To the business firm it means increased
markets and larger profits. To our government it means
increased effectiveness and public support.
-9In short, too many Americans — especially those who
have known only the affluent society — are unaware of the
real source of economic growth in our country. The material
abundance, the freedoms of choice, the opportunities for
meaningful work are all largely the result of the creativity
and productivity of our free and competitive economic system.
This is the crucial theme that must be communicated to all
Americans until they understand it. The American economy is
the well spring of our Nation's basic strength in every
sphere — political, social, military and economic. It is
the source of our present abundance and the basis of our
hopes for a better future. We can solve our recognized
problems best by preserving and improving our uniquely
productive system. And in doing this we will preserve our
other freedoms that have made America so great.
The great historian, Arnold J. Toynbee, recognized
these fundamental points when he wrote that great civilizations usually develop in difficult environments. The easy
life seems to lead to decay while progress results from
challenges. After analyzing sixteen dead civilizations and
nine others that seemed to be declining he concluded that
their deterioration was due to three major causes: (1) the
failure of creative power; (2) the loss of a cooperative
spirit on the part of the masses who supply the productive
labor force; and (3) the consequent loss of social unity in
society as a whole. Professor Toynbee went on to note that
there is no inexorable pattern of decay for any civilization.
The failure of a society is a human failure. It springs
from the refusal of the people to work and sacrifice to
attain worthy goals.
The United States now faces a basic choice. Yet we
hear misleading political rhetoric that we can achieve our
basic economic goals without making the necessary sacrifices
required to produce and pay for the desired goods and services.
Our magnificent country is capable of achieving any worthy
goal it identifies but we must face up to many economic
realities, particularly the obvious point that goods and
services cannot be distributed to the consuming public
unless they are first produced. We have the human and
material resources necessary to operate our open and competitive
economic system to achieveoOo
our goals if we will create the
proper environment. How well we make these basic decisions
will ultimately determine what future historians will write
about America.
-
FOR A.M. -RELEASE
'^SATURDAY. OCTOBER 16, 1976
ADDRESS BY THE HONORABLE WILLIAM S. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
BUSINESS COUNCIL
HOT SPRINGS, VIRGINIA, OCTOBER 16, 1976
Thank you, Mr. Arthur Wood and members and guests of the
Business Council:
It is a privilege and a pleasure for me to attend this
gathering of an organization that numbers among its members
some of the true leaders of this country — business leaders who
make our fantastically diverse, productive economic system
work. I am delighted to have this opportunity to meet with
friends, both old and new, and to hear from you as well as
.speak to you.
We all know that politics can make strange bedfellows,
Some of the current Washington, scandals"have made that pain
fully clear. But, in preparing for this speech, I was reminded
that ecomomics, too, sometines makes for strange bedfellows.
To be perfectly candid with you, in doing a little
research for this gathering, I was amazed to find myself in
agreement with a quote from a man who did not exactly share
my enthusiasm for the private sector:
His name was Nikolai
Lenin and the quote in question is this: "Political institutions
are a superstructure resting on an economic foundation."
Now a few weeks ago, if anyone had told me that I would
open an address to the Business Council by quoting Lenin, I
would have laughed him out of my office. But here I am,
quoting the father of modern totalitarianism on economics
and politics. To put it mildly, I think I owe you an
explanation.
As so often happens with social thoreists Lenin made a
number of the right observations for the wrong reasons —
and then proceeded to draw the wrong conclusions. Nevertheless,
with the eye of a critical outsider, he did recognize some
things about western democracy that we ourselves may have
overlooked.
To begin with, Lenin clearly saw that our political
institutitions were not an independent, organic whole. They
were born, and they survive, because of a broader social
foundation.- With the single-mindedness of a fanaric, Lenin
thought this foundation was entirely economic. Experience
teaches us that it has many other aspects a3 well — spiritual
WS-1126
- 2 roots, shared experience and aspirations, geography and climate
and, most importantly, the basic composition, and the dynamic
vitality and freedom of the people themselves. All of these
things combined to create the soil in which the political
institutions of a nation take root.
But it is the economic foundation which ultimately
means the most in practical terms, Regardless of a people's
intentions or a leader's ambitions, a nation can only do as
much, for better or worse, as its economic base can support.
This is as true of the state bent on relieving human suffering
as it is of the state bent on conquest.
Unfortunately, the importance of economics is equalled
only by its dullness as a subject in the way it is ordinarily
taught and discussed. It is, as the great 19th century
historian Thomas Carlyle said, the "dismal science", boring
people even while it shapes their lives and determines their
futures. On the surface, economics seems little more than a
pile of charts and a jumble of figures so large as to be
incomprehensible in everyday terms.
This leads to some curious inconsistencies. The same
citizen who bursts into a rage over a wandering Congressman
who spends a few thousand dollars to put his young mistress
on a committee payroll will blandly look the other way while
the same Congressman and his colleagues, year after year,
legislate tens of billions of dollars in spending and create
massive deficits that wreak havoc with the economy. As
Lenin's brutal, cynical successor, Joseph Stalin, once put
it, "A single death is a tragedy, a million deaths is a
statistic." And statistics bore us.
So the economic news is usually confined to a few gray
columns of figures buried in the middle of the newspaper or
a few seconds of dry reportage in the middle of the evening
television news. It just doesn't make sexy headlines or
exciting news stories. Yet the economy is the one thing
that affects each one of us in every aspect of our lives —
from the food we eat, the quality of our education, our
mobility and freedom of choice in careers and travel, to the
selection and affordability of goods and services, our
material and personal sense of independence, and our overall national strength and security as well. The smallest
shock to the economy is felt in every limb of the body
politic and shapes the way we vote and the way we view our
present and plan for our future.
No one understood this better than our founding fathers.
They knew that political and economic freedom must go hand
in hand if they are long to survive and so they bequeathed
to us a heritage of freedom and free enterprise that has
-3given us greater liberty and greater affluence than any
other nation has ever known.
Ironically, the American system has worked so well for
so long that many of us today may be losing sight of how and
why this mighty engine for human progress functions. I call it
"the failure of success". The better the system works, the
more envy and hatred it generates among its opponents and the
more complacency and apathy it generates among its advocates.
Intellectuals rant and rave over its small failings, using
them as an argument for revolution instead of reform;
politicians tap more and more of the bounty of the private
sector to finance their pet programs and pack their favorite
pork barrels; and the average citizen, not quite sure of what
is happening, stays on the job — whether he is a factory hand
or a company executive — keeping the American Dream alive
in spite of increasing government interference and oppressive
taxes.
Meanwhile, growing numbers of citizens — especially
those born into an affluent society which seemed to have no
beginning or end, no cause and effect — do not really
understand the dynamics of prosperity and responsibility in
a free society. We are fast becoming a nation of economic
illiterates and, as economic ignorance increases, so too does
economic irresponsibility on the part of too many of our
leaders.
In nearly four years in Washington I have had ample
opportunity to observe both the strengths and weaknesses of
our system, its still untapped potential for good and the
dangerous fissures that have formed through several decades
of political abuse.
And my time at the Treasury has left me convinced
that, to paraphrase Sir Winston Churchill, free enterprise is
far from perfect, but it is the best economic system the
human race has ever managed to devise.
What I would like to do today is take a brief look at
where the American economy stands, and then discuss the
responsibility that we in this room share to meet the two
great long term challenges facing free enterprise.
To begin with, the short-term news about the American
economy is good. We are now in the midst of a healthy and
balanced expansion:
— Inflation has been cut more than in half since the
beginning of 1975.
-4— Employment is at all-time highs;
— Industrial output, retail sales, the GNP, personal
income, have registered important gains.
And yet the decline in unemployment, though below its
recession high point, is irregular and far slower than we
are willing to tolerate. And inflation is by no means under
firm control and remains the most dangerous enemy of that
durable prosperity which we and all nations are seeking to
achieve.
The ruinous inflation that crested in 1974 was the chief
cause of the recession that followed. If we embark once
again on a course of excessive fiscal and monetary policies,
we will only rekindle another round of inflation and an even
worse recession.
In our own economic interest, and in the interest of
global economic stability, our first responsibility must be
to stand by economic policies that will ensure healthy,
balanced growth and prevent a resurgence of inflation. With
responsible leadership, we can, and will do this.
That, in a nutshell, is where we stand today. But all
the progress we have made will be rendered worthless if we do
not address ourselves to the two long-term challenges to
capitalism that I mentioned earlier. For want of better
names, I would characterize these two challenges as educational
and ethical. Both of them represent the soft, vulnerable
underbelly of free enterprise.
In our era, when the main political struggle is between
controlled societies and free ones, nothing is more vital to
the survival of our economic way of life than a clear public
understanding of free enterprise. And that requires business
leaders with the courage, energy and understanding to
articulate it.
The challenge to American business today, when so much
of the world is lurching towards socialism or totalitarianism,
is not only to make our system work, but to make it understood.
And too many businessmen are shirking this responsibility,
preferring the temporary security and seclusion of the board
room to the rough and tumble of public debate.
The result is that private enterprise is losing by
default — in many of our schools, in much of the communications
media and in a growing portion of the public consciousness.
-5By abandoning the field of public discussion to the
opposition, by financing some of the very institutions that
seek our downfall, and by following the inarticulate, cautious,
I almost said cowardly, route — we are digging our own
graves.
The need today is not for gray men with an eye to nothing
but the corporate balance sheet. What we need, and need
desperately, is statesmanship in the business community —
leadership with guts, with conviction and with a firm ethical,
intellectual and moral base.
No one is more aware of this than the opponents of free
enterprise. Advocates of a state-controlled economy, whether
they are communists, fascists or democratic socialists, base
their own position on an ethical view, though a mistaken one.
Their economic philosophy is deliberately linked to a general
philosophy of life for, to the "true believer," Socialism
and Marxism are not merely economic formulas, but allembracing world views — a kind of temporal religion.
Their systems do not work as well as free enterprise
but, like all religious devotees, they are willing to suffer
and sacrifice for their beliefs. Instead of automatically
weakening their faith, adversity may even fortify it as long
as they believe and as long as they feel that their belief
is anchored to something of moral worth.
Those of us on the side of economic freedom are not so
fortunate. The American free enterprise system has consistently
outperformed Marxism and modified brands of socialism from
the beginning, and continues to do so today. Any objective
evaluation of economic performance clearly illustrates the
United States superior record in both economic output and
the equitable distribution of economic benefits.
Nevertheless, American free enterprise today is in
serious danger of failing as a belief/ The ethical and
philosophic underpinnings of capitalism have not been
thought out, articulated and then disseminated to the millions
of average citizens who enjoy the direct material benefits
and the indirect spiritual and political benefits our system
provides. Nor is this lack of understanding merely confined
to the economic layman. It also afflicts many of the men
and women who lead industry and business. Small wonder,
then, that the man on the street has his doubts about the
system.
The problem is a complex one and is not confined to
business alone; Vietnam, Watergate, student unrest, shifting
moral codes, the worst recession in a generation, and a
-6number of other jarring cultural shocks have all combined to
create a new climate of question and doubt. The same opinion
samplings that show a decline of public confidence in business
beginning in the turbulent 1960s, also show declines in
confidence for the professions, the clergy, organized labor,
government, and politics. It all adds up to a general
malaise, a society-wide crisis of institutional confidence.
There are, however, some specific symptoms and cures
which apply particularly to the business community. The two
we are discussing are, in my opinion, the most important —
the need for educating the general public to the social as
well as economic benefits of the free enterprise system and
the need to educate the business community itself to the
relationship between good business and good citizenship:
"reinforcing the ethical base of capitalism.
On the first score, it is ironic that at a time when
Americans are enjoying such great abundance and such great
opportunity, so many of us have lost sight of the principles
and institutions that have made our way of life possible.
But the truth is as inescapable as it is unpleasant; somewhere
along the line there has been a dangerous breakdown in
communications. Today, when nearly everyone takes the fruits
of the free enterprise system for granted — the abundance,
the opportunity for learning, travel, individual freedom,
and general upward mobility — not everyone understands the
basic economic facts of life that create all these benefits.
Part, but not all, of the problem is a matter of image.
Frequently, and especially to youthful idealists, those who
support a state-dominated economic system are perceived as
concerned, socially progressive men and women who "care" —
in a nutshell, they are seen as the humane champions of the
underdog. And, often enough, they really are the only ones
who have effectively communicated their concern for social
issues. It is the private sector which ultimately supplies
new jobs and creates the material means for raising living
standards, but the private sector seldom receives (and
hardly ever clearly demonstrates its just claim to) credit
from the man in the street.
Those who advocate strengthening the free enterprise
system and who warn against injecting the government into
every new economic and social problem that comes down the pike,
are seen often depicted as either outdated theorists or selfish
opportunists concerned only with personal gain and preserving
the status quo. They find no smypathy in many university
economic departments and little understanding in much of the
-7media. To make matters worse, their own surface appearances
often tend to confirm this impression, wrong though it is.
So our first challenge is education — education of the
public at large and greater self-understanding within the
business community itself. One of the best ways to teach the
pros and cons of any system is to compare it to the available
alternatives. Most Americans never have been and, let us hope,
never will be forced to experience first-hand what it means
to live in a country where economic freedom has been destroyed
or severely limited. Yet, if our system is to survive, our
people must have a valid standard for comparison on both
material and moral grounds. This can be achieved through
education but, so far, it has not been.
Most Americans have never witnessed the seeminglyendless queues of workers and housewives that line up for
hours outside state owned food and department stores in order
to buy a poor selection of overpriced food staples and
state-manufactured clothing and merchandise in countries
when free enterprise has died.
They do not realize what a miracle of variety, economy
and productive competition the average American shopping
center would represent to most of the earth's people.
They have never.asked themselves why a country like the
Soviet Union, with some of the largest, richest tracts of
grainland in the world, but with a government-owned and run
agricultural system, cannot even feed its own people without
turning to American farmers who own their own land, make
their own economic decisions and feed not only their own
people, but millions of others as well.
They have not had to suffer the loss of opportunity,
the social unrest and economic instability of western democracies
where the post-war years of cradle-to-the-grave welfare and
government stifling of private sector initiative have led to
economic stagnation and the demoralization and mass emigration
of the productive middle income class.
Too often they have been taught to distrust the very
word profit and the profit motive that makes our prosperity
possible, to somehow feel this system, that has done more to
alleviate human suffering and privation than any other, is
somehow cynical, selfish, and amoral.
And, of course, they have never lived in the countries
where the seemingly unselfish and idealistic dream of a
nonprofit, propertyless society has turned into a nightmare
-8reality — where the state and the state alone dictates what
kind of education you will receive; whether or not you will
be allowed to travel; what books you can read; what kind
of job you have; what you will be paid, what merchandise you
can buy with your earnings; where you will live; what medical treatment you will receive; what your children will be
taught; and ultimately, where you will be buried.
Only when economic freedom has already been destroyed is
its vital relationship to personal freedom and opportunity
vividly demonstrated. And when the process of erosion is
gradual it is like the poisoning of Socrates by Hemlock; numbing begins in the extremities and moves inexorably until it
extinguishes the spark of life. As Alexander Hamilton warned
so long ago, "Power over a man's substance amounts to power
over his will." Unfortunately, however, economic freedom,
like clean air, is something that most people do not really
appreciate until it begins to run out — and then it is often
too late.
Today we have reached a point where, although the free
enterprise system works, and works better than any other
economic system in effect anywhere in the world — feeding,
clothing, and housing more people more humanely than any other
while allowing them the enjoyment of our other basic freedoms — it is losing the semantic war to an alien philosophy
of government control that has never worked but somehow has
managed to preserve an aura of idealism, altruism and ethical
soundness — at least when viewed without detailed knowledge
and from a comfortable distance.
So the first part of the challenge for American
capitalism is clear. We must get across the human side
of capitalism, the fact that free enterprise has been and
continues to be a force for human good and, in its correct
application, an extension of much that is finest in our
Judeo-Christian spiritual and ethical tradition.
But better economic education by itself is not enough.
There are also serious internal questions that must be
addressed. And of these none is more important than business
ethics.
"Ethics" — even the word sounds stuffy and remote,
doesn't it? Yet, in a period when consumerism is foremost
in the public mind, and when a new generation is taking
a second look at the economic system which many of us take
for granted, business ethics take on a new importance.
-9Let me level with you. I'm worried. I am genuinely
concerned that, unless more of the leaders in the business
community start paying more attention to the moral side of
capitalism, capitalism may be in very serious trouble.
It's quite true that only a very small percentage of
American businessmen engage in corrupt or unethical practices.
But the vast majority of honest businessmen must recognize
that this tiny minority of spoilers is giving a black eye
to our whole free economic system — and providing the
enemies of our system with lethal ammunition.
Now I am well aware that for every business deception
and every corporate caper there are plenty of glib excuses.
Local customs, the need to cut corners, the belief that
"Everyone else is doing it" — I'm sure you've heard them
all too.
But that lame excuse ignores the fact that America is
supposed to stand for something more — something better —
than the old, discredited law of the jungle.
As one distinguished veteran of the American business
scene, Mr. Stanley Marcus, has said, "Our credo should not be
'When in Rome do as the Romans do.' Rather, it should be,
'When in Rome, do as the Americans are supposed to do.'"
You have to pay for a code of ethics and sometimes the
cost is high. It may mean writing off some tempting markets
where a pay-off is the price of admission. But, in the long
run, the alternative is far more costly. For the alternative
is nothing less than the replacement of honest competition
by bribery and corruption. And free enterprise without
honest competition ceases to be free. It may be corporate
enterprise — the scramble of several large business concerns
to outsmart and out rig each other — but it is no longer
part of a free, self-adjusting market. For without honest,
open competition, there is no corporation in the world that
is wise, moral or far-sighted enough to voluntarily correct
its own mistakes for long. Competition is the key, the
catalyst, to human progress. Take it away and the system
suffocates, whether it is a naked example of state socialism
or a corporate oligarchy or protected monopolies.
That is why I don't buy excuses for corporate corruption.
Maybe I'm naive, but I still believe that honesty really
is the best business policy. It seems clear to me that
corruption — whether it involves questionable angling for
overseas contracts, illegal contributions to office holders,
or any other form of graft or payola -- hampers the
effective functioning of the market place. It leads to
higher prices, lessened responsiveness to the consumer and
lower quality of goods and services.
-10It is the exact opposite of the capitalist ideal
for both the producer and the consumer.
—
So, when I begin to preach the gospel of business
ethics, believe me, I am preaching it for the sake of
business as well as ethics! To me, the two are inseparable.
The real question facing American business is not
whether it can "afford" stronger ethical standards, but how
much longer it can go on without them.
Of course, most businesses do have a high standard of
ethics. But they simply are not visible, in a dramatic way,
to the general public. Corruption, on the other hand,
sticks out like a sore thumb and is capitalized on by every
elitist social planner and intellectual Utopian as an excuse
for creating more state controls and stifling more individual
-11freedom. And never forget, as we witness the steady villification of business and management in too much of the mass media,
that today's popular misconceptions all too often shape tomorrow's
statutes — as witness the Arab Boycott legislation that swept
in on a wave of unreasoned emotion.
Our entire way of life is held together by voluntary,
society-wide bonds of mutual trust and respect. Once those
bonds are broken — once public confidence falls too low,
as the polls show it falling today — the whole social framework collapses. And when that happens, it's all over for
everything — government, democracy, free enterprise and our
whole way of life.
Now, let's ask ourselves — who has been undermining
public confidence in the free enterprise system that we
all believe in? Of course, some groups have always been
opposed to it. We take that for granted. They've always
been against it and always will be. But, in 200 years of
American history, they've never made much difference by themselves.
Our system really gets into trouble when its friends —
not its enemies — begin to sell it short.
And today, too many of the people you and I think of as
allies and fellow believers have begun to lose faith in their
beliefs. They say they believe in competition, but, when
government offers a subsidy, their competitive standards go
out the window. They say they believe in free enterprise, but
what they want most in the world is a secure, guaranteed future.
As Adlai Stevenson once said, "... it is often easier
to fight for principles than to live up to them." Too many
leaders in American business have been talking a good fight
but — when it comes to the basics — have abandoned their
moral values for quick, easy profit.
Now that may work for a while. But it won't work forever.
The day will come when it's all over — when the same government that has given you security takes away your independence.
There's a very simple but very timely old Roman proverb.
It says that "A good reputation is more valuable than money."
That's an old idea, but, like so many eternal truths, it has
its modern application. To quote Stanley Marcus once again,
-12-
"There is never a good sale for Nieman-Marcus,
unless it's good for the customer."
Isn't that what capitalism is all about? The age-old
struggle within the ranks of free enterprise has not been between
capitalists and communists. It has been, and is, between
honest businessmen who recognize the ethical, and utilitarian
basis for sustained prosperity and those who lose sight of it
in persuit of a fast buck.
This great but sometimes confused nation of ours was born
in turmoil. Conflict and doubt are nothing new to us. They
didn't stop us 200 years ago and they shouldn't stop us now.
It is no accident or blind fate that has made America so rich
and abundant a land. You can't legislate inventiveness or
prosperity; we have no more born geniuses or natural inventors
and industrialists that any other country. But we do have a
free system in a world where many other countries are not free.
And, through it, we encourage the talent that lies within
individuals in a way that most other societies have failed to
do.
The result has been not just profits for the few, but a
better and freer life for the many. Isn't that the acid test—
the bottom line— of so much of the ideological arguement and
specualtion going on today? Compare the systems— ours works.
And, in large measure, it works because of people like you—
people who believe in the value of a service or product but,
even more importantly, believe in the value of a way of life
that is uniquely American.
My time at the Treasury will soon be over. Some months
ago I decided that, regardless of the outcome of the election,
I will return to private life in January. But leaving the
Treasury does not mean abandoning public affairs. I have a
deep-seated concern about the direction our country is headed
in and I continue to stand up for the principles of political
and economic freedom in the public arena as a concerned citizen.
I urge each of you to do the same.
Don't get me wrong. I don't regret a moment of the time
I have spent in government. It's been a very rich and rewarding
experience. While I have a few scars to show for some of the
stands I have taken, I'm grateful for the chance I had to take
those stands and serve my country.
-13-
But the more I have seen of government, the more I
recognize the limits of what it can do for people — as
opposed to what it can do to them.
Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only the individual himself can
create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. Our greatest progress has come through individuals
not through voter blocs or special interest groups. It
happens through organizations like this, in company offices
like yours, in schools and labs and libraries and civic
groups across this great land of ours where, every day,
individuals with a better idea are solving problems and
creating new opportunities.
What we call the American experience — the American
story — is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document or charismatic leader, is what
sums up the true meaning and purpose of America. And that
is what we must preserve.
Thank you.
oOo
FOR IMMEDIATE RELEASE
October 14, 1976
RICHARD S. KOFFEY NAMED
DEPUTY TAX LEGISLATIVE COUNSEL
Secretary of the Treasury William E. Simon today announced
the appointment of Richard S. Koffey as Deputy Tax Legislative
Counsel for the Treasury Department. Mr. Koffeyfs appointment
was effective October 5, 1975. He succeeds former Deputy Tax
Legislative Counsel Victor Zonana, who resigned to return to
New York University as Professor of Law.
As Deputy Tax Legislative Counsel, Mr. Koffey will provide
assistance and advice in matters of domestic tax policy including tax legislation to the Assistant Secretary of the Treasury
for Tax Policy, Charles M. Walker.
Mr. Koffey joined Treasury in September 1975 as an AttorneyAdvisor on the staff of the Tax Legislative Counsel. From 1970
to 1975, Mr. Koffey, a member of the New York Bar, was an
associate with the New York law firm of Dewey, Ballantine, Bushby,
Palmer and Wood.
Mr. Koffey was born in Albany, New York on October 18, 1944.
He received his B.A. degree in 1966 from Cornell University and
his J.D. degree cum laude from Columbia University Law School in
1969. He is married to the former Anne Louise Drake of Framingham, Massachusetts. They have one child, Nicole, and reside in
Washington, D.C.
oOo
WS-1127
FOR IMMEDIATE RELEASE
October 13, 1976
PARSKY NAMES HOWARD L. WORTHINGTON AWARD WINNER
Assistant Treasury Secretary for International Affairs,
Gerald L. Parsky, today named Jerry Newman, a fourteen-year
career employee, as the first recipient of the Howard L.
Worthington Award, which was established to provide recognition
for individual excellence in the formulation and implementation
of international economic policy.
Mr. Newman, who is Director of the Treasury Department's
Office of Developing Nations is the first recipient of the award
named in Howard L. Worthington's memory. Mr. Worthington served
as Deputy Assistant Secretary of the Treasury for Trade and
Raw Materials Policy and had a distinguished career in federal
service spanning over two decades. A former Foreign Service
Officer, Mr. Worthington died of a heart attack in April, 1975.
In commenting about Mr. Newman, Parsky said, "Through
his work on Middle East affairs as well as on a variety of
international economic issues, Jerry Newman has demonstrated the
kind of dedication, imagination and excellence that Howard
Worthington exemplified during his distinguished career in
federal service."
Jerry Newman, 36, a graduate of the University of Virginia
(B.A.) and George Washington University (M.A.), is married to
the former Theresa Fratta and resides in Falls Church, Virginia.
WS-1128
o 0o
'Department of theTREASURY
MGTON, D.C. 20220
TELEPHONE 964-2041
••^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FOR RELEASE AT 12:00 NOON
October 15, 1976
TREASURY TO AUCTION $2,500 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $2,500 million of
2-year notes to refund $1,481 million of notes held by the public
maturing October 31, 1976, and to raise $1,019 million new cash.
Additional amounts of these notes may be issued at the average price
of accepted tenders to Government accounts and to Federal Reserve Banks
for their own account in exchange for $98 million maturing notes held
by them, and to Federal Reserve Banks as agents of foreign and international
monetary authorities for new cash only.
Details about the new security are given in the attached highlights
of the offering and in the official offering circular.
Attachment
WS-1129
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED NOVEMBER 1, 1976
October 15, 1976
Amount Offered:
To the public
$2.500 million
Description of Security:
Terra and type of security
2-year notes
Series and CUSIP designation
Series S-1978
(CUSIP No. 912827 GB 2)
Maturity date
October 31, 1978
Call date
No provision
Interest coupon rate
To be determined based on the
average of accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auctio
Interest payment dates
April 30 and October 31
Minimum denomination available
$5, 000
Terms of Sale:
Method of sale
Yield auction
Accrued interest payable by investor.....
None
Preferred allotment
Noncompetitive bid for
$500,000 or less
Deposit requirement
5% of face amount
Deposit guarantee by designated institutions...
Acceptable
Key Dates:
Deadline for receipt of tenders
Thursday, October 21, 1976,
by 1:30 p.m., EDST
Settlement date (final payment due)
a) cash or Federal funds
b) check drawn on bank within
FRB district where submitted
c) check drawn on bank outside
FRB district where submitted
Delivery date for coupon securities
Monday, November 1, 1976
Wednesday, October 27, 1976
Monday, October 25, 1976
Monday, November 1, 1976
he Department of theTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
For Release on Delivery
Statement of the Honorable Edwin H. Yeo, III
Under Secretary of the Treasury for Monetary Affairs
Before the
Subcommittee on International Economics
of the
Joint Economic Committee
Monday, October 18, 1976
11:00 A.M.
Mr. Chairman, and Members of the Subcommittee:
In calling these hearings, you have drawn attention to
the need to move to the next phase of international monetary
reform — the operational phase. For several years the world
was engaged in the complex task of designing a monetary system.
Now we must make the system work. As nations move toward
ratification of the amended IMF Articles, we must translate
the philosophy of that charter into practice, and develop
the operating procedures for putting the new system into force.
If the job of applying the new system seems intellectually
less exhilarating than the job of creating it, certainly the
present task is of no less importance for the world economy.
Nor do I think it will be less difficult. I am grateful to
the Subcommittee for an opportunity to comment on this
important work — though my comments will, at this early
stage, of necessity be tentative and general.
'[-'
*
The subject of these hearings is "Guidelines for
Exchange Market Intervention." But that subject should be
seen in a larger context. Under the Jamaica agreements, we
and other nations aim at assuring orderly exchange arrangements
and promoting a stable system of exchange rates. That objective
of course cannot be attained solely, or even most importantly,
by exchange market intervention. Rather it will be attained
by the continuing development of orderly underlying economic
and financial conditions in the member countries. The new
system recognizes — as events in recent years have proved
in many countries — that without such stable underlying
WS-1130
conditions, no amount of exchange market intervention will
- 2 assure stability, but that with stable conditions and limited
intervention, orderliness and gradual change will characterize
the exchange markets. The focus of the new system is thus
much broader than exchange market intervention.
The IMF is specifically charged under the amended Articles
with surveillance of members1 exchange rate policies. The
new Article IV, Section 3(b), says that the IMF, "shall
exercise firm surveillance over the exchange rate policies
of members, and shall adopt specific principles for the
guidance of all members with respect to those policies."
This is a central feature of the operation of the new system.
The purpose of this surveillance is to enable the IMF to fulfill
its functions of overseeing the international monetary system
to ensure its effective operation, and of overseeing the
compliance of each member with its obligations. Thus IMF
surveillance of exchange rate policies — and principles
which may be adopted as a framework for that surveillance —
should in my view not be limited to questions of exchange
market intervention but should have a wider focus, if we
are to assure that nations do not manipulate exchange rates
to the disadvantage of others, and if we are to assure that
members1 exchange rate policies facilitate rather than
counter effective balance of payments adjustment.
How then do we work out the techniques, of surveillance,
and develop the needed principles, so essential to the
successful functioning of the system? I must tell you that
there are differing views on this question.
Some have argued that precise guidelines for IMF
surveillance of members1 exchange rate policies should have
been delineated in the amended Articles. I disagree on
two counts — first, that there should be detailed rules, y
and second, that any such rules should be incorporated in
the Articles.
On the second point, the Articles should not in my view
impose detailed operating rules and procedures on the
international monetary system. The Articles, after all, are
meant to serve as the. Fund's constitution, not a detailed
contract. Even if we were all agreed on precise guidelines
that should be adopted for assessing members1 exchange rate
policies, it would be wrong to incorporate them in the
Articles. We learned from Bretton Woods the difficulties
of having a charter filled with detailed rules which can too
soon become obsolete or inapplicable — indeed, a major
- 3 advantage of the Jamaica agreement is that we are moving to
a charter which avoids so many detailed rules and contains
appropriate elasticity to allow the system to adapt to
changing conditions.
But more Importantly, irrespective of where they might
be embodied, I do not agree that the IMF should delineate
hard and detailed rules by which each members1 performance
with respect to exchange policies would be judged. It is
in my view neither appropriate nor possible that this
important Fund surveillance work through the application of
detailed rules and precise formulas. We do not have the
capability, the experience, or the knowledge, to develop
such a set of rules to be applied across a brpad spectrum
of individual national situations. It is particularly
difficult to apply rigid formulas equitably to economies
that differ as profoundly as in the IMF membership — where
the gross national product of the largest member is 60,000
times as large as that of the smallest member; where some
members have no capital markets while others have highly
developed and sophisticated markets1 where economic structure
and elasticities of price and income can vary widely; and
where the relative importance of international transactions
to domestic economies differs greatly. Rigid rules and
formulas simply won't work in such situations.
Nor would I agree with those who would aall on the Fund
to attempt to determine a set of "target" exchange rates
toward which each nation's policies should be directed.
There are those who believe that a comparison of statistical
iiata on prices or costs in individual countries can reveal
appropriate exchange rates. That approach is subject to
insurmountable difficulties, both theoretical and practical.
While it may indicate that some rates are inappropriate, it
cannot be depended on to indicate what rates are proper.
It is tantamount to continuous renegotiation of a par value
system, based on statistics which are of necessity both partial
in coverage and backward-looking in approach. In practice,
9 it may prove to be nothing more than a veiled approach to
a return to fixed rates.
How then should the Fund proceed in its surveillance
of numbers' exchange rate policies? In ray view we should
proceed by a careful and evolutionary approach. We should
cultivate more fully the IMF's consultative processes and
refine its procedures for monitoring member countries'
economic and financial policies. Rather than adopting a
- i» -
sweeping preconceived, rigid economic code, we need to
construct, through a case-by-case approach, a common law
based on case history. If we proceed in this manner, we
will be able to delineate on the basis of experience broad
principles of behavior with regard to what constitutes
appropriate adjustment policies, and what constitutes
manipulation of exchange rates. The development — and
the acceptance — of these principles cannot be forced.
But over time workable codes can be expected to emerge,
through consultation with members and through the monitoring
of their activities.
I hope the Fund will proceed cautiously in this work.
The world faces a new situation, in some ways a dramatically
different situation from the past, and history may not
provide the best guide for the future. Our experience is
drawn from a past that may not be fully relevant, and our
attempts to distill this experience into detailed blueprints
for the future may be more harmful than helpful.
Mr. Chairman, in addition to commenting on the general
question of developing principles and guidelines for IMF
surveillance, you have also asked me to speak to the question
of whether, since Rambouillet and Jamaica, other industrial
countries have been persistently intervening in exchange
markets to maintain their currencies overvalued or undervalued
relative to the dollar.
The short answer, in my judgment, is no. I do not think
we have a basis for objecting that large or persistent
intervention has been conducted to over- or undervalue other
currencies at the expense of the dollar. There has been a
substantial amount of exchange market intervention in the
11 months since Rambouillet, much of it related to operations
within the EC snake, and I would certainly not want to defend
each and every action. But I do think I detect some progress
over that period. I think there is increased recognition
of the doubtful value of efforts to "defend"by exchange
market intervention a particular exchange rate which is
fundamentally at odds with underlying conditions and market
judgments. Also — this is the other side of that same coin
I think there is greater understanding of the need for both
surplus and deficit countries to allow exchange rates to
play their appropriate role in facilitating balance of
payments adjustment. There may in fact be an emerging
consensus on future intervention policy. But I would like
to comment briefly on other points implicit in your question
before outlining that consensus.
- 5My first point relates to the meaning of what was agreed
to at Rambouillet and Jamaica. These meetings resulted in
understandings in five important areas: 1) development of
a shared analysis of the causes of instability in the
international economy; 2) recognition that achievement of
monetary stability requires achievement of stability in
underlying international economic and financial conditions;
3) recognition that countries should intervene to counter
disorderly exchange market conditions, with the judgment
about whether to intervene to be left to the individual
country concerned; 4) recognition of the need to strengthen
consultative procedures among finance ministries and central
banks of the major countries; and 5) development of a specific
text of amended Article IV of the IMF Articles of Agreement
to be proposed to other IMF members.
It is important to recognize that neither the Rambouillet
understandings, nor the text of new Article IV agreed upon
at Jamaica, prohibit exchange market intervention per se —
even intervention that may persist for a time. Indeed, the
text of amended Article IV will specifically permit members
to maintain pegged rates for their currencies, "common
margins" arrangements such as those presently maintained by
several European countries, or other arrangements of their
choice. The fundamental obligation regarding exchange rates
laid out in amended Article IV is to "avoid manipulating
exchange rates or the international monetary system in order
to prevent effective balance of payments adjustment or to
gain an unfair competitive advantage over other members."
That obligation does not relate exclusively or even necessarily
to exchange market intervention.
My second point is that, while the amended Articles clearly
express the will of the IMF membership regarding the framework
for future international monetary arrangements, those amended
Articles do not yet have legal effect. The first task Is to
secure ratification of the amended Articles, a process that
has received major impetus from passage of our own legislation
by the Congress a few weeks ago. But we must be very wary
about anticipating obligations that are not yet legally
binding and about reaching judgments regarding member countries1
current policies based on obligations that will not exist
for at least some months to come.
- 6 But despite the problems, the uncertainties, my own
Judgment is that there has been an increasing and healthy
coalescence of views on appropriate exchange market behavior
and intervention policy since Rambouillet and Jamaica.
All agree that exchange market intervention may be useful
to counter disorderly market conditions* More importantly,
more and more countries appear to be coming to the view —
in some cases, after repeated hard and costly lessons —
that intervention that attempts to do more may be counter*
productive and disruptive* And most recently, the Interim
Committee has enunciated several general principles for
operation of the system that we think are extremely important
in today9s circumstances of widespread payments imbalance.
These are essentially that:
— countries in structural deficit must stabilise
their internal economies;
— industrial countries in stronger positions
should pursue expansionary — but not
Inflationary — domestic policies and maintain
unrestricted access to their markets; and
— all countries, deficit and surplus, should permit
appropriate changes in their exchange rates to
facilitate needed balance of payments adjustment*
These principles are indeed broad, but if they are
applied — and that is our objective — they are a
prescription for needed adjustment and achievement of
international monetary stability. This is the main task
before us.
Thank you very much.
oo 00 oo
FOR RELEASE AT 4:00 P.M.
October 15, 1976
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 $6,000 million, or
thereabouts, to be issued October 28, 1976, as follows:
91-day bills (to maturity date) in the amount of $2,500 million, or
thereabouts, representing an additional amount of bills dated July 29, 1976,
and to mature January 27, 1977 (CUSIP No. 912793 E3 6), originally issued in
the amount of $3,606 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $3,500 million, or thereabouts, to be dated October 28, 1976,
and to mature April 28, 1977 (CUSIP No. 912793 F8 4).
The bills will be issued for cash and in exchange for Treasury bills maturing
October 28, 1976, outstanding in the amount of $6,004 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,752 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
one-thirty p.m., Eastern Daylight Saving time, Friday, October 22, 1976.
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
WS-1131
(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 $500,000 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 or at the Bureau of the Public Debt
on October 28, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing October 28, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the.par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets. Accordingly, the owner of 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, °r
from the Bureau of the Public Debt.
oOo
e Department of theJREASURY
;HINGT0N,D.C. 20220
TELEPHONE 964-2041
(CORRECTED COPY)
October 18, 1976
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,400 million of 13-week Treasury bills and for $3,400 million
of 26-week Treasury bills, both series to be issued on October 21, 1976,
were opened at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing
January 20, 1977
Price
High
Low
Average
Discount
Rate
98.795 a/4.767%
98.784
4.811%
98.787
4.799%
26-week bills
maturing April 21, 1977
Investment
Rate 1/
Price
4.89%
4.94%
4.93%
97.524 b/4.898%
97.513
4.919%
97.517
4.911%
Discount
Rate
Investment
Rate 1/
5.09%
5.11%
5.11%
a/Excepting 1 tender of $510,000
b/Excepting 1 tender of $600,000
Tenders at the low price for the 13-week bills were allotted % .
Tenders at the low price for the 26-week bills were allotted 29%.
TOTAL TENDERS RECEIVED AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Received
20,320,000
Boston.
$
New York
3,566,145,000
20,400,000
Philadelphia
37,995,000
Cleveland
23,510,000
Richmond
24,310,000
Atlanta
342,450,000
Chicago
51,090,000
St. Louis
31,510,000
Minneapolis
31,200,000
Kansas City
18,345,000
Dallas
San Francisco 410,885,000
65,000
Treasury
TOTALS$4,578,225,000
Accepted
Received
$
13,320, 000
$ 141,345,000
1,948,845, 000
5,548,220,000
20, 400, 000
12, 375,000
37, 845, 000
181, 230,000
23, 510, 000
19, 860,000
23, 755, 000
11, 785,000
104, 350, 000
347, 275,000
25, 730, 000
45, 435,000
13, 180, 000
45, 160,000
31, 200, 000
13, 435,000
000
13, 345,
12, 655,000
000
144, 955,
307, 950,000
65, 000
90,000
$2,400,500,000 c/ $6,686,815,000
Accepted
$
26,345,000
3,142,290,000
7,375,000
41,230,000
8,860,000
11,785,000
45,175,000
19,435,000
9,160,000
12,935,000
12,655,000
62,910,000
90,000
$3,400,245,000 d/
c/ Includes $343,015,000 noncompetitive tenders from the public.
d/ Includes $154,015,000 noncompetitive tenders from the public.
1/ Equivalent coupon-issue yield.
WS-1132
heDepartmentoftheTREASURY
IASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
October 21, 1976
RESULTS OF AUCTION OF 2-YEAR TREASURY NOTES
The Treasury has accepted $2,502 million of $4,102 million of
tenders received from the public for the 2-year notes, Series S-1978,
auctioned todayThe range of accepted competitive bids was as follows:
Lowest yield 5.88% 1/
Highest yield
Average yield
5.99%
5.96%
The interest rate on the notes will be 5-7/8%. At the 5-7/8% rate,
the above yields result in the following prices:
Low-yield price 99.991
High-yield price
Average-yield price
99.787
99.842
The $2,502 million of accepted tenders includes 94 % of the amount of
notes bid for at the highest yield and $ 239 million of noncompetitive
tenders accepted at the average yield.
In addition, $408 million of tenders were accepted at the averageyield price from Government Accounts and Federal Reserve Banks for their
own account in exchange for notes maturing October 31, 1976, ($98 million)
and from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash ($310 million).
1/ Excepting 2 tenders totaling $2,060,000
WS-1133
eDepartmentoftheTREASURY
5HINGT0N, D.C. 20220
TELEPHONE 964-2041
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BILL PALLOT INTERNATIONAL AWARDS DINNER
CORAL GABLES, FLORIDA
OCTOBER 22, 1976
Thank you Mr. Fisher, Mr. Pallot, Mr. Borman, distinguished
guests, ladies and gentlemen:
It is a special pleasure for me to be here this evening
at an event honoring the contributions of such distinguished
Americans as Bill Pallot and Frank Borman to their communities,
and to our country.
It is also a distinct privilege to appear before members
and friends of the International Center, which has done so
much in the past six years to promote international understanding
and cooperation in the fields of education, international trade
and culture. Your fellowships, your seminars, your cultural
programs, your trade missions and your other worthy programs have
contributed much to greater understanding of the increasingly
complex issues of our increasingly interdependent world and of
America's role in it.
This afternoon I had the pleasure of speaking to hundreds
of University of Miami students at an event sponsored by
Invest-In-America, a fine grass roots organization that is
fighting on the front lines to save our Free Enterprise System.
I spoke about the system, about the enormous benefits it has
given us and about the insidious threat it faces from the
growth of government — a threat which could corrode the system
by eating at the foundations of our economic and individual
freedoms.
I spoke of the growing dominance of government over our
lives as measured by ever expanding federal budgets, and
budget deficits, ever-increasing governmental regulations and
a tax system and transfer programs that are eroding the middle
income class. And I quoted the words of Alexander Hamilton:
"Power over a man's substance is power over his will."
WS-1134
- 2 Another great American, Daniel Webster, solemnly
reminded his countrymen that, "God grants liberty to those
who love it and are always ready to guard and defend it."
Now it is fairly easy to defend our liberty when it is faced
with external threats. When foreign enemies threaten, the
danger is clearly defined and Americans have always united in
opposing it.
But today we face a danger that is every bit as great
as any foreign enemy, but which is far less obvious and more
insidious — an internal danger that is slowly but surely
eroding our individual political and economic liberty — the
substance and the will which Alexander Hamilton referred to.
Faced with the ever-encroaching influence of government
over our lives, many citizens do not take the threat
seriously. They fail to realize that the time is at hand to
face up to Mr. Webster's challenge now — before it is too
late. Meeting this challenge head-on is vital to our future
as a free people to our economic growth and stability, and to
our role in the community of nations.
The challenge must be met because we are at a crossroads
in our evolution as a free society where we face an all
important choice -- a choice between the freedom for each of
us to live our lives as we best see fit, or the surrendering
of more of that freedom to an increasingly powerful government
in exchange for a false promise of security and permanent
prosperity. As Gibbon saw it the ancient Athenians faced that
choice too. "But in the end," he wrote in his epitaph for
ancient Athens, "more than they wanted freedom, they wanted
security. They wanted a comfortable life and they lost it all
security, comfort and freedom. When the Athenians finally
wanted not to give to society but for society to give to them,
when the freedom they wished for most was freedom from
responsibility, then Athens ceased to be free."
That is the issue, If ever there was a time then, when the
preservation of our freedoms was vital to every citizen in
every walk of life in our country and throughout the world,
that time is now.
When we examine America's role in the world, we can see
the importance of the challenge ahead. Without doubt, one of
the most important contributions our country has made in this
generation, working together with the world community, has
been on the economic front. Our economic policies, both
domestic and international have been geared to the goal of a
stable world order. And it is this subject that I would like
to explore with you today.
- 3 Many of you are probably familiar with the old Chinese
saying: "May you live in interesting times." All of us, I
believe, would agree that, from an economic as well as a
political point of view, we have been living in particularly
interesting times. In the past few years the world economy
has sustained a number of severe jolts — a fourfold increase
in oil prices, large-scale money movements between nations,
collapse of the old monetary order, inflation and recession.
These have had an enormous impact on the economies of developed
and developing nations alike and fluctuations in economic
fortunes have led to changes, at times abrupt, in the
political fortunes of these countries.
The role of the United States in meeting these challenges
has been vital. A quarter century ago, it was commonplace to
observe that when the U.S. sneezed, the world caught cold and
when the U.S. caught cold, the world came down with
pneumonia. While that is no longer as true today as it was
then, we are still the major economic force in the world. With
less than 6 percent of the world's population we account for
over 25 percent of its annual production, and our exports and
imports each are running at over $100 billion annually —
more than those of any other single nation.
The health of the U.S. economy, then remains vital to
the economic health of other countries. And their political
and social stability depends in large measure on their economic
health. These past years have clearly demonstrated to us and
many others that no nation or group of nations can solve their
economic problems in isolation. We have witnessed how inflation
and recession affect us all. We have observed that no country
can achieve success by attempting to export its economic
troubles. And we have come to see that the most significant
contribution we can make to economic progress in the world is
to restore durable prosperity in our own domestic economies.
For the United States this means, first, that we must follow
stable fiscal and monetary policies aimed at reducing inflation
and laying the foundation for durable, non-inflationary
domestic growth, and second, that we must translate these same
policies internationally to assure the existence of a free and
open world trade and investment order. That, it must be
recognized, will be American's greatest contribution to world
economic stability. And, because the smallest shock to the
economy is felt in every limb of the body politic and shapes
our lives today and in the future, fulfillment of that goal
will be a significant contribution to world political stability
as well.
- 4 At home, our economy is in the midst of a healthy and
balanced recovery:
— Inflation has been cut more than in half since
the beginning of 1975.
— Employment is at all-time highs.
— Industrial output, retail sales, the GNP,
personal income, have registered important
gains.
And yet the decline in unemployment, though below its
recession high point, is irregular and far slower than we are
willing to tolerate reflecting the lagged effect of the
recession and the unprecedented surge of new workers into
the labor force. And inflation is by no means under firm
control and remains the most dangerous enemy of that durable
prosperity which we and all nations are seeking to achieve.
The ruinous inflation that crested in 1974 was the chief
cause of the recession that followed. If we embark once
again on a course of excessive fiscal and monetary policies,
we will only rekindle another round of inflation and an even
worse recession.
In our own economic interest, and in the interest of global
economic stability, our first responsibility must be to pursue
economic policies that will ensure healthy, balanced growth and
prevent a resurgence of inflation.
Thus one of the biggest contributions we can make to
global economic health begins right here at home. We uphold
not only a narrow national interest, but the economic well
being of our neighbors and trading partners around the world.
In shaping our international economic policies we must
emphasize the same principles of open markets and competition
that have served America so well during its two-hundred year
history. The monetary reform we have already achieved and
our current trade reform efforts can shape the world economic
system far into the future. We can either promote increased
competition, the reduction of tariffs and non-tariff barriers,
equitable trading rules and open access to markets and raw
materials; or, the world economy will develop unwanted cartels
to control prices and supplies, protectionism will once again
disrupt the flow of trade and capital, and instead of greater
international cooperation and shared progress, the world
marketplace will be plagued by negative conflicts and economic
stagnation.
- 5 In the area of international monetary affairs, the past
several years have shown progress and accomplishment. After
years of difficult and sometimes contentious debate, the
United States and other IMF member nations have reached
fundamental agreement on a comprehensive reform of the
international monetary system, a reform that will bring the
system into line with today's needs and realities and provide
a flexible framework for adaptation to a dynamic world economy.
The new monetary system builds importantly on two
cirtical features of the Bretton Woods framework.
— First, the central, pivotal role of the IMF as
the institutional heart and monitor of the
system will be continued and strengthened.
— Second, the essential aims of Bretton Woods,
which give cohesion and direction to the
philosophy of a liberal world monetary order,
will be reaffirmed.
But while the new system provides the same aims as the
Bretton Woods system and continues to rely primarily on the
IMF as the institution for achieving its purposes, it differs
in other critical respects.
The Bretton Woods system was created against the backdrop of a different world — the world of the 1930's and 40's
in which levels of international trade were very low; in
which capital flows had virtually dried up and the value of
international investment to international prosperity was not
recognized; in which interest rate and monetary policy
instruments had fallen into relative disuse; in which the
attention of policy officials was directed single-mindedly
toward jobs and employment goals.
It is understandable that features of a monetary system
designed to meet the problems of that world could become obsolete
and anacronistic in the conditions of today. The structure
of the world economy has changed and the problems have changed.
Between 1950 and 1975, alone, the level of trade among market
economies has increased from $50 billion to $800 billion.
Capital flows have reached proportions that would astound the
men of an earlier era, Harry Dexter White and Lord Keynes.
And these same men would be saddened and baffled by the struggle
of nations to get below double-digit inflation and at the same
time deal with the modern day twin of inflation and a high
level of unemployment.
Bretton Woods was based on the idea that stability could
be imposed from without. Keynes and White the architects of
the system, assumed that if countries were' required to adhere
- 6 to fixed exchange rates, to be altered only after fundamental
economic changes had occurred, and were supplied with moderate
amounts of credit from the International Monetary Fund, that
arrangement would provide adequate leverage — at least on
deficit members — to encourage stable economic policies.
The system had an elegant symmetry but even in its heyday
it did not work as it was intended. Countries with a balance
of payments surplus were reluctant to permit their currencies
to appreciate. On the other hand, devaluation by countries
experiencing balance of payments deficits were frequent and what
was intended to be a system of symmetrical adjustment became
lopsided. The U.S. was at the center of the system — pinned
down. Other countries could and did adjust exchange rates
relative to the U.S., but we did not enjoy the same privilege.
It was during this period — the 1960's — that it was
clearly demonstrated that the most important single price in
the U.S. was the price of the dollar. The relationship of the
dollar to other currencies plays a significant role in determining what is produced in the U.S. and what it produced
elsewhere. Exports, imports, location of production facilities,
and capital flows are all in varying degrees a function of the
exchange rate.
Then, preceded by a series of exchange crises, hurried
conferences, makeshift remedies and a pervasive "Let's keep
a stiff upper lip attitude" the system collapsed in 1971.
The effort to put it back together failed and the end
occurred in 1973 when the dollar floated.
The new system takes a different approach. It does
not rely on the system to force stability on member countries.
Instead, it looks to the policies of member countries to
bring stability to the system. In the exchange markets, the
new system does not seek to forestall change by imposing rigid
rates but recognizes that countries' competitive positions do
and will change, and that it is far less destabilizing to permit rates to move in response to market forces than to hold out
until the abandonment of costly large financing efforts brings
abrupt jumps. It recognizes that the only valid path to
international monetary stability is the pursuit of policies
in the member countries that converge toward stability rather
than diverge into instability. It acknowledges that we can
never assure lasting stability in exchange rates between
currencies if the underlying trends in various economies are
sharply different in pace or direction.
- 7 This is much truer today than 30 years ago, because of
the progress we have made in liberalizing the world economy
and the growth of economic interdependence. The move to a
liberal and integrated world economy has brought greater
prosperity and major benefits to all nations. But allowing
wider scope for international commerce also means greater
potential for disruption from that commerce. With freedom
for expanded trade and capital flows, market responses to
changing conditions can be swift and massive. In today's
integrated world economy, action to manage or fix exchange
rates in contradiction to basic market forces is doomed to
failure. In recent years, nations have learned this lesson
time and again: and those who challenge it do so at their
peril.
The new monetary system is a more flexible, pragmatic,
market-oriented system than the old — better suited to today's
highly integrated world economy. The new system looks to
prevention whereas the old system applied only cures, often too
late and with ineffective doses. It concentrates on the real
determinants of monetary stability in underlying economic and
financial conditions. Because the new system established
nations' obligations in terms of basic policy, rather than
mechanics or procedure that obscure rather than sharpen the
central issues, it is realistic in structure and right in
approach. However, its success or failure will depend
ultimately — as will the success of failure of any system —
on the prudence and soundness of government policy in the
respective nations.
Just as the United States vigorously supported monetary
reform, we also support the continued growth of a free and
open world trading and investment order. One of the most
encouraging and significant postwar economic developments has
been the dramatic expansion of trade among market economies -from a level of $55 billion in 1950 to over $800 million in
19 75. We believe that in strengthening these bonds of trade,
we strengthen the bonds of peace, understanding and interdependence.
The case for free trade is based on the general concept
of comparative advantage. Trade barriers typically reduce
or eliminate the exchange of goods that would benefit all
countries. Similarly, trade restrictions, which insulate
domestic producers from foreign competition, reduce the pressures for controlling price increases and for stimulating
creative productive development.
A few weeks ago I had the honor of addressing this year's
joint meetings of distinguished representatives of the
International Monetary Fund and of the World Bank in Manila.
- 8 One of the points I tried to stress there was that the most
important contribution any nation can make toward global
economic prosperity and stability is stable, non-inflationary
economic policies. Because of its size, this is particularly
true of the United States — and, here, the economic picture
is promising. Following the most severe economic recession of
the postwar era, the U.S. is now 1-1/2 years into a healthy and
balanced economic expansion. If erratic shifts and excesses
in government actions are avoided, this expansion will continue
well beyond 1976, although the rate of growth will naturally
tend to moderate.
During this economic expansion, we have witnessed a
continuation in the strength of export sales and a more rapid
rise in imports. This has resulted in a swing in our balance
of trade from a massive surplus in 1975 to a substantial
deficit in 1976. We view this shift with equanimity because
we recognize that it reflects the sharp increase in imports
that has occurred as our economy has moved from recession to
expansion. This adjustment is a proper reaction to changing
economic conditions that the international monetary system can
handle well if we do not seek to offset the effect of natural
market forces.
And the fact is that our trading system has undergone -and survived — a massive ordeal by fire. In the wake of the
most serious economic problems in 40 years, inflation,
recession, and other disruptions, neither we nor our trade
partners resorted to potentially disastrous, beggar-thyneighbor policies.
This is an important accomplishment. We must build
on it and expand it as we move from a period of eocnomic
recovery to a period of economic expansion.
The major thrust of U.S. trade policy as embodies in the
multilateral trade negotiations should be:
-- To negotiate for more open access to markets
and supplies with emphasis on equity and reciprocity;
— To increase flexibility in providing escape
clause relief and adjustment assistance for
American industries, workers and individual
firms suffering injury from import competitions;
— To diversify the types of actions the United
States can take in responding to unfair international trade practices;
- 9 —
And to expand normal commercial
relationships with the non-market
economies.
Recently, there has been some international concern
that the U.S. is drifting towards a policy of protectionism.
Let me assure you that this is not the case. As cause
for their concern, critics have cited the recent determinations
of the International Trade Commission in favor of import relief
for a few specific U.S. industries.
The justification for these limited measures is obvious.
Industries in all countries have the right to be free from
injurious international dumping of marginal or excess production.
They also have the right not to be required to compete against
government-subsidized imports. Our antidumping and countervailing duty laws are designed to implement those rights.
On a more practical level, I believe that equitable
administration of laws pertaining to unfair trade practices
actually assists the United States and other countries in
reducing generalized barriers to trade. Unless we in the
Administration can convince Congress and domestic interests that
the U.S. intends to provide remedies against unfair trade
practices, it will be impossible to develop the necessary
support for generalized trade liberalization. In other words,
we see no inconsistency between free trade and fair trade and
the assurance of the latter is what enables us to progress in
achieving the former. Believe me, it is hard to convince
Congress that we should cut tariffs across the board if we
just stand by while those same imports benefit from government
subsidies. Moreover, we believe that artificial export subsidies
are not in the best interests of the nation providing them
because first, they distort market forces and interfere with
the allocation of capital where it will be most productive,
and second, they are an expensive use of scarce government
resources. Finally, they have the effect of unilaterally
negating another country's tariff rate and therefore, tempt
that country to raise its tariff rate or to seek other protection
through quotas or other non-tariff trade barriers.
Just as free trade requires open markets, it also requires
an open attitude toward foreign investment. Foreign direct
investment and short-term credit ~o finance -race have played
an important part in the economic development zz -he Atlantic
community during the postwar period and have a vital part -c
play today in the Atlantic community as well as in the world
at large.
- 10 The U.S. Government should, and has, set an example by
reaffirming its intention to avoid restrictions on foreign
investment in America, consistent with national security.
In general, foreign investors receive the same treatment as
domestic investors. During the period of concern about the
possibility that OPEC funds would flow into America to buy
up basic industries, various bills were submitted in the Congre
to restrict foreign investment. The Administration strongly
opposed such actions, and no additional barriers were created.
We recognize that individual national economies can best
achieve the goal of sustained non-inflationary growth in a
free and open international trading system. We need an open
world market to allocate raw material and capital resources
efficiently in order to supply abundant goods and services to
all of our people at non-inflationary prices. All the aid we
can give will not help if it does not foster a prosperity
shared by all. This shared prosperity we seek calls for
solutions which must be dynamic and have widespread benefits.
Thus, we must seek increased production and improved
efficiency, not just transfer of wealth. Development
assistance should be thought of, not as an international
welfare program to redistribute the world's wealth, but as an
important element of an international investment program to
increase the rate of economic growth in developing nations
and to provide higher living standards for the people of
every nation.
We believe this is the responsible position not only
for ourselves, but for all those who believe in a genuinely
free, open world economic order.
That then is the overview. But before I close, I would
like to address a few more words specifically to those of you
who have vital interests in expanding trade with the developing
world, and, in particular, with the nations of Latin America.
The American partnership with developing countries and
development prospects of all countries depends even more
importantly on our trade and investment links. The worldwide demands for capital in the period ahead will be massive
and the competition fierce. Countries which wish to attract
investment capital will find that establishing the proper
domestic climate is essential. Countries which raise
impediments to capital flows will simply not be able to meet
the competition. The experience of many countries illustrates
how this can properly be done. Countries and peoples as varied
as the Taiwanese, the Brazilians and the South Koreans have
dramatically raised their living standards and expanded their
economic base. They have done so not only because of the
- 11 amount of help they received, but because of the care and
self-discipline they used in putting that help to work.
Others can do the same, but only with the realization that
developmental help involves a partnership and — like all
partnerships — requires the best intentions and the best
efforts of both partners in order to succeed.
What is needed then, to speed up the pace of economic
development in both Latin America and around the world, is
less rhetoric that focuses solely on what governments might
do to increase foreign aid. The United States is committed
to help the developing countries to help themselves. We will
meet that commitment. However, the only permanent solution
to their problems is to adopt domestic economic policies that
will allow the creative and productive forces of the private
sector to expand freely. We believe that policymakers in
every country should be devoting far greater attention than
at present to the implementation of long-delayed internal
reforms, such as disciplined fiscal budgeting, maintenance
of market-oriented interest and exchange rates, adoption of
more suitable monetary policies, and greater emphasis on
facilitating the private sector's contribution to development.
The objective should be to implement policies that will
attract investments rather than creation of a hostile
environment dominated by excessive taxation, nationalization
or cartelization.
Some countries have already followed this path to
dramatic progress. Brazil has enjoyed an enviable record of
dynamic development for a number of years. As a nation with
a rapidly developing economy it offers one of the most outstanding examples of what an economy, when unfettered by
excessive governmental interference, is able to accomplish
in a short time. We believe that only a free and open economy
can mobilize the creative energies of an entire nation and
glavanize a people for the upward struggle toward the achievement of a better standard of human existence.
In working towards this goal Brazil has made the United
States its largest and most dynamic export market and also
has encouraged substantial United States' private investment.
Brazilian exports to the U.S. increased at the rate of
30 percent annually over the 1970-74 period reaching $1.7 billion
in the latter year. The U.S. share of total 1974 Brazilian
exports was about 21 percent. And U.S. investors account for
over 1/3 of total foreign investment in Brazil, by far the
largest sum of any country. Total U.S. direct investment
in Brazil quadrupled in the eight-year period from 1966-1974.
In fact, Brazil is now the seventh largest recipient of U.S.
- 12 investment among all countries in the world. In terms of
complementary technology, U.S. capital has provided Brazil
with significant support for its most technologically
sophisticated industries.
These figures, however, do not provide the complete
story about the role of U.S. investment in Brazil's
development. U.S. firms in Brazil provide significant
employment opportunities and have substantial export capacity.
These important factors underline the mutually-advantageous
character of American private investment in Brazil. And they
suggest how increased U.S. investment can be expected to
strengthen Brazilian efforts to meet specific employment and
balance of payments needs.
U.S. financial institutions have also shown their support
and confidence in the soundness of Brazil's future development
and have provided substantial financial resources. To me, this
is not surprising. It is but one more example of how the
pursuit of sound economic policies will attract U.S. investors
eager to channel large-scale outside resources into the local
development effort. They realize that a well-managed
economy represents the best possible place for the investment
of their capital. Brazil's experience is indicative of the
fact that many developing nations in Latin America and throughout the world are increasingly recognizing the advantage to
their development of more intensive participation in an
interdependent world.
In summary, then, the same economic principles that have
worked to create prosperity, stability and freedom at home
can also help to shape a freer, more prosperous and liberal
economic order. We desire a shared prosperity. That
prosperity can only come through increased flows of investment.
Through increased investment we achieve greater productivity
and through greater productivity we achieve a higher standard
of living for all.
As the nation that accounts for over one fourth of the
world economy, we have a special obligation to help others to
help themselves -- in the marketplace and through the strong
support of international financial and development institutions,
in concert, not in competition with, the private sector.
If we stand by these commitments, if we preserve and
expand a strong economy at home and continue to lead the fight
for a freer, more prosperous world economy, then what was once
called the American dream — the seemingly impossible dream of a
free, decent existence for all — can become not only the
dream, but the reality of the
human family.
o entire
0o
Thank you.
tDepartmentoftheJREASURY
TELEPHONE 964-2041
IGTON, D.C. 20220
October 22, 1976
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,500 million of 13-week Treasury bills and for $3,500 million
of 26-week Treasury bills, both series to be issued on October 28, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
13-week bills
maturing January 27, 1977
Price
Discount
Rate
Investment
Rate 1/
98.761
98.752
98.754
4.902%
4.937%
4.929%
5.03%
5.07%
5.06%
26-week bills
maturing April 28, 1977
Discount Investment
Price
Rate
Rate 1/
97.436
97.419
97.425
5.072%
5.105%
5.093%
5.28%
5.31%
5. 30%
Tenders at the low price for the 13-week bills were allotted 90%.
Tenders at the low price for the 26-week bills were allotted 17%.
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
$
19,865,000
Boston
3,461,405,000
New York
32,615,000
Philadelphia
26,940,000
Cleveland
14,770,000
Richmond
18,405,000
Atlanta
220,490,000
Chicago
60,030,000
St. Louis
31,215,000
Minneapolis
29,565,000
Kansas City
10,380,000
Dallas
313,435,000
San Francisco
Treasury
30,000
TOTALS
$4,239,145,000
Accepted
$
15,865,000
2,212,500,000
32,615,000
25,360,000
14,770,000
15,905,000
67,515,000
34,940,000
9,495,000
21,865,000
10,380,000
39,520,000
30,000
Received
$
53,210,000
4,435,945,000
39,960,000
159,580,000
25,170,000
25,530,000
384,075,000
33,445,000
24,775,000
11,740,000
7,830,000
338,580,000
25,000
$2,500,760,000 a/:$5,539,865,000
concludes $ 266,465,000 noncompetitive tenders from the public
b/Includes $ 102,480,000 noncompetitive tenders from the public
L'Equivalent coupon-issue yield.
> WS-1135
Accepted
$
48,210,000
3,096,425,000
9,960,000
69,580,000
18,170,000
25,030,000
41,97 5,000
14,445,000
5,775.000
8,740,000
7,830,000
153,920,000
25,000
$3,500,085,000 b/
DepartmentoftheTREASURY
INGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE UPON DELIVERY
REMARKS OP RICHARD R. ALBRECHT
GENERAL COUNSEL OP THE TREASURY DEPARTMENT
AT SESSION #2 OP THE
"PRESIDENTIAL CAMPAIGN COLLOQUY"
ON THE TOPIC
U.S. INTERNATIONAL TRADE POLICY
IN THE NEXT FOUR YEARS
BEFORE THE FEDERAL BAR ASSOCIATION
NATIONAL LAWYERS CLUB — WASHINGTON, D. C.
TUESDAY, OCTOBER 26, 1976 ~ 12:30 P.M.
I very much appreciate this invitation of the Federal
Bar Association — with special thanks to Mr. Ince, as
Chairman of the International Law Council — to present the
Administration's view of United States foreign trade policy
over the next 4 years.
Last week, you heard the Vice Chairman of the U.S.
International Trade Commission, Dan Minchew.
Today, I will try to tell it like it is, and as it will
remain, not only for the next 4 years, but for the foreseeable
fut ure.
Why? Because this Administration and the Congress,' in
an unparalleled display of bipartisan statesmanship, have
together forged the framework of what well may be the first truly representative national foreign trade policy ever
devised for this nation.
That framework, quite' simply, is the Trade Act of 1974.
Painstakingly hammered out over 2 years of Congressional consideration and passed overwhelmingly with bipartisan support,
it is — as President Ford said when he signed it — "The
most significant legislation passed by the Congress since the
beginning of the Trade Agreements Programs 4 decades ago . . .
WS - 1136
-2(which) will determine for many, many years American trade
relations with the rest of the world."
I don't think it is necessary to emphasize the importance
of international trade to the economic well-being of this, as
well as most other countries in an increasingly interdependent
world. Foreign purchases of goods produced in the United
States today account for about 16 percent of everything we
turn out of American factories and farms, the same percentage
as for world production as a whole. We sell overseas about
26 percent of everything we grow, the same percentage as
Western Europe exports of everything it produces. In the
last 3 years, U.S. exports have roughly./doubled — to more
than $100 billion annually, nearly 8 percent of our Gross
National Product. At the same time, we have grown increasingly
dependent on imports for our supplies of vital raw materials.
Thanks to sound economic policies at home, an improved
international monetary system, and the ingenuity of American
technology, our products are more competitive today in world
markets than ever before.
Thanks to the freeing of our farmers from government
regulation, we have reduced the taxpayer costs of agricultural support programs from over $4 billion a year to less
than $400 million, and encouraged full production to help
meet the needs not only of our own people, but of the world,
including three-quarters of the world population that lives
in developing countries.
The core of our international economic policy is dedicated to the principle of fairer and freer international
trade. In pursuing this principle, we believe there will be
- greater support for liberalization of
world trade and investment;
- greater discipline to avoid beggar-thyneighbor policies;
- greater ability and desire to assist the
developing world to grow and become
economically self-sufficient;
- greater ability to respond promptly and
effectively to structural changes in the
world economy, such as the changed energy
balance;
-3- greater responsible participation by
other nations with us in ensuring that
international economic arrangements
evolve to meet changing conditions;
and with these will be a sound U.S. dollar and strong U.S.
economy.
Following this principle, the United States has worked
with other nations to develop viable and realistic solutions
to the very serious problems we face. There has not been a
great sounding of trumpets, but there has been quiet, meaningful progress. And it is by adherence to this principle which
has served us so well that we should approach the major
economic challenges that lie ahead.
Now let us consider the five basic components in the
Trade Act:
- authority to negotiate further reductions
and elimination of trade barriers;
- a mandate to work with other nations to
improve the world trading system;
- procedures to ensure an unprecedented
degree of participation of the Congress
and private sector in formulating and
approving foreign trade policy;
- reforms of U.S. laws to deal with injurious and unfair competition;
- improvement of our economic relations
with nonmarket economies and developing
countries.
To reduce trade barriers and to improve the world
trading system, the U.S. is now fully engaged in the Multilateral Trade Negotiations in Geneva, involving some 92
developed and developing countries in a sweeping effort to
liberalize and improve the rules of the world trading system.
These trade negotiations were conceived about 5 years ago as
a major and necessary companion effort to reform of the
international monetary system.
-4As with those monetary negotiations, the trade talks
are not focused on short-term solutions and spectacular
initiatives; rather, they aim at creating a better long-run
structure for efficient trade and more harmonious trade
relations. A cornerstone of this effort will be increased
cooperation among governments in creating a framework for
national policies which reinforce rather than conflict with
each other.
The international mandate for this work came from.
ministers meeting in Tokyo in September 1973. What we can
make of this mandate in the next few years will be determined by the leadership the United States provides.
This leadership is needed not just to reduce tariffs
and other barriers to trade. It will also be essential if
we are to create more effective international disciplines
for all members of the trading community who find themselves
under pressure to fall back on restrictive or narrowlyconceived policies which would result in economic burdens
for their trading partners. Since these pressures are especially acute in many countries this year, our vigorous
and imaginative pursuit of these negotiations takes on a
special importance. The most relevant issues of the day,
including the problems of commodities and access to supplies
as well as demands for temporary import restrictions, are
on the table in Geneva.
What are some of the specific initiatives in which the
Administration's trade negotiators are taking the lead to
develop new rules of international trade? They have made
specific proposals in Geneva to:
- eliminate or control export subsidies
which distort international trade and
disadvantage U.S. producers;
- improve import relief practices through
agreed international "safeguards"
mechanisms;
- reduce tariffs where they affect the
trade of developed and developing
countries the most;
- reform the trading system to remove
inequities;
-5-r
- harmonize government procurement and
product standard and labeling practices
which discriminate against American
bidders in important markets;
- eliminate unreasonable quota and import
licensing requirements;
- speed up the work so that meaningful
agreements can be reached within the
shortest time frame possible.
The success of our negotiators in this effort will depend in large part on their ability to perceive and pursue
the interests of the American people. For this purpose,
the Administration has implemented the procedures provided
for in the Trade Act to ensure on an unprecedented scale
greater participation by all segments of the American
private sector — industry, agriculture, labor, service
industries, and consumers — in the formulation and implementation of foreign trade policy.
To this end, we have implemented procedures whereby
some 800 representatives of all these segments now serve
on no less than 45 advisory panels, ranging from the
President's overall Advisory Committee on Trade Negotiations
through policy and sectoral or technical panels representing
producers, retailers, consumers and workers. Public advice
from all interested parties has been sought through open
hearings across the country as well as in Washington and an
"open door" policy is maintained for any and all who wish to
present their views.
Congressional participation in the trade negotiating
process has been upgraded through a regular process, both
formal and informal. Designated Congressional advisers and
staff meet periodically with U.S. trade negotiators in
Washington, and attend negotiating sessions in Geneva. Administration consultation and communication with Congressional
membership and staff is on a continuing, often daily, basis.
Also, in accordance with the Trade Act, the Administration
has developed a thorough and representative method of interdepartmental and interagency trade policy coordination. A
Cabinet-level Trade Policy Committee, chaired by the President's
Special Representative for Trade Negotiations, reviews and
synthesizes all Executive Branch recommendations before they
go to the President for final decision.
-6-.
Now, today, we have in place and working a novel and
unique system for doing all of these important things —
— Coordinating Administration foreign trade policy
through a workable interagency process which assures that
all views of departments with different constituencies are
heard and considered before a final Presidential decision
is taken.
— Involving all segments of the private sector, the
general public and its elected representatives in the policymaking process.
— Negotiating fairer as well as freer trade bilaterally
as well as multilaterally, so that the benefits of expanded
commerce can be more equitably shared by all nations.
Now, I would like to turn to the question of fairer
trade and the reform of U.S. laws to deal with injurious
and unfair competition. Domestic trade grievance procedures
have been substantially liberalized and improved so that all
with legitimate complaints against injurious, illegal or
unfair foreign trade practices may be assured of a fair
hearing and a considered response from their government,
based on the legal and economic merits of their case.
Recently, there has been some international concern
that the U.S. is drifting towards a policy of protectionism.
Let me assure you that this is not the case. As cause for
their concern, critics have cited the increased activity
under our antidumping and countervailing duty laws.
The justification for these limited measures is obvious.
Industries in all countries have the right to be free from
injurious international dumping practices. They also have
the right not to be required to compete against governmentsubsidized imports. Our antidumping and countervailing duty
laws are designed to assure that those rights are observed.
On a more practical level, I believe that evenhanded,
fair and open administration of laws pertaining to unfair
trade practices actually assists the United States and
other countries in reducing generalized barriers to trade.
Unless we in the Administration can convince Congress and
domestic interests that the U.S. intends to provide remedies
against specific unfair trade practices, it will be impossible to develop the necessary support for generalized trade
liberalization. In other words, we see no inconsistency between freer trade and fairer trade and the assurance of the
latter is what enables us to progress in achieving the former.
-7Another important component of the Trade Act deals with
our relations with developing countries and nonmarket
economies.
We have pursued policies in the United States and more
specific proposals in the trade area which would benefit
developing countries. We have adopted a generalized system
of preferences that will greatly assist developing countries
to expand their exports. The product list includes about
2,700 items, which on the basis of 1974 trade data accounted
for $2.6 billion in trade from eligible countries, or approximately 2.6 percent of total U.S. imports. Of U.S. dutiable
non-petroleum imports from eligible developing countries,
this accounts for 19 percent. When total imports of all
eligible products from all sources are considered, this
represents a potential market of $25 billion.
In the MTN, we have proposed a tariff cutting formula
which would decrease tariff escalation. We have also stated
our belief that special treatment for developing countries
In new codes on safeguards and on subsidies and countervailing
duties will be appropriate and feasible. Along with other
countries, we have also assigned special priority to liberalizing trade in tropical products.
The United States also supports the objectives of the
developing countries to reduce excessive fluctuations in
prices and supplies of raw materials, to improve access to
markets, and to increase productive capacity. We are willing
to sit down with producers and consumers of specific commodities to develop reasonable solutions. But we cannot
support any trading system that requires a prior commitment
to Commodity agreements based on a system of government
administered prices which would never work in today's world
of rapid technological change and changing consumer and•
investor preferences. The market system is the most efficient
means of balancing the supply and demand for commodities and
for rewarding economic efficiency — we need not be afraid to
defend that system.
During the past year, the President has been determined
to put forward constructive, realistic proposals, and we have
done so at the United Nations Seventh Special Session last
September and recently at the United Nations Committee on
Trade and Development. We offered a comprehensive approach
to commodities. Our proposals included measures to assist
countries suffering from fluctuating export earnings, to
provide better access to developed country markets for semiprocessed and manufactured products using raw materials, and
to encourage investment in the development of natural
-8resources by private interests and international financial
institutions.
With the nonmarket economy countries, we embarked on a
policy in the 1970 's which will move us away from confrontation. The decision to expand our trading relations with
Eastern Europe, the Soviet Union and the People's Republic
of China does not reflect weakness on our part. Rather, it
is a further recognition that world prosperity comes through
acceptance of a global economy.
We have made great progress in the expansion of our
commerical relations with the nonmarket economy countries
in the last 3 years. In 1971, our total exports to all of
these countries combined amounted to less than $400 million.
In 19755 exports were $3-1 billion, nearly an eightfold
increase in 4 years. By contrast, 1971 U.S. imports were
$2 30 million,while in 19 75 our imports were $969 million.
Thus, our total trade surplus with these countries grew
approximately 12 times in 4 years — to about $2.1 billion,
and the potential for future U.S. exports of goods and services remains high.
This summarizes the initiatives in international trade
policy which this Administration has taken within the comprehensive framework of the Trade Act of 1974. Our efforts are
not, however, geared to the next 4 years. The steps we are
taking, the agreements which we reach will shape the course
of international trade through the rest of this century. We
urge you to join us in meeting the challenges which lie ahead
as we strive for a freer and fairer world trading system.
Contact; Richard B. Self
Extension 8256
October 26, 1976
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES PRELIMINARY
COUNTERVAILING DUTY DETERMINATIONS
AGAINST FASTENERS FROM JAPAN
AND BICYCLES FROM THE REPUBLIC OF CHINA
Undersecretary of the Treasury Jerry Thomas announced
today two preliminary determinations under the Countervailing Duty Law (19 U.S.C. 1303) that "bounties or
grants" are being paid or bestowed on imports of nuts,
bolts and screws from Japan and bicycles from the
Republic of China. Notice to this effect will be published in the Federal Register of October 27, 1976.
Under the Countervailing Duty Law, the Treasury
Secretary is required to assess an additional (countervailing) duty on merchandise found to be receiving the
payment or bestowal of a "bounty or grant". It also
requires the Secretary to issue a preliminary determination within six months after a petition alleging
subsidies has been received. Interested parties will
be given a period of 30 days after the publication of
the notice to provide written views regarding this
action. The Treasury must issue a final determination
in the bicycle case by no later than April 19, 1977,
and for the fastener case no later than April 21,
1977.
During 1975 imports of nuts, bolts and screws from
Japan were approximately $133 million. During the same
period bicycle imports from the Republic of ChinA^
*
*
*
were $10.7 million.
^~^^
WS-1137
Department of theTREASURY
HiNGT0N,D.C. 20220
TELEPHONE 964,2041
October 26, 1976
FOR RELEASE AT 4:00 P.M.
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 $6,300 million, or
thereabouts, to be issued November 4, 1976,
as follows:
91-day bills (to maturity date) in the amount of $2,600 million, or
thereabouts, representing an additional amount of bills dated August 5, 1976,
and to mature February 3, 1977 (CUSIP No. 912793 E44 ), originally issued in
the amount of $3,699 million, the additional and original bills to be freely
interchangeable.
182-day bills., for $3,700 million, or thereabouts, to be dated November 4, 1976,
and to mature May 5, 1977
(CUSIP No. 912793 F9 2 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
November 4, 1976,
outstanding in the amount of $ 6,302 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $3,003 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
One-thirty p.m., Eastern Standard time, Monday, November 1, 1976.
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
WS-1138
(OVER)
-2securities and report daily to the Federal Reserve Bank of New York their position!
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 $500,000 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 or at the Bureau of the Public Debt
on November 4, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing November 4, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
14TH ANNUAL ECONOMIC OUTLOOK CONFERENCE
OF THE
ORANGE COUNTY CHAMBER OF COMMERCE
ANAHEIM, CALIFORNIA
OCTOBER 28, 1976
Thank you, Chuck; Chairman Diedrich, Chairman Hart,
Miss Bennett, distinguished guests, friends:
It is a great personal honor to be introduced by such
an outstanding member of Congress as Chuck Wiggins, who has
waged the good fight for responsible government so effectively
in the House of Representatives for the past 10 years, and
who stands in that chamber as an example of integrity,
dedication and patriotism.
I am delighted to be in Orange County. We easterners
often hear about California's dynamism and energy but you
have to come here and observe organizations like the Orange
County Chamber of Commerce to fully appreciate the comment.
This area is booming, and many of you are active in the
aggressive campaign to bring new businessees here to build
on your economic progress thus far and provide more jobs,
higher living standards and even greater opportunity for the
people of this great county in particular and for Southern
California in general.
It is also a privilege to address this Economic Outlook
Conference, one of the largest business gatherings in the
country, whose obvious success owes much to the labors of
Dick Hart and Sarah Bennett. I am impressed not only by
your numbers — over a thousand — and by the scope of your
deliberations — energy, transportation, industrial growth,
international trade and investment, to name only a few
subjects covered this morning — but I am also impressed by
your strong accent on long-range solutions rather than just
short-range problems.
WS-1139
-2Congressman Wiggins and others here can vouch for the
fact that if you were holding these sessions in Washington,
you'd be committing one of the cardinal sins of that city,
where the definition of long term is never beyond the next
election. And yet the need for long-term vision in this
country has never been greater, and we will all benefit from
efforts by business and professional leaders like yourselves
to take the long view, to realize that "Tomorrow is Here",
in the words of your conference theme.
What I would like to do today is follow your lead, take
a look at where the U.S. economy stands today and, more
importantly, where it is headed, and then discuss briefly a =»
responsibility that we in this convention center share to
meet two great long-range challenges facing our free enterprise
system.
To begin with, the short-term news about the American
economy is good. We are now in the midst of a healthy and
balanced expansion:
— Inflation has been cut more than in half since the
beginning of 1975;
-- Employment is at an all-time high of 88 million
Americans;
-- Industrial output, retail sales, the GNP, personal
income, have all registered important gains.
And yet the decline in unemployment, though below its
recession high point, is irregular and far slower than we
will tolerate. And inflation is by no means under firm
control and remains the most dangerous enemy of that durable
prosperity which we and all nations are seeking to achieve.
Since the mid-1960s, spending by the Federal Government
has triggered general economic instability and chronic
Federal budget deficits. The repeated overheating of the
economy created double-digit inflation pressures rarely
experienced in the United States. As these distortions have
occurred, it has been impossible to sustain stable monetary
policies which have tended to vacillate between restraint to
fight inflation and ease to finance the artificially inflated
pace of economic activity.
From these experiences there is one basic conclusion:
Our basic desire for economic progress, through improved
living standards and employment opportunities, will be
-3frustrated unless we better control the insidious inflation
which has destroyed economic stability and which today
threatens not only our goal of sustained growth but the
ultimate survival of all of our basic institutions. When
inflation distorts the economic system and destroys the
incentives for real improvement, the people will no longer
support that system and society disintegrates. I am convinced
that our uniquely creative and productive society will also
collapse if we permit inflation to dominate economic affairs.
The intensity of my feelings about inflation has
resulted in some critics labeling me as obsessed. However,
I am not so much obsessed as I am downright 'antagonistic
toward those who consistently vote for bigger government
deficits. We must always remember that it is inflation that
causes the recessions that so cruelly waste our human and
material resources and the tragic unemployment that leaves
serious economic and psychological scars long after economic
recovery occurs. It is inflation which destroys the purchasing
power of our people as they strive — too often in a losing
struggle — to provide the necessities of food, housing,
clothing, transportation and medical attention and the
desired necessities of education, recreation and cultural
opportunities.
. >
Inflation is not now, nor has it ever been, the grease
that enables the economic machine to progress. Instead, it
is the monkey wrench which disrupts the efficient functioning
of the system. Inflation should be identified for what it
is: The most vicious hoax ever perpetrated for the expedient
purposes of a few at the cost of many. There should be no
uncertainty about its devastating impact, particularly for
low-income families, the elderly, who are dependent upon
accumulated financial resources and the majority of working
people who do not have the political or economic leverage to
beat the system by keeping their incomes rising even more
rapidly than inflation. When inflation takes over an economy
the people suffer and it is time that this basic point is
emphasized by every responsible citizen and the full brunt
is brought to bear on their elected officials. Let me
assure you that regardless of the rhetoric emanating from
Washington, D.C., the spend-spend, elect-elect, syndrome is
alive and well.
Almost buried in that rhetoric are the economic issues
that will ultimately shape the future course of the United
States. The American people must now decide what kind of
economy they want for the foreseeable future. They must
-4realize that their government's fiscal and monetary policies
and the maze of government programs that increasingly
intervene in their daily lives are the real issues that will
determine their personal welfare:
— whether or not inflation will be effectively controlled
or once again allowed to return to double-digit levels;
— whether or not capital investment will be adequate
to create meaningful jobs for the growing labor force;
— whether or not government regulation and administrative
controls will be changed to meet current economic realities
and restore productivity and efficiency;
— whether or not the United States will provide effective
leadership qn^ international monetary, trade and investment
issues.
«£,.
•j
These are the real issues and each candidate's statements
must be judged against the following standard: Do his or
her policies contribute to sustained and orderly economic
growth? Or do they merely perpetuate the familiar stop-andgo patterns of the past involving increased government
spending without regard for the chronic deficits and economic
disruption created, excessive expansion of the money supply,Xv
even more government controls over the private economy and
increased intervention in private wage and price decisions.
The proper role of government is to create an environment
for sustained and orderly economic growth through its fiscal,
monetary, and regulatory policies. The disappointing
performance of the U.S. economy during much of the last
decade emphasizes the basic need for more stable policies
that will implement that role. As I have noted, in the mid1960s the United States began an unfortunate series of
exaggerated booms and recessions: serious overheating of the
economy created severe price pressures; accelerating inflation
caused recessions by restricting housing construction,
personal spending and business investment; these recessions
created unwanted unemployment which wasted resources and
caused personal suffering; rising unemployment too often
triggered poorly planned and ill-timed government fiscal and
monetary policies, setting off another round of excessive
stimulus and again leading to overheating — inflation —
recession -- unemployment — and more government intervention.
Two years ago, the pace of economic activity was
deteriorating, inflation was already at double-digit levels
and rising, unemployment was beginning to increase and great
-5uncertainty prevailed about international; trade and monetary
problems. Although others are now anxious to take credit
for the responsible policies he developed, the fact is that
under President Ford's leadership the U.S. economy has
experienced a healthy and balanced economic expansion over
the past 18 months. This favorable turnaround resulted from
following four basic -policy guidelines to break the vicious
circle and return the U.S. economy to full output:
— First, the Administration recognized the diversity -....
of problems and avoiding concentrating on a single issue. •
Inflation, unemployment, declining output, the availability
of productive resources, international trade-and investment —
all had to be considered simultaneously to create a balanced
program for recovery. Controlling inflation was the necessary
beginning point to restore consumer purchasing power to
provide needed demand to turn the economy around, but the
entire mix of goals was recognized.
— Second, the Administration wanted its policies to
solve more problems than they would create. During a period
of difficulty, it may be expedient to respond to strident
calls "to do something — anything" to demonstrate political
leadership. But this naively activist approach is the basic
source of problems, not the solution. The conventional
wisdom that a few billion dollars of additional government
spending somehow makes the difference between success or
failure of the entire U.S. economy — which is rapidly
approaching an annual level of output of two trillion
dollars — has always amazed me. There is definitely an
important role for governments in protecting public interests
but the claim that governments can or should control the
economy is totally false.' We would all be better off if
government officials would admit that the real creativity
and productivity of America depend upon the private sector.
— Third, the recovery process needed to attack the
basic cause of the recession: inflation. From 1890 to 1970
prices in the United States increased at an annual rate of
1.8 percent. From December 1973 to December 1974 they
jumped 12.2 percent. It seems so obvious that any long-term
solution to our economic problems required better control of
inflation which had distorted the spending and savings
decisions of all Americans. Nevertheless, the Administration
was accused of having a single-minded obsession with inflation.
To the contrary, it simply recognized inflation for what it
is: the greatest threat to the sustained progress of our
economy and the ultimate survival of all of our basic
institutions.
-6— Fourth, the Administration emphasized the need to
alleviate the transitional problems of moving from recession
to recovery. The automatic stabilizers built into many
government programs were improved to respond to rising
unemployment and sustain the flow of personal incomes.
The positive results of following these policies can
now be evaluated after 18 months of healthy and balanced
economic expansion. The real output of goods and services
has expanded at an annual pace well above the long-term
capability of the U.S. economy without experiencing the
widespread capacity constraints or severe raw materials
problems that were predicted by many analysts. Personal
consumption has provided the basic thrust for growth throughout
most of the current expansion. Residential construction has
not returned to its pre-recession levels, although the
current annual pace of approximately 1-1/2 million starts
is well above the recession low. Business spending —usuallysluggish during the early stages of recovery — is now
beginning to accelerate and business inventory buying is
about at the level expected. Government spending at all
levels continues to grow, but at a more controlled rate, and
the pace of export sales has continued although imports are
rising more rapidly because of the relatively advanced
status of our economic expansion.
Looking to the future, we expect the expansion in the
United States will continue in 1977, but at a reduced pace
more consistent with the long-term potential of our economy.
This is a proper pattern because continuation of the rate of
output gains in the 6 to 7 percent zone over an extended
period of time would inevitably overheat the economy, once
again leading to a new round of inflation, followed soon
afterwards by recession and unemployment. Output gains in
1977 should be in the 5 to 6 percent zone as the economy
gradually returns to its long-term potential annual rate of
output.
Personal consumption will continue to be the basic
strength of the U.S. economy, since it comprises two-thirds
of the total GNP, but the rate of increase in this sector
will probably slow down and business investment and continued
modest gains in housing construction will provide most of
next year's thrust for additional growth.
We expect inflation to remain in the 5 to 6 percent
zone. This is not a satisfactory level of price increase
and our Nation must not and will not accept it. Employment
growth should continue, although not as rapidly as during
the last 18 months, and the unemployment rate should continue
-7to decline, particularly as the extraordinary growth in the
labor force slows down.
In summary, there are several worrisome problems to
contend with and the future course of each sector of the
economy will not be steadily upward each month, but the
likely overall course for the U.S. economy is favorable — i f
fiscal and monetary policies remain responsible. The key to
achieving this relatively optimistic goal will be how well
inflation is controlled. There never was and is not now a
choice between inflation and unemployment. That concept is
a fallacy. The real choice is between making steady progress
on both inflation and unemployment or of returning to the
stop-and-go economic policies that have failed to provide
needed stability in the past.
In our own economic interest, and in the interest of
global economic stability, our first responsibility must be
to stand by economic policies that will ensure healthy,
balanced growth and prevent a resurgence of inflation. With
responsible leadership, we can, and will do this.
That, in a nutshell, is where we stand today. But all
the progress we have made will be rendered worthless if we do
not address ourselves to the two long-term challenges to
capitalism that I mentioned earlier. For want of better
names, I would characterize these two challenges as educational
and ethical. Both of them represent the soft, vulnerable
underbelly of free enterprise.
In our era, when the main political struggle is between
controlled societies and free ones, nothing is more vital to
the survival of our economic way of life than a clear public
understanding of free enterprise. And that requires business
leaders with the courage, energy and understanding to
articulate it.
The challenge to American business today, when so much
of the world is lurching towards socialism or totalitarianism,
is not only to make our system work, but to make it understood. And too many businessmen are shirking this responsibility, preferring the temporary security and seclusion
of the board room to the rough and tumble of public debate.
The result is that private enterprise is losing by
default — in many of our schools, in much of the communications
media and in a growing portion of the public consciousness.
-8By abandoning the field of public discussion to the
opposition, by financing some of the very institutions that
seek our downfall, and by following the inarticulate, cautious
— I almost said cowardly — route; we are digging our own
graves.
The need today is not for gray men with an eye to nothing
but the corporate balance sheet. What we need, and need
desperately, is statesmanship in the business community —
leadership with guts, with conviction and with a firm ethical,
intellectual and moral base.
No one is more aware of this than the opponents of free
enterprise. Advocates of a state-controlled economy, whether
they are communists, fascists or democratic socialists, base
their own position on an ethical view, though a mistaken one.
Their economic philosophy is deliberately linked to a general
philosophy of life for, to the "true believer," Socialism
and Marxism are not merely economic formulas, but allembracing world views — a kind of temporal religion.
Their systems do not work as well as free enterprise
but, like all religious devotees, they are willing to suffer
and sacrifice for their beliefs. Instead of automatically
weakening their faith, adversity may even fortify it as long
as they believe and as long as they feel that their belief
is anchored to something of moral worth.
Those of us on the side of economic freedom are not so
fortunate. The American free enterprise system has consistently
outperformed Marxism and modified brands of socialism from
the begining, and continues to do so today. Any objective
evaluation of economic performance clearly illustrates the
United States superior record in both economic putput and
the equitable distribution of economic benefits.
Nevertheless, American free enterprise today is in
serious danger of failing as a belief. The ethical and
philosophic underpinnings of capitalism have not been
thought our, articulated and then disseminated to the millions
of average citizens who enjoy the direct material benefits
and the indirect spiritual and political benefits our system
provides. Nor is this lack of understanding merely confined
to the economic layman. It also afflicts many of the men
and women who lead industry and business. Small wonder,
then, that the man On the street has his doubts about the
system.
-9The problem is a complex one and is not confined to
business alone. Vietnam, Watergate, student unrest, shifting
moral codes, the worst recession in a generation, and a
number of other jarring cultural shocks have all combined to
create a new climate of question and doubt. The same opinion
samplings that show a decline of public confidence in business
beginning in the turbulent 1960s, also show declines in
confidence for the professions, the clergy, organized labor,
government, and politics. It all adds up to a general
malaise, a society-wide crisis of institutional confidence.
There are, however, some specific symptoms and cures
which apply particularly to the business community. The two
we are discussing are, in my opinion, the most important —
the need for educating the general public to the social as
well as economic benefits of the free etnerprise system and
the need to educate the business community itself to the
relationship between good business and good citizenship:
reinforcing the ethical base of capitalism.
On the first score, it is ironic that at a time when
Americans are enjoying such great abundance and such great
opportunity, so many of us have lost sight of the principles
and institutions that have made our way of life possible.
But the truth is as inescapable as it is unpleasant; somewhere
along the line there has been a dangerous breakdown in
communications. Today, when nearly everyone takes the fruits
of the free enterprise system for granted — the abundance,
the opportunity for learning, travel, individual freedom,
and general upward mobility — not everyone understands the
basic economic facts of life that create all these benefits.
Part, but not all, of the problem is a matter of image.
Frequently, and especially to youthful idealists, those who
support a state-dominated economic system are perceived as
concerned, socially progressive men and women who "care" —
they are seen as the humane champions of the underdog.
And, often enough, they really are the only ones who have
effectively communicated their concern for social issues.
It is the private, sector which ultimately supplies new jobs
and creates the material means for raising living standards,
but the private sector seldom receives (and h~rdly ever
clearly demonstrates Its just claim to) credit from the man
in the street.
Those who advocate strengthening the free enterprise
system and who warn against injecting the government into
every new economic and social problem that comes down the
pike, are often depicted as either outdated theorists or selfish
-10opportunists concerned only with personal gain and preserving
the status quo. They find no sympathy in many university
economic departments and little understanding in much of the
media. To make matters worse, their own surface appearances
often tend to confirm this impression, wrong though it is.
So our first challenge is education — education of the
public at large and greater self-understanding within the
business community itself. One of the best ways to teach the
pros and cons of any system is to compare it with the
available alternatives. Most Americans never have been and,
let us hope, never will be forced to experiance first-hand
what it means to live in a country where economic freedom has
been destroyed or severely limited. Yet, if our system is to
survive, our people must have a valid standard for comparison
on both material and moral grounds. This can be achieved
through education but, so far, it has not been.
Most Americans have never witnessed the seemingly
endless queues of workers and housewives that line up for
hours outside state-owned food and department stores in
order to buy a poor selection of overpriced food staples and
state-manufactured clothing and merchandise in countries
where free enterprise has died.
They do not realize what a miracle of variety, economy
and productive competition the average American shopping
center would represent to most of the earth's people.
They have never asked themselves why a country like the
Soviet Union, with some of the largest, richest tracts of
grainland in the world, but with a government-owned and run
agricultural system, cannot even feed its own people without
turning to American farmers who own their own land, make
their own economic decisions and feed not only their own
people, but millions of others as well.
They have not had to suffer the loss of opportunity
the social unrest and economic instability of western
democracies where the post-war years of cardle-to-grave
welfare and government stifling of private sector initiative
have led to economic stagnation and the demoralization and
mass emigration of the productive middle income class.
Too often they have been taught to distrust the very
word profit and the profit motive that makes our prosperity
possible, to somehow feel this system, that has done more to
alleviate human suffering and privation than any other, is
somehow cynical, selfish, and amoral.
-11And, of course, they have never lived in the countries
where the seemingly unselfish and idealistic dream of a
nonprofit, propertyless society has turned into a nightmare
reality — where the state and the state alone dictates what
kind of education you-will receive; whether or not you*will
be allowed to travel; what books you can read; what kind
of job you have; what you will be paid, what merchandise you
cay buy; where you will live; what medical treatment you
will receive; what you children will be taught; and,
ultimately, where you will be buried.
Only when economic freedom has already been destroyed is
its vital relationship to personal freedom and opportunity
vividly demonstrated. And when the process of erosion is
gradual it is like the poisoning of Socrates by hemlock:
numbing begins in the extremities and moves inexorably until
it extinguishes the spark of life. As Alexander Hamilton
warned so long ago, "Power over a man's substance" amounts to
power over his will^" Unfortunately, however,^economic
freedom, like clean air, is something that most people-do not
really appreciate until it begins to run out — and then it is
often too late.
Today we have reached a point where, although the free
enterprise system works, and works better than^any other
economic system in effect anywhere in the world — feeding,
clothing, and housing more people more humanely than any
other while allowing them the enjoyment of our other basic
freedoms — it is losing the semantic war to'an alien philosophy
of government control that;has never worked but somehow has
managed to preserve an!aura of idealism, altruism and ethical
soundness — at least when viewed without detailed knowledge
and from a comfortable distance.
So the first part of the challenge for American
capitalism is clear. We mustvget across the human side of
capitalism, the fact/that free enterprise has been and
continues to be a force for human"good and, in its correct
application, an extension of much that is finest irt our
Judeo-Christian spiritual and ethical tradition.
But better economic;education by fitself is not enough.
There are also serious^internal questions that must be
addressed, and of these.none-is' more important than business
ethics.
It's quite true^that^only:a very small percentage of
American businessmen engage in corrupt or unethical practices.
But the vast majority of honest businessmen must recognize
-12that this tiny minority of spoilers is giving a black eye
to our whole free economic system — and providing the
enemies of our system with lethal ammunition.
It seems clear to me that corruption — whether it
involves questionable angling for overseas contracts, illegal
contributions to office holders, or any other form of graft
or payola — hampers the effective functioning of the market
place. It leads to higher prices, lessened responsiveness to
the consumer and lower quality of goods and services.
It is the exact opposite of the capitalist ideal —
for both the producer and the consumer.
So, when I begin to preach the gospel of business
ethics, believe me, I am preaching it for the sake of
business as well as ethics I To me, the two are inseparable.
Of course, most businesses do have a high standard of
ethics. But they simply are not visible, in a dramatic way,
to the general public. Corruption, on the other hand,
sticks out like a sore thumb and is capitalized on by every
elitist social planner and intellectual Utopian as an excuse
for creating more state controls and stifling more individual
freedom. And never forget, as we witness the steady villification of business and management in too much of the mass
media, that today's popular misconceptions all too often shape
tomorrow's statutes.
This great but sometimes confused nation of ours was
born in turmoil. Conflict and doubt are nothing new to us.
They didn't stop us 200 years ago and they shouldn't stop
us now. It is no accident or blind fate that has made America
so rich and abundant a land. You can't legislate inventiveness
or prosperity; we have no more born geniuses or natural inventors and industrialists that any other country. But we do
have a free system in a world where many other countries are
not free. And, through it, we encourage the talent that lies
within individuals in a way that most other societies have
failed to do.
The result has been not just profits for the few, but a
better and freer life for the many. isn't that the acid test the bottom line — of so much of the idealogical argument
and speculation going on today? Compare the systems — ours
works. And, in large measure, it works because of people
like you in this convention hall — people who believe in
the value of a service or product but, even more importantly,
believe in the value of a way of life that is uniquely
American.
•
-13My time at the Treasury will soon be over. Some months
ago I decided that, regardless of the outcome of the election,
I will return to private life in January. But leaving the
Treasury does not mean abandoning public affairs. I have
a deep-seated concern about the direction our country is
headed in and I continue to stand up for the principles
of political and economic freedom in the public arena as a
concerned citizen. I urge each of you to do the same.
Don't get me wrong. I don't regret a moment of the
time I have spend in Government. It's been a very rich and
rewarding experience. While I have a few scars to show for
some of the stands I have taken, I'm grateful for the chance
I had to take those stands and serve my country.
But the more I have seen of government, the'more I
recognize the limits of what it can do for people — as
opposed to what it can do to them.
Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only the individual himself
can create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. Our greatest progress has come through individuals
not through voter blocs or special interest groups. It
happens through organizations like this, in company offices
like yours, in schools and labs and libraries and civic
groups across this great land of ours where, every day,
individuals with a better idea are solving problems and
creating new opportunities.
What we call the American experience -- the American
story — is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document or charismatic leader, is
what sums up the true meaning and purpose of America. And
that is what we must preserve.
Thank you.
oOo
FOR IMMEDIATE RELEASE
TUESDAY, OCTOBER 26, ,1976
CONTACT: PRISCILLA CRANE
(202) 634-5248
NEW REVENUE SHARING REGULATIONS ISSUED TODAY
Secretary of the Treasury, William E* Simon, today
announced publipation for public comment of proposed regulations to clarify the public participation,, public hearing
and publication requirements of Tl^e State and kocal Fiscal
Assistance Amendments of 1976. These amendments extend
the General Revenue Sharing Program for three and threequarters years, to October 1, 1980. >• The proposed regulations, which will be published intomorrow's Federal Register, are intended to become effective
January 1, 1977.
The proposed regulations were written to . facilitate cqmpliance with ,the new provisions of revenue
sharing law without imposing unnecessary burdens on local
government. "The General Revenue Sharing Program always was
intended to diminish the Federal presence, not increase it,"
Secretary Simon said today. "It is the intent of this Department, in keeping with our Congressional mandate, to keep
administrative costs and paperwork to a minimum. The new
regulations have been designed in keeping with that philosophy,"
he added.
WS-1140
-2In the regulations issued today, the Secretary is
exercising discretionary authority provided to him by the
Congress to waive any requirements which might tend to put
an undue administrative or cost burden on States and units
of local general government.
For example, the proposed regulations provide that places
which receive 'a-revenue sharing entitlement less than $10,000
in a'fiscal year are exempted from holding a proposed use
hearing. Governments which receive between $10,000 and
$50,000 of entitlement funds during the applicable fiscal
year are also exempted if the chief executive officer of
such -jurlsdications assures Treasury that reasonable opportunit
has been provided for citizen participation in determining
proposed uses of the money. The requirements also are waived
when the cost vof compliance is in excess of 2 percent of the
revenue sharing funds of the recipient government for its
fiscal year.
• The 1976 Amendments to the revenue sharing law require
a public hearing before the body of each recipient government
which has responsibility for enacting the budget. The regulations provide for published notice of the time and place of
such hearings at least 10 days in advance of the date they
are held. If these hearing and notice requirements conflict
with State or local law, the regulations require compliance
with 'local laws. The budget hearing and public notice
-3- .
requirements may also be waived by the Secretary under certain
circumstances.
Before the proposed regulations are adopted in final
form, consideration will be given to any written comments
or suggestions which are received on or before November 30, 1976.
Written comments must be submitted in triplicate to the
Director, Office of Revenue Sharing (Symbols CC), Department
of the Treasury, Washington, D. C.
0 0 0
20226.
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
FUND FOR HIGHER EDUCATION
NEW YORK CITY, OCTOBER 25,1976
Thank you Gus Levy, Amnon Barness, Lee Abraham, Ralph
Leach, Representatives of the Fund for Higher Education,
Distinguished Guests, ladies and gentlemen:
I am deeply honored to be here this evening and to accept
this award which I will cherish. In a gathering that includes
so many old and valued friends, a long-winded formal speech
would be inappropriate. So, with your permission, I would
like to set aside my planned formal address and, instead,
share with you a few personal reflections on my 4 years in
Washington.
To begin with, I want to thank you for this Flame of
Truth Award. Truth -- the plain economic facts of life that
are so often lost in the confusing political shuffle of
Washington — is what I have been trying to get across to
the American people for the past 4 years.
Secondly, I would like to say a few words about the
Fund for Higher Education itself, and the principles it
stands for. In my extensive travels to Israel I have come
to know and love this courageous country and to respect it
as the economic prodigy of the post-war era. Oceans and
continents may separate us, but the same pioneer spirit
that tamed a savage America and produced abundance from the
wilderness has made the desert flower in Israel.
Surely the work of the Fund in Israel and America —
the nurturing of learning that would otherwise perish —
is an achievement every bit as profound and important as
making the desert flower. I am most gratified that the
recipients of the funds from my award tonight will be Tel
Aviv University, where I received an honorary degree last
year, and my own alma mater, Lafayette College. Both of
these institutions — one in Israel and one in America —
will be able to keep the torch of truth bright for more
young minds because of your generosity.
WS-1141
-2The system that made your generosity possible — the
free enterprise system — is a very basic part of western
civilization. It is the economic component of freedom and,
as history has proven again and again, political freedom
cannot long survive once economic freedom has been destroyed.
As one of the founders of the American Republic -- a man,
incidentally, whom some historians identify as being of mixed
Jewish descent -- once put it, "Power over a man's substance
is power over his will." Those are the words of Alexander
Hamilton and, everywhere we look in the world today, we see
this truth reaffirmed anew by totalitarian societies that
first abolish economic freedom and then, one by one, abolish
other human rights.
We in America have been given many blessings. No country
is richer or more abundant. No people have more opportunities
to better themselves and seek new horizons. Nowhere else is
there so much diversity of choice, of careers, of opportunity.
But the bottom line of all these opportunities is freedom.
And As another great American, Daniel Webster, solemnly
reminded his countrymen, "God grants liberty to those who
love it and are always ready to guard and defend it."
Not it is fairly easy to defend our liberty and when it is
faced with external threats. When foreign enemies threaten,
the danger is clearly defined and Americans have always united
in opposing it. But today we face a danger that is every bit
as great as any foreign enemy, but which is far less obvious
and more insidious — an internal danger that is slowly but
surely eroding our individual political and economic liberty —
the substance and the will which Alexander Hamilton referred
to.
Faced with the ever-encroaching influence of government
over our lives, many citizens do not take the threat
seriously. They fail to realize that the time is at hand to
face up to Mr. Webster's challenge now — before it is too
late. Meeting this challenge head-on is vital to our future
as a free people, to our economic growth and stability, and to
our role in the community of nations.
The challenge must be met because we are at a crossroads
in our evolution as a free society where we face an all
important choice — a choice between the freedom for each of
us to live our lives as we best see fit, or the surrendering
of more of that freedom to an increasingly powerful government
in exchange for a false promise of security and permanent
prosperity.
-3Freedom — the very word should inspire us to action at a
time when socialism and totalitariasm are on the march
around the world. Yet here at home, too many of us simply
take it for granted. Others are not so naive. In my travels
as Secretary of the Treasury I have been to every part of
the globe. And everywhere I have found that America still
stands as the beacon of freedom — the bastion of liberty and
hope even in those countries where freedom no longer exists.
What a pity it is that so many of our own people do not
understand what people thousands of miles away so clearly see.
What a tragedy that we who enjoy the benefits of freedom may
let it slip through our fingers from simple complacency. It
has often happened before, and it may happen in America.
What the historian Gibbon said of Athens may yet be said
of America. "In the end," he wrote in his epitaph for the
ancient republic, "more than they wanted freedom, they wanted
security. They wanted a comfortable life and they lost it
all — security, comfort and freedom. When the Athenians
finally wanted not to give to society but for society to give
to them, when the freedom they wished for most was freedom
from responsibility, then Athens ceased to be free."
Frankly, it astonishes me that whenever the advocates
of more government control and less economic freedom are
confronted with the irrefutable evidence that we already
have too much government, they just keep on demanding more —
and two of the casualties of their misguided logic are jobs
and durable prosperity.
Free lives, individual lives, productive lives are built
on capital investment, not on the red ink, the bureaucratic
controls and the printing press cf big government. And
savings are the source of capital investment.
But savings are currently being drained by excessive
government deficits. Resources absorbed by government for
its spending today cannot simultaneously be invested in
expanded plant and machinery to employ more people tomorrow.
We cannot have both bigger government and a healthy expanding
private sector. Government never creates wealth -- people do.
We cannot continue to transfer each year an increasing
percentage of our national wealth from the most productive
to the least productive sector of our economy without
endangering the economic future of our children.
The private sector produces the food we eat, the goods
we use, the clothes we wear, the homes we live in.
-4It is the source of five out of every six jobs in
America, and it provides directly and indirectly, almost
all the resources for the rest of the jobs in our all-toorapidly expanding public sector.
It is the foundation for defense security for ourselves
and most of the Free World.
It is the productive base that pays for government
spending to aid the elderly, the jobless, the poor, the
dependent and the disabled. Indeed, far from being the
inhuman monster caricature painted by political demagogues,
the American private sector is in reality the mightiest
engine for social progress and individual improvement ever
created.
This, ladies and gentlemen, is the crucial theme that
must be. communicated broadly and deeply into the national
consciousness: The American production and distribution
system is the very foundation of our nation's strength and
freedom — the source of present abundance and the foundation
of our hopes for a better future.
As many of you may know, some time ago I announced
that, regardless of the outcome of the election, I intend to
resign as Secretary of Treasury in January. NineteenSeventy six, our bicentennial year as a nation, will be my
last full year in office. But 1976 also marks another
bicentennial — the 200th anniversary of Adam Smith's
Inquiry into the Nature and Causes of the Wealth of Nations.
Many people mistakenly believe that Adam Smith was
nothing more than an inhumane apologist for robber Baron
Capitalism. Actually, he was precisely the opposite, a
profound moral philosopher and a champion of individual
human dignity and freedom.
Smith advocated a commercial system of what he termed
"natural liberty", free of arbitrary preferences or restraints.
"Every man," Smith wrote, "as long as he does not violate
the laws of justice should be left perfectly free to pursue
his own interest in his own way and to bring both his industry
and capital into competition with those of any other man, or
order of men." Above all, Smith realized that there is no
political short-cut to affluence. It can only come from the
creative efforts of individual human beings.
To me, this wisdom represents the essence of one of the
most important educational lessons of our nation's history —
-5but too many of our young people are simply not being tauaht
it.
Competition of ideas, like competition of products, is
a healthy thing. I welcome it. But, as contributors to
educational institutions we have an obligation to see that
no one economic philosophy enjoys an academic monopoly —
and on too many of our campuses, socialist doctrine has
become the new economic orthodoxy. It's time for a change,
and we can help bring economic fairness and balance back to
higher education by making our voices heard.
It is no accident or blind fate that has made America
so rich and abundant a land. You can't legislate inventiveness
or prosperity; we have no more born geniuses or natural
inventors and industrialists than any other country. But we
do have a free system in a world where many other countries
are not free. And, through it, we encourage the talent that
lies within individuals in a way that most other societies
have failed to do.
The result has been not just profits for the few, but
a better and freer life for the many. Isn't that the acid
test of so much of the ideological argument and speculation
going on today? Compare the systems — ours works. And, in
large measure, it works because of people like you — people
who believe in the value of a service or product but, even
more importantly, believe in the value of a way of life that
is uniquely American.
My time at the Treasury will soon be over. But leaving
the Treasury does not mean abandoning my deep-seated concerns
and translating them into outspoken criticism whenever
necessary.
Don't get me wrong. I don't regret a moment of the
time I have spent in government. It's been a very rich and
rewarding experience. If I have tilted at a few windmills,
I think I have also helped to fight a few giants— double
digit inflation, the energy crisis and the political panic
mentality that cries out for more controls and tampering
with the economy instead of allowing the enormous selfcorrecting mechanisms of the market place to take effect.
But the more I have seen of government, the more I
recognize the limits of what it can do for people — as
opposed to what it can do to them.
Government can change the law, but it cannot change
numan nature. Government can impede or ease the way for
individual initiative. But only the individual himself can
create, can change, can brave new horizons.
-6More than anywhere else, that is what happens here in
America. Our greatest progress has come through individuals —
not through voter blocs or special interest groups. It
happens through voluntary organizations like this, in
company offices like yours, in schools and labs and libraries
and civic groups across this great land of ours where, every
day, individuals with a better idea are solving problems and
creating new opportunities.
What we call the American experience — the American
story — is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document or charismatic leader, is what
sums up the true meaning and purpose of America. And, with
the light of truth and the courage of our convictions, that
is what we can preserve for our prosperity.
Thank you.
oOo
tDepartmentoftheTREASURY
SHINGTON, D.C. 20220
TELEPHONE 964-2041
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
IN ACCEPTING
THE DISTINGUISHED ACHIEVEMENT AWARD
OF THE
MONEY MARKETEERS OF NEW YORK UNIVERSITY
OCTOBER 26, 1976
Paul Meek, John Sawhill, Michael Grunebaum
President Lee Burnham, distinguished guests and
good friends:
Thank you for your warm welcome and for choosing me to
receive your first Distinguished Achievement Award. This
award is, of course, a deep personal honor for me. But also,
in establishing it, your organization -- with the encouragement
of Dean Dill of New York University's Graduate School of
Business — has rightly chosen to recognize and emphasize the
vital role played by our financial markets and financial system
both here and abroad. For that role is incalculable in
providing liquidity and investment which assists in promoting
domestic and international economic and financial stability
and in strengthening the free market system world wide.
It is also a special pleasure to receive such generous
treatment from the Money Marketeers. I not only count many
old friends among you, I consider you an outstanding force
for leadership within and beyond the financial community. And
I know that each of you shares with me a profound concern
about the future and the continued growth of the remarkable
economic system that has given our nation the highest living
standards, the greatest prosperity and the best opportunities
for progress and fulfillment enjoyed by any people in history.
Tonight I'd like to talk briefly with you about the
economy both as a force in world affairs and in terms of our
national goals, highlighting some of the progress we have made
and the challenges we still face.
You may be familiar with the old Chinese curse: "May
you live in interesting times." All of us would agree that,
from an economic as well as a political point of view, we
WS-1142
-2have been living in interesting times, indeed. In the past
few years the world economy has sustained a number of severe
jolts: a fourfold increase in oil prices, large-scale money
movements between nations, collapse of the old monetary order,
inflation and recession. These have had an enormous impact
on the economies of developed and developing nations alike
and fluctuations in economic fortunes have led to changes, at
times abrupt, in the political fortunes of these countries.
The role of the United States in meeting those challenges
has been crucial. A quarter century ago, it was commonplace
to observe that when the U.S. sneezed, the world caught cold
and when the U.S. caught cold, the world came down with
pneumonia. While that is no longer as true today as it was
then, we are still the major economic force in the world. With
less than 6 percent of the world's population we account for
over 25 percent of its annual production, and our exports and
imports each are running at over $100 billion annually — more
than those of any other single nation.
The health of the U.S. economy, then, remains vital to
the economic health of other countries. And their political
and social stability depands in large measure on their own
economic health. These past years have clearly demonstrated
that no nation or group of nations can solve their economic
problems in insolation. We have witnessed how inflation and
recession affect us all. We have observed that no country can
achieve success by attempting to export its economic troubles.
And we have come to see that the most significant contribution
we can make to economic progress in the world is to restore
prosperity and durable, non-inflationary growth in our own
domestic economies.
For the United States this means, first, that we must
follow stable fiscal and monetary policies aimed at reducing
inflation and laying the foundation for durable growth and,
second, that we must translate these same policies internationally
to promote a freer and more open world trade and investment
order. That, it must be recognized, will be America's greatest
contribution to world economic stability and — because the
economy lies at the heart of the body politic — a significant
contribution to world political stability as well.
Moreover, in determining our international economic
policies we must emphasize those same principles of open
markets and competition that have served America so well
during its two-hundred year history. Our monetary and trade
reform accomplishments will shape the world economic system
far into the future. We can either continue to promote increased
-3competition, the reduction of tariffs and non-tariff
barriers, equitable trading rules and open access to markets
and raw materials; or the world economy will develop unwanted
cartels to control prices and supplies, protectionism will
once again disrupt the flow of trade and capital, and instead
of greater international cooperation and shared progress, the
world marketplace will be plagued by negative conflicts and
economic stagnation.
The international economic system is not truly universal,
involving all countries, large and small. Between 1950 and
1975, the level of trade among market economies increased from
$50 billion to $800 billion. This dramatic expansion of the
world economy has coincided with the creation of scores of new
nations and new centers of economic power.
Furthermore, this economic system has undergone — and
survived — a massive ordeal by fire. In the wake of the most
serious economic problems in 40 years, inflation, recession,
the energy crisis and other disruptions, neither we nor our
trading partners resorted to potentially disastrous dog-eatdog, begger-thy-neighbor policies. This is an important
accomplishment. We must build on it and expand it as we move
from a period of economic recovery to a period of economic
expansion.
Just as free trade requires open markets, it also requires
an open attitude toward foreign investment. Foreign direct
investment and short-term credit to finance trade have played
an important part in the economic development of the Atlantic
community during the postwar period and have a vital part to
play today in the Atlantic community as well as the world at
large.
The U.S. Government should, and has, set an example by
reaffirming its intention to avoid restrictions on foreign
investment in the United States, consistent with national
security. We believe this is the responsible position not only
for ourselves, but for all those who believe in a genuinely
free and open world economic order.
Just as the United States has supported the growth of
trade and investment, we support — and with other nations
have reached fundamental agreement on — a comprehensive
reform of the world monetary order that will bring it into
line with today's needs and realities.
-4The new system builds importantly on two critical features
of the old Bretton Woods framework which it replaces — the
central, pivotal role of the International Monetary Fund as
the heart and monitor of the system, and the essential Bretton
Woods philosophy of a liberal world monetary order.
But the Bretton Woods system was created against the
backdrop of a different world — the world of the 1930*s and
1940's. It is understandable that features of a monetary system
designed to meet the problems of that world could become
obsolete and anachronistic in the conditions of today, where
the structure of the world economy has changed and the problems
have changed — where world trade has grown enormously and
capital flows have reached proportions that would astound the
leaders of that earlier era — a world in which nations struggle
with the modern-day twin evils of inflation and high unemployment.
Bretton Woods was based on the idea that stability could
be imposed from without, that if countries were required to
adhere to fixed exchange rates and were supplied with moderate
amounts of IMF credit, that arrangement would provide adequate
leverage — at least on deficit members — to encourage stable
economic policies.
The system had an elegant symmetry but even in its heyday
it did not work as it was intended. Countries with a balance
of payments surplus were reluctant to permit their currencies
to appreciate. On the other hand, devaluation by countries
experiencing balance of payments deficits were frequent and what
was intended to be a system of symmetrical adjustment became
lopsided.
The new system does not try to force stability on member
countries, but rather looks to the policies of member countries
to bring stability to the system. It does not seek to forestall
change by imposing rigid rates. Instead it recognized that
the competitive positions of countries do and will change, and
that it is far less destabilizing to permit rates to move in
response to market forces that to hold out until the abandonment
of costly large financing efforts brings abrupt changes.
There are those who are nostalgic for the good old days
and may translate this nostalgia into a desire to return to
the par value system, thinking that fixed rates would bring
stability. I would suggest that such beliefs are an illusion.
Think again of the chaos and disorder of the closing years
of the Bretton Woods system. Think back to those days of
market closures which disrupted trade and commerce. Remember,
-5too, the hurried attempts to patch together some solution so
that markets might open again. Think back over the last
four years of unparalleled flows of money, massive increases
in oil prices, inflation, recession, balance of payments
problems. Just imagine the old par value system trying to
accomodate those strains.
Looking to the future, we face many challenges. But
challenges present opportunities and to seize those opportunities
we must adopt policies that will:
— Restore and maintain economic stability in our
domestic economies;
-- Make the reformed international monetary system
work;
— Tackle with increased courage and understanding the
difficult problems of development in the less developed
nations;
— Continue to work for a free and open world trade and
investment order that is essential to a shared prosperity
for all.
The pursuit of responsible domestic policies in the
United States is particularly important if we are to avoid
disrupting both our own economy and, because of our position
as a major world economic power, inevitably those of other
countries.
After suffering the most severe recession of the postwar
era, our economy is now in the midst of a healthy and balanced
recovery —
* Inflation has been cut in half since the beginning
of 1975;
* Employment is at an all-time high of 88 million workers;
* Industrial output, retail sales, the GNP, personal
income, — all have registered important gains.
Yet the decline in unemployment, though below its recession
high point, is irregular and far slower than we want —
reflecting the lagged effect of recession and the surge of new
workers into the labor force. And inflation is by no means
under firm control and remains the most dangerous enemy of that
durable prosperity which we are seeking to achieve.
-6The economy has now posted positive growth in the
output of goods and services for six consecutive quarters.
The quarterly pattern of growth has not been even but the"
overall improvement is readily apparent. Following a
stronger-than-expected surge of personal spending in early
1976, the consumer became more cautious during the summer
and business capital investment has not accelerated as rapidly
as expected. Nevertheless, the facts are that the forecasts
of a year ago made by both government and private economists
will be surpassed in 1976 for real growth, continued improvement in inflation and the growth of employment and that the
unemployment rate projected will be achieved or bettered
despite the disappointing increase during the three summer
months. Current economic statistics clearly indicate that
personal spending is again accelerating, business spending
is increasing and housing construction is finally beainning
to pick up. We expect the annual growth rate to be higher in
the fourth quarter as the disruptive impact of three major
strikes in the rubber, coal and automobile industries are
overcome and these vital industries contribute to growth
rather than holding it back and as personal spending, business
capital investment and housing construction all improve.
Personal spending will continue to be the crucial sector and
there is cause for optimism as long as inflation is held down.
As we look back at this period we will recognize that the
erratic quarterly pattern of the last year has been typical
of other cyclical recoveries and that the strong and wellbalanced recovery of the last 1-1/2 years has laid the necessary
foundation for economic growth in the future. The exaggerated
rhetoric created by the current political campaign should not
confuse the fundamental point that the United States has had
a strong economic recovery and that the basis for continued
growth in 1977 is already in place.
Looking to the future, we expect economic expansion will
continue in 1977, but at a somewhat reduced pace. This is
a proper pattern because continuation of the rate of output
gains in the 6 to 7 percent zone over an extended period of
time would inevitably overheat the U.S. economy, once again
leading to a new round of inflation; followed soon afterwards
by recession and unemployment.
A resurgence of inflation would quickly erode both consumer
confidence and actual purchasing power, which would restrict
the personal spending that creates the driving force for the
entire economy. in turn, business firms would cut back their
spending plans, eroding current economic growth and delaying
the capital investment necessary for achieving our national"
goals -- particularly the creation of new jobs.
-7There never was and is not now a choice between inflation
and unemployment, as some claim. That concept is a fallacy.
The real choice is between making steady progress on both
inflation and unemployment or returning to the stop-and-go
economic policies that have failed to provide the needed
stability in the past.
In charting our course for the future, we must recognize
a basic reality: inflation is the greatest threat to the
sustained progress of our economy and the ultimate survival
of all of our basic institutions. There is a clear record
from the past. When inflation distorts the economic system
and destroys the incentives for real improvement the people
will no longer support the system and society disintegrates.
I am convinced that our uniquely creative and productive
society will also collapse if we permit inflation to dominate
our economic affairs.
The intensity of my feelings about inflation has resulted
in some critics labeling me as obsessed. However, I am not
so much obsessed as I am downright antagonistic toward those
who consistently advocate higher spending and bigger deficits.
We must always remember that it is inflation that:
— Causes the recessions that so cruelly waste our
human and material resources and the tragic unemployment that
leaves serious economic and psychological scars long after
recovery occurs;
— Destroys the purchasing power of our people as they
strive, too often in a losing struggle, to provide food,
housing, clothing, transportation, and medical attention;
-- Is the most vicious hoax ever perpetrated for the
expedient purposes of a few at the cost of many.
And there should be no uncertainty about its devastating
impact, particularly for low-income families, the elderly
dependent upon accumulated financial resources and the majority
of working people who don't have the political or economic
clout to beat the system by keeping their incomes rising even
more rapidly than inflation. When inflation takes over an
economy it is the poorest people who suffer most and turn to
the Government. It's an insidious process, because they become
willing clients of the state and the very policies which
created their misery.
-8And still there are those who continue to advocate
the same old tired nostrums that have pushed Federal
spending to more than one billion dollars every day, that
have produced budget deficits in 38 of the past 46 years,
that have driven up the Federal debt to massive proportions,
that have forced us in just the past 10 years to borrow
half a trillion dollars in the private capital markets —
money swallowed up by the Washington bureaucracy thc.t could
and should have been invested in the private sector.
Think what the impact has been on Treasury's debt
management responsibilities.
Financing three fiscal year deficits totaling $159
billion would pose a considerable challenge in ideal market
conditions. But we have had the added handicap of a financial
structure which had been severely impaired by recession and
inflation — a Congress which appeared determined to vote for
continually higher outlays and correspondingly larger deficits
despite their inflationary implications — and a deteriorating
debt maturity structure which threatened further market
congestion in the future.
Therefore, it has been necessary to re-examine and
adjust our debt management strategies in order to balance
the immediate interest cost advantage of short-term financing
with the structural stability of longer-term financing. To
accomplish the combined goals of deficit financing and debt
extension, the Treasury made use of a wider range of auction
techniques in order to attract the broadest and most diversified group of investors and develop a viable and fluid
market for longer-term Treasury securities. The traditional
"price" auction technique — the "yield" auction — the "dutch"
auction — each offered a distinctive characteristic which
has facilitated the increasingly frequent financing of
Treasury notes and bonds. And the reintroduction of the fixed
price subscription has allowed Treasury to appeal directly to
investors with considerably larger issues of longer-term
securities than could be placed with the conventional market
underwriting apparatus.
Because uncertainty is the greatest enemy of the markets,
we regularized our financial operations with the combined
effect of providing investors a timetable with which to
synchronize their purchasing programs with our borrowing
schedule, and also helping private borrowers coordinate their
activities to their best advantage.
-9In addition, we have tried to be as straightforward
as possible regarding future cash requirements, and have
generally communicated these projections to the market
with our quarterly refinancing announcements. As you can
imagine, when dealing with an entity as large and dynamic
as the Federal Government, these forecasts will be subject
to some modification. However, we believe these projections
combined with a regularized cycle of offerings, have
contributed significantly to the successful achievement of
Treasury's financial needs.
These techniques and innovations, combined with a strong
and resilient Treasury securities market, have permitted
the financing of huge deficits more easily.
Despite these accomplishments, we still have a tremendous
job ahead of us. The deficit for fiscal year 1977 of at
least $50 billion, while smaller than the $65.6 billion
deficit last year, is still by historical and current market
standards a formidable undertaking. In addition to raising
an average of $1 billion of new cash each week, we will need
to refund nearly $34 billion in coupon securities and $160
billion in bills. Our continued success in debt management
will not only be determined by the amount of cash raised or
by the average maturity of the debt outstanding, but also by
our ability to convince the Congress to pursue the sound
fiscal policies which we are encouraging other nations to
follow.
A promising start has been made with enactment of the
Congressional Budget Act, and with the determination and
cooperation of both Congress and the Executive branch, this
new machinery can become an effective tool for fiscal
responsibility.
Look back over the boom-and-bust sequence of the past
few years -- one of the most difficult periods in modern
economic history -- we should be greatly encouraged by how
well our financial system functioned under fire. That
performance reflects not only the basic strengths and
resiliency of the system but is also a tribute to the men
and women who are the leaders of the financial community,
many of whom are in this room tonight.
Nonetheless, unwise government fiscal and monetary
policies have produced straing, and certainly a return to
high levels of inflation would only add further pressures
on a financial system which has experienced a pronounced
shift toward less liquidity and higher debt over the past
-10decade. True, the extensive rebuilding of corporate
balance sheets over the past year has improved the mix of
assets, liabilities and equity, but only back to their 1972
relative composition. The system is still fairly rigid
and less able to absorb the consequences of poor government
policies.
Another wave of inflation with rising interest rates
and falling equity prices would force more corporate treasurers
into short-term financing for long-term needs, lower interest
coverage ratios further, and ultimately raise the risk of
widespread insolvencies or bankruptcies. Our financial
institutions would find themselves faced with growing needs
for credit just at the time that serious disintermediation
sets in. In other words, a repetition of the credit cycles
that have unfortunately characterized our economy and our
financial system since the mid-1960s would occur — but
starting this time from an even more highly leveraged
overall financial base.
This is one more reason why we must waste no time in
finishing the job of putting our economic house in order
by pursuing policies that strengthen our financial system
and our overall free enterprise economy.
In the past, we have looked at our dynamic free enterprise system as the Golden Goose that produced all our
blessings and encouraged the self-initiative that has made
our country the envy of the world. But today the Federal
Government is growing and spending faster than the goose
can lay its eggs. And should these policies continue, they
will not only steal all the eggs, but kill the goose itself.
This is the crucial theme that must be communicated
broadly and deeply into the national consciousness: the
source of our present abundance and the foundation of our
hopes for a better future.
And those same economic principles that have worked
to create prosperity, stability and, most importantly,
freedom at home can also help to shape a freer, more prosperous and liberal world economic order. We desire a shared
prosperity. That prosperity can only come through increased
flows of investment. Through increased investment we achieve
greater productivity and through greater productivity we
achieve a higher standard of living for all.
If we preserve and expand a strong economy at home
and continue to lead the fight for a freer, more prosperous
-11world economy, then what was once called the American
dream — the seemingly impossible dream of a free, decent
existence for everyone — can become not only the dream,
but the reality, of the entire human family.
Again, my profound thanks to all of you for this award.
oOo
FOR RELEASE AT 12:00 NOON
WEDNESDAY, OCTOBER 27, 1976
Joint Statement of
William E. Simon, Secretary of the Treasury
and
James T. Lynn, Director, Office of Managementfand Budget
on Budget Results for the Transition Quarter
SUMMARY
The September Monthly Statement of Receipts tJand Outlays of
the United States Government is being released today. The
statement contains the following final budget totals for the
Transition Quarter, July 1 through September 30, 1976. (The
Transition Quarter is the special period between the.,old July-toJune fiscal year, and the new fiscal year established byRthe
Congressional Budget Act of ,-19.74, which runs from October, to
September. )
Receipts o£ $91,9 billion.
Outlays a£ $94.5 bUUon,
Budget deficit o£ $12.7 billion.
The January budget estimated transition quarter receipts of $81.9
billion, outlays of $98 billion and a resultant deficit of $16.1
billion.
The Mid-Session Review of the 1977<budget, issued in July
1976, showed revised estimates for the Transition Quarter of
$82.1 billion for receipts, $102.1 billion for outlays and a
resultant deficit of $20 billion. Most of the $4.1 billion
revision in outlays reflected an assumed shift in spending from
1976 to the Transition Quarter. The data released today show
that, setting aside adjustments for major financial transactions,
outlays for the Transition Quarter are $1.9 billion below the
January estimate. The assumed shift in spending in the
Transition Quarter from
fiscal year 1976 did not occur.
The major sources of the differences in outlays from the
January estimates for fiscal year 1976 and the Transition Quarter
are:
WS-1143
Sources of Differences in Outlays
(in billions of dollars)
Fiscal
year
1976
Qpen-ended programs__and
fixed costs:
Payments for individuals
Other
Subtotal, open-ended programs and fixed costs....
pppart.ment of Defense.
Military (excluding major
financial transactions):
Procurement
Operation and maintenance,
military personnel, RDTE...
Other
Subtotal, DOD, military....
Qther programs:
HEW
Foreign economic assistance..
Interior
«••
Labor (training and employment )
Transportation
EPA.
ERDA
All other
Subtotal, other programs...
Total of the above
Major financial transactions
Offshore oilland receipts....
Foreign military sales
Asset sales
. • •
Total, major financial
transactions
Total
•Less than $50 million
-1 .2
Transition
quarter
-.4
Tota
-1.7
-2.6
-1.9
-.5
-.6
-1 .1
-1,.0
_ ,2
-1..7
-1 .0
-^1
-1 .9
-1. 9
^ 5
-3. 6
.6
.2
-. 1
1 ..1
^ .6
^ .3
.7
"'- .3
- .1
- .2
-1 .7
-3 .5
.2
-.4
.3
-. 1
_
-7 .1
=1*3.
-9 .0
.5
-1 .2
-1 ,1
-.8
-1 .2
.4
-.8
rdUi
^2 JL
j-^a
-3,5
-11 .4
-
.5
.8
•3
_
.3
*
.7
.5
- ,.7
.2
- .5
-1 .7
-2 .8
_
.7
3
AMOUNTS IN THE TRANSITION QUARTER
Receipts
Budget receipts in the transition quarter were $81.8 billion,
$0.1 billion below the $81.9 billion estimated in January.
Individual income taxes were $1.2 billion below the January
estimate, but this was partially offset by increases in other
receipts. For instance, social insurance taxes and contributions
were up by $0.6 billion, of which $0.5 billion is accounted for
by unemployment insurance. Other increases include $0.1 billion
for excise taxes, and $0.2 billion for customs duties.
Outlays
Total budget outlays for the transition quarter were $94.5
billion. The change from the January estimate total is accounted
for primarily by unanticipated financial transactions, although
there have been numerous, nearly offsetting^ increases and
decreases. It is unclear whether these changes will result in
overall increases or decreases for 1977 but it is likely that the
effect on total outlays will not be significant. Of much greater
significance are the increases to 1977 outlays resulting from
congressional action and inaction on 1977 budget proposals.
The following identifies significant outlay changes from the
January budget in the transition quarter:
Outlays for Department of Defense-Military were $2.5
billion below the budget estimate. Approximately $0.6
billion occurred in procurement approriations.
Obligation rates for hardware procurement lagged due to
late 1976 appropriations and the increase in procurement
appropriations. The effect of this lag on 1977
estimates is uncertain. Obligation rates were slower
than expected for operation and maintenance, research
and development, and military personnel but these delays
have been made up.
Much of the outlay shortfall of
$1.0 billion in these latter categories is expected to
be made up in 1977. Also contributing to the decrease
were higher reimbursements of $0.6 billion from foreign
military sales that affect outlays in the procurement
appropriations.
Military Assistance Programs. — Increased spending for
military assistance programs was largely offset by
4
unanticipated net receipts of $0.6 billion for foreign
military sales.
Most of the $2.5 bil lion change i n the Department of the
Trea syry re suits fro m a t echnical adjustment. The
larg est par t of the $2.3 billion difference in interest
on t he publ ic de bt r esult ed from converting intrabudg etary i ntere st p aymen ts to th e trust funds from an
accr ual to a cas h ba sis. The cha nge is offsetting and
has no effe ct on tot al bu dget out lays. The remaining
Trea sury di f ferenoes resu lted fro m higher miscellaneous
offs etting recei pts in su ch accou nts as interest on
loan s to th e Fed eral Home Loan Ba nk, and lower-than
anti cipated outl ays from the Gene ral Revenue Sharing
Trus t Fund and o ther Trea sury ace ounts. At this time
Trea sury do es no t an ticip ate any significant adjustments
in f iscal y ear 1 977 outla ys due t o the variance in the
tran sition quart er.
Outlays were $0.8 billion lower because of increased
receipts from offshore oil leasing. These receipts are
treated as an offset to budget outlays, and the increase
is due to the Atlantic outer continental shelf sale.
The budget estimate was based on a probability
assumption that the chances of no sale were greater than
chances for a sale. The sale did take place, and,
therefore, without any presumed effect on 1977, the
estimate for the transition quarter was too low.
Transiti on quarter out lays for th e Department of
Housing and Urban Deve lopment wer e down by $53 0 million
from the estimate made in January
This was d ue to
improved market condit ions which allowed HUD t o make
greater than expected mortgage sa les at prices favorable
to the g overnment. Th ese sales a re not expect ed to
affect 1 977 estimates. Claims on the FH A Fund from
defaults on FHA-insure d mortgages were a bout $ 150
million lower than pre dieted for the tra nsitio n quarter.
Presenti on of these cl aims is at the di screti on of the
mortgage es and HUD mus t pay all c laims p resent ed.
Claims p resented to th e FHA Fund in the transi t ion
quarter have no effect on claims to be p resent ed in
1977. T otal outlays f rom all oth er HUD accoun ts netted
out with in $60 million of the 197 7 Budget esti mate.
The Veterans Administration estimated transition quarter
outlays of $4.4 billion in the January budget. Actual
outlays were $4.0 billion. The major share of the $401
million difference is due to lower than expected
payments for compensation and pensions, and for
5
readjustment benefit caseloads — approximately $37
million for the former and $291 million for the latter.
Further, housing asset sales were higher than expected
Overall, somewhat higher outlay effects may be expected
in 1977.
Department of Transportation out lays were $360 million
belo w the Jan uary esti mate. The difference is mainly
attr ibuta ble to t hree areas with in DOT. For the
Fede ral aid high way p rogra m, th e January Budget
anti cipat ed 1 976 oblig ation s of $7.2 billion,
cons isten t wi th t he ob ligat ions limitation for that
.year
In stea d, S tates only obli gated $4.6 billion in
1976 , thereby cau sing outl ays t o be lower in the T.Q.
by $ 167 m illi on. As a cons equence, outlays in 1977 for
»p below the level
this prog ram are expec ted t o dro]
orig inall y es tima ted i n the Januilary Budget.
For the Federal Aviation Administrationr most of the
change of $108 millio n is due to the del ay of
congres sional action on t he A dmin istrati on's legislative
proposa 1 regarding th e ex tens ion of the Airport and
Airway Development Ac t of 197 0. Legisla tive action was
expecte d early in 197 6; h owev er, final a ction slipped
until J uly 1976. No sign ific ant outlay impact is
Urb an Mass
expecte d in FY 1977. For the ortfall
Transit
of $83
million is
tration
most
o
f
th
e
sh
Adminis
due to the failure of
rmula grant program
UMT
A
fo
recipie nts to submit
and timely applications
comp
lete
for ope rating subsidi
significant outlay impact
es.
No
is expe cted in FY 197
7.
Outlays for the Energy Research and Development
Agency
were about $140 million below the January budget
estimate due to unavoidable programmatic delays in such
areas as fossil, solar, and geothermal energy research
and development.
Department of Agriculture o utlays for the transition
quart er were $ 589 mil lion ab ove the January estimate.
This increase is net of some program shortfalls,
incre ases in o ffsetti ng rece ipts, and outlay increases
in th ree progr am area s. Out lays for the Commodity
Credi t Corpora tion we re $246 million higher largely
becau se of the finane ing of export sales which were
antic ipated in 1976 b ut made in the transition quarter
Farme r's Home Adminis tration outlays were $247 million
highe r largely becaus e asset sales were lower than
6
anticipated. Finally^food stamp demand was $198 million
higher than expected. It is not now expected that these
increases will have a significant effect on estimates
for 1977.
outlays
The United States Postal Service / exceeded the January
budget estimate by $507 million. This was the result of
a supplemental appropriation which was applied against
the accumulated operating indebtedness as of September,
1976.
The Department of Health. Educationr and ]£e.lfare outlay
estimates were $669 million above the J anuar y budget
estimate. The increase from $33.7 bill ion t o $34.3
billion i s due largely to congressional acti on or
inaction on th e Administration's budget prop osals. Nonenactment of c ost-savings legislative p ropos als
increased out 1ays by $413 million; refu sal o f Congress
to enact propo sed rescissions of 1976 a nd tr ansition
quarter a pprop riations required additio nal o utlays of
$108 mill ion; and enactment of appropri ation s in excess
of Admini strat ive requests caused addit ional outlays of
r $663 million
in all froincrease
m the se factors.
$142 mill ionto Protection
Environmental
Agency.—The
of $270
million over the January estimates is caused by the
waste treatment grant program where construction
proceeded more rapidly than had been planned. The
higher rate of spending is expected to continue in 1977.
Foreign Economic Assistance.—T ransition quarter outlays
were $226 milli on higher than e stimated in the January
budge t. The ou tlay incre ases r esult from late enactment
of 19 76 a ppropr iations, c ausing a spillover of outlays
into the transi tion quart er and from Congress' add-on of
$239. 5 mi llion to the Sup portin g Assistance request for
the T rans ition Quarter. Becaus e the outlay rise in the
trans itio n quar ter reflec ts app ropriations changes in
1976 and the tr ansition q uarter , most of the effect was
shi ft out lays from 1976 t o the transition quarter.
to
There fore this action is expect ed to have only a small
impac t onfor1977
Outlays
the outlays.
Federal Deposit Insurance f.nrpnration.
were $207 million higher than the budget estimate. This
was due largely to developments not anticipated in
earlier planning.
Labor Department outlays in the transition quarter
exceeded the amount shown in the January budget by $11°
7
million. This was due to higher spending for summer
youth programs and slippage of outlays from 1976 into
the transition quarter for the public service employment
program. Outlays for unemployment compensation were
slightly higher than the budget estimate. This is the
net effect of a decrease in the unemployment trust fund
caused by lower than expected unemployment, and an
increase in outlays for benefits to former Federal
personnel and ex-servicemen. These changes are not
expected to alter 1977 outlays from levels previously
estimated.
Transition Quarter
BUDGET RECEIPTS AND OUTLAYS
(in millions of dollars)
Description
Receipts by Source
Individual income taxes
Corporate income taxes
Social insurance taxes and contributions :
Employment taxes and contributions.
Unemployment insurance
Contributions for other insurance
and retirement
Excise taxes
Estate and gift taxes
Customs
Miscellaneous
Total receipts
Outlays bv Major Agency
Legislative branch and the judiciary.
Executive Office of the President....
Funds appropriated to the President:
Disaster relief
Military assistance programs
Foreign economic assistance
Other
Agriculture:
Commodity Credit Corporation,
foreign assistance, and special
export programs
Other
Commerce
January
budget
estimate
Actual
40,003
8,416
38,801
8,460
21,729
2,214
21 ,803
2,698
1,231
4,371
1 ,400
1 ,000
1,530
81.894
1 ,258
4,473
1 ,455
1 ,212
1,613
81.77^
317
19
310
16
55
129
677
-36
71
183
903
64
586
675
553
832
3,018
534
Defense:
Military
civil
!.!..!..
Health, Education, and Welfare:
Social security and medicare
Other
Housing and Urban Development
Interior
Justice
Labor
Outlays bv Malor Agency (continued)
State
Transporation
Treasury:
Interest on the public debt
General revenue sharing
Other
Energy Research and Development
Administration
Environmental Protection Agency
General Services Administration
National Aeronautics and Space
Administration
Veterans Administration
Civil Service Commission
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board
United States Postal Service
Railroad Retirement Board
Small Business Administration
Other independent agencies
, Allowance for contingencies
Undistributed offsetting receipts:
Federal employer contributions to
retirement funds
Interest
received by trust
trust funds
24 ,471
710
24 ,485
9,193
1 ,927
847
618
5,796
382
3,363
21 ,926
583
24,568
9,773
1,397
788
551
5,905
316
3,003
-2,545 a/
-128
10,400
1 ,627
180
8,102
1,588
10
-2,298 ^
-39
-170
83
580
-530 a/
-59
-67
110
-66
-360
1,192
838
45
1,051
1 ,108
3
-141
270
-42
909
4,358
2,329
-74
-99
431
918
107
1,459
175
953
3,957
2,353
133
-178
938
937
78
1 ,266
44
-401 £/
24
207
-80
507
19
-29
-192
-175
-979
-985
-6
-270
1,839b/
Rents and royalties on the
Continental Shelf
Outer
_500
Total outlays.... 97 . Q7i
Budget deficit(-) -16,077
a/
Includes major financial transactions netting to a total change
b/ Most of these changes are technical and are offfsetting. (See
NOTE: Detail may not add to totals due to rounding.
Final1 Monthly Treasury Statement of
'•^e-igi*
J7tfL
Receipts and Outlays of the United States Government
for period from July 1, 1976 through September 30,1976
TABLE I--TOTALS OF BUDGET RESULTS AND FINANCING (IN MILLIONS)
Budget Receipts and Outlays
Transition Quarter
Receipts
Actual transitional quarter (three
Comparative data:
Actual prior quarter (three months).
Estimated for transition quarter
Estimated 1977 .
Outlays
Budget
Surplus (+)
or
Deficit (-)
M e a n s of Financing
By
Borrowing
from the
Public
B y Reduction
of Cash
and Monetary
Assets
Increase (-)
By
Other
Means
Total
Budget
Financing
$81,773
$94,473
-$12,700
$17,977
-$2,899
-$2,378
£12,700
72,275
90,805
-18,530
23,452
-1,751
-3,171
18,530
82,132
352,466
102,110
399,973
-19,978
-47,507
18,946
62,369
6,100
-3,200
-5,068
-11,662
19,978
47,507
TABLE II--SUMMARY OF BUDGET RECEIPTS AND OUTLAYS (In thousands)
Classification
Actual
Transition
Quarter
to Date
Budget Estimates
Transition
Quarter 2
RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
Contributions for other insurance and retirement.
Excise taxes
Estate and gift taxes
Customs
Miscellaneous
Total.
$38,800,969
8,460,466
$39,729,000
8,925,000
21,803,012
2,697,903
1,258,218
4,472,698
1,454,592
1,212,173
1,612,734
81,772,766
21,649,800
2,213,746
1,251,370
4,385,000
1,373,000
1,075,000
1,530,204
82,132,120
224,882
85,188
16,206
234,590
93,871
18,577
468,084
609,060
144,292
3,849,622
533,952
21,926,215
582,545
34,340,745
1,397,090
787,617
550,633
-985,125
-270,286
-1,311,119
1,472,533
599,789
95,932
4,052,275
535,954
24,455,000
727,977
34,468,427
2,642,499
884,100
616,703
6,075,435
401,724
3,402,270
3
10,100,000
1,626,589
436,758
1,189,589
1,187,914
11.443
908,300
4,370,156
5,104,374
-986.216
3
-2,116.075
-500,000
_94,472,996
102.110.488
-12,700,230
-19.978.368
OUTLAYS
Legislative Branch
The Judiciary
Executive Office of the President
Funds Appropriated to the President:
International security assistance
International development assistance.
Other
Department
of Agriculture
Department of C o m m e r c e
Department of Defense - Military
Department of Defense - Civil
Department of Health, Education, and Welfare.
uepartment of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
.......'.'..'.
Department of Transportation
Department of the Treasury:
Interest on the public debt
General Revenue Sharing
& £ R e 8 ! a ! ' c i 1 ' andbeveiopmenVAtoinistration;'.'.'.'.'.'.'.
Other.
Environmental Protection Agency
General Services Administration
\\\\
Vef.™ ^e.ro"*«ttcs and Space Administration
'.'.'.'.'.'.
veterans Administration.
independent agencies
v}??V!l*s> undistributed
'..'.'.'.
UBdMrlbuted offsetting receipts:
h t S e m P l o v e r contributions to retirement funds ....
uuerest on certain Government accounts
«ents
and royalties on the Outer Continental Shelf lands'.
Total.
^"•Plus (+) or deficit (-)
*e footnotes on page 3.
_
~
Source: Bureau of Government Financial Operations, Department of the Treasury
o j yuo j o^o
316,144
3,002,507
3
8,101,561
1,587,642
9,886
1,051,211
1,108,362
3,202
953,026
3,957,459
5,527,046
3
TABLE HI-BUDGET RECEIPTS A N D O U T L A Y S (In thousands)
This Month
Classification of
Receipts
Individual income taxes:
Withheld
Presidential Election Campaign Fund
Other
^LilCJ•
Total—Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions:
Federal old-age and survivors ins. trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Deposits by States
Total—FOASI trust fund
Federal disability insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Deposits by States
Total--FDI trust fund
Federal hospital insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Receipts from railroad retirement account....
Deposits by States
P r e m i u m s collected for uninsured individuals .
Total--FHI trust fund
Railroad retirement accounts:
Railroad Retirement T a x Act taxes
Total--Employment taxes and contributions.
Unemployment insurance:
Unemployment trust fund:
State taxes deposited in Treasury
Federal Unemployment T a x Act taxes
Railroad Unemployment Ins. Act contributions
Total—Unemployment trust fund
Gross
Receipts
4
Refunds
(Deduct)
Net
Receipts
Gross
Receipts
Refunds
(Deduct)
Net
Receipts
$32,949,319
540
6,808,720
$141,863 $15,512,762
Gross
Receipts
Refunds
(Deduct)
Net
Receipts
$28,632,620
398
6,205,578
39,758,579
$957,610
$38,800,969
34,838,596
$1,210,902
$33,627,694
6,258,508
9,808,905
1,348,439
8,460,466
9,159,982
1,159,980
8,000,002
4,561,917
211,175
5
-460,046
4,561,917
211,175
-460,046
13,827,917
211,175
1,846,756
13,827,917
211,175
1,846,756
12,097,490
196,159
1,760,991
12,097,490
196,159
1,760,991
4,313,046
4,313,046
15,885,848
15,885,848
14,054,640
14,054,640
6,812,308
4
Comparable Prior Quarter
Transition Quarter to Date
$10,405,590
88
4
5,248,947
15,654,625
ro
553,800
4
1
598,960
27,268
183,026
809,254
598,960
27,268
183,026
1,816,960
27,268
285,823
1,816,960
27,268
285,823
1,589,329
25,621
239,727
1,589,329
25,621
239,727
809,254
2,130,051
2,130,051
1,854,676
1,854,676
936,436
30,699
135,863
286,475
776
1,390,249
936,436
30,699
135,863
286,475
776
1,390,249
2,842,436
30,699
135,863
447,557
2,248
3,458,803
2,842,436
30,699
135,863
447,557
2,248
3,458,803
2,487,161
28,930
135,544
375,224
1,784
3,028,644
2,487,161
28,930
135,544
375,224
1,784
3,028,644
4
4
4
25,312
15
25,298
328,344
34
328,310
261,835
124
261,711
6,537,861
15
6,537,847
21,803,047
34
21,803,012
19,199,795
124
19,199,671
91,984
37,089
25,149
1,600
91,984
35,489
25,149
2,289,297
377,378
37,365
6,137
2,289,297
371,241
37,365
1,439,534
314,925
28,079
7,214
1,439,534
307 ,.711
28,079
154,222
1,600
152,622
2,704,041
6,137
2,697,903
1,782,538
7,214
1,775,324
Contributions for other insurance and retirement:
Federal supplementary medical ins. trust fund:
P r e m i u m s collected for the aged
P r e m i u m s collected for the disabled
Total--FSMI trust fund
162,189
15,304
162,189
15,304
492,298
46,350
492,298
46,350
428,143
40,517
428,143
40,517
177,492
177,492
538,648
538,648
468,660
468,660
Federal employees retirement contributions:
Civil service retirement and disability fund ...
Foreign service retirement and disability fund
Other
203,682
891
67
203,682
891
67
702,554
3,489
204
702,554
3,489
204
665,785
3,733
74
665,785
3,733
74
204,640
204,640
706,247
706,247
669, 592
Total--Federal employees retirement
contributions
See footnotes o n page 3.
669, 592
Classification of
Receipts—Continued
Gross
Receipts
Social insurance taxes and contributions—Continued
Contributions for other insurance and retirement—
Continued
Other retirement contributions:
Total—Contributions for other insurance and
Total—Social insurance taxes and contributions
Net
Receipts
Gross
Receipts
Refunds
(Deduct)
1
Net
Receipts
Gross
Receipts
Refunds
(Deduct)
Net
Receipts
$4,125
$13,323
$13,323
$8,334
$8,334
$4,125
386,258
1,258,218
1,258,218
1,146,586
1,146,586
386,258
7,078,341
$1,614
7,076,727
25,765,305
$6,172
25,759,134
22,128,919
$7,338
22,121,581
848,685
95,872
559,661
17,875
830,810
95,872
559,661
2,563,946
277,480
1,676,583
44,209
579
522
2,519,737
276,901
1,676,060
2,793,398
254,211
1,326,931
35,565
446
479
2,757,833
253,765
1,326,453
1,504,218
17,875
1,486,343
4,518,008
45,311
4,472,698
4,374,540
36,489
4,338,051
467,041
13,577
453,464
1,485,247
30,654
1,454,592
1,384,572
20,794
1,363,778
439,899
11,141
428,758
1,242,772
30,599
1,212,173
959,615
32,423
927,192
510,938
510,938
1,500,459
1,500,459
1,365,287
-22,995
48,766
-121
-22,995
48,886
-49,812
162,185
97
-49,812
162,088
350,014
181,664
28
350,014
181,636
536,709
-121
536,829
1,612,832
97
1,612,734
1,896,966
28
1,896,938
32,493,141
739,748
31,753,393
84,191,648
81,772,766
74,743,189
Excise taxes:
Miscellaneous receipts:
Fees for licenses to import petroleum and petroleum
Refunds
(Deduct)
Comparable Prior Quarter
Transition Quarter to Date
This Month
6
2,418,882
1,365,287
2,467,955
72,275,235
FOOTNOTES
NOTE: The enactment of the Congressional Budget and Impoundment Control Act of 1974 (Public Law
93-344) established a new fiscal year period (October 1 through September 30) effective with fiscal
year 1977. There will be a three month transition quarter between fiscal year 1976, which ends
June 30, 1976 and fiscal year 1977 which begins October 1, 1976. The data presented in this statement in the columns "transition quarter to date", and "comparable prior quarter" is cumulative for
the months July through September 1976 and July through September 1975 respectively.
•"•This statement contains the final figures showing budget results for
Transitional Quarter ending September 30, 1976.
2
Based on revised estimates of the 1977 Budget update released July 16,
1976.
3
Effective September 1976 Interest on Special issues for government
accounts was converted from an accrual basis to a cash basis retroactive
for the Transition Quarter. Interest on Special issues is an intrabudgetary
outlay which is offset by the intrabudgetary receipt of interest by various
government accounts. Therefore, although the total interest for Public and
Special issues is less than was estimated under an accrual basis, the change
to the cash basis for special issues has no effect on total outlays for the
transition quarter cash shown below:
Transition Quarter (in Billions)
Net
Actual
Estimate
Difference
$10.1
$2.0
• 0.3
-2.1
•1.8
7.8
8.0
0.2
Interest on the Public Debt
Undistributed Offsetting Receipts:
Interest on Certain Gov't Accounts
Net Totals
4
In accordance with the provisions of the Social Security Act, as amended
"Individual income taxes withheld" have been decreased and "Federal
Insurance Contributions Act" taxes have been increased in the amount of
$132,313,538 to correct estimates for quarter ended December 31, 1975.
"Individual income taxes other" have been decreased and "Self Employment
Contributions Act Taxes" have been increased in the amount of $22,141,812
to correct estimates for the calendar year 1974 and prior.
'includes $469,500,577 distribution to Federal Disability and Hospital
Insurance Trust Funds.
6
Represents refunds of prior collections.
'includes gold tranche drawing rights plus dollars held by the fund for
operating purposes.
*L,ess than $500.00
**Less than $500,000.00
Throughout this Statement, details m a y not add to totals b e c a u s e of rounding.
(0
TABLE III--BUDGET RECEIPTS AND OUTLAYS-Contlnued (In thousands)
This Month
Classification of
OUTLAYS
Legislative Branch:
Senate
......
House of Representatives
Joint items
Congressional Budget Office
Architect of the Capitol
Library of Congress
Government Printing Office:
General fund appropriations
Revolving fund (net)
General Accounting Office
United States Tax Court
„
Other
Proprietary
receipts from
the public
Total—Legislative
Branch.
Intrabudgetary transactions
The Judiciary:
Supreme Court of the United States
Courts of Appeals, District Courts, and other
judicial services
,
Federal Judicial Center
,
Space and facilities, The Judiciary
Other
Proprietary receipts from the public
Total—The Judiciary
Executive Office of the President:
Compensation of the President
,
The White House Office
Office of Management and Budget
Office of Telecommunications Policy
Special Action Office for Drug Abuse Prevention.
Other
Total—Executive Office of the President,
Funds Appropriated to the President:
Appalachian regional development programs
Disaster relief
Expansion of defense production
Foreign assistance:
International security assistance:
Liquidation of foreign military sales fund
Military assistance
Foreign military training
Military assistance, South Vietnamese Forces
Foreign military credit sales
Security supporting assistance
Emergency security assistance for Israel
Advances, foreign military sales
Other
Proprietary
receipts fromsecurity
the public:
Total—International
assistance,
Advances, foreign military sales
Other
Applicable
Receipts
Outlays
$10,039
35,352
16,775
667
5,601
8,925
7,472
11,476
12,625
530
878
Net
Outlays
Outlays
$10,039
35,343
16,775
667
5,601
8,925
7,472
11,476
12,625
530
878
-1,523
-98
108,710
228,287
690
690
19,831
418
2
1,715
19,831
418
2
1,715
-94
22,563
86,015
21
1,335
1,790
1,565
32
1,142
5,883
21
1,335
1,790
1,565
32
1,142
5,883
26,465
27,177
26,459
27,177
1,523
-98
110,241
22,657
1,531
94
94
Comparable Prior Quarter
Transition Quarter to Date
$31,672
56,661
17,566
1,776
15,200
27,432
32,317
8,271
32,691
1,754
3,108
-163
Applicable
Receipts
Net
Outlays
Outlays
Applicable
Receipts
$31,672
56,648
17,566
1,776
15,200
27,432
32,317
8,271
32,691
1,754
3,108
-3,391
-163
224,882
201,008
1,872
1,872
1,652
1,652
61,255
1,149
16,189
5,550
61,255
1,149
16,189
5,550
-826
85,188
35,755
487
2,813
2,956
43,663
35,755
487
2,813
2,956
-155
43,508
63
4,136
5,373
2,136
788
3,712
16,206
63
4,136
5,373
2,136
788
3,712
16,206
63
4,032
5,525
725
3,928
3,321
17,593
73,548
71,321
73,539
71,321
86,490
65,023
$13
3,391
3,404
826
826
$29,488
50,612
25,731
$12
-5,553
35,844
2,933
411
147,097
25,923
7,340
356,685
873,625
12,330
570,679
885,955
-873,625
-12,330
-315,276
-16,322
244,365
8,879
1,467
757,666
284,638
27,842
1,812,972
-16,322
244,365
8,879
1,467
757,666
284,638
27,842
1,812,972
2,539,249
114,173
3,121,507
2,653,422
-2,539,249
-114,173
468,084
$29,488
50,600
25,731
13,850
27,180
13,850
27,180
23,883
-4,277
30,578
1,626
2,470
-132
23,883
-4,277
30,578
1,626
2,470
-2,426
-132
198,570
2,426
2,438
155
155
63
4,032
5,525
725
3,928
3,321
17,593
73
1^861
-5,553
35,844
2,933
411
147,097
25,923
7,340
356,685
Net
Outlays
-3,970
85,304
94,095
37,682
120,755
119,222
1,224,413
1,901
1,679,401
6,782
1,182,571
55,792
1,245,145
86,417
65,023
—1,861
-10,752
85,304
94,095
37,682
120,755
119,222
1,224,413
1,901
-1,182,571
-55,792
434,257
TABLE
III--BUDGET R E C E I P T S A N D
O U T L A Y S — C o n t i n u e d (In thousands)
Transition Quarter to Hate
This Month
C lassif'Kation ol
Ol' II AYS-- Continued
! und-. Appropriated to the President - -Continued
r urt'ifjii assistance — Continued
Indochina postwar reconstruction as.siMj.iKv
International development assistanceMultilateral assistanceInternational financial institutions
International organizations and programs ....
Bilateral assistance:
Public enterprise funds:
Development loans revolving fund
Overseas Private Investment Corporation..
Inter-American Foundation
Other
I-unctional development assistance program..
Payment to loreign service retirement and
disability fund
American si hools and hospitals abroad
International disaster assistance
Other assistance programs
Intragovernmental funds
Total--Biiateral
assistance
Proprietary
receipts
from the public
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Comparable Prior yvmrti'
Net
Outlays
301
-."3,302
-<?3.302
M1.076
f41.076
10.951
33,312
10,951
33.312
345,427
84,286
345,427
84,286
190,581
35.543
190.581
35.543
56,299
-1,420
455
151
64.250
109.585
8.152
1.567
1.753
13.316
107, 600
-1, 765
1,567
616
13. 316
96,517
3,740
2,016
80(5
184,090
169,889
580
6 982
8 190
212 ,454
-301
-169 889
15
3,480
-7,758
23,067
-557
305,416
56,907
1.389
455
366
64.250
2,970
2,654
20,129
119
?608
2.809
215
96,809
2,970
2,654
20,129
119
-96.809
580
6,982
8,190
212,454
-301
,1.984
9,917
1,137
100,442
48,796
362,276
182,928
179 348
Total--International development assistance..
193.500
100,442
93,059
791,989
182,928
609 ,060
International Narcotics Control Assistance
President's foreign assistance contingency fund
Middle Kast special requirements iund
597
Naval Petroleum Reserve Strategic Petroleum
Storage
Other
T o t a l - - F u n d s A p p r o p r i a t e d to the P r e s i d e n t
Department of Agriculture:
Departmental management
Science and education programs:
Agricultural Research Service
Animal and Plant Health Inspection Service.
Cooperative State Research Service
Fxtension Service
National Agricultural Library
Total--Science and education programs
Agricultural economies:
Statistical Reporting Service
,
Economic Research Service
Marketing Services
Internal lonal programs:
1 oreign Agricultural Se rvlce
Foreign assistance and special export programs..
Agricultural Stabilization and Conservation Service:
Salaries and expenses
Sugar act program
Agricultural conservation program (RKAP)
Cropland adjust men! program
tlmei nencv conservation measures
! u es! : y lucent ives programs
i )! n,-i
Net
Outlays
301
149,238
Total--!- oreign assistance
,. ,, Applicable I
Outlays
u'ceipts
597
222
1,433
766,733
222
1,433
986,396 |
12,340
2,169
822.544
-583
998,743
-219,664
-12,340
2.169
-176,199
-583
3,044
1,442
7,942
3,922.621
,044
,442
,942
2,836.351
12,340
2,646
4.070,136
6,328
2.848.699
1,086,271
-12. 340
646
1,221,437
531,539
J83.723
10.275
1
1,183
8,626
201,608
103.808
427.731
7,483
-1,380
6,251
1.348,953
505
,416 ,389
15
3,480
-7,758
23.067
-557
-8,626
103,808
7,483
-1,380
6,251
2,264,371
12,793
-6.535
2.015
-377
184.090
915,418
_505_
1,350,886
1,065.503
6,328
10,906
10,906
62 ,090
87 .958
22 ,409
53 ,666
1,154
62.090
87,958
22,409
53,666
1.154
21,377
34.612
12.609
23,928
371
21,377
34.612
12,609
23,928
371
69,774
96,324
28,761
55.239
1,192
69,774
96,324
28,761
55,239
1,192
92.897
92.897
251,290
251,290
227,276
227,276
2,180
-132
599
2.180
-132
599
6,947
3,455
1,740
6,947
3,455
1,740
5,198
-64,481
5,198
-64,481
11,494
146,220
11,494
146,220
8,589
12 199
8,589
112,199
19,850
979
63.388
21
1,077
439
723
19,850
979
63.388
21
1,077
439
723
35,503
986
121,196
11
3.399
1.729
2.606
35,503
986
121,196
11
3,399
1.729
2,606
23 408
4 723
50 893
141
1 756
1 226
2 767
23,408
4,723
50.893
111
1,756
1 ,226
2.767
86,476
86.476
165.430
165,430
84,915
84,915
6. 564
5,676
1,923
6,564
5,676
1.923
I o> al~-Agricultural Stabilization and Conservation
01
TABLE MI-BUDGET RECEIPTS AND OUTLAYS-Contlnued (In thousands)
This Month
Classification of
OUTLAYS—Continued
Outlays
Department of Agriculture—Continued
Corporations:
Federal Crop Insurance Corporation:
Federal Crop Insurance
Corporation
fund
Administrative
and operating
expenses
Commodity Credit Corporation:
Applicable
Receipts
Rural development:
Rural Development Service
Rural Electrification Administration
F a r m e r s H o m e Administration:
Public enterprise funds:
,...
Other
Rural water and waste disDosal erants
Salaries and expenses
Other
Total--Farmers H o m e Administration
Outlays
Applicable
Receipts
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
$8,567
540
$7,427
$1,140
540
$16,050
3,504
$14,270
$1,781
3,504
$9,657
4,747
$14,194
-$4,537
4,747
206,782
92,623
114,159
816,592
364,725
451,868
893,882
541,505
352,377
277,858
1,044
50,000
227,858
1,044
281,591
1,814
49,980
231,612
1,814
440
937
485,684
142,623
343,062
1,099,998
414,704
685,294
895,259
541,505
353,754
494,792
150,050
344,742
1,119,552
428,974
690,578
909,663
555,699
353,965
70
1,584
252
4,856
252
4,856
278
5,298
1,114,759
423,881
238,286
2,226
24,148
37,383
5,449
1,846,132
1,422,469
514,010
-159,027
-455
2,155
24,148
37,383
5,449
423,663
923,950
435,764
191,723
-824
18,326
36,756
4,847
1,610,541
1,337,722
272,819
1,422,469
428,771
1,616,117
1,337,722
278,395
Special activities:
Total—Commodity Credit Corporation
Comparable Prior Quarter
Transition Quarter to Date
Net
Outlays
0)
70
1,584
440
937
278
5,298
361,849
131,257
68,750
2,624
8,833
13,225
1,418
587,957
292,181
208,183
24,260
37,239
2,617
8,833
13,225
1,418
295,776
589,610
292,181
297,430
1,851,240
17,923
17,612
7,375
17,923
17,612
7,375
57,069
47,712
21,325
57,069
47,712
21,325
53,862
45,905
19,893
53,862
45,905
19,893
3,820
3,820
9,922
9,922
10,208
10,208
-3,653
-513
2,567
2,221
63,909
3,474
9,400
86,704
63,909
-950
9,400
82,280
62,080
5,148
12,171
89,608
475,566
5,206
107,363
192
588,326
1,366,642
46,993
346,012
446
1,760,093
1,366,642
46,993
346,012
446
1,760,093
1,381,174
7,081
200,450
1,381,174
7,081
200,450
1,588,705
1,588,705
590,547
1,846,797
1,842,373
1,678,313
153,666
106,998
31,510
6
600,749
582,908
238,741
71
995,867
187,300
154,435
120
-71,917
248,463
37,288
-944
18,326
36,756
4,847
Soil Conservation Service:
Other
„
Consumer programs:
Agricultural Marketing Service:
Funds for strengthening markets, income and
-3,653
513
2,567
2,734
513
4,424
4,424
6,474
6,474
62,080
-1,326
12,171
83,135
Food and Nutrition Service:
475,566
5,206
107,363
192
588,326
591,060
513
4,424
6,474
1,671,840
T A B L E 1 If-- B U D G E T R E C E I P T S A N D O U T L A Y S — C o n t i n u e d (Ini t h o u s a n d s )
Outlays
Department of Agriculture—Continued
Forest Service:
Intragovernmental funds
Forest protection and utilization
Cnnptrription and land arntiisition
Forest roads and trails ...
Forest Service permanent appropriations
Cooperative work.
Department of C o m m e r c e :
General Administration
Office of Energy Programs
Bureau of the Census
Bureau of Economic Analysis
Economic Development Assistance:
Economic Development Administration:
Job opportunities program
Other
Promotion of Industry and C o m m e r c e :
Domestic and International Business Administration..
Science and Technology:
National Oceanic and Atmospheric Administration....
National Fire Prevention and Control Administration.
Outlays
Applicable
Receipts
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
$1,064
67,201
2,248
12,378
118,622
5,436
3,154
$4,480
202,790
6,173
467
167,441
16,346
19,633
$4,480
202,790
6,173
467
167,441
16,346
19,633
$2,558
189,837
7,327
13,841
131,747
14,179
10,098
$2,558
189,837
7,327
13,841
131,747
14,179
10,098
210,102
210,102
417,330
417,330
369,588
369,588
$132,467
-132,467
575,211
1,475,417
5,953,929
603
145
1,988
869
4,961
455
18,173
2,655
603
145
1,988
869
„
Net
Outlays
$1,064
67,201
2,248
12,378
118,622
5,436
3,154
2,050,628
Total—Department of Agriculture
Applicable
Receipts
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
O U T L A Y S - - Continued
.
$248,441
-248,441
2,104,307
3,849,622
5,151,390
4,961
455
18,173
2,655
4,287
4,287
26,607
26,607
$103,388
-103,388
2,003,283
3,148,107
-85
24,944
26,258
1,794
7,242
3,172
-3,257
24,944
26,258
1,794
7,242
32
81,793
78,658
6,006
31,025
10,090
-10,058
81,793
78,658
6,006
31,025
22,756
60,636
26,074
7,825
24,095
10,310
12,446
60,636
26,074
7,825
24,095
60,152
3,172
56,980
197,514
10,090
187,424
141,386
10,310
131,075
5,187
5,464
1,260
5,187
5,464
1,260
15,384
14,472
3,428
15,384
14,472
3,428
15,587
13,904
2,729
15,587
13,904
2,729
11,911
11,911
33,284
33,284
32,219
32,219
58,443
901
7,256
7,308
122
58,321
901
7,256
7,308
139,118
2,924
19,885
18,166
614
138,504
2,924
19,885
18,166
126,649
738
20,046
22,215
653
125,996
738
20,046
22,215
73,908
122
73,787
180,093
614
179,479
169,648
653
168,995
187
17,865
36,622
5,564
2,045
-1,858
17,865
36,622
5,564
1,499
41,950
85,326
15,365
6,265
-4,766
41,950
85,326
15,365
690
46,982
78,436
17,808
4,657
-3,967
46,982
78,436
17,808
60,238
2,045
58,193
144,139
6,265
137,874
143,916
4,657
139,259
4,782
-4,782
-2,543
13,720
-13,720
-16,632
12,277
-16,632
-13,622
-12,277
-13,822
197,151
564,642
533,952
504,441
27,897
476,544
Maritime Administration:
-2,543
207,271
10,121
30,689
H
00
TABLE MI-BUDGET RECEIPTS AND OUTLAYS-Continued (In thousands)
This Month
Classification of
O U T L A Y S - - Continued
Department of Defense--Military:
Military personnel:
Department of the A r m y
Department of the Navy
Department of the Air Force
Total—Military personnel
Applicable
Receipts
Outlays
',
Comparable Prior Quarter
Transition Quarter to Date
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
$2,461,438
1,971,189
1,925,690
(2,453,047
1,934,285
1,947,445
2,140,930
$2,461,438
1,971,189
1,925,690
6,358,317
6,358,317
6,334,777
$2,453,047
1,934,285
1,947,445
6,334,777
1,947,333
1,947,333
1,735,627
1,735,627
$779,413
719,976
641,541
$779,413
719,976
641,541
2,140,930
Retired Military personnel
Operation and maintenance:
Department of the A r m y
Department of the Navy
Department of the Air Force
Defense agencies
Total—Operation and maintenance
651,605
651,605
936,822
755,447
743,627
228,833
2,664,730
936,822
755,447
743,627
228,833
2,664,730
2,257,252
2,209,211
2,161,492
632,826
7,260,781
2,257,252
2,209,211
2,161,492
632,826
7,260,781
1,941,690
2,074,202
2,148,510
573,593
6,737,995
1,941,690
2,074,202
2,148,510
573,593
6,737,995
Procurement:
Department of the A r m y
Department of the Navy
Department of the Air Force
Defense agencies
Total—Procurement
228,357
611,342
493,911
22,589
1,356,197
228,357
611,342
493,911
22,589
1,356,197
167,274
1,926,123
1,630,468
42,556
3,766,420
167,274
1,926,123
1,630,468
42,556
3,766,420
444,072
1,968,442
1,540,626
22,867
3,976,006
444,072
1,968,442
1,540,626
22,867
3,976,006
135,142
287,329
271,785
61,689
135,142
287,329
271,785
61,689
436,708
778,418
829,809
160,745
436,708
778,418
829,809
160,745
459,593
778,359
835,328
113,800
459,593
778,359
835,328
113,800
755,945
755,945
2,205,681
2,205,681
2,187,080
2,187,080
Military construction:
Department of the A r m y
Department of the Navy
Department of the Air Force
Defense agencies
Total—Military construction ,
30,660
53,862
47,144
1,550
133,216
30,660
53,862
47,144
1,550
133,216
83,032
169,119
119,821
4,238
376,211
83,032
169,119
119,821
4,238
376,211
189,277
161,263
89,944
6,042
446,526
189,277
161,263
89,944
6,042
446,526
Family housing:
H o m e o w n e r s assistance fund
Other
Total—Family housing
448
110,818
$440
7
110,818
1,008
295,806
$861
148
295,806
1,349
299,299
$1,828
-479
299,299
111,265
440
110,825
296,814
861
295,954
300,648
1,828
298,820
7,366
55
17,621
912
17,621
912
7,864
672
Research, development, test and evaluation:
Department of the A r m y
Department of the Navy
Department of the Air Force
Defense agencies
Total—Research, development, test and
evaluation
Civil Defense
Special foreign currency program
Revolving and management funds:
Public enterprise funds:
Department of the A r m y
Department of the Navy
Department of the Air Force
Intragovernmental funds:
Department of the A r m y
Department of the Navy
Department of the Air Force
Defense agencies
Total--Revolving
and 3.
management funds
See footnotes on page
7,366
55
(*)
116
-145,485
14,042
-11,007
-44,982
-187,316
(*)
116
116
-145,485
14,042
-11,007
-44,982
-187,432
212
-150,601
28,182
-66,416
-117,195
-305,818
271
(*)
-59
"271
-150,601
28,182
-66,416
-117,195
-306,089
185
(*)
-52,647
-7,704
-25,696
-147,734
-233,596
7,864
672
343
343
-158
(*)
-52,647
-7,704
-25,696
-147,734
-233.939
TABLE
III — B U D G E T R E C E I P T S A N D O U T L A Y S — C o n t i n u e d (In thousands)
This Month
Classification of
O U T L A Y S - - Continued
Applicable
Receipts
Outlays
Department of Defense—Military—Continued
Miscellaneous trust revolving funds
Miscellaneous trust funds
"!""*"
Proprietary receipts from the public!''..'.'.'. .*.'
Intrabudgetary transactions
Total—Department of Defense—Military
Department of Defense—Civil:
Cemeterial expenses, A r m y
Corps of Engineers:
Intragovernmental funds
Other
......."'
Proprietary receipts from the public''"'.'''."
Soldiers' and Airmen's H o m e :
Soldiers' and Airmen's H o m e revolving fund .
Other
The P a n a m a Canal:
P a n a m a Canal Company
Other
Other
........."..'.'',
Proprietary receipts from the public.'''.'.'.'.'.'.'', [
Intrabudgetary transactions
Total--Department of Defense—Civil
Department of Health, Education, and WelfareFood and Drug Administration
Health Services Administration:
Health maintenance organization loan and loan
guarantee fund
Health services
°
Indian health services and facilities..."'.''''.'
Other
Center for Disease Control
National Institutes of Health:
Intragovernmental funds
Cancer research
Heart and lung research
Arthritis, metabolism and digestive diseases.
Neurological diseases and stroke
Allergy and infectious diseases
General medical sciences
Child health and human development
Other research institutes
Other
Total—National Institutes of Health
Alcohol, Drug Abuse, and Mental Health
Administ ration:
Alcohol, drug abuse, and mental health
Saint Kli/.abeths Hospital
Other
Health Hi-sources Administration:
Public enterprise funds
Health resources
Office of Assistant Secretary for Health
See tootnotes on page 3.
$14,674
2,099
$11,923
-218*162
-1,795
7,648,971
-205,683
799
-34,318
238,173
3,242
26
1,271
25,581
8,400
89
27
23,045
2,399
-5,203
234,818
28,712
Comparable Prior Quarter
Transition Quarter to Date
Net
Outlays
Outlays
$2,751
2,099
218,162
-1,795
$27,081
3,635
7,854,654
21,952,317
799
1,501
-34,318
238,173
-3,242
Applicable
Receipts
$32,444
"-7*474
-2,671
26,102
-25,024
621,923
17,420
(*)
1,271
63
3,501
2,536
8,400
89
-2,399
-5,203
60,978
15,600
139
Net
Outlays
Applicable
Receipts
Outlays
-$5,363
3,635
7,474
-2,671
$22,311
1,445
21,926,215
21,516,463
1,501
722
-25,024
621,923
-17,420
"86',858
-890
18,476
-8
3,501
50
3,456
62,446
-1,468
15,600
139
-9,803
-6,397
57,597
11,443
171
9,803
114,013
40,655
541,117
71
-6,397
$24,984
65
57,292
7,986
-3,764
206,106
672,285
89,740
582,545
651,447
83,820
17,137
56,526
1,728
54,798
55,443
1,270
4,800
53,701
31,500
4,800
53,701
31,500
18,346
18,346
7,270
191,391
91,176
(*)
45,887
7,270
191,391
91,176
(*)
45,887
-49
231,888
80,877
54
41,493
-159,248
96,974
42,901
28,253
15,009
16,467
32,678
20,634
19,336
4,504
-159,248
96,974
42,901
28,253
15,009
16,467
32,678
20,634
19,336
4,504
-156,957
220,365
106,171
51,042
35,853
39,927
53,751
38,358
67,808
15,387
-158,957
220,365
106,171
51,042
35,853
39,927
53,751
38,358
67,808
15,387
-1,029
182,102
73,237
39,795
36,808
26,424
56,114
36,406
63,128
17,416
117,509
117,509
471,704
471,704
530,402
53,835
6,660
12
53,835
6,660
12
253,508
15,509
-9
253,508
15,509
-9
233,724
15,928
52
3,219
165,579
3,158
2,211
165,579
3,158
16,986
298,920
54,237
316
298,920
54,237
17,998
229,590
27,964
17,661
524
16,670
18,275
J-M-
27,964
(0
TABLE lll-BUDGET RECEIPTS AND OUTLAYS-Contlnued (In thousands)
Classification of
OUTLAYS—Continued
Department of Health, Education, and Welfare—Continued
Education Division:
Office of Education:
Public enterprise funds:
Student loan insurance fund
Higher education facilities loan and insurance
fund
Elementary and secondary education
Indian education
School assistance in federally affected areas
Emergency school aid
Education for the handicapped
„
Occupational, vocational, and adult education
Higher education
Library resources
Educational development
Other
Total—Office of Education
National Institute of Education. „
Office of the Assistant Secretary for Education
Total—Education Division
Social and Rehabilitation Service:
Public assistance:
Social Services
Health care services
Public assistance and other income supplements...
W o r k incentives
Special assistance to refugees from Cambodia,
Vietnam and Cuba in the United States
Other
Total—Social and Rehabilitation Service
Social Security Administration:
Intragovernmental funds
Payments to social security trust funds:
Health care services
Special benefits for disabled coal miners
Supplemental security income program
Federal old-age and survivors insurance trust fund:
Benefit payments
Administrative expenses and construction
Vocational rehabilitation services................
Total—FOASI trust fund
Federal disability insurance trust fund:
Benefit payments
Administrative expenses and construction
Vocational rehabilitation services
Total—FDI trust fund
Outlays
Applicable
Receipts
Comparable Prior Quarter
Transition Quarter to Date
This Month
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
$12,088
$1,822
$10,266
$63,663
$6,145
$57,517
$29,918
$4,253
$25,665
31,261
361,385
17,931
62,653
19,455
16,721
8,455
312,375
-1,383
-2,035
9,580
848,487
1,137
30,124
361,385
17,931
62,653
19,455
16,721
8,455
312,375
-1,383
-2,035
9,580
845,527
34,491
706,562
18,954
74,898
55,457
55,435
89,710
594,734
18,125
-189
32,712
1,744,551
3,291
31,200
706,562
18,954
74,898
55,457
55,435
89,710
594,734
18,125
-189
32,712
1,735,115
2,887
749,370
8,808
42,859
60,115
39,704
151,301
419,679
58,456
14,637
26,596
1,604,329
3,616
-728
749,370
8,808
42,859
60,115
39,704
151,301
419,679
58,456
14,637
26,596
1,596,461
4,420
1,010
14,022
1,866
14,022
1,866
17,296
2,141
850,957
1,760,439
1,751,003
1,623,766
264,987
616,620
619,846
38,208
11,269
3,826
264,987
616,620
619,846
38,208
11,269
3,826
464,170
2,453,657
1,481,314
86,461
35,273
12,100
464,170
2,453,657
1,481,314
86,461
35,273
12,100
540,396
2,019,689
1,213,967
58,249
18,614
13,150
540,396
2,019,689
1,213,967
58,249
18,614
13,150
1,554,755
1,554,755
4,532,974
4,532,974
3,864,065
3,864,065
995
995
-132
-132
878,711
240,454
1,289,603
617,608
243,683
1,253,964
16,874,378
233,707
1,714
15,192,384
253,070
-14,807
617,608
243,683
1,253,964
15,192,384
253,070
-14,807
2,959
4,420
1,010
853,916
2,959
9,436
9,436
7,868
17,296
2,141
7,868
1,615,897
99,743
79,477
396,490
99,743
79,477
396,490
5,647,825
82,665
1,714
5,647,825
82,665
1,714
878,711
240,454
1,289.603
16,874,378
233,707
1,714
5,732,204
5,732,204
17,109,799
17,109,799
15,430,646
15,430,646
858,897
23,967
16,396
899,260
858,897
23,967
16,396
899,260
2,554,992
70,753
27,293
2,653,039
70,753
27,293
2,374,427
68,700
-157,368
2,285,758
2,374,427
68,700
-157,368
2,653,039
2,285,758
T A B L E III—BUDGET RECEIPTS A N D OUTLAYS—Continued (In thousands)
O U T L A Y S - - Continued
Outlays
Department of Health, Education, and Welfare--Continued
Social Security Administration—Continued
Federal hospital insurance trust fund:
Administrative expenses and construction
Total—FHI trust fund
Applicable
Receipts
Comparable Prior Quarter
Transition Quarter to Date
This Month
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
$1,131,559
31,607
$1,131,559
31,607
$3,315,251
88,408
$3,315,251
88,408
$2,817,052
76,227
$2,817,052
76,227
1,163,165
1,163,165
3,403,659
3,403,659
2,893,279
2,893,279
430,674
43,143
430,674
43,143
1,269,038
132,077
1,269,038
132,077
1,061,935
119,851
1,061,935
119,851
473,817
473,817
1,401,115
1,401,115
1,181,787
1,181,787
8,844,152
8,844,152
26,977,374
26,977,374
23,906,593
23,906,593
201
1,020
7,231
4,978
13,429
201
1,020
7,231
4,978
13,429
602
2,667
10,065
18,128
31,462
602
3,669
5,489
16,925
26,685
602
3,669
5,489
16,925
26,685
180,127
173
180,127
173
447,076
542
447,076
542
409,169
-5,231
409,169
-5,231
2,107
1,567
4,409
1,376
2,107
1,567
4,409
1,376
-1,834
2,477
5,515
24,450
3,687
2,477
5,515
24,450
3,687
-4,647
9,023
5,740
27,718
389
9,023
5,740
27,718
389
27,043
-99,743
-99,743
-878,000
-878,000
-617,608
-617,808
-37,875
-37,875
-37,875
-37,875
-2,178
-2,178
11,788,049
34,373,226
34,340,745
30,713,496
Federal supplementary medical ins. trust fund:
Administrative expenses and construction
T o t a l — F S M I trust fund
Total—Social Security Administration
Special institutions:
American Printing House for the Blind
National Technical Institute for the Deaf
Gallaudet College
Howard University
Total- -Special institutions
' 602 .
2,667
10,065
18,128
31,462
Assistant Secretary for H u m a n Development:
Research and training activities overseas
Departmental management: 1
Office for Civil Rights
General Departmental management
Other
Proprietary receipts from the public
Intrabudgetary transactions:
Payments for health insurance for the aged:
Federal hospital insurance trust fund
Federal supplementary medical ins. trust fund ...
Payments for military service credits and special
benefits for the aged:
Federal old-age and survivors ins. trust fund ....
Federal hospital insurance trust fund
Receipts transferred to railroad retirement account.
Interest on reimbursement of administrative and
vocational rehabilitation expenses:
Federal old-age and survivors ins. trust fund ....
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical ins. trust fund ...
Other
Total--Department of Health, Education, and
Welfare
11,794,373
$1,834
6,324
$4,647
32,481
-$27,043
371
30J13.125
TABLE lll-BUDGET RECEIPTS AND OUTLAYS-Continued (In thousands)
Applicable
Receipts
Outlays
Department of Housing and Urban Development:
Housing programs:
Public enterprise funds:
Federal Housing Administration fund
College housing-loans and other expenses ...!.".".'"."
Low-rent public housing-loans and other expenses.'.
Revolving fund (liquidating programs)
Other
'.
Intragovernmental funds
Housing payments:
College housing grants
Low-rent public housing
Homeownership assistance.
Rental housing assistance
Rent supplement program
Payments for operation of low-income housing
projects
Other
Total—Housing programs.
Government National Mortgage Association:
Public enterprise funds:
Special assistance functions fund
„
Management and liquidating functions fund
Guarantees of mortgage-backed securities
Participation sales fund
Total--Government National Mortgage
Association
Community planning and development:
Public enterprise funds:
Rehabilitation loan fund
Urban renewal fund
Community development grants.
Comprehensive planning grants
Other
Total—Community planning and development
New Communities Administration.
Federal Insurance Administration
Policy development and research
Departmental management:
intragovernmental funds
Salaries and expenses
Other
Other
Proprietary receipts from the public
Total—Department of Housing and Urban Development
$127,371
4,744
16,106
9,018
129
446
1,161
85,731
17,187
59,070
17,763
42,241
955
$118,437
7,603
16,998
2,606
2,150
381,921
Net
Outlays
Outlays
Applicable
Receipts
$8,935
-2,859
-892
6,413
-2,021
446
1,161
85,731
17,187
59,070
17,763
42,241
955
$440,316
43,413
51,113
27,826
263
7,840
2,654
280,372
39,695
142,475
53,349
127,586
955
$400,989
21,262
40,069
9,404
5,651
147,794
234,128
1,217,856
168,089
4,803
351
-5,839
272,963
9,792
1,904
-104,875
-4,989
-1,553
-5,839
167,404
284,659
12,434
107,688
160,982
6,329
2,618
290,051
2,254
23,162
3,983
8,628
4,476
980
7,191
25,417
435
864,567
Net
Outlays
Applicable
Receipts
Outlays
$658,450
48,029
102,190
50,544
127
-6,461
3,059
373,445
44,848
94,035
48,792
477,376
740,481
1,417,067
441,442
975,625
1,318,749
17,292
1,115
10,086
1,550,966
24,653
5,935
-232,217
-7,361
-4,820
10,086
2,015,019
14,981
3,158
15,980
898,672
21,167
6,229
1,116,347
-6,186
-3,071
15,980
-117,256
1,347,242
1,581,554
-234,312
2,049,138
926,069
1,123,069
10,180
84,526
160,982
6,329
2,618
264,635
25,679
403,454
438,994
19,651
8,930
896,709
6,538
88,764
19,141
314,690
438,994
19,651
8,930
801,407
16,948
445,024
119,961
20,272
50,204
652,410
5,344
62,560
11,605
382,464
119,961
20,272
50,204
584,506
3,983
8,193
4,476
980
7,191
25,936
25,377
11,621
422
35,121
692
-33
4,807
4,059
5,510
16,767
13,051
-95
72,074
-38
1,253
3,233
4,256
13,533
13,051
-95
72,074
-38
278
-278
3,560,943
2,163,854
21,129
21,318
11,621
422
35,121
692
-33
-756
1,397,090
1,440,179
2,785,704
-67
-44
458,349
406,218
95,302
756
$357,791
26,933
44,449
8,679
3,589
Net
Outlays
$39,326
22,151
11,045
18,422
-5,389
7,840
2,654
280,372
39,695
142,475
53,349
127,586
955
44
-67
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
O U T L A Y S - - Continued
l\)
8
4,225,883
$300,659
21,095
57,741
41,865
-3,462
-6,461
3,059
373,445
44,848
94,035
48,792
8
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TABLE lll-BUDGET RECEIPTS AND OUTLAYS-Contlnued (In thousands)
This Month
Classification of
O U T L A Y S - -Continued
Outlays
Department of Justice:
General administration
$2,279
Legal activities
."!!!!!!!!!
18,880
Federal Bureau of Investigation
'.'.'.'.'.'.'.'.'.'.
37,717
Immigration and Naturalization Service
..'."..".
16,606
Federal Prison System:
-595
Federal Prison Industries, Inc
809
Federal prisons commissary funds
20,001
Other
77,231
L a w Enforcement Assistance Administration
11,903
Drug Enforcement Administration
Proprietary receipts from the public
184,831
Total—Department of Justice
Department of Labor:
Employment and Training Administration:
10,972
P r o g r a m administration, and other
177,702
Employment and training assistance
230,709
Temporary employment assistance
-449
E mergency employment assistance
84,076
Federal unemployment benefits and allowances
4,705
Grants to States for unemployment insurance and
employment services
314,643
Advances to the unemployment trust fund and other
funds
931,618
Unemployment trust fund:
Federal—State unemployment insurance:
110,444
State unemployment benefits
2,626
Grants to States for unemployment insurance
302
and employment services
15,735
Federal administrative expenses
803
Railroad unemployment insurance:
Interest on refunds of taxes
215
Railroad unemployment benefits
1,061,743
Administrative expenses
Payments of interest on advances from railroad
retirement account
1,884,101
Total—Unemployment trust fund
2,946
Total—Employment and Training Administration
6,696
Labor-Management Services Administration
40,974
Employment Standards Administration:
268
Salaries and expenses
11,837
Special benefits
5,406
Special workers* compensation expenses
4,718
Occupational Safety and Health Administration
-175,000
Bureau of Labor Statistics
1,781,946
Departmental management
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Labor
Applicable
Receipts
$764
2,671
3,435
200
200
Transition Quarter to Date
Net
Outlays
Outlays
$2,279
18,880
37,717
16,606
-595
45
20,001
77,231
11,903
-2,671
181,395
$5,265
66,007
130,177
58,920
-4,130
2,407
68,418
213,082
43,927
10,972
177,702
230,709
-449
84,076
4,705
Applicable
Receipts
Comparable Prior Quarter
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
$5,265
66,007
130,177
58,920
-4,130
51
68,418
213,082
43,927
-31,082
550,633
$3,728
62,122
117,189
50,988
-1,225
1,889
60,042
236,322
38,610
1,154
569,665
3,071
20,948
1,058,452
519,058
-404
139,928
-26,302
20,948
1,058,452
519,058
-404
139,928
-26,302
32,808
1,122,073
256,079
-1,678
504,718
59,282
32,808
1,122,073
256,079
-1,678
504,718
59,282
314,643
1,110,768
1,110,768
2,044,471
2,044,471
931,618
3,105,643
3,105,643
4,227,009
4,227,009
110,444
2,626
379,812
9,000
379,812
9,000
262,817
10,157
262,817
10,157
302
15,735
803
462
46,619
2,093
462
46,619
2,093
291
35,088
1,993
291
35,088
215
215
215
1,061,743
3,543,844
3,543,844
4,537,355
4,537,355
1,884,101
6,366,292
6,366,292
8,555,107
8,555,107
2,946
10,297
10,297
8,560
8,560
6,696
40,974
268
11,837
5,406
4,718
-200
20,673
70,609
1,101
30,730
16,753
14,232
20,673
70,609
1,101
30,730
16,753
14,232
-340
18,475
24,239
1,433
20,696
15,065
-1,770
-2,043,000
-625,000
5,905,346
6,598,806
18,475
24,239
1,433
20,696
15,065
-1,770
-117
-2,043,000
1,781,746
-175,000
584,072
-625,000
5,905,687
$2,356
31,082
33,438
340
340
1,916
117
117
$3,728
62,122
117,189
50,988
-1,225
—28
60,042
236,322
38,610
-1,154
566,594
6,598,689
T A B L E H I — B U D G E T R E C E I P T S A N D OUTLAYS—Continued (In thousands)
Classification of
O U T L A Y S - - Continued
Department of State:
Administration of foreign affairs:
Intragovernmental funds
Salaries and expenses
Acquisition, operation and maintenance of buildings
abroad
Payment to Foreign Service retirement and
disability fund
Foreign Service retirement and disability fund
Other
Total--Administration of foreign affairs
International organizations and conferences
International commissions
Educational exchange
Other:
Assistance to refugees from the Soviet Union
Special assistance to refugees from Cambodia
and Vietnam
Other
Proprietary receipts from the public
Intrabudgetary transactions:
Foreign Service retirement and disability fund:
Receipts transferred to Civil Service retirement
and disability fund
General fund contributions
Other
Total- -Department of State
Department of Transportation:
Office of the Secretary
Coast Guard:
Trust revolving fund
Intragovernmental funds
Operating expenses
Acquisition, construction, and improvements
Retired pay
Other
Total—Coast Guard
Federal Aviation Administration:
Aviation war risk insurance revolving fund
Operations
Other
Airport and airway trust fund:
Grants-in-aid for airports
Facilities and equipment
Research, engineering and development
Interest on refunds of taxes
Other
Total--Airport and airway trust fund
Total--Federal Aviation Administration
Applicable
Receipts
Outlays
Comparable Prior Quarter
Transition Quarter to Date
This Month
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
-$794
5,379
-$794
5,379
-$19
78,731
-$19
78,731
$1,647
84,893
$1,647
84,893
6,911
6,911
3,002
3,002
255
255
5,941
292
5,941
292
1,590
18,234
1,287
1,590
18,234
1,287
15,336
714
15,336
714
17,730
17,730
102,825
102,825
102,845
102,845
3,878
1,436
5,064
3,878
1,436
5,064
174,079
5,638
21,321
174,079
5,638
21,321
99,617
4,731
15,844
99,617
4,731
15,844
74
74
4,795
4,795
2,043
2,043
4,772
566
4,772
566
692
17,484
4,207
17,484
4,207
-11,731
83,824
3,283
83,824
3,283
-17,156
-49
-2,170
-255
-147
"-86
316,144
311,953
25,040
11,380
-512
1,881
195,119
33,259
32,612
25,221
287,580
1,412
4,577
168,718
23,653
28,118
16,362
242,839
-$692
$11,731
-255
-49
-2,170
-255
33,956
327,875
8,391
25,040
-383
2,483
66,128
12,161
10,942
8,847
100,178
1,213
1,881
195,119
33,259
32,612
25,221
289,305
-181
124,484
3,088
-182
124,484
3,088
-301
381,679
8,344
-302
381,679
8,344
134
354,983
8,571
7,334
16,355
4,898
7,334
16,355
4,898
25,503
48,364
18,092
26
16
92,001
95,854
45,298
19,776
4
390
161,323
481,722
525,011
-255
33,265
-692
8,391
461
2,483
66,128
12,161
10,942
8,847
101,022
844
844
28,583
28,583
25,503
48,364
18,092
26
16
92,001
155,974
155,973
481,723
-5
11,731
1,725
1,725
$17,156
-147
17,156
294,797
11,380
1,493
1,493
21
-81
4,577
168,718
23,653
28,118
16,362
241,346
113
354,983
8,571
95,854
45,298
19,776
4
390
161,323
21
524,990
01
TABLE MI-BUDGET RECEIPTS A N D OUTLAYS-Continued (lii thousands )
Applicable
Receipts
Outlays
Department of Transportation—Continued
Federal Highway Administration:
Highway
Deautification
Other
Highway trust fund:
Federal-aid highways
Right-of-way revolving fund.
Total—Federal Highway Administration
National Highway Traffic Safety Administration:
Traffic and highway safety
Trust fund share of highway safety programs
Federal Railroad Administration:
Railroad research and development
Rail service assistance.
Grants to National Railroad Passenger Corporation.
Other
Saint Lawrence Seaway Development Corporation
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
OUTLAYS—Continued
Net
Outlays
Outlays
Applicable
Receipts
0)
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
$4,904
-466
$4,904
-466
$13,492
5,860
$13,492
5,860
$8,256
8,687
$8,256
8,687
607,529
2,015
5,992
607,529
2,015
5,992
1,714,388
9,220
2,852
1,714,388
9,220
2,852
1,763,766
8,849
85
1,763,766
8,849
619,972
619,972
1,745,812
1,745,812
1,789,642
1,789,642
3,239
9,600
1,096
3,239
9,600
1,096
9,111
31,100
-2,192
9,111
31,100
-2,192
8,763
22,600
1,813
8,763
22,600
1,813
85
5,250
4,017
2,894
14,126
1,914
$4,451
798
4,017
2,894
14,126
1,914
22,238
13,980
4,669
117,348
5,189
$13,878
8,360
13,980
4,669
117,348
5,189
17,850
12,288
7,672
80,000
4,349
$19,553
-1,702
12,288
7,672
80,000
4,349
28,201
4,451
23,750
163,424
13,878
149,546
122,159
19,553
102,607
154,467
383
144
1,654
3,173
154,323
-1,271
-3,173
287,199
1,576
206
3,448
10,331
286,993
-1,872
-10,331
203,077
1,638
85
2,572
8,135
202,992
-934
-8,135
1,082,346
10,266
1,072,080
3,032,097
29,590
3,002,507
2,928,923
31,859
2,897,064
10,244
2,514
10,244
2,514
40,201
8,913
40,201
8,913
6,917
6,917
7
7
7
1
1
33,198
29,296
29,296
Department of the Treasury:
Office of the Secretary:
Bureau of Government Financial Operations:
Public enterprise funds:
11,080
11,080
7
850,000
33,198
-133
-133
-937
-937
14,092
14,092
409
1,905
1,567
10
409
1,905
1,567
10
575
11,189
1,879
69
399
575
11,189
1,879
69
399
10,751
1,917
103
2
10,751
1,917
14,845
14,845
896,380
46,380
56,163
56,163
8,694
8,694
27,289
27,289
22,262
22,262
34,035
34,035
7,825
82,338
45,444
82,338
45,444
-2,673
5,233
7,771
578
10,049
26,387
578
10,049
26,387
76,095
45,853
8,771
76,095
45,853
8,771
Special payments to recipients of certain retirement
850,000
N e w York City seasonal financing fund,
103
2
Total—Bureau of Government Financial
United States Customs Service:
1
7,825
-2,673
5,233
7,771
1
850,000
12,025
21,164
.::::::::: |
12,025
21.164
T A B L E 1 I I — B U D G E T RECEIPTS A N D OUTLAYS—Continued (In t h o u s a n d s )
Outlays
Department of the Treasury--Continued
Internal Revenue Service:
Payment where credit exceeds liability for tax
Interest on refund of taxes
Internal revenue collections for Puerto Rico
Total—Internal Revenue Service
United States Secret Service
3
Net
Outlays
Outlays
480,232
39,959
30,017
-22,096
21,513
17,324
28,622
21,513
-11,298
7,798,145
303,416
7,798,145
303,416
6,737,067
328,569
6,737,067
328,569
1,485,743
8,101,561
8,101,561
7,065,636
7,065,636
459
-27,741
-167,414
-31,720
1,537,861
1,587,642
1,587,642
-99,222
-374,601
-412,594
9,699,089
1,527,785
2,635,287
-1,149,544
1,485,743
195,531
$18
115
2,635,287
-1,149,544
1,733,392
Net
Outlays
480,346
30,017
17,863
-31,720
Applicable
Receipts
116
9,363
5,612
27,741
167,414
Outlays
$115
365
459
Net
Outlays
$133
10,512
166,628
202,389
69,978
30,707
11
$11
Applicable
Receipts
$16
10,535
173,220
200,264
85,773
102,090
28,907
600,805
$132
10,535
173,220
200,264
85,773
102,090
28,907
600,921
9,363
5,976
Interest on the public debt:
Applicable
Receipts
$100
3,497
49,925
60,355
5,191
46,031
9,974
175,073
$111
3,497
49,925
60,355
5,191
46,031
9,974
175,084
Salaries and expenses.
Accounts, collection and taxpayer service
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
O U T L A Y S - - Continued
-412,594
11,062,988
$116
99,222
374,601
1,363,899
10,512
166,628
202,389
69,978
30,707
172,527
147,727
-598,120
8,763,734
348,991
1,527,785
-172,527
-147,727
-598,120
8,414,743
Energy Research and Development Administration:
Proprietary receipts from the public
389,082
92,332
97
-8
389,082
92,332
97
8
864,273
186,909
127
99
864,273
186,909
127
-99
608,695
111,124
11
608,695
111 124
it
176
-17fi
176
719,655
190
-190
17,085
8,078
42,631
73,702
13,424
554,118
7,553
-32
716,370
Total—Energy Research and Development
Environmental Protection Agency:
Revolving fund for certification and other services...
Total--Environmental Protection Agency
481,511
-8
481,520
1,051,310
99
1,051,211
719,830
114
1,897
5,736
16,613
28,093
4,783
271,201
2,906
331,344
76
38
1,897
5,736
16,613
28,093
4,783
271,201
2,906
-9
331,259
117
16,193
24,749
43,585
85,291
12,820
919,463
6,320
1,108,539
142
-25
16,193
24,749
43,585
85,291
12,820
919,463
6,320
-35
1,108,362
17,085
8,078
42,631
73,702
13,424
554,118
7,553
32
716,592
222
36,879
36,879
-9,872
-9,872
-41,620
-41,620
-9,454
9,535
3,960
13,163
-9,454
9,535
3,578
13,163
-6,021
40,146
16,149
10,696
-6,021
40,146
14,875
10,696
-47,044
36,590
14,302
-3,297
-47,044
36,590
12,305
-3,297
9
85
35
177
General Services Administration:
Personal property activities:
Automated data and telecommunications activities....
383
1,274
1,997
Sec footnotes on page 3.
-J
O
TABLE III—BUDGET RECEIPTS AND OUTLAYS—Continued (In thousands)
General Services Administration--Continued
Property management and disposal activities.
Preparedness activities
General activities
Proprietary receipts from the public:
Stockpile receipts
Other
Intrabudgetary transactions
Total—General Services Administration ...
National Aeronautics and Space Administration:
Research and development
Construction of facilities
Research and program management
Other
Proprietary receipts from the public
Total—National Aeronautics and Space
Administration
Veterans Administration:
Public enterprise funds:
Loan guaranty revolving fund
Direct loan revolving fund
Veterans reopened insurance fund
Education loan fund
Other
Compensation and pensions
Readjustment benefits.
Medical care
Medical and prosthetic research
General operating expenses
Construction projects
Insurance funds:
National service life
Government life
Veterans special life
Other
Proprietary receipts from the public:
National service life
Government life
Other
Intrabudgetary transactions:
Payments to veterans life insurance funds:
National service life
Government life
Total—Veterans Administration
Independent Agencies:
Action
A r m s Control and Disarmament Agency....
Board for International Broadcasting
Civil Aeronautics Board
See footnotes on page 3.
Outlays
$81
1,324
5,760
Applicable
Receipts
8
11,188
17,353
-121
61,127
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
O U T L A Y S - - Continued
28,939
Net
Outlays
Outlays
Applicable
Receipts
$81
1,317
5,752
-11,188
-17,353
-121
$28,007
3,526
16,997
32,188
99,280
179,378
6,965
63,470
70
-107
730,690
25,785
194,953
1,924
325
$7
203
63,451
31,142
-349
96,078
Net
Outlays
Outlays
-$649
3,065
15,362
Applicable
Receipts
$28,007
3,519
16,794
-63,451
-31,142
-349
-1,144
3,202
-24,435
730,690
25,785
194,953
1,924
-325
769,889
30,940
189,777
100
165
228
Net
Outlays
-$649
3,057
15,134
33,271
10,395
-33,271
-10,395
-1,144
45,898
-70,333
769,889
30,940
189,777
100
-165
179,378
6,965
63,470
70
107
249,883
107
249,776
953,351
325
953,026
990,706
165
990,541
36,209
7,342
1,668
300
20,299
694,991
242,219
319,884
8,318
32,531
13,506
35,701
3,743
1,877
-973
113,539
15,805
2,375
3
20,867
(*)
-77,330
-8,463
-708
297
-568
694,991
242,219
319,884
8,318
32,531
13,506
35,701
3,743
-1,638
-973
-39,395
-469
685
118,159
27,034
4,773
705
58,502
2,088,128
782,938
953,611
23,889
111,006
42,391
136,240
12,155
6,098
12,876
150,051
43,291
7,360
6
59,216
(*)
-31,892
-16,257
-2,586
700
-714
2,088,128
782,938
953,611
23,889
111,006
42,391
136,240
12,155
-4,854
12,876
-146,847
-1,402
-1,401
120,525
30,816
4,315
916
63,209
1,935,753
1,136,221
833,367
21,441
107,112
35,381
106,098
13,507
5,229
23,927
58,483
39,677
7,535
5
61,197
(*)
62,042
-8,861
-3,221
911
2,012
1,935,752
1,136,221
833,344
21,441
107,112
35,381
106,098
13,507
-5,667
23,927
-111,276
-2,683
395
-160
-3
-511
-10
-511
-10
-533
-6
3,516
39,395
469
-685
-160
-3
10,952
146,847
1,402
1,401
23
10,896
111,276
2,683
-395
-533
-6
1,417,452
195,284
1,222,168
4,377,986
420,527
3,957,459
4,437,277
291,381
4,145,896
20,832
1,405
4,185
7,079
30
20,802
1,405
4,185
7,074
47,958
2,642
21,265
22,208
1#8
47,840
2,642
21,265
22,193
43,127
1,121
13,975
20,768
-134
43,262
1,121
13,975
20,753
"4
"l4
"l5
T A B L E III—BUDGET R E C E I P T S A N D OUTLAYS—Continued (In thousands)
Classification of
O U T L A Y S - - Continued
Independent Agencies--Continued
Civil Service Commission:
Civil Service retirement and disability fund
Payment to Civil Service retirement and
disability fund
Salaries and expenses
Government payment for annuitants, employees
health benefits
E mployees health benefits fund
,
Employees life insurance fund
,
Retired employees health benefits fund
,
Other
Proprietary receipts from the public
Intrabudgetary transactions:
Civil Service retirement and disability fund:
Receipts transferred to Foreign Service
retirement and disability fund
General fund contributions
Total--Civil Service Commission
Commission on Civil Rights
Community Services Administration
Consumer Product Safety Commission
Corporation for Public Broadcasting
District of Columbia:
Federal payment
Loans and repayable advances
Emergency Loan Guarantee Board
Equal Employment Opportunity Commission
Federal Communications Commission
Federal Deposit Insurance Corporation
Federal Energy Administration
Federal H o m e Loan Bank Board:
Public enterprise funds:
Federal H o m e Loan Bank Board revolving fund .
Federal Savings and Loan Insurance Corp. fund.
Interest adjustment payments
Federal Maritime Commission
Federal Mediation and Conciliation Service
Federal Power Commission
Federal Trade Commission
Historical and Memorial Commissions
Intergovernmental agencies:
Washington Metropolitan Area Transit Authority ..
Other
International Trade Commission
Interstate C o m m e r c e Commission
Legal St rvices Corporation
National
Credit
Union
See
footnotes
on page
3. Administration
National Foundation on the Arts and the Humanities..
National Labor Relations Board
National Science Foundation
Nuclear
Regulatory Commission
Postal Service
Outlays
Applicable
Receipts
Comparable Prior Quarter
Transition Quarter to Date
This Month
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
Outlays
$765,884
$765,884
$2,265,108
$2,265,108
$1,949,681
100
3,275
100
3,275
245
245
170
64,481
-6,782
-9,944
841
2,189
-2
98,844
626,593
86,568
4,285
2,265
(*)
-371
-100
-1,434
-245
819,571
3,108,054
530
37,994
2,504
64,481
215,850
-20,541
1,446
2,189
(*)
$222,632
-10,597
605
-371
-100
1,032,214
212,642
530
38,000
2,505
5,044
4,393
245,078
12,235
4,223
4,549
260
595
1,362
2,433
3,386
1,773
2,391
615
848
4,031
35,353
2,985
16,678
3,796
83,691
15,504
503,612
25,826
2,531
(*)
2
112,498
2
-2,531
5,044
4,391
132,580
12,233
1,873
123,722
10,191
26,000
90,396
95,000
5
16,209
12,764
418,467
38,523
5,419
17,204
-1,196
-12,655
260
594
1,362
2,433
3,372
-969
2,391
477
848
4,014
35,353
1,282
16,678
3,782
83,619
15,494
503,612
74,695
17,981
488
1,897
4,336
8,649
11,140
13,907
51,678
1,425
2,472
12,769
51,769
7,386
43,896
15,753
206,810
45,838
937,742
i
(*)
l
14
2,743
"138
17
1,703
(*)
14
72
10
$636,417
116,004
2,642
755,068
22
2
12,286
3,877
5
8
285,187
65,116
118,134
153,197
4
(*)
10
22
8,068
414
187
3,355
(*)
36
335
19
25,826
31,603
98,844
-9,823
-29,437
1,642
2,265
-4
48,335
481,134
101,813
4,142
2,030
-1,434
-245
-765
-170
2,352,986
2,617,974
1,873
123,700
10,189
26,000
90,396
82,714
-3,872
16,204
12,756
133,280
-26,593
1,677
131,949
8,157
16,250
57,950
55,700
133
13,201
12,996
164,064
34,715
-43,439
-135,216
488
1,892
4,335
8,639
11,117
5,839
51,678
1,011
2,472
12,582
51,769
3,532
43,895
15,717
206,475
45,819
937,742
226,683
11,100
681
1,735
4,040
8,238
9,448
6,217
91,907
1,534
2,258
12,078
4,400
37,428
16,695
211,141
36,185
1,587,185
Applicable
Receipts
$464,775
189,742
2,096
656,610
85
5
3,476
3
3
308,099
66,353
119,868
6
(*)
2
8
3,322
386
"is
3,973
1
35
21
(»)
CO
ro
o
TABLE lll-BUDGET RECEIPTS AND OUTLAYS-Continued (In thousands)
Classification of
O U T L A Y S - - Continued
Independent Agencies—Continued
Railroad Retirement Board:
Regional rail transportation protective account.. .
Railroad Retirement Accounts:
Proprietary receipts from the public
Intrabudgetary transactions:
Railroad retirement accounts:
Interest transferred to federal hospital insurance
Small Business Administration:
Public enterprise funds:
Surety bond guarantees revolving fund
Temporary study commissions.......................
Tennessee Valley Authority:
This Month
Outlays
Comparable Prior Quarter
Transition Quarter to Date
Applicable
Receipts
Net
Outlays
Outlays
Applicable
Receipts
Net
Outlays
Outlays
$5,190
$5,190
$9,284
$9,284
304,246
2,918
1
304,246
2,918
1
(*)
913,267
7,359
3
913,267
7,359
3
(*)
$851,643
5,747
10
6,879
2,178
(*)
6,879
6,879
(*)
6,879
Applicable
Receipts
Net
Outlays
$851,643
5,747
10
(*)
(*)
2,178
319,233
(*)
319,233
936,792
(*)
936,792
859,578
(*)
859,578
3,568
706
$3
(*)
3,565
706
11,574
3,993
$6
(*)
11,568
3,993
12,730
10,665
$7
(*>
12,723
10,664
50,336
15,076
326
1,364
1,740
34,388
19,349
98
698
15,947
-4,273
228
666
1,740
-1
157,066
55,231
842
3,819
5,961
93,612
49,405
228
1,526
63,454
5,826
614
2,293
5,961
-3
284,370
138,528
574
4,419
10,272
83,027
45,799
238
917
6
10,272
-fi
68,842
54,534
14,307
222,918
144,774
78,144
438,164
129,987
308,177
9,062
956
2
90
9,060
866
30,431
3,243
8
90
30,423
3,153
25,493
4,779
23
200
25,470
4,579
247,256
194,052
2
53,204
-2
710,561
478,424
7
232,137
-7
644,600
389,391
6
255,210
-fi
247,256
194,054
53,202
710,561
478,431
232,130
644,600
389,397
255,203
31,413
1,073
137
243
70,176
2,063
680
70,176
2,063
680
115
58,170
2,392
365
1
3
201,343
92,728
336
1 SO^
United States Information Agency:
Other
Total—U. S. Information Agency .................
See footnotes on page 3.
31,413
1,073
137
-243
-115
^R 170
2,392
365
-213
213
32,623
-243
32,866
72,920
-115
73,035
60,927
-213
61,140
400
935
5,070
2,750,233
101
787
400
833
4,282
2,145,852
3,150
2,589
14,673
7,558,749
563
1,963
3,150
2,026
12,710
5,527,046
6,250
2,151
12,963
7,541,012
374
1,780
6,250
1,778
11,183
5,857,306
604,381
2,031,703
1,683,705
TABLE MI-BUDGET RECEIPTS AND OUTLAYS-*Continued
Undistributed offsetting receipts:
Federal employer contributions to retirement and
social insurance funds:
Legislative Branch:
United States T a x Court:
The Judiciary:
Judicial survivors annuity fund.
Department of Health, Education, and Welfare:
Federal old-age and survivors insurance trust
fund....
Federal disability insurance trust fund..
Federal hospital insurance trust fund .......
Department of State:
Foreign service retirement and disability fund.
Other independent agencies:
Civil Service Commission:
Civil service retirement and disability fund
Receipts from off-budget Federal agencies:
Independent agencies:
Civil Service Commission:
Civil Service Retirement and Disability Fund
Applicable
Receipts
Outlays
Net
Outlays
Federal supplementary medical ins. trust fund .
Department of Labor:
Department of State:
Foreign service retirement and disability fund..
Department of Transportation:
Alroort and airwav tni<?t fund
Veterans Administration:
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
-$8
-$8
-$8
-$8
-$65
-$65
-194
-194
-64
-64
-72,000
-9,000
-14,000
-874
-72,000
-9,000
-14,000
-874
-220,000
-29,000
-45,000
-3,539
-220,000
-29,000
-45,000
-3,539
-198,000
-25,000
-40,000
-3,553
-198,000
-25,000
-40,000
-146,537
-146,537
-592,247
-592,247
-557,694
-557,694
-47,095
-47,095
-95,138
-95,138
-100,488
-100.488
-289,571
-289,571
-985,125
-985,125
-924,807
-924,807
-156
-156
-136
-136
Interest on certain Government accounts:
Interest credited to certain Government accounts:
The Judiciary:
Department of Defense:
Civil:
Soldiers' and Airmen's H o m e permanent fund.
Department of Health, Education, and Welfare:
Federal old-age and survivors ins. trust fund ,.
Comparable Prior Quarter
Transition Quarter to Date
This Month
Classification of
O U T L A Y S - - Continued
[In thousands)
-3,553
-1,477
-1,477
-1,477
-1,477
-1,535
-1,535
-17,006
-3,527
-1,410
-2,048
-9,581
-17,006
-3,527
-1,410
-2,048
-9,581
-79,678
-13,267
-4,964
-4,420
-54,647
-79,678
-13,267
-4,964
-4,420
-54,647
-73,088
-13,029
-4,935
-3,394
-63,831
-73,088
-13,029
-4,935
-3,394
-31
-31
-117
-117
-174
-174
-504
-5,759
-504
-5,759
-937
-13,372
-937
-13,372
-873
-11,890
-873
-11,890
-22
-22
-42
-8,113
-42
-8,113
-45
-8,113
-8,113
-63,831
-45
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23
TABLE IV-MEANS OF FINANCING (In thousands)
Net Transactions
(-) denotes net reduction of either
liability or assets accounts
Classification
(Assets and Liabilities
Directly Related to the Budget)
This Month
Transition Comparable
Prior
Quarter
Quarter
to Date
Account Balances
Current Transition
Quarter
Beginning of
This Quarter This Month
Close of
This Month
LIABILITY A C C O U N T S
rowing from the public:
ublic debt securities, issued under general
financing authorities:
Obligations of the United States, issued by:
United States Treasury
Federal Financing Bank
$1,373,269 $14,268,983
Total public debt securities
gency securities, issued under special financing
iuthorities (See Schedule B . For other agency
Dorrowing, see Schedule C.)
rued interest payable on public debt securities
Deduct:
Accrued interest receivable on public debt securities
held as investments of government accounts
Total accrued interest payable to the public....
>sit funds:
locations of special drawing rights
3
620,432,257 633,327,971
$634,701,165
75
1,373,269 14,268,983
20,458,495
194,091
-7,706
1,354,067 14,463,074
20,450,789
-1,925,222 -3,513,684
-3,001,169
151,565,894 149,977,432
148,052,209
479,719,133 494,416,603
497,695,892
-19,202
Deduct:
Federal securities held as investments of
government accounts (See Schedule D )
$20,459,065 $620,432,182 $633,327,896
-570
75
75
634,701,240
11,066,063
11,046,861
631,285,027 644,394,035
645,748,101
10,852,770
3,279,289
17,976,759
23,451,958
-385,465
143,523
2,137,539
-1,390,668
-311,922
1,712,458
311,922
1,390,668
1,005,202
455,446
425,081
3,922,351
3,372,595
4,377,797
14,494
-404,512
25,225
9,273
-165,495
148,583
2,629,119
3,050,678
2,639,851
3,464,463
2,654,344
3,059,951
848,644
92,319
-2,173,796
5,644,863
4,888,537
5,737,182
4,743,117 18,559,021
21,686,332
494,966,145 508,782,049
513,525,166
4,234,274
4,763,262
4,377,797
tellaneous liability accounts (Includes checks
Total liability accounts
A S S E T A C C O U N T S (Deduct)
and monetary assets:
S. Treasury operating cash
;cial drawing rights:
Total holdings
SDR certificates issued to Federal Reserve Banks
Id tranche drawing rights:
J.S. subscription to International Monetary Fund:
Direct quota payments
Maintenance of value adjustments
)ther demand liabilities issued to I M F
teceivable/Payable (-) for U. S. currency valuation
adjustment
5,705,018
2,579,478
2,940,514
14,834,741
11,709,201
17,414,219
31,281
-100,000
40,734
-100,000
-116,420
2,315,900
-700,000
2,325,353
-700,000
2,356,633
-800,000
-68,719
-59,266
-116,420
1,615,900
1,625,353
1,556,633
42,332
132,000
73,675
725,000
-483,358
157,352
6,700,000
978,837
-4,466,289
6,700,000
1,010,180
-3,873,289
6,700,000
1,052,512
-3,741,289
-20,058
-34,773
283,651
22,420
7,705
-12,352
154,274
763,903
-42,355
3,234,968
3,844,596
3,998,870
163,090
-385,395
-1,030,498
4,023,558
3,475,074
Sfi^R164
5,953,663
2,898,720
1,751,241
23,709,166
20,654,223
26,607,886
7
Balance .
er cash and monetary assets
Total cash and monetary assets
llaneous asset accounts
Total asset accounts
s of liabilities (+) or assets (-)
actions not applied to current year's surplus or deficit
Schedule A for details)
budget financing [Financing of deficit (+) or
sition of surplus (-)]
Dtnotes on page 3.
-484,819
781,347
635,994
2,849,716
4,115,882
3,631,063
5,468,843
3,680,067
2,387,235
26,558,882
24,770,106
30,238,949
+19,299,097 +468,407,262 +484,011,943
+483,286,217
-725,726 +14,878,954
-31,453 -2,178,725
-757,179 +12,700,230
-769,159
-2,147,272
+18,529,938 +468,407,262 +481,864,671
-2 178 725
+481,107,492
24
TABLE IV-SCHEDULE A--ANALYSIS OF CHANGE IN EXCESS OF LIABILITIES (In thousands)
Classification
Excess of liabilities beginning of period:
Based on composition of unified budget in preceding period.
Adjustments during current fiscal year for changes in
composition of unified budget
Excess of liabilities beginning of period (current basis)
Transition
Quarter
to Date
This
Month
Comparable
Prior
Quarter
$484,011,943 $468,407,262 $395,345,957
484,011,943
468,407,262
395,345,957
Budget surplus (-) or deficit:
Based on composition of unified budget in prior fiscal year .
Changes in composition of unified budget
-757,179
12,700,230
18,529,938
Budget surplus (-) or deficit (Table III)
-757,179
12,700,230
18,529,938
-43,072
-98,938
-198,988
"l22*,274
-38,903
129', 355
Transactions not applied to current year's surplus or deficit:
Seigniorage
Increment on gold
Net gain (-)/loss for U. S. currency valuation adjustment ..
Conversion of interest receipts of government accounts to
an accrual basis
Off-budget Federal agencies:
Export-Import Bank of the United States
Pension Benefit Guaranty Corporation
Postal Service
Rural electrification and telephone revolving fund
Rural telephone bank
Housing for the elderly or handicapped fund
Federal Financing Bank
Total--transactions not applied to current year's surplus
or deficit
Excess of liabilities close of period
3
311,922
311,922
139,762
343
-556,994
-135,278
3,910
-1,283
334,417
222,596
-293
-726,065
-80,477
16,637
-2,871
2,575,115
295,119
-1,415
-935,403
107,394
29,436
-3,378
1,347,038
31,453
2,178,725
769,159
483,286,217
483,286,217
414,645,054
See footnotes on page 3.
TABLE IV--SCHEDULE B--AGENCY SECURITIES, ISSUED UNDER SPECIAL
FINANCING AUTHORITIES (In thousands)
Account Balances
Current Transition
Quarter
Net Transactions
(-) denotes net reduction of
liability accounts
Classification
This Month
Agency securities, issued under special financing authorities:
Obligations of the United States, issued by:
Export-Import Bank
Obligations guaranteed by the United States, issued by:
Department of Defense:
Family Housing Mortgages
Department of Housing and Urban Development:
Federal Housing Administration
Department of Transportation:
Coast Guard:
Family Housing Mortgages
Obligations not guaranteed by the United States, issued by: '
Department of Defense:
Homeowners Assistance Mortgages
Department of Housing and Urban Development:
Government National Mortgage Association
Independent agencies:
Postal Service
Tennessee Valley Authority
Total agency securities
Transition
Quarter
to Date
Comparable
Prior
Quarter
$367,200
Beginning of
This
Quarter
This
Month
Close of
This Month
$2,593,115
$2,960,315
$2,960,31E
-$15,296
-35,128
-118,581
1,168,914
1,149,082
1,133,786
-4,014
-2,951
47,121
581,069
582,132
578,118
-48
-62
2,090
2,042
2,042
18
-1,184
2,582
2,493
2,601
-35,000
-35,000
4,180,000
4,145,000
4,145,000
250,000
2,075,000
250,000
1,975,000
250,000
1,975,000
10,852,770
11,066,063
11,046,861
107
"-166*666
-19,202
194,091
-7,706
25
TABLE IV--SCHEDULE C (MEMORANDUM)--AGENCY BORROWING FINANCED THROUGH
ISSUE OF PUBLIC DEBT SECURITIES (In thousands)
Account Balances
Current Transition
Quarter
Transactions
Classification
This Month
Transition
Quarter
to Date
Comparable
Prior
Quarter
Beginning of
This Quarter
This Month
Close of
This Month
Borrowing from the Treasury:
Agency for International Development
Commodity Credit Corporation
Export-Import Bank of the United States.
Federal Financing Bank
Federal H o m e Loan Bank Board
Federal Housing Administration:
General insurance
Special risk insurance ,
Government National Mortgate Association:
Emergency H o m e Purchase Assistance fund
Management and liquidating functions
Special assistance functions
Rural Electrification Administration
Rural Telephone Bank
Saint Lawrence Seaway Development Corporation
Secretary of Agriculture, Farmers H o m e Administration:
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Secretary of Housing and Urban Development
Department:
College housing loans
National flood insurance fund.
New communities guaranty fund:
Title IV.
Title V H
Urban renewal fund
Secretary of the Interior:
Bureau of Mines, helium fund
Secretary of Transportation:
Rail Service Assistance
Regional Rail Reorganization
Smithsonian Institution:
John F. Kennedy Center parking facilities
Tennessee Valley Authority
United States Information Agency
Veterans Administration:
Veterans direct loan program
D. C. Commissioners: Stadium sinking fund, A r m o r y
Board, D. C
$715,946
62,200
3,471,157
-43,271
-#5,400
-2,878,370
-54,084
1,772,781
160,706
$2,840,048
10,824
22,413,168
1,533,954
$3,314,926
10,824
25,051,833
1,490,683
$3,555,993
73,024
25,884,325
1,490,683
40,000
120,000
92,000
128,000
108,000
2,727,268
1,939,000
2,847,268
1,991,000
2,847,268
2,031,000
-124,173
-621,836
715,200
1,562,450
58,190
4,503,299
7,511,917
191,388
118,476
755,718
676,000
285,000
1,064,787
58,190
4,875,157
7,568,673
198,209
118,476
755,718
676,000
360,000
940,614
58,190
4,908,527
7,409,108
200,733
118,476
830,718
676,000
360,000
2,811,000
115,819
2,811,000
119,843
2,811,000
119,843
1,771
6,671
800,000
1,794
23,623
800,000
2,134
27,165
800,000
250,650
250,650
251,650
52,479
1,522
52,479
1,522
52,479
1,522
20,400
150,000
22,114
20,400
150,000
22,114
20,400
150,000
22,114
1,730,078
1,730,078
1,730,078
1,663
832
832
$241,067
62,200
832,492
"33',370
-159,565
2,524
75,000
405,228
-102,809
9,345
"412i 959
^800
75,000
75*666
4,024
340
3,543
363
20,495
1,000
1,000
6,820
-1,000
-832
1,007,798
4.283,010
364,812
53,090,867
56,366,079
57,373,876
500,000
175,000
Postal Service
-216,450
Tennessee Valley Authority
....'......'.'.'.'..'.'.'.
458,550
Export-Import Bank of the United States
'.
500,000
555,000
-216,450
95,000
332,550
2,748,000
2,180,000
4,984,600
2,748,000
2,560,000
4,984,600
3,248,000
2,735,000
4,768,150
838,550
427,550
9,912,600
10,292,600
10,751,150
5,121,560
792,362
63,003,468
66,658,679
68,125,026
Total Borrowing from the Treasury
Borrowing from the Federal Financing Bank:
Total Borrowing from the Federal Financing Bank
Total Agency Borrowing financed through
issues of Public Debt Securities
1,466,348
only amounts loaned to Federal Agencies in lieu of Agency Debt issuance and excludes Federal Financing Bank purchase of loans
guaranteed by Federal Agencies. The Federal Financing Bank borrows from Treasury and issues its o w n securities and in turn
1 these funds to Agencies in lieu of Agencies borrowing directly through Treasury or issuing their o w n securities.
TABLE IV--SCHEDULE D--INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES(ln thousands)
26
Net Purchases or Sales (-)
Classification
This Month
Transition
Quarter
to Date
Comparable
Prior
Quarter
Securities Held as Investments
Current Transition Quarter
Beginning of
This Month
$35,215
$35,215
$35,215
101,755
104,995
106,470
Federal Funds:
Department of Agriculture:
Agency securities
Department of C o m m e r c e .
Department of Housing and Urban Development:
Federal Housing Administration:
Federal housing administration fund:
Public debt securities
Agency securities
!!!!.'!.'.
Government National Mortgage Association:''
Special assistance function fund:
Agency securities
Management and liquidating functions fund':'
Agency securities
Guarantees Of Mortgage-Backed Securities:
Public debt securities
Agency securities
Participation sales fund:
Public debt securities
Agency securities
.......
Housing Management:
Community disposal operations fund:
Agency securities
Rental housing assistance fund
N e w Communities Administration:
N e w communities fund
Federal Insurance Administration:
National insurance development fund
Department of the Interior:
Bonneville Power Administration
Veterans
Administration:
Department
of Transportation
Veterans reopened
insurance fund
Department
of Treasury
Independent agencies:
Emergency Loan Guarantee Board
Federal Energy Administration
.'.
Federal Savings and Loan Insurance CorporationPublic debt securities
Agency securities
National Credit Union Administration .'..'.'
Other
Total public debt securities ,
Total agency securities.
Total Federal funds.
Trust Funds:
Legislative Branch:
United States T a x Court
Library of Congress.
.'.'.
The Judiciary:
Judicial Survivors Annuity Fund ,
Department of Agriculture ,
$1,475
$4,715
2,245
10,165
-1
27,683
-3
45,510
-2
1,524,203
191,207
1,562,051
191,204
1,551,886
191,203
-917
-2,120
16,653
111,203
110,000
109,083
-280
-123
2,289
-901
-730
39,879
39,736
39,456
5,800
-901
2,836
233
33,449
4,092
36,960
4,092
39,249
3,191
47,297
26,794
45,845
1,578,214
86,745
1,557,711
86,745
1,605,008
86,745
-50,165
-46,710
4,041
Department of Health, Education, and WelfareFederal old-age and survivors insurance trust fundPublic debt securities
Agency securities '..'.'..'.
Federal disability insurance trust' hind'
Federal hospital insurance trust fundPublic debt securities
Agency securities
'.
S h e " 1 S u p p l e m e n t a r y medical"insurance' trust 'fund.'
388
46,710
388
50,165
388
-3,778
1,521
11,990
90,176
91,697
91,697
-29,115
315
7,672
5,200
315
17,766
40,335
34,145
14,100
1,511,570
68,460
14,100
1,521,664
39,345
14,415
1,529,337
360
3,512
3,220
350,131
353,283
353,643
1,875
23,280
1,712,430
24,630
25,930
108,778
4,090,182
141,977
70,765
261,890
9,808,553
609,357
1,300
12,655
2,650
-1,712,430
135,230
15", 820
-1,040
865
-2,928
6,650
""-825
13,510
-16,257
-2,100
-1,524,232
-3,448
291,402
16,154
3,967,607
141,977
72,653
256,105
11,316,528
610,704
-18,356
-1,527,679
307,556
11,927,232
10,417,909
10,399,553
22
-180
22
140
543
1,340
543
1,520
565
1,340
230
171
10,691
10,922
10,921
-65
50
607
622
542
35
35
35
1,274
1,699
1,108
37,412,610
555,000
6,930,738
37,510,245
555,000
6,524,758
36,499,847
555,000
6,453,247
10,892,180
50,000
1,230,135
187
10,643,333
50,000
1,423,507
187
10,959,482
50,000
1,243,945
187
Department of Commerce.,
Department of Defense.
Close of
This Month
This Quarter
-591
-166
-1,010,398
-912,763
-71,511
316,149
-179,562
-1,043,469
-khY, 491
^43l',545
67,302
264,796
13^810
-65J146
-30
4,102,837
141,977
69,725
262,755
9,792,296
607,257
27
TABLE IV--SCHEDULE D--INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES—Continued (In thousands)
—
Net Purchases or Sales (-)
Classification
This Month
Transition
Quarter
to Date
Securities Held as Inv<jstments
Current Transition C
Comparable
Prior
Quarter
Beginning of
This Quarter
This Month
Close of
This Month
Trust Funds--Continued
-$1,020
$2,780
-$2,145
511,490
$15,290
$14,270
-666,587
104,068
-1,301
-1,588,757
4,810,035
6,673
5,580,690
5,372
4,914,103
5,372
-2,110
-6,244
-11,305
181,852
215
177,718
215
175,608
215
62,876
7,887
183,030
-78,601
136,537
-561,257
2,529,171
9,030,477
10
2,649,325
8,943,989
10
2,712,201
8,951,876
-5,450
22,200
11,100
26,260
53,910
48,460
400
458
916
3,527
3,585
3,985
-2,975
-8,948
-9,952
569,027
563,054
560,079
511
25,259
24,088
1,435
5,881
6,135
6,930,933
310,000
476,384
1,143
6,955,681
310,000
480,830
1,143
6,956,192
310,000
482,265
1,143
-318,322
-769,743
-514,411
-10,550
14,836
-600
-133,030
210
-50
-328,782
-14,171
31,057
-1,800
-127,752
210
-487
-659,534
-11,977
89,929
""l34,'691
43,059,637
375,000
336,085
2,100,891
19,081
6,734,835
18,675
10,535
3,962,655
50,000
42,608,216
375,000
332,464
2,117,111
17,881
6,740,113
18,675
10,098
3,631,903
50,000
42,289,894
375,000
321,914
2,131,947
17,281
6,607,083
18,885
10,048
-2,327,473
-2,602,758
-4,136,836
137,299,928
1,340,000
137,024,643
1,340,000
134,697,169
1,340,000
-2,327,473
-2,602,758
-4,136,836
138,639,928
138,364,643
136,037,169
9,260
-9,600
27,660
Department of Labor:
Department of State:
Other
Department of Transportation:
Veterans Administration:
Government life insurance fund
National service life insurance fund:
Agency securities
General Post Fund National H o m e s
Independent agencies:
Civil Service Commission:
Civil service retirement and disability fund:
Agency securities
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
Federal Deposit Insurance Corporation
Japan-United States Friendship Commission
Harry S. Truman Memorial Scholarship Trust Fund ...
Railroad Retirement Board:
-565,396
Agency securities
Total public debt securities
Total agency securities
Total trust funds
Off-budget Federal agencies:
Export-Import Bank of the United States.
Postal Service:
Public debt securities
Agency securities
Rural electrification and telephone revolving fund
Pension Benefit Guaranty Corporation
Total public debt securities
Total agency securities
Total Off-budget Federal agencies
Grand Total...
9,600
96,465
• • • • • • • • • • D
114,865
124,125
1,019,213
1,431,200
4,401
56,401
4,401
55,761
828,111
994,759
3,975
1,194,880
1,615,487
616,754
828,111
998,734
1,194,880
1,615,487
-3,513,684
-3,001,169
151,565,894
149,977,432
148,052,209
200
200
200
200
200
200
828,312
420,608
620,729
-3,975
420,608
-1,925,222
-640
3,303,121
50,000
827,988
3,975
4,855
55,851
603,213
-3,975
-454
-90
411,988
•
10
-998
797
MEMORANDUM
Investments in securities of privately owned
? r ? i r n m e n t " s p o n s o r e d enterprises:
Milk market orders assessment fund
Total
Note: Investments are in public debt securities unless otherwise noted.
TABLE V-COMPARATIVE STATEMENT OF BUDGET RECEIPTS AND OUTLAYS
BY MONTHS OF TRANSITION QUARTER
28
(Figures are rounded in millions of dollars and m a y not add to totals)
Classification
July
Aug.
Oct.
Sept.
Dec.
NOV.
April
March
Feb.
Jan.
May
June
Transit
ComQuartet parable
to
Prior
Date
Quarter
RECEIPTS
Individual income taxes
$11,201 $12,088 $15,513
Corporation income taxes.
1,513
689
6,259
Social insurance taxes and
contributions:
Employment taxes and
5,937 9,328
6,538
Unemployment insurance....
723 1,822
153
Contributions for other
408
464
386
insurance and retirement ..
1,510 1,476
1,486
Excise
taxes
Estate and gift taxes
454
547
453
Customs
389
394
429
Miscellaneous
524
552
537
Total—receipts transi22,660 27,360 31,753
Total-receiptsprior quarter. . .
20,056 23,604
.
"
'
•
"
'
!
$38,801
8,460
$33,628
8,000
21,803
2,698
19,200
1,775
1,258
4,473
1,455
1,212
1,613
1,147
4,338
1,364
927
1,897
81,773
28,615
72.275
OUTLAYS
Legislative Branch
Executive Office of the
Funds appropriated to the
President:
International security
assistance development
International
Other
Department of Agriculture:
Foreign assistance, special
export programs and
Commodity Credit
Other
Department of C o m m e r c e
Department of Defense:
Military:
Department of the A r m y
Department of the Navy ...
Department of Air Force ..
Defense agencies
50
27
109
23
6
5
402
449
36
225
85
199
44
6
16
18
379
-315
468
434
70
62
93
46
609
144
428
204
832
3,018
534
2,682
477
;
»:
I
241
867
178
312
954
159
279
1,197
197
1,612
2,408
2,277
945
5
1,597
2,221
2,027
976
5
2,060
2,449
2,288
1,051
7
7,246
6,826
7,855
168
209
206
1,493
1,555
1
—H
Total Military
Civil
Department of Health,
Education, and Welfare:
Social and Rehabilitation
Federal old-age and
survivors insurance trust
1,485
Federal disability insurance
Federal hospital insurance
Federal supplementary
medical insurance trust
fund
Other
67
36
1
5,676
5,702
5,732
868
886
899
1,102
1,138
1,163
447
1,657
480
1,618
1
i
1
1
|
"|
.
i
474
1,965
:'
466
5,268
7,078
6,591
2,971
18
5,362
6,894
6,510
2,629
21,926
21,402
583
568
4,533
3,864
17,110
15,431
2,653
2,286
3,404
2,893
1,401
5,240
1,182
5,058
8
TABLE V--COMPARATIVE STATEMENT OF BUDGET RECEIPTS AND OUTLAYS
BY MONTHS OF TRANSITION QUARTER-Continued
(Figures are rounded in millions of dollars and may not add to totals)
Classification
Sept.
July
Aug.
£1,125
253
215
-1134
280
154
£'406
255
181
1,213
696
233
1,270
945
50
1,062
720
34
Oct.
Jan.
Dec.
Nov.
Feb.
Transit 1 ComQuarter | parable
to
i Prior
Date
Quarter
June
May
April
March
OUTLAYS--Continued
li
Department of Housing
SI,397 !
788
,
551
£2,786
775
567
i
3,544
2,362
316
4,537
2,061
295
1,726
1,276
1,773
1,124
8,102
104
1,588
-94
7,066
72
1,528
-251
1,051
720
1,108 !
716
Department of Labor:
Department of State
Department of Transportation:
Highway trust fund
Department of The Treasury:
Interest on the public debt....
Interest on refunds, etc
General revenue sharing
Other
Energy Research and Development Administration
Environmental Protection
482
464
629
356
3,754
27
1,587
-272
2,862
29
233
336
439
338
331
-130
101
32
174
I
i
616
457
!
3
1,486
48
(-)
4
482
General Services
344
Veterans Administration:
Compensation and pension....
Other
Independent agencies:
Civil Service Commission....
Postal Service
Small Business
Administration
Tennessee Valley Authority ..
Other ind. agencies
Undistributed offsetting receipts:
Federal employer contributions to retirement fund
Interest credited to certain
accounts
Rents and Royalties on Outer
Continental Shelf Lands
Allowances Undistributed
359
250
|
i
694
(**)
4
653
699
-7
4
689
695
-4
3
528
849
434
684
820
504
26
114
677
37
65
494
14
53
755
-321
-374
-751
-64
i
i
953'
991
1,870:
2,353
9381
1,961
1,587
78
232
1,926
255
1,745
-290
-985j
-925
-550
1,030
-270
-291
-289
-958
-1,311|
-305
!
2,088
-11:
1
' !
|
:
:
!
308
'
1
1
j
33,906
29,571
31,108
30,654\ 29,044 |
30,996
,
,
94,4731
90,805
i
-11,247
Surplus (+) or deficit (-) prior quarter
. .
-11,052
See footnotes on page 3.
-70
1,936
-6
11
2,205
j
i
Total outlays--transition
Surplus (+) or deficit (-) transition quarter
3
i
National Aeronautics and
-2,211j
-7,050
+757
-429\
-12,700
j
1
r-
|
"
1~
1
• —
-18,530
30
TABLE VI-TRUST FUND IMPACT ON BUDGET RESULTS AND INVESTMENT HOLDINGS (In millions)
Transition Quarter to Date
Current Month
Classification
Receipts
Trust receipts, outlays, and investments held:
Federal old-age and survivors
Federal -disability insurance
Excess of
Outlays receipts
or outlays^)
Receipts
Trust funds receipts and outlays
on the basis of Table in and
investments held from
Table IV-D
Interfund receipts offset against
trust fund outlays
$15,886
2,130
3,459
$16,811
2,611
3,351
-$924
-481
107
$37,968
6,931
10,942
$38,065
6,525
10,693
$37,05E
6,4K
11,005
177
209
372
573
-196
-364
539
720
519
1,517
20
-797
1,230
43,616
1,424
43,161
1,244
42,84]
-16
133
28
(**)
619
-517
305
877
-2
-109
16
-133
68
38
-133
186
1,740
-68
726
-576
-166
13
28
2,456
6,735
2,529
2,467
6,740
2,649
2,471
6,601
2,712
-60
517
-280
-724
2
112
-38
133
91
1,588
1,744
-726
905
2,864
-13
-19
9,030
8,944
8,952
4,013
4,810
8,286
93
3,682
5,581
8,310
124
3,3K
4,914
8,30£
HI
7,735
9,939
-2,204
31,048
31,336
-288
138,639
138,365
136,037
768
768
2,782
2,782
8,503
10,707
-2,204
33,830
34,118
-288
24,018
21,057
2,961
54,052
66,464
-12,412
11
11
33
33
24,029
21,068
54,085
66,497
-779
-779
-6,142
-6,142
31,753
30,996
81,773
94,473
560
25
153
3
277
3,327
1,676
328
2,698
9
Total trust fund receipts and
Federal fund receipts and outlays on
the basis of Table m
Interfund receipts offset against
Federal fund outlays
Total Federal fund receipts and
Total interfund receipts and outlays...
Net budget receipts and outlays
See footnotes on page 3
This month
Close of
this month
-$1,330
-77
245
96
Veterans life insurance.
All other trust
This
Quarter
$5,643
887
1,146
Federal Deposit Insurance Corp....
General Revenue Sharing
Highway
Military assistance advances
Railroad retirement
Beginning of
$4,313
809
1,390
Federal supplementary medical
Federal employees retirement
Federal employees life and health
Outlays
Excess of
receipts
or outlays^)
Securities Held as Investments
Current Transition Quarter
2,961
757
-12,412
-12,700 j
TABLE VII--SUMMARY OF RECEIPTS BY SOURCE AND OUTLAYS BY FUNCTION (In thousands)
31
Total Budget
Source
This Month
Transition Quarter
to Date
Comparable Prior
Quarter
N E T RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
? Contributions for other insurance and retirement ..
Excise taxes
Estate and gift taxes
Customs
Miscellaneous
Total
OUTLAYS
National defense
International affairs
General science, space, and technology
Natural resources, environment, and energy
Agriculture
Bommeree and transportation
,
Community and regional development
,
Education, training, employment and social services..
Health
Income security
Veterans benefits and services
Law enforcement and justice
General government
Revenue sharing and general purpose fiscal assistance.
Interest
Undistributed offsetting receipts
Total
$15,512,762
6,258,508
$38,800,969
8,460,466
£33,627,694
8,000,002
6,537,847
152,622
386,258
1,486,343
453,464
428,758
536,829
31,753,393
21,803,012
2,697,903
1,258,218
4,472,698
1,454,592
1,212,173
1,612,734
19,199,671
1,775,324
1,146,586
4,338,051
1,363,778
927,192
1,896,938
81,772,766
72,275,235
7,658,718
151,977
308,836
1,173,304
530,998
1,977,211
524,549
1,861,555
2,843,427
10,955,353
1,222,964
300,214
311,553
137,108
30,996,214
1,255,688
-217,240
22,388,851
1,449,751
1,128,573
3,591,726
760,073
4,684,861
1,505,295
4,683,016
8,992,124
32,838,104
3,974,959
859,667
854,162
2,024,055
94,472,996
7,304,310
-2,566,530
22,421,382
950,356
1,202,195
2,642,381
758,858
6,344,692
1,362,317
4,358,908
7,774,860
30,650,313
4,164,476
765,992
550,170
1,921,309
90,805,173
6,457,283
-1,520,320
For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington, D. C. 20402
Subscription price $62.20 per year (domestic), $15.55 per year additional (foreign mailing), includes all issues of Daily Treasury Statement,
the Monthly Statement of the Public Debt of the United States and the Monthly Treasury Statement of Receipts
and Outlays of the U.S. Government. N o single copies are sold.
GPO 908-327
FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE
October 27, 1976
TREASURY NOVEMBER QUARTERLY FINANCING
The Treasury will raise about $2,000 million of new
cash and refund $3,994 million of securities maturing
November 15, 1976, by issuing $3,000 million of 3-year
notes, $2,000 million of 7-year notes, and $1,000 million
of 23-1/4 year bonds.
The $3,994 million of maturing securities to be
refunded in the general offering are those held by private
investors. Government accounts and Federal Reserve Banks,
for their own accounts, hold $331 million of maturing
securities that may be refunded by issuing additonal
amounts of new securities. Additional amounts of the notes
and the bonds may also be issued, for new cash only, to
Federal Reserve Banks .as agents for foreign and international
monetary authorities.
Details about each of the new securities are given in
the attached "highlights" of the offering and in the official
offering circulars.
It should be noted that the maximum amount of tenders
that will be accepted on a noncompetitive basis for preferred
allotment has been increased from $500,000 to $1,000,000.
oOo
Attachment
WS-1144
HIGHLIGHTS OF TREASURY
OFFERINGS TO THE PUBLIC
NOVEMBER 1976 REFUNDING
76
TO BE ISSUED NOVEMBER 15, 1
Amount Offered:
To the public
Description of Security:
Term and type of security
Series and CUSIP designation
$3,000 million
3-year notes
Series K-1979
(CUSIP NO. 912827 GC 0)
Maturity date November 15, 1979
Call date
interest coupon rate
No provision
To be determined based on
the average of accepted bids
investment yield To be determined at auction
Premium or discount
To be determined after auction
interest payment dates
May 15 and November 15
Minimum denomination available
$5,000
Terms of Sale: .
Method of sale
Accrued interest payable by
investor
Preferred allotment
October 27, 1976
$2,000 million
$1,000 million
7-year notes
Series B-1983
(CUSIP NO. 912827 GD 8)
November 15, 1983
No provision
To be determined based on
the average of accepted bids
To be determined' at auction
To be determined after auction
May 15 and November 15
$1,000
23-1/4-year bonds
7-7/8% Bonds of 1995-2000
(CUSIP No. 912810 BS 6)
February 15, 2000
February 15,.1995
7-7/8%
To be determined at auction
To be determined after auction
February 15 and August 15
$1,000
Yield Auction
Price Auction
None
Noncompetitive bid for
$1,000,000 or less
$19.68750 per $1,000
Noncompetitive bid for
$1,000,000 or less
5% of face amount
5% of face amount
Acceptable
Acceptable
deadline for receipt of tenders Wednesday, November 3, 1976,
by 1:30 p.m., bai
Thursday, November 4, 1976,
by 1:30 p.m., EST
Friday, November 5, 1976,
by 1:30 p.m., EST
Settlement date (final payment due)
Settlement^ ^ F e d e r a i F f u n d s
Monday, November 15, 1976
b) check drawn on bank
within FRB district where
submitted
Wednesday, November 10, 1976
c) check drawn on bank outside
FRB district where
submitted
Monday, November 8, 1976
Delivery date for'coupon securities. Monday, November 15, 1976
Monday, November 15, 1976
Monday, November 15, 1976
Wednesday, November 10, 1976
Wednesday, November 10, 1976
Monday, November 8, 1976
Monday, November 15, 1976
Tuesday, November 9, 1976
Monday, November 15, 1976
Deposit requirement 5% of face amount
Deposit guarantee by designated
institutions
Yield Auction
None
!?° n C ° m p ^H t i V e -, b l d
$1,000,000 or less
f
°r
Acceptable
1.
Today T.-:e are announcing the terms of our
November 15 quarterly financing in which we will be
refunding about $4 billion of maturing privately-held
debt and raising approximately $2 billion of our
fourth quarter new cash needs.
2. There is only one maturing issue --a 6-l/47o note
that was originally sold on September 8, 1971, in the
amount of $1.3 billion, and then reopened in the amount
of $3 billion as part of the November 15, 1972 financing
package. On both occasions, the sale was an auction.
The total outstanding is $4,325 million, with
Government accounts and the Federal Reserve holding
some $339 million of the total, according to our
latest figures.
3. The new issues we are offering for settlement
on November 15 include a three-year note, a seven-year
note, and a long bond in the 25-year maturity range.
Specifically, the issues include:
a. A 3-year note, due November 15, 1979, in
the amount of $3 billion. This issue will be auctioned
on a yield basis on Wendesday, November 3.
2
b. The 7-year issue is another note, due
November 15, 1983, in the amount of $2 billion, with
the auction on Thursday, November 4.
c. The long bond will be a reopening of the
7-7/8% bond of February 15, 1995 - 2000. There is
between $1.3 and $1.4 billion of this bond now privatelyheld. It was originally sold on February 18, 1975, and
was reopened in our May 17 financing this year. It has
been trading around 101+ on the bid side.
4. I would like to point out specifically that we
have raised the noncompetitive maximum for all three
issues from the $500,000 figure customary in the past
to $1 million. We believe that the opportunity to tender
a noncompetitive basis for amounts up to $1 million will
be attractive to smaller institutions which have not
investment
been able to satisfy their &&^2<&&S5X needs at the lower
level but have been unwilling to bid competitively
because they lack close contact with the market.
5. I would like to turn now to our cash needs for
the fourth quarter as we now see them.
3
As you know, we closed the books on September 30
with a cash balance of $17.4 billion. We would like
to aim for an end-of-December balance of approximately
$10 billion, which means about $7-1/2 billion of our
fourth quarter needs can be met simply by drawing down
our cash balance.
We also see a need for a total of about $ 19-21
billion of other financing; this is for the whole
October 1 - December 31 period.
A little over $3 billion of that will be covered
by nonmarketable securities, savings bonds mainly, but
also including some foreign nonmarketables. Some
$600 million were put on early this month. This would
$15-17
leave a balance of/
billion to be done in the market.
We have already done $2.5 billion in a five-year note,
$1.3 billion in a 2-year note, and will be doing
$2 billion, leaving a further $9-11 billion yet to
be done.
I think there should be no difficulty handling this
with the tools we have at hand. There are 2-year notes
at the end of November and December and we would expect
to sell a 4-year note early in December. We also
have a number of possibilities in the bill market, including
cash management bills that could be timed to mature in
January, when we presumably will be doing another 2-year note
4
in a slot that is now empty, or in April or June when we
have heavy tax receipts. We could also add to the 52-week
bill cycle, and to the regular weekly bills. I might
note that we have two small weekly bill maturities in
December, so that one possibility would be to enlarge
them to bring them into line with other outstanding
weekly bill maturities.
SHORT TERM INTEREST RATES
Weekly Averages
%
15
14
10
9
-J*
8
7
6
5
•
•
* ••••
uVl/
5
w
Prime Rate
13
12
Commercial
\?\ Paper Rate
11
10
9
8
Week Ending
October 20, 1976
*
if*
j J
3 Month
Treasury Bill Rate
VL» A ^
Js'
M?-^
- 1
I
**•>•*
4
3
i i I i
1973
Office of the Secretary of the Treasury
Office of Government Financing
i i i i i I i i i i i
1974
_L_L
Mill
1975
Calendar Years
I I 1I I I I
7
6
5
4
3
1976
October 26, 1976 12
SHORT TERM INTEREST RATES
Weekly Averages
Week Ending
October 20,1976
1
I- 7
r
Prime Rate
-6
..•—\,
Commercial
Paper Rate^,
>**
A '*••<
Jan.
Office of the Secretary of the Treasury
Office of Government Financing
.*•*"•»•....•»*:
..•"
>»•%.
v
/ ^
"*"-..^-/^
3 Month
-#/
Treasur Bi Rate
\ ^
y "
Federal Funds
Rate
Feb.
Mar.
Apr.
May June
1976
July
-5
Aug.
Sept
Oct.
October 26,1976-11
INTERMEDIATE AND LONG MARKET RATES
Monthly Averages
New Aa
Corporates v
10
J>'*+
..•*•'
v\\:L
v%**
N e w Conventional
Mortgages
/
/A
8
*•••.......<•••*
/
\
Week Ending
October 22, 1976
>*•••,
i
'•••'...••\
•**\
-r^
NV
V
/-*-*
'
s~ \ I A/ "~
7-Year
/^Treasury
\j^
^ New 20 Year
Municipal Bonds
I I I I I l l I I I l
I I I I I I I 1 I1
J
S N
1973
Office of the Secretary of the Treasury
Office of Government Financing
M
M
J S
1974
N
J M
M J S
1975
N
J M
M J S N
1976
October 26.1976-10
INTERMEDIATE & LONG MARKET RATES
Weekly Averages
New Conventional
Mortgages*
\
\
•
Week Ending
October 22,1976
v ••—————————j^** ^s^ ...••••••*,
« ^.....^••••.•••••"'•••••........—^
s *••••
^— Treasury 20-Year
»».
>»......,.„
New
Aa Corporates
mi
i
»•>.,
•••««.
v^.—««.*•
8
Treasury 10-Year
Treasury 7-Year
7New20-Year ^
Municipal Bonds
i i 1i i i I i
i i i I i
Jan.
Feb. Mar. Apr.
1976
i
May
June
July
i
i
i
i
i i
i
i
Aug. Sept. Oct.
* Monthly,, weekly data not available
Office of the Secretary of the Treasury
Office of Government Financing
October 26, 1976-9
TREASURY FINANCING REQUIREMENTS
July-September 1976
$Bil.
Uses
Increase in
Operating Cash
30
Redemptions
of Special
Issues*
20
Sources
1
29 /.
Gov't Acc't
^ Sales
Savings Bonds
* - & Other
Refundings
Maturities
10
im
Cash Deficit
Net New^l
Cash
0
* Includes maturing marketable securities of $l3/4 billion.
Office of the Secretary of the Treasury
Office of Government Financing
October ?l. 1976 26
TREASURY FINANCING REQUIREMENTS
October-December 1976^
$Bil.
Uses
Redemptions
of Special
Issues *
30
Sources
37V4
Maturities
Decrease in
Operating Cash
Gov't Acc't
Sales
Savings Bonds
& Other
lv
*
Refundings
20
t
3
26 /4
J
jr 3 /4
Cash Deficit
10
Done
Net N e w
Cash 16
^
12^4
To Be
Done
0
* Includes maturing marketable securities of $V* billion.
-i/Assumes $10 billion December 31 cash balance.
Office of the Secretary of the Treasury
Office of Government Financing
October 26. 1976-4
TREASURY OPERATING CASH BALANCE
Jan.
Feb. Mar
Office of the Secretary of the Treasury
Office of Government Financing
Apr.
May June July
1976
* Daily
Aug Sept. Oct.
October 26. 1976-8
TREASURY NET NEW MONEY BORROWING^
Calendar Year Halves
$Bil.
Coupons:
Over 10 yrs.
40
^
w 7-10yrs2-7 yrs.
30
W/A
2 yrs. and under
Bills
21.0
20
10
0
-3.1
-10
1974
Office of the Secretary of the Treasury
Office of Government Financing
I 1975
2/
1976
1/ Excludes Federal Reserve and Government Account transactions.
1/ Issued or announced through October 19,1976.
October 26, 1976 7
GROSS MARKET BORROWING 1974 - TO DATE
Calendar Year Halves
1974
Office of the Secretary of the Treasury
Office of Government Financing
1975
1976
1/ Gross public offerings of coupon issues and cash management bills; net offerings of regular bills.
Excludes Federal Reserve and Government Account transactions.
2/,Issued or announced through October 19,1976.
October26.19765
GROSS OFFERINGS OF MARKETABLE SECURITIES
Calendar Year Halves
232.6
Coupons:
|:£il£| Over 10 yrs.
217.8
7-15 yrs.
VZm
2-7 yrs.
'/////, 2 yrs. & under
187.7
••Bills 1687
w
145.6
//////.
I
II
1974
Office of the Secretary of the Treasury
Office of Government Financing
I
II
1975
* Issued or announced through October 19, 1976.
I
II*
1976
October 26. 19 7 6 6
PRIVATE HOLDINGS OF TREASURY MARKETABLE
DEBT BY MATURITY
$BII.
Coupons:
300
—
250
[llll! Over 10 yrs,
V>
7-10 yrs.
] 2-7 yrs.
2 yrs. & under
294.6
200- 183
150
100
50
Jan.
Mar.
May
Jul.
1975
Sep.
Nov.
* Estimated
Office of the Secretary of the Treasury
Office of Government Financing
Jan.
Mar.
May
1976
Jul.
Sep."
October 26.1976 15
MARKETABLE MATURITIES WITHIN 1 YEAR
$Bil.
180
150
120 :
90
60
30 —
0
150 —h
120
90
60 ~~
30
0
150 —
120
90 —
60
30 —
0
Bills
Privately Held
2 year cycle notes
All other
rotal
L55.5
Oct 31,1976*
119.6
21.6
14.3
]L36.2
Oct 31, 1975
L09.1
15.3
11.8
Oct 31 ,1974
95.6
75.0
16j6
4.0
* Estimated
Office of the Secretary of the Treasury
Office of Government Financing
October 21 1976 20
AVERAGE LENGTH OF THE MARKETABLE DEBT
Privately Held
Years
June 1966
5 years
4 months
5V&
Months
36
4l/2
I I I I I I
J
M
3l/2
M
J
1975
M
J
1976
N
September 1976
2 years
9 months
2V2
1966
Office of the Secretary of the Treasury
Office of Government Financing
1967 1968 1969
1970
11971
A
1972 1973 1974 1975 1976
October 21. 1976 1
EFFECT OF MID-QUARTER FINANCINGS
ON DEBT EXTENSION
2 years
9 monthst
Months
34
-J
Average Length ofMarketable Debt*
2 years
5 months
October 15,1976
32
30
25-year
11.3 Bond
28
Wtt'.'-WTO!
233/4-year
-4
10-year
Y/y Note
2-year
Note
82.3K
l
J
Office of the Secretary of the Treasury
Office of Government Financing
3-year
Note
* Privately Held
J
1976
Ear
i* Estimated
N
October 21.197M
ALLOTMENTS OF FIXED PRICE OFFERINGS IN 1976
8.0
All Others
6.0
4.7
Bank Investment
Dealers
Individuals:
$200,000 and over
y//////A.
$25,000-199,000
$10,000-24,000
$1,000-9,000
February
8 % 2/15/83
Office of the Secretary of the Treasury
Office of Government Financing
May
7 % % 5/15/86
August
8 % 8/15/86
October 21. 1976 18
MARKETABLE MATURITIES THROUGH DECEMBER 31,1977
Privately Held, Excluding Bills & Exchange Notes
J
Office of the Secretary of the Treasury
Office of Government Financing
J
1977
A
S
0
N
D
October 21. 1976 14
OWNERSHIP OF THE MATURING ISSUES
NOVEMBER 1976 — DECEMBER 1977 *
(In millions of dollars)
Maturing Issues
6%% Nt. Nov. 1976
7%% Nt. Nov. 1976
7%%Nt. Dec. 1976
8 % Nt. Feb. 1977
6% Nt. Feb. 1977
61/2% Nt. Mar. 1977
7%%Nt. Apr. 1977
6%% Nt. May 1977
9% Nt. May 1977
6%% Nt. May 1977
61/2%Nt.June 1977
71/2% Nt. July 1977
7 % % Nt. Aug. 1977
81/4%Nt.Aug. 1977
8 % % Nt. Sept. 1977
71/2% Nt. Oct. 1977
7 % % Nt. Nov. 1977
6%% Nt. Nov. 1977
71/4% Nt. Dec. 1977
Total
Total
Commercial
Privately
Banks
Held
Savings Institutions
LongIntermediateterm
term
I nvestors^/ I nvestors ^
State &
Local Corporations
General
Funds
Other
Foreign
Private
Holders
281
115
302
712
220
64
137
181
1,695
1,185
1,535
1,550
1,515
1,515
1,515
50
15
30
5
15
5
5
30
10
10
50
15
50
25
70
95
60
65
35
240
125
185
120
170
200
180
185
60
285
260
215
205
165
285
365
140
320
335
490
60
185
180
290
250
185
190
30
415
200
135
290
85
85
155
120
200
185
555
105
95
15
120
235
15
195
5
25
235
5
60
55
115
215
160
125
140
815
40
200
90
155
325
75
65
5
130
30
80
140
90
175
265
145
210
190
22,190
640
4,040
3,730
2,475
3,225
3,986
1,370
2,017
2,072
1,520
2,034
1,477
1,991
2,343
1,895
1,921
1,379
3,250
1,877
3,179
2,984
2,398
2,541
2,515
1,555
42,749
910
1,020
950
550
955
880
1,145
945
995
930
845
1,288
35
216
84
810
272
914
339
258
106
115
6,449
^ Based on August 1976 survey of ownership.
II Includes State and local pension funds and life insurance companies.
i-/Includes fire, casualty, and marine insurance, savings banks, savings and loan, and corporate pension funds.
Office of the Secretary of the Treasury
Office of Government Financing
October 26, 1976-1
MARKET YIELDS ON GOVERNMENTS
(Bid Yields)
8
Octobei' 22,197
/
%
/
fy
8
J-
57
10
4
12
14
1
1
5
6
16
18
20
1
22
24
1
8
26
28 30
1
10
Years to Maturity
Office of the Secretary of the Treasury
Office of Government Financing
October 26, 1976-13
TREASURY MARKETABLE COUPON ISSUES
TO PRIVATE INVESTORS
$Bil.
1976
10
8
::
6
j
4
2V
i
0
111
•
09
W/A
II 1 I I I I
i
6
1975
4
I 111
o
• Mh \w i Mn hil
i
1974
I
Jan.
Feb. Mar. Apr. May June
Oflice of the Secretary o* the Treasury
Office of Government Financing
• 2 year Cycle Note
GB) 4 year Cycle Note
T/l 5 year Cycle Note
July
Aug
• Long Bond
r^9 Intermediate Note
\M Short Note
I
Sept. Oct. Nov. Dec.
October 21 1976 l<>
TREASURY MARKETABLE MATURITIES
$Bil.
4
2
0
6
4
2
0
6
4
2
0
6
4
2
0
4
2
0
Privately Held, Excluding Bills and Exchange Notes
$Bil.|—
1981
1976
4.0
I
1.4
0
1977
43
1 3
h\*
.
2.0
•
2
20
•
3.2 oq
« ^2 42 5 2.5
Ik i •«! i Kli
1.9 19 .Jl.9 0 gUrf B8
g1978
I Jg 1 ill I
5.9
2.8
22^2.4 262f^
2.4
1979
2.9
1-8
1.9
1.7
2
J
I 1980
@
1.6
fj
1.7
£
1.6
2.1
1.1
J F M A M J J A S O N D
Office of the Secretary of the Treasury
Office of Government Financing
4^
2
0
2
0
6
4
2
0
2
0
2
0
8
6
4
2
0
2.9
1.9
1.7
I
1982 Lf
23
13
01
1983
1.1
1984
1.0
13
1985
1986
7.7
1
I
•
J F M A M J
• Securities issued prior to 1975.
r Z N e w issues calendar year 1975.
E H Issued or announced January 1 - October 15,1976.
J A S O N D
October 26,1976-2
TREASURY MARKETABLE MATURITIES
Privately Held, Excluding Bills and Exchange Notes
$Bil.
2|0
2
0
2
0
6
4
2
0
$Bil.
2h
0
2
1987
1988
0
2
0
20
2
0
2-
1989
1990
2.3
1.0
2h
0
6
4
2
0
4
210
4
2
0
J F M A M J
1991
1995
1996
1997
1998
1999
200014
13
19
oi-
1992
1.6
2001
20
8
2002
1.9
•
2003
1993
2004
2h
1994
0
2h
0
J A S O N D
1.0
2005
m
J F M A M J J A S O N D
• I Securities issued prior to 1975.
B 5 New issues calendar year 1975.
C D Issued or announced January 1 October 15, 1976.
Office of the Secretary of the Treasury
Office of Government Financing
October 26. 19/63
AGENCY MATURITIES v
Privately Held
$Bil. 1984
1
1985
3
" I7
0
1
1987
1986
15
. .1
1989
1988
.
AA
1991
1990
-3
0
.6
^2
mi
1992
*
0
1994
1993
1
2 2
.1
3
*
.1 .i .1
1997
1996
1995
1998
.1
1999
1
1981
3.0
•
0
1982
1
1983
0
1.8
.1
7
123 4 12 3 4
Office of the Secretary of the Treasury
Office of Government Financing
I
10
.7
8
£ • • £ £ • J.££JL
2002
2001
2000
2004
2005
2006
.1
2003
2007
n
0 -•
•
III
12341234
•
£
2
2
1234 1234 1234
Calendar Years Quarterly
•!/ Issued or announced through October 15, 1976.
* Less than $50 million.
1234
0c,ober?l l976?l
NET NEW MONEY IN AGENCY FINANCE
$Bil.
0
FCA
Privately Held
$Bil.
ill. nihil.III
0
FNMA
i.ll
I
-1-
FHLB
3
Budget Agencies
2h
1
1
•i
0
0
"P P"
-1
I II III IV
1973
Office of the Secretary of the Treasury
Office of Government Financing
I II III IV I II III IV I II III IV
1974
i
-1
| || III IV I II III IV
1975
1976
1973
Calendar Years Quarterly
* L e s s than $ 5 0 million.
1974
II III IV I II III IV
1975
1976
October 21,1976 22
FOR IMMEDIATE RELEASE
October 29, 1976
ANNUAL AWARDS CEREMONY HONORSTREASURY EMPLOYEES
Two hundred Treasury employees were recognized for
their contributions and achievements today at the Annual
Awards Ceremony in Washington, D. C.
Deputy Secretary George H..Dixon, who presented the
awards, praised the recipients for the extra efforts they
had given to getting the job done in Treasury. He also
noted that Treasury employees' suggestions and superior
performance had resulted in first-year savings to the
government of more than $4 million.
The Exceptional Service Award, the highest award which
may be recommended for presentation by^ the Secretary, was
conferred on 20 employees. The Department's second highest
award, the Meritorious Service Award, was presented to 27
employees. Among the recipients of that award was Larry
Buendorf, a U.S. Secret Service Special Agent, who was honored
for his actions in deterring an attempt against the life of
President Ford in Sacramento, California.
One hundred twenty-five employees were recognized for
special achievements and suggestions. Fifteen employees
received monetary awards of $1,000 or more in these categories.
James B. Hollender, a computer operator with the Internal
Revenue Service in Fresno, California, was recognized as the
Department's outstanding suggester of" the year for fiscal
year 1976.
Other awards included:
Plaques presented to the Bureau of Engraving and Printing
and the Bureau of the Mint for the best showing in the performance and suggestions phases of the Incentive Awards Program,
respectively.
WS-1145
- 2-
Recognition of 39 employees for excellence in supervision
and in furthering government-wide programs in which the
President has requested special efforts from the Executive
Branch.
Recognition of 12 employees who have served in the Federal
service for 40 or more years.
###
t
Contact: L.F.Potts
Extension 2951
October 29, 1976
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES REOPENING OF
DISCONTINUED ANTIDUMPING INVESTIGATION
WITH RESPECT TO
RAILWAY TRACK MAINTENANCE
EQUIPMENT FROM AUSTRIA
The Treasury Department announced today that its
investigation of railway track maintenance equipment
from Austria, which was discontinued in 1972, would be
reopened. Notice of this action will be published in
the FEDERAL REGISTER of November 1, 1976.
Treasury's antidumping investigation of the subject merchandise was discontinued on March 24, 1972,
in part on the basis of price assurances. The
notice of reopening will state that the Treasury
has received current pricing information from the
domestic industry indicating that the subject merchandise from Austria is being sold in the United
States at less than fair value. The Customs Service
is renewing its investigation of imports of railway
track maintenance equipment in order to determine
whether or not a violation of price assurances is
occurring. This marks the first occasion that the
Treasury has reopened an investigation discontinued
on the basis of price assurances.
Imports of the subject merchandise from Austria
during the first half of 1976 were valued at roughly
$1,287,000.
*
WS-1146
*
*
FOR IMMEDIATE RELEASE
October 29, ]976
The Treasury Department today released a reply by
Richard R. Albrecht, the department's General Counsel,
to a press release issued today by Representative
Jack Brooks, Chairman of the House Committee on
Government Operations; relating to duplication of
former President Richard M. Nixon's tapes.
###
WS-H4 7
THE 6EVERAL COUNSEL OF THE TREASURY
W A S H I N G T O N . D.C. 20220
October 29, 1976
Honorable Jack Brooks
Chairman
Committee on Government Operations
House of Representatives
2167 Rayburn House Office Building
Washington, D. C. 20515
Dear Mr. Chairman:
Because the Secret Service, an agency of this Department,
controls access to the original tape recordings made by
former President Nixon, I did not want a day to go by
without correcting the false and misleading inferences
contained in the press release issued by your office
late this afternoon.
During the period August-October 19 76 referred to in your
press release:
There had been no access by President Ford or anyone
on his behalf.
The court order governing access to the tapes has
been scrupulously observed at all times.
The court order requires duplication of tapes upon
the request of, and for use by, Mr. Nixon's
designated agents.
Tapes removed for duplication for Mr. Nixon's agents,
at their request and as required by the court order,
covered only conversations prior to July 22, 1972,
which was well before the House Banking and Currency
Committee had proposed the investigation which you
have referred to in your press release.
No other access has occurred.
Sincerely,
Richard R. Albrecht
General Counsel
FOR IMMEDIATE RELEASE
November 1, 19 76
H. STUART KNIGHT ELECTED VICE PRESIDENT FOR THE
AMERICAS OF INTERPOL
H. Stuart Knight, Director of the U.S. Secret Service,
was elected Vice President for the Americas during the 45th
Annual General Assembly of the International Criminal Police
Organization (INTERPOL) held October 14-20, 1976, in Accra,
Ghana.
Knight is one of four Vice Presidents to INTERPOL who
represent the continents of Asia, Africa, Europe and the
Americas. The purpose of the organization is to insure and
promote the widest possible assistance among all criminal
police authorities within the laws existing in the countries,
and to establish and develop all institutions likely to
contribute effectively to the suppression and prevention of
crime.
As Vice President, Knight is a member of the Executive
Committee. The Committee supervises the execution of the
decisions of the General Assembly, submits to the General
Assembly any program of work or projects it considers useful,
and supervises the administration and work of the Secretary
General of Interpol.
There are currently 125 member countries of Interpol.
OoO
WS-1148
nnn
\t dtpartmentoftheTREASURY
TELEP
SHINGTON, O.C. 20220
FOR IMMEDIATE RELEASE
November 1, 1976
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,600 million of 13-week Treasury bills and for $3,700 million
of 26-week Treasury bills, both series to be issued on November 4, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing February 3. 1977
Price
High
Low
Average
Discount
Rate
98.776
98.770
98.771
4.842%
4.866%
4.862%
Investment
Rate 1/
4.97%
4.99%
4.99%
26-week bills
maturing May 5, 1977
Discount Investment
Price
Rate
Rate 1/
97.461a/ 5.022% 5.22%
97.453
5.038%
5.24%
97.457
5.030%
5.23%
a/ Excepting 1 tender of $1,000,000
78%,
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted 26%,
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
$
49,805,000
Boston
3,849,320,000
New York
31,875,000
Philadelphia
36,045,000
Cleveland
17,140,000
Richmond
28,605,000
Atlanta
277,960,000
Chicago
64,045,000
St. Louis
34,175,000
Minneapolis
32,705,000
Kansas City
103,035,000
Dallas
184,080,000
San Francisco
Treasury
TOTALS
205,000
$4,708,995,000
Accepted
$
15,390,000
2,236,025,000
27,420,000
30,175,000
15,640,000
24,855,000
70,600,000
20,155,000
13,175,000
27,985,000
93,035,000
27,880,000
205,000
Accepted
Received
54,540,000
7,763,025,000
15,620,000
213,080,000
53,100,000
24,415,000
573,260,000
69,130,000
25,290,000
13,380,000
23,145,000
404,330,000
15,000
$2,602,540,000 b/ $9,232,330,000
^/Includes $ 331,165,000 noncompetitive tenders from the public.
l/EquivalS $ 1 3 4 , 1 6 ° ' 0 0 0 noncompetitive tenders from the public.
coupon-issue yield.
5-1149
$
4,540,000
3,498,470,000
5,620,000
25,180,000
6,100,000
12,415,000
16,260,000
46,130,000
2,290,000
12,530,000
15,145,000
63,990,000
15,000
$3,708,685,0/0 c/
If Department of
NGTON,D.C. 20220
theTREASURY
TELEPHONE 964-2041
FOR RELEASE AT 3:30 P.M.
November 2, 1976
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 $6,300 million, or
thereabouts, to be issued November 12, 1976, as follows:
90-day bills (to maturity date) in the amount of $2,600 million, or
thereabouts, representing an additional amount of bills dated August 12, 1976,
and to mature February 10, 1977 (CUSIP No. 912793 E5 1), originally issued in
the amount of $ 3,803 million, the additional and original bills to be freely
interchangeable.
181-day bills, for $3,700 million, or thereabouts, to be dated November 12, 1976,
and to mature May 12, 1977
(CUSIP No. 912793 G2 6).
The bills will be issued for cash and in exchange for Treasury bills maturing
November 12, 1976,
outstanding in the amount of $6,304 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $3,507 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
P.m., Eastern Standard time, Monday, November 8, 1976.
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
WS-1150
4
(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 othersftusXbe 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 $500,000 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 or at the Bureau of the Public Debt
on November 12, 1976, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing November 12, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
OOo
:ederai financing D a m e
WASHINGTON, D.C. 20220
FOR IMMEDIATE RELEASE
October 27, 1976
SUMMARY OF LENDING ACTIVITY
October 1-October 15, 1976
Federal Financing Bank lending activity for the period
October 1 through October 15, 1976 was announced as follows
by Roland H. Cook, Secretary:
On October 1, Amtrak signed Note #10 with the Bank in
the amount of $280 million. The full amount was borrowed and
used to repay Note #5 and Note #6 which were maturing with the
Bank. The maturity of the loan is October 1, 1978. The interest rate is 6.5351. On the same day, Amtrak signed Note #11,
a renewable line of credit with the Bank. The final maturity
of the line is October 1, 1977. Amtrak borrowings are guaranteed by the Department of Transportation.
On October 1, the U.S. Railway Association (USRA) borrowed
$2,850,000 against Note #8. The maturity of the loan is
April 30, 1979; and the interest rate is 6.692%. USRA borrowings from the Bank are guaranteed by the Department of
Transportation.
The Federal Financing Bank made ten loans totaling
$40.7 million to utility companies guaranteed by the Rural
Electrification Administration. All of the loans mature
December 31, 2010. Interest rates range from 7.789% to 7.909
on a quarterly basis.
On October 4, the General Services Administration borrowed $2,428,626.65 under the Series M $279 million commitment
with the Bank. The loan matures July 31, 2003, and bears
interest at a rate of 8.014%.
On October 4, the FFB purchased $400,000 of notes from
the Department of Health, Education and Welfare (HEW). The
Department had previously acquired the notes which were issued
by various public agencies under the Medical Facilities Loan
Program. The notes mature July 1, 2000; and bear interest at
a rate of 7.957%. The notes purchased by the Bank are guaranteed by HEW.
WS-1151
- 2On October 4, the Federal Financing Bank made an advance
to the Chicago, Rock Island and Pacific Railroad Company in
the amount of $549,000. The maturity of the loan is June 21,
1991. The interest rate is 7.795%. The loan is guaranteed
by the Department of Transportation.
The FFB made the following loans to borrowers guaranteed
by the Department of Defense under the Foreign Military Sales
Act:
Interest
Date
Borrower
Amount
Maturity
Rate
10/4 Government of China $ 855,000.00 7/1/84 7.115%
10/5 Government of Liberia 249,000.00 6/30/82 6.853%
10/6 Government of
Nicaragua
10/8
Government of
Bolivia
10/8 Government of
Philippines
240,000.00
6/30/80
6.476%
3,600,000.00
6/30/83
6.882
i-
5,180,000.00
6 30/82
6.732
10/12 Government of Jordon 751,636.31 6/30/85 6.967%
10/12 Government of Tunisia 956,463.55 7/30/82 6.548%
10/13 Government of
Honduras
796,461.38
6/30/81
6.318%
10/13 Government of
Argentina
343,855.68
4/30/83
6.645%
rcnuA?11 °^ob,er 5> the Student Loan Marketing Association
(SLMA) rolled over $15 million on a loan previously maturing
with the Bank. The loan matures January 11, 19 77, and bears
interest at a rate of 5.350%. SLMA borrowings are guaranteed
by the Department of Health, Education and Welfare
- 3 On October 5, the FFB purchased a $300 million 5-year
Certification of Beneficial Ownership from the Farmers Home
Administration. The maturity is October 5, 1981, and the
interest rate is 7.231% on an annual basis. On the same day,
the Bank purchased an additional $300 million 10-year Certificate. The maturity is October 5, 1991. The interest rate is
7.957% on an annual basis.
The National Railroad Passenger Service (Amtrak) made
the following drawings against Note #7:
Interest
Date
Amount
Maturity
Rate
10r/8 $7,500,000.00 12/31/76 5.173%
10/12 7,500,000.00 12/31/76 5.124%
Amtrak borrowings from the Bank are guaranteed by the
Department of Transportation.
On October 15, the Tennessee Valley Authority borrowed
$55 million. The loan matures January 31, 1977; and bears
interest at a rate of 5.135%.
Federal Financing Bank loans outstanding on October 15,
1976 totaled $26.5 billion.
###
f departmentoftheTREA$URY
IGT0N,D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 3:30 P.M.
November 2, 1976
,r
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice, invites tenders
for $3,245 million, or thereabouts, of 365-day Treasury bills to be dated
November 15, 1976, and to mature November 15, 1977(CUSIP No. 912793 H6 6 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
November 15, 1976.
.
n*
This issue will not provide new money for the Treasury as the maturing
issue is outstanding in the amount of $3,245 million, of which $1,890 million
is held by the public and $ 1,355 million is held by Government accounts and
the Federal Reserve Banks for themselves and as agents of foreign and international
monetary authorities.
Additional amounts of the bills may be issued to Federal
Reserve Banks as agents of foreign and international monetary authorities.
Tenders from Government accounts and the Federal Reserve Banks for themselves
and as agents of foreign and international monetary authorities will be accepted
at the average price 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 and from
individuals at the Bureau of the Public Debt, Washington, D. C.
20226, up to
one-thirty p.m., Eastern Standard time, Tuesday, November 9, 1976.
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.
except for their own account.
Others will not be permitted to submit tenders
Tenders will be received without deposit from
incorporated banks and trust companies and from responsible and recognized
WS-1152
,
,
(OVER)
-2dealers 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 $500,000
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.
Settle-
ment for accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank or Branch
on November 15, 1976,
or at the Bureau of the Public Debt
in cash or other immediately available funds or in a
like face amount of Treasury bills maturing November 15, 1976.
exchange tenders will receive equal treatment.
Cash and
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 pruchase, 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, or from the Bureau of the Public Debt.
OOo
kDepartmentoftheJREASURY
/ASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
N o v e m b e r 3, 1976
COUNTRIES W H I C H M A Y R E Q U I R E P A R T I C I P A T I O N IN
OR C O O P E R A T I O N W I T H A N INTERNATIONAL
BOYCOTT
In accordance w i t h the r e q u i r e m e n t s of Section 1067(b)
of the Tax Reform A c t of 1 9 7 6 , the S e c r e t a r y of the Treasury
today issued a list of c o u n t r i e s w h i c h m a y require p a r t i c i p a tion in or cooperation w i t h an international boycott within
the meaning of Section 999(b) of the Internal Revenue Code
of 1954.,
The list, also published in the Federal Register, consists
of the following c o u n t r i e s :
Bahrain
Egypt
Iraq
Jordan
Kuwait
Lebanon
Libya
Oman
Qatar
Saudi Arabia
Syria
United Arab E m i r a t e s
Yemen Arab Republic
Yemen, Peoples D e m o c r a t i c R e p u b l i c of
Pursuant to the Tax Reform Act of 1976, a current list
of countries which require or m a y require p a r t i c i p a t i o n in
or cooperation w i t h an i n t e r n a t i o n a l b o y c o t t w i t h i n the
meaning of Section 999(b) of the Internal Revenue Code of
1954 will be published at least q u a r t e r l y .
WS-1153
oOo
kDepartmentoftheTREASURY
tfHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
November 3, 1976
RESULTS OF AUCTION OF 3-YEAR TREASURY NOTES
The Treasury has accepted $3,001 million of $5,386 million of
tenders received from the public for the 3-year notes. Series K-1979,
auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 6.32% 1/
Highest yield
Average yield
6.37%
6.36%
The interest rate on the notes will be 6-1/4%. At the 6-1/4% rate,
the above yields result in the followng prices:
Low-yield price 99.811
High-yield price
Average-yield price
99.677
99.704
The $3,001 million of accepted tenders includes 51% of the amount of
notes bid for at the highest yield and $ 563 million of noncompetitive
tenders accepted at the average yield.
In addition, $ 353 million of tenders were accepted at the averageyield price from Government accounts and Federal Reserve Banks for their
own account in exchange for notes maturing November 15, 1976,($70 million)
and from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash ($283 million).
1/ Excepting 1 tender of $1,005,000
oOo
WS-1154
FOR IMMEDIATE RELEASE
November 3, 1976
TREASURY SETS OPEN MEETING ON PROPOSED BOOK-ENTRY REGULATIONS
An open meeting to discuss proposed Treasury regulations
to accelerate a program to place all of its marketable securities on a book-entry system, eliminating issuance of engraved
certificates, will be held at 2 p.rti, , Monday, November 15,
in Room 4121, Main Treasury Building,
Comment on the regulations, published in the Federal
Register November 1, must be submitted on or before November 24,
1976, to the Bureau of the Public Debt, Washington, D. C , 20226.
More than 80 percent of the marketable public debt is
currently held in book-entry form under a system initiated in
1968 by the Treasury and the Federal Reserve Banks.
Book-entry is a modern, efficient, safe and expeditious
method of dealing in securities that is compatible with the
computer age. It is an answer to the paperwork crisis created
by the mounting volume of public debt transactions; it protects
the investor against loss, theft, and counterfeiting; and it
substantially reduces the cost of issuing, storing and delivering Treasury securities.
The proposal to completely eliminate the use of definitive
securities in public debt borrowings will begin next month
with issuance of 52-week bills, Exceptions will be made only
for a small number of institutional investors prevented by
law or by regulation from holding securities in book-entry
form. Definitive bills of $100,000 denomination will be available to such investors for a limited period of time.
It is anticipated that offerings of 26-week bills and 13week bills in book-entry form only will follow during the first
nine months of 1977. Later, the program will be extended to
marketable Treasury bonds and notes.
WS-1155
-2As part of its program for the discontinuance of definitive Treasury bills, the Treasury will offer direct book-entry
custody accounts to those investors who prefer not to deal
through commercial banks or other financial institutions.
Tenders for such book-entry bills may be submitted to the
Bureau of the Public Debt, either directly, through a Federal
Reserve Bank or Branch, or through an institution dealing in
Treasury securities. Investors may also arrange for the transfer of outstanding eligible issues to a book-entry account
at the Treasury. While such accounts will be established and
maintained without charge to the investor, there will be some
limitations on the services the Treasury will provide.
The Treasury and Federal Reserve Banks are continuing
their efforts of recent months to explain the operation of
the proposed system to financial institutions, securities
dealers, investors and other interested parties. A special
effort will be made to familiarize the general public with
the system prior to its inception in December. Additional
details concerning the system will be announced in advance
of that time.
The new Treasury regulations published in the Federal
Register are listed in Department circular, Public Debt Series
26-76.
/
#
#
#
FOR IMMEDIATE RELEASE
November 4, 1976
The Secretary of the Treasury issued today guidelines,
consisting of questions and answers, relating to provisions of
the Tax Reform Act of 1976 which deny certain tax benefits for
participation in or cooperation with international boycotts.
The Secretary also outlined procedures governing the issuance of
guidelines (which may be in the form of questions and answers,
examples or regulations), the making of determinations, and the
publication of forms relating to the anti-boycott provisions.
Guidelines.
The guidelines issued today may be used by
taxpayers for guidance in resolving issues arising under section 999
of the Internal Revenue Code (the Code), as enacted in the Tax
Reform Act of 1976.
The Internal Revenue Service will follow the
guidelines in requiring the filing of reports, in making determinations as to participation in or cooperation with a boycott, and
in computing the loss of tax benefits of a participating or cooperating person.
guidelines.
These guidelines may be changed by additional
However, changes adverse to taxpayers will apply
only to the filing of reports, the determination of participation
in or cooperation with a boycott, and the computation of the loss
of tax benefits, for periods beginning after publication of the
change.
Written comments on the earliest practicable date are
oOo
WS-1156
- 2 invited on these guidelines and should be submitted in duplicate
to:
Assistant Secretary for International Affairs, U.S Treasury
Department, Washington, D.C. 20220; and Assistant Secretary for
Tax Policy, U.S. Treasury Department, Washington, D.C. 20220.
Future Guidelines.
Additional guidelines under section 999
of the Code, which may take the form of further questions and
answers, examples and/or regulations, will be prepared by the
Assistant Secretary for International Affairs and the Assistant
Secretary for Tax Policy.
The Assistant Secretary for International
Affairs will take the initiative in preparing guidelines relating
to the definition of boycott participation and cooperation set
forth in sections 999(b)(3) and 999(b)(4) of the Code.
The
Assistant Secretary for Tax Policy will take the initiative in
preparing guidelines concerning other aspects of section 999 of the
Code.
Guidelines will be approved and published by the Secretary
of the Treasury.
Determinations.
Under section 999(d) of the Code, upon
application by a taxpayer, determinations shall be made with
respect to whether a particular operation constitutes participation in or cooperation with an international boycott.
Requests for determinations should be addressed to the Commissioner
of the Internal Revenue, under procedures to be published shortly.
Pending the issuance of final regulations,
determinations will be made concerning issues specifically addressed in the published guidelines.
If an issue
arises which is not specifically addressed in the published
guidelines, the Internal Revenue Service will not make a
- 3 determination until the issue has been brought to the attention
of the Assistant Secretary for International Affairs and the
Assistant Secretary for Tax Policy and a new or modified guideline which addresses the issue is published by the Secretary so
that a determination can be made. Taxpayer-requested determinations
will be made public with due regard to the confidentiality of the
identity and information submitted by the taxpayer, under the
procedures set forth in section 6110 of the Code.
Reporting Form. The staffs of the Internal Revenue Service
and the Assistant Secretary for Tax Policy are developing an
appropriate form for the report required of persons under
section 999(a) of the Code. The form (Form 5713) will be published
early in 1977.
List of Countries. The countries which currently require or
may require participation in or cooperation with an international
boycott (within the meaning of section 999(b)(3)) are listed below.
(See also the Federal Register for November 3, 1976):
Bahrain
Egypt
Iraq
Jordan
Kuwait
Lebanon
Libya
Oman
Qatar
Saudi Arabia
Syria
United Arab Emirates
Yemen Arab Republic
Yemen, Peoples Democratic Republic of
###
GUIDELINES
Boycott Provisions (section 999)
of the Internal Revenue Code
Table of Contents
Boycott Reports
Definition of "Operations"
Definition of "Reason to Know" of Official Requirement
of Boycott Participation
Definition of "Clearly Separate and Identifiable Operations
Effective Date Provisions
International Boycott Factor
Determinations
Definition of an Agreement to Participate in or Cooperate
with a Boycott (section 999(b)(3))
Refraining from Doing Business with or in a Boycotted
Country (section 999(b)(3)(A)(i))
Refraining from Doing Business with any United States
Person Engaged in Trade in a Boycotted Country (section
999(b)(3)(A)(ii))
Refraining from Doing Business with any Company Whose
Ownership or Management is Made Up, in Whole or in Part,
of Individuals of a Particular Nationality, Race or
Religion (section 999(b)(3)(A)(iii))
Refraining from Employing Individuals of a Particular
Nationality, Race or Religion (section 999(b)(3)(A)(iv))
As a Condition of the Sale of a Product, Refraining from
Shipping or Insuring that Product on a Carrier, Owned,
Leased, or Operated by a Person who does not Participate
in or Cooperate with an International Boycott (section
999(b)(3)(B))
In the questions and answers :
(a) Company A and Company B are companies organized
under the laws of one of the states of the United States,
(b) Country X is a boycotting country, which, inter
alia, boycotts Country Y;
(c) Country Y is a country boycotted by Country X;
(d) All references to "Sections" are to Sections of
the Internal Revenue Code, as amended by the Tax Reform
Act of 1976; and
(e)
In parts H-M the answer which follows each question
takes into account only the action described in the question
and no other. Most questions and answers refer to a type of
conduct which is referred to in section 999(b)(3) or section
999(b)(4).
In many of these questions and answers the result
would be the same if another type of conduct also referred
to in section 999(b)(3) or section 999(b)(4) were substituted
for the particular type of conduct referred to in the question.
For example, in Question and Answer H-10 the result would be
the same if "individuals of race R" were substituted for
"individuals of religion R".
- 2It should be recognized that in instances where the
action described in the question by itself does not,
according to the answer, provide sufficient evidence to
support an inference that an agreement under section 999(b)(3)
exists, an overall course of conduct which includes such action
in addition to other actions could support such an inference.
A. Boycott Reports.
A-l.
Q:
Who must report as required by section 999(a)?
A:
Generally, any United States person (within the
meaning of section 7701(a) (30)) , or any other person (within
the meaning of section 7701(a)(1)) that either claims the
benefit of the foreign tax credit under section 901, or owns
stock of a DISC, is required to report under section 999(a)
if it -a.
has operations; or
b.
is a member of a controlled group, a member
of which has operations; or
c.
is a United States shareholder (within the
the meaning of section 951(b)) of a foreign corporation
that has operations; or
d.
is a partner in a partnership that has
operations; or
e.
is treated under section 671 as the owner
of a trust that has operations
in or related to a country (or with the government, a company,
or a national of a country) (i) which is on the list maintained
by the Secretary under section 999(a)(3) or (ii) in which it
has operations and which it knows or has reason to know
requires participation in or cooperation with an international
boycott as a condition of doing business therein (or with the
government, a company or a national thereof) unless such
A-2
participation or cooperation is sanctioned by section 999(b)(4)
(A) , (B) or (C). (For the definition of operations in or
related to a country, see the questions under part B.)
Additionally, if a person controls a corporation (within the
meaning of section 304(c)), then under section 999(e) that
person must report whether the corporation had reportable
operations, whether the corporation reported such operations,
and whether the corporation participated in or cooperated with
the boycott. The corporation must make the same reports with
respect to the operations and reports of the person controlling
A-2. Q: Do the reporting requirements of section 999(a)
which refer to "United States shareholders" of foreign corporations require U.S. minority shareholders to report on the
operations of such foreign corporations?
A: Yes. Under section 951(b) the term "United
States shareholder" includes any United States person who
owns (within the meaning of section 958(a)) or is considered
as owning (by the application of the rules of ownership of
section 958(b)), 10 percent or more of the total combined
voting power of all classes of stock entitled to vote of
such foreign corporation. The reporting requirement applies
even if the United States shareholder is a minority shareholder and even if the foreign corporation is not a controlled
foreign corporation within the meaning of section 957(a).
A-3
A-3.
Q:
If one member of a controlled group of corp-
orations (within the meaning of section 993(a)(3)) files a
report under section 999 with respect to the reportable
operations of all members of that group, is this sufficient
to discharge the reporting obligation of all members of the
group?
A:
Yes, provided that the common parent (as
defined in the regulations under section 1504) files a
consolidated return and the report on behalf of all members
of the controlled group.
In the absence of a consolidated
return, each member of the controlled group must individually
file the section 999 report.
If a consolidated return is
filed on behalf of some members of the controlled group,
only one report need be filed with respect to those members.
However, each other member must individually file the report.
A-4.
Q:
If one United States shareholder of a foreign
corporation files a report under section 999 in respect of
the reportable operations of the foreign corporation, is
this sufficient to discharge the reporting obligations of
all United States shareholders of the foreign corporation
in respect of that corporation's operations?
A:
No.
Each United States shareholder of a
foreign corporation must file the section 999 report in
respect of the activities of that corporation.
However,
if two or more United States shareholders of the foreign
A-4
corporation are included in the same consolidated return,
only one report need be filed with respect to all United
States shareholders included in the return.
A-5.
Q:
How will the reporting requirements under
section 999(a), "International Boycott Reports by Taxpayers",
be satisfied?
A:
A taxpayer required to file an international
boycott report under section 999(a) will fulfill this
requirement by filing a new IRS Form 5713, "International
Boycott Report Form", and all applicable supporting schedules
and forms contained in the taxpayer's income tax returns
which indicate the amounts and computations of benefits
denied under sections 908, 952(a) and 995(b)(1) of the
Internal Revenue Code.
Form 5713, the only new IRS form
pertaining to the international boycott provision, will be
available early in 1977. Existing Form 1118 (Foreign Tax
Credit), Form 1120-DISC (DISC Income), and Form 3646 (Subpart
F Income) will contain new line entries to reflect tax
benefits denied under the boycott provisions.
A-6.
Q:
What degree of confidentiality will the
international boycott reports submitted by taxpayers
receive?
A:
The reports by taxpayers will be submitted
as part of the income tax return and, therefore, will be
accorded the same degree of confidential treatment under
section 6103 as any other information contained in an
income tax return.
A-5
A-7.
Q:
Where and how should the "International Boycott
Report Form" be filed?
A:
The "International Boycott Report Form", Form
5713, should be filed in duplicate by all reporting taxpayers.
One copy of Form 5713 should be sent to the Internal Revenue
Service Center, 11601 Roosevelt Blvd., Philadelphia,
Pennsylvania, 19155, and the other copy of Form 5713 should
be attached to the taxpayer's income tax return which is
filed with the taxpayer's customary Internal Revenue Service
Center.
A-8.
Q:
Do individuals as well as corporations use
Form 5713, "International Boycott Report Form"?
A:
Yes. All taxpayers required to file a report
under section 999(a) will use IRS Form 5713. However, some
parts of the form apply to corporations only; individual
taxpayers can ignore these parts and complete only the
questions relevant to individuals (unless under section
999(e) the participation in or cooperation with the international boycott by a corporation is attributable to that
individual) . While all taxpayers reporting under section
999(a) are required to file Form 5713, the filing of Form
5713 does not necessarily fulfill all of the reporting
requirements under section 999(a) (see the answer for
Question A-5).
A-6
A-9.
Q:
Section 999(b)(4) permits a person to agree
to comply with certain laws without being treated as having
agreed to participate in or cooperate with an international
boycott.
Company A agrees to comply with prohibitions on
importation and exportation with respect to operations in or
related to a country referred to in section 999(a)(1), as
set forth in section 999(b)(4)(B) and section 999(b)(4)(C).
Is Company A required to report the operations under such
agreement on Form 5713, the "International Boycott Report
Form"?
A:
Yes, for the reasons stated in the answer
to Question A-l, whether or not Company A agrees to comply
with the prohibitions.
A-10.
Q:
Section 999(b)(4)(A) permits a person to
meet requirements imposed by a foreign country with respect
to an international boycott if United States law or regulations, or an Executive Order, sanctions participation in,
or cooperation with, that international boycott.
If a
person's operations fall within this exception, is the
person required to report such operations?
A:
No.
The reporting requirements with respect
to operations under such international boycott agreements
are waived.
A-7
A-ll.
Q:
If Company A sells goods or services to
Company B (or does other business with Company B) and
Company B and Company A are unrelated, and Company A knows
or has reason to know that Company B in turn will sell
these goods or services for use in an international boycott
enforcing country (within the meaning of section 999(b)(3)),
and further, Company B participates in or cooperates with
such boycott, is Company A required to report with respect
to such operations?
A: No. Although such operations are related
to a boycotting country (see the answer for Question B-l),
the reporting requirements are waived for Company A, provided
that Company A does not receive a request or participate in
or cooperate with an international boycott under section
999(a)(2) or section 999(b)(3).
A-12. Q: Company A is a U.S. shareholder (within the
meaning of section 951(b)) of Company C, a foreign corporation. Company A has a taxable year ending January 31,
and Company C has a taxable year ending June 30. Both
companies have operations in Country X, which is on the
list maintained pursuant to section 999(a)(3). Who should
file Form 5713 and for what period?
. A-8
A: As indicated in the answer to Question A-l,
Company C need not file Form 5713 unless it claims the
benefit of the foreign tax credit under section 901 or owns
stock of a DISC.
Company A must file Form 5713 for periods
ending January 31, and must report operations of Company C
during Company C's taxable year ending within the period
covered by Company A's report.
A-13.
Q:
In the case of a controlled group, what period
of time is the international boycott report to cover, and
when is the "International Boycott Report Form", Form 5713,
to be filed?
A:
For purposes of reporting and for purposes
of determining the international boycott factor, all persons
described in the answer to Question A-l are to report all
reportable operations by all members of the controlled
group (or by any foreign corporation with a United States
shareholder who is a member of the controlled group) for
the taxable years of such members which end with or within
the taxable year of the controlled group's common parent.
In the event no common parent exists, the members of the
controlled group are to elect the tax year of one of the
members to serve as the common tax year for the group.
It is contemplated that procedures for making an election
will be specified in the instructions of the "International
Boycott Report Form", Form 5713.
The taxable year election
A-9
is a binding election to be made once, with subsequent
elections for alternative tax years granted only with the
approval of the Secretary of the Treasury.
Individual members of the controlled group will continue
to use their normal tax years for all other purposes,
including adjustments required under sections 908, 952(a),
and 995(b)(1). When the international boycott factor is
used, the consolidated boycott factor, for that year, will
be applied to the normal tax year of each taxpayer for
determining adjustments under sections 908, 952(a), and
995(b) (1) .
The income tax year of a taxpayer may differ from the
reporting period covered by the "International Boycott
Report Form". Therefore, the Form 5713 which is attached
to, and filed with, the income tax return of the taxpayer
will be the Form 5713 for the reporting year ending with
or within the tax year of the taxpayer.
B.
Definition of "Operations".
B-l.
Q:
Under what circumstances does a person have
operations in, or related to, a boycotting country (or
with the government, a company, or a national of that count
A:
A person has operations in, or related to, a
boycotting country
(or with the government, a company, or
a national of that country) if the operation in which it
engages:
1.
is carried on in whole or part in a
boycotting country ("in a country");
2.
is carried on outside a boycotting
country either for or with the government, a
company, or a national of a boycotting country
("with the government, a company, or a national
of a country"); or
3.
is carried on outside a boycotting
country for the government, a company, or a
national of a non-boycotting country if the
person having the operation knows or has
reason to know that a specific good or service
produced by the operation is intended for use
in a boycotting country or for the government,
a company, or a national of a boycotting country
("related to a country").
B-2
The term "operation" encompasses all forms of business or
commercial activities whether or not productive of income,
including, but not limited to, sales; purchases;
banking,
financing and similar activities; extracting; processing;
manufacturing; production; construction; transportation;
activities ancilliary to the foregoing (e.g., contract
negotiating, advertising, site selecting, etc.); and the
performance of services, whether or not ancilliary to the
foregoing.
Operations described in principles 2 and. 3 are illustrated
in the following two examples:
(a) Company A engages in a joint venture
manufacturing operation in a non-boycotting
country with Company C, a company incorporated
under the laws of Country X.
Company A has
operations "with" a company of a boycotting
country.
(b) D, a national of a non-boycotting
country has a contract to construct a dam
in Country X.
D subcontracts to Company A
for the manufacture of a generator for the
dam.
The contract between D and Company A
and the generator specifications indicate
that the generator is for use in Country X.
B-3
The contract specifies delivery of the
generator to D f.o.b. New York.
Company
A has operations "related to" a boycotting
country.
C. Definition of "Reason To Know" Requirement of Boycott
Participation.
C-l.
Q:
Under what circumstances, in the absence of
a Treasury listing of a country, will it be deemed under
section 999(a)(1)(B) that a person knows or has reason to
know that participation in or cooperation with an international boycott is required as a condition of doing business
within such country or with the government, a company, or
a national of such country?
A:
A person will be deemed to know or have reason
to know that a country requires participation in or cooperation with an international boycott as a condition of doing
business within a country or with the government, a company,
or a national of a country, if that person receives what
could be interpreted as an official request of that country
to participate in or cooperate with an international boycott
or if that person knows that others have received such requests.
Whether a request could be interpreted as an official request
of a country depends on an analysis of the facts and circumstances surrounding the request.
However, the request
need not be made directly by a government official or representative in order to be interpreted as an official request.
Thus, for example, assume that Company A has a contract with
the government of a boycotting country to build a dam in
that country and is required under the contract to require
C-2
its subcontractors to agree to participate in or cooperate
with the boycott.
Assume further that Company A requires
Subcontractor B to make such an agreement as a condition of
receiving the subcontract to build a generator for the dam.
Company B will be deemed to have reason to know that participation in or cooperation with an international boycott
is a condition of doing business within the boycotting
country or with the government, a company, or a national
of such country.
D. Definition of "Clearly Separate and Identifiable Operations".
D-l.
Q:
If a person or a member of a controlled group
(within the meaning of section 993(a)(3)) enters into an
agreement which constitutes participation in or cooperation
with an international boycott (within the meaning of section
999(b)(3)), what operations of that person or group will be
considered as operations in connection with which such participation or cooperation occurred?
A:
All operations of such person or such group in
(a)
that country in connection with which
the agreement is made; and
(b) any other country which requires participation in or cooperation with that boycott
with respect to which the agreement is made;
will be presumed to be operations in connection with which
there was participation in or cooperation with an international boycott.
This presumption may be rebutted, however,
if the person or group demonstrates that a particular operation
is a clearly separate and identifiable operation from the
operation with respect to which the agreement was made, and
that no agreement constituting participation in or cooperation with an international boycott was made with respect to
such separate and identifiable operation.
D-2
The presumption of participation in or cooperation with
the boycott will not apply with respect to operations outside
of the countries described in (a) and (b) above, but such
operations will be considered as operations involving participation in or cooperation with the boycott if so warranted
by the facts.
D-2.
Q: Who has the burden of proof with respect to
establishing whether a particular operation is a "clearly
separate and identifiable operation" and whether there was
participation in or cooperation with an international boycott
in connection with that operation?
A:
Where a person or a member of a controlled
group has participated in or cooperated with an international
boycott in connection with one or more of its operations, that
person (or if applicable the U.S. shareholder of a foreign
corporation) or that group bears the burden of proof of
establishing that any other operation is clearly separate
and identifiable from the operation with respect to which
participation or cooperation occurred and that no such participation or cooperation occurred with respect to the separate
and identifiable operation.
D-3
D-3.
Q:
How can a taxpayer determine what constitutes
a "clearly separate and identifiable operation"?
A:
The determination whether an operation con-
stitutes a clearly separate and identifiable operation must
be based on an examination of all the facts and circumstances.
The following factors may be considered in determining whether
an operation is clearly separate and identifiable from an
operation with respect to which participation in or cooperation with an international boycott occurred:
1.
Were the two operations conducted by
different corporations, partnerships, or other
business entities?
2.
Were the operations, whether conducted
by separate entities or not, supervised by
different management personnel?
3.
Did the operations involve distinctly
different products or services?
4.
Were the operations undertaken pursuant
to separate and distinct contracts?
5.
If business operations in the countries
conducting the international boycott in question
were not continuous over time, was each transaction separately negotiated and performed?
The application of these factors may be illustrated by
the following examples:
D-4
(a) Company A contracts with Country X to
build several major buildings in Country X.
Company A has never engaged in any business
in Country X prior to such contract.
Nine months
later Company A enters into a second contract with
Country X to build a large dock facility in Country
X.
Construction of the dock facility will constitute
an operation separate and identifiable from construction of the buildings.
(b) Company A contracts, as general contractor,
to build a pipeline in Country X.
In connection with
the construction of the pipeline, Company A must
retain engineering consultants.
Company C, a U.S.
company and a member of the same controlled group
of which Company A is a member, is engaged in the
business of providing engineering consulting services
to both related and unrelated parties.
Company A
retains Company C to provide such services with
respect to the pipeline construction.
The engineering
consulting services provided by Company C will constitute an operation separate and identifiable from
the construction of the pipeline.
D-5
(c)
Company A markets electronic computers
and medical diagnostic equipment in Country X.
The two product lines, computers and medical
equipment, are handled by representatives of two
separate divisions which are located in different
offices.
The managers of each division report to
different superiors in the United States. The
activities of Company A with respect to the sale
of computers will constitute a separate and identifiable operation from Company A's activities in
connection with the sale of medical equipment.
(d) Company A imports and sells motor vehicles
in Country X.
Company A maintains a national office
and import depot at a major port in Country X and
has five sales offices located in various cities in
Country X.
The managers of the sales offices are
authorized to handle local matters relating to
maintaining the offices and are subject to the
close supervision and inspection of national office
personnel.
For internal accounting purposes, Company
A treats each sales office as a profit center,
charging each office for its inventory and a proportional share of corporate overhead.
The marketing
activities of the various sales offices do not
constitute operations separate and identifiable
from each other, nor do the marketing activities
D-6
of Company A as a whole constitute an operation
separate and identifiable from the import and
distribution activities of Company A.
(e) Company A markets appliances, such as
refrigerators, washers and dryers, and home entertainment equipment, such as televisions and tape
recorders, in Country X.
The appliances are
manufactured in Country X by Company C, a U.S.
company wholly owned by Company A, and the home
entertainment equipment is manufactured in Country
X by Company D, also a U.S. company wholly owned
by Company A.
Company A purchases the production
of Company C and Company D for resale to independent
retailers who generally handle both lines of products
The boards of directors of Companies A, C, and D
are composed of the same individuals and the same
individual serves as president of each company.
The products of Companies C and D are manufactured
in the same plant, and the executive offices of
Companies A, C, and D are all located in a building
adjacent to that plant.
The respective activities
of Companies A, C, and D do not constitute clearly
separate and identifiable operations.
E.
Effective Date Provisions.
E-l.
Q:
What are the effective dates of the reporting
requirements and sanctions of the international boycott
provisions?
A:
Generally, the reporting requirements and
the sanctions of the international boycott provisions apply
to agreements to participate in or cooperate with an international boycott, made after November 3, 1976, and to agreements
made on or before November 3, 1976, that continue in effect
thereafter. However, there are two exceptions to this general
rule.
First, the reporting requirements of section 999(a)
apply to operations referred to in section 999(a)(1) or (2)
after November 3, 1976, whether or not there has been an
agreement to participate in or cooperate with an international
boycott, and whether or not the operations are carried out in
accordance with the terms of a binding contract entered into
before September 2, 1976. Operations on or before November 3, 19
are reportable if there has been participation in or cooperation with the boycott during the taxable year but after
November 3, 1976 (see the answer to Question E-2).
Second,
in the case of operations carried out in accordance with the
terms of a binding contract entered into before September 2,
1976, the sanctions of the international boycott provisions
apply only to agreements to participate in or cooperate with
an international boycott made on or after September 2, 1976,
and to agreements made before that date that continue in effect
after December 31, 1977.
E-2
E-2.
Q:
If a person who reports his tax liability on
a calendar year basis makes an agreement on November 20, 1976,
to participate in or cooperate with an international boycott,
which of that person's operations conducted during the taxable
year are reportable, which operations are included in the
international boycott factor calculations, and how are the
sanctions applied?
A:
All operations of the person during the entire
1976 taxable year (including pre-November 20, 1976, operations)
in or related to a boycotting country or with the government,
a company, or a national of such country must be reported under
section 999(a) and will be considered in calculating the
international boycott factor (or the amount of taxes or
income specifically attributable to operations in which
there was participation in or cooperation with an international
boycott) for the taxable year.
However, under section 999(c)(1),
operations for which the presumption of participation in or
cooperation with the boycott has been rebutted need not be
reflected in the numerator of the international boycott factor
(or under section 999(c)(2), the tax benefits specifically
attributable to specific operations for which that presumptii,on
has been rebutted will not be denied).
The sanctions are applied to the year 1976 on a pro rata
basis.
If
a
person uses the international boycott factor for
1976, the factor is applied under sections 908, 952(a), and
E-3
995(b)(1), after it has been multiplied by the fraction 58/366,
representing the number of days after the November 3, 1976,
effective date remaining during the calendar year.
If a
person identifies specifically attributable taxes and income,
the tax benefits denied under sections 908, 952(a), and 995(b)(1)
are computed by first ascertaining the tax benefits of the
foreign tax credit, deferral, and DISC respectively for the
taxable year attributable to operations for which the presumption of boycott participation has not been rebutted, and
then multiplying that amount by 58/366.
E-3.
Q:
If a person having a July 1-June 30 taxable
year carries out operations in accordance with the terms
of a binding contract entered into before September 2, 1976,
and, in furtherance of that contract, makes an agreement on
February 15, 1978, to participate in or cooperate with an
international boycott, which of the person's operations
conducted during the taxable year July 1, 1977 - June 30,
1978, are reportable, which operations are included in the
international boycott factor calculations, and how are the
sanctions applied?
A:
All operations of the person during the entire
July 1, 1977 - June 30, 1978, taxable year (including preFebruary 15, 1978, operations) in or related to a boycotting
country or with the government, a company, or a national of
E-4
such country, must be reported under section 999(a) and
will be considered in calculating the international boycott
factor (or the amount of taxes or income specifically attributable to operations in which there was participation in
or cooperation with an international boycott) for the taxable
year. However, under section 999(c)(1), operations for which
the presumption of participation in or cooperation with the
boycott has been rebutted need not be reflected in the
numerator of the international boycott factor, and, under
section 999(c)(2), the tax benefits specifically attributable
to specific operations for which that presumption has been
rebutted will not be denied.
The sanctions are applied to the July 1, 1977 - June 30,
1978, taxable year on a pro rata basis. If a person uses the
international boycott factor for the taxable year, the factor
is applied under sections 908, 952(a), and 995(b)(1) after
it has been multiplied by the fraction 181/365, representing
the number of days after the December 31, 1977, effective date
remaining during the taxpayer's taxable year. If a person
identifies specifically attributable taxes and income, the
benefits to be denied under sections 908, 952(a), and 995(b)(1)
are computed by first ascertaining the tax benefits 6f the
foreign tax credit, deferral, and DISC respectively for the
taxable year attributable to operations for which the presumption of boycott participation has not been rebutted, and
then multiplying that amount by 181/365.
E-5
E-4.
Q:
What is a binding contract for purposes of
the binding contract rule?
A:
A binding contract with respect to a person,
a member of a controlled group which includes that person,
or a foreign corporation of which that person is a United
States shareholder is a contract which was, on September 1,
1976, and is at all times thereafter, binding on that person,
foreign corporation or member, and under which all material
terms are fixed or are ascertainable with reference to an
objectively determinable standard.
E-5.
Q:
If, under a binding contract existing before
September 2, 1976, a person agreed to refrain from an activity
described in section 999(b)(3), will operations under the
contract be subject to the international boycott provisions
in years after 1977?
A:
Yes, unless the person establishes that,
before December 31, 1977, he renounced the agreement to
participate in or cooperate with the boycott, that the
renunciation was communicated to the government or person
with which the agreement was made, and that the agreement
was not reaffirmed after 1977.
E-6.
Q:
If, under a contract made in 1979, a person
who reports his tax liability on a calendar year basis agrees
to refrain from an activity described in section 999(b)(3),
but does not continue to refrain from such activity after
E-6
1980, will operations under the contract be subject to the
international boycott provisions in years after 1980?
A:
Yes, unless the person establishes that,
before December 31, 1980, he renounces the agreement to
participate in or cooperate with the boycott, that the
renunciation is communicated to the government or person
with which the agreement was made, and the agreement is not
reaffirmed after 1980.
E-7.
Q:
If, under a contract made after January 1,
1977, a person agreed to refrain from an activity described
in section 999(b)(3), and later renounced the agreement and
communicated such renunciation to the government or person
with which the agreement was made, which operations of such
person during the taxable year of the renunciation are
reportable, which operations are included in the international boycott factor calculations, and how are the
sanctions to be applied?
A:
All operations of the person during the entire
taxable year within which the agreement was renounced
(including post-renunciation operations) in or related to
a boycotting country or with the government, a company, or
a national of such country must be reported under section
999(a) and will be considered in calculating the international
boycott factor (or the amount of taxes or income specifically
E-7
attributable to operations in which there was participation
in or cooperation with an international boycott) for the
taxable year.
However, under section 999(c)(1), operations
for which the presumption of participation in or cooperation
with the boycott has been rebutted need not be reflected in
the numerator of the international boycott factor, and the
tax benefits specifically attributable to specific operations
for which such presumption has been rebutted will not be
denied.
There is no proration between the pre-renunciation
and post-renunciation portions of the taxable year of either
the boycott factor or the specifically attributable taxes
and income.
E-8.
Q:
Before September 2, 1976, Company A enters
into a binding contract, which does not contain an agreement
to boycott or by itself support an inference of the existence
of an agreement to boycott.
However, Company A's course of
action in carrying out operations in accordance with the
terms of the contract constitutes participation in or
cooperation with an international boycott.
Will the pro-
visions of section 999 be applied to such participation or
cooperation which takes place prior to January 1, 1978
(see section 1066(a) of the Tax Reform Act of 1976).
E-8
A:
If the course of action from which the existence
of the agreement was inferred took place before September 2,
1976, then the provisions of section 999 would not be applied
to such participation in or cooperation with an international
boycott which takes place prior to January 1, 1978. However,
if the inference of the existence of the agreement would
depend on action taken on or after September 2, 1976,
then the provisions of section 999 would be applied to
participation in or cooperation with the international boycott
subsequent to November 3, 1976 (see section 1066(a)(1) of the
Tax Reform Act of 1976).
F.
International Boycott Factor.
F-l.
Q:
How will the international boycott factor be
determined?
A:
Section 999(c)(1) provides that the international
boycott factor will be determined under regulations prescribed
by the Secretary.
The international boycott factor will be a
fraction, the numerator of which reflects the operations of a
person (or group) in or related to countries associated in
carrying out the international boycott and the denominator of
which reflects the person's (or group's) worldwide foreign
operations.
It is anticipated that regulations setting forth
the method of determining the international boycott factor
will be forthcoming in the near future and will provide that
the international boycott factor will be determined with
reference to three factors: purchases, sales, and payroll.
F-2.
Q:
In the case of a controlled group (within the
meaning of section 993(a)(3)) is a single international
boycott factor computed for the entire group?
A:
Yes.
All members of a controlled group share
a single, common international boycott factor which reflects
the operations of all members of the controlled group.
F-2
F-3.
Q:
Once an international boycott factor has been
computed for a controlled group (within the meaning of
section 993(a)(3)), how is the factor applied to individual
members of the group?
A:
The international boycott factor of a controlled
group is applied separately under sections 908(a), 952(a),
and 995(b)(1) to each individual member of the controlled
group.
F-4.
Q:
If a person applies the international boycott
factor to some operations during the taxable year, must the
factor be applied to all operations of that person for the
taxable year?
A:
Yes.
If a person applies the international
boycott factor to one operation during the taxable year,
the factor must be applied to all operations during the
taxable year, under each of sections 908(a), 952(a), and
995(b)(1).
If a person identifies specifically attributable
taxes and income under section 999(c)(2), that method must
be applied to all operations during this taxable year and
applied under sections 908(a), 952(a), and 995(b)(1).
F-5.
Q:
In the case of a controlled group (within
the meaning of section 993(a)(3)), may one member use the
international boycott factor under section 999(c)(1) and
another member identify specifically attributable taxes
and income under section 999(c)(2)?
F-3
A:
Yes. Each member may independently choose
either to apply the international boycott factor under
section 999(c)(1) or to identify specifically attributable
taxes and income under section 999(c)(2).
G. Determinations.
G-l. Q: What degree of confidentiality will determinations,
and requests for determinations, under section 999(d) receive?
A: A determination under section 999(d) will be
treated as a "written determination" within the meaning of
section 6110(b)(1). Therefore the determination and any
background file document related thereto will be subject to
public inspection in accordance with the rules set forth in
section 6110, and subject to the deletions set forth in
section 6110(c).
H.
Definition of an Agreement to Participate in or Cooperate
wirth a Boycott (section 999(b)(3)).
H-l. Q: Company A, a trading company, signs a contract
with Country X to export goods to Country X. The contract
contains a clause requiring Company A not to obtain any of
the goods from any company listed in the clause as trading
in Country Y. Does Company A's entering into the contract
constitute an agreement according to section 999(b)(3)?
A: Yes. Entering into a written contract which
includes a provision requiring Company A to refrain from
taking an action described in section 999(b)(3)(A)(ii) constitutes an agreement according to section 999(b)(3).
H-2. Q: During the course of negotiations concerning
a contract for the export of goods to Country X, Company A,
a trading company, and Country X agree orally that Company
A will refrain from purchasing any of the goods from any
company included on a list shown to Company A's representatives and engaged in trade in Country Y. They also agree
that this agreement tfill not be reflected in the written
contract for the export of the goods or in any other writing.
Does the oral understanding between Company A and Country X
constitute an agreement according to section 999(b)(3)?
A: Yes. The oral understanding is an explicit
agreement to refrain from taking an action described in
section 999(b)(3)(A)(ii) and thus constitutes an agreement
according to section 999(b)(3).
H-2
H-3. Q: Company A signs a contract with Country X
to construct an industrial plant in Country X.
The contract
states that the laws, regulations, requirements or administrative
practices of Country X will apply to Company A's performance
of the contract in Country X.
The customs laws, regulations,
requirements or administrative practices of Country X prohibit
the importation into Country X of goods manufactured by any
company engaged in trade in Country Y or with the government,
companies or nationals of Country Y.
Does Company A's action
constitute an agreement according to section 999(b)(3)?
A:
No.
The existence of an agreement will not be
inferred solely from the inclusion in a contract of a provision stating that the laws, regulations, requirements or
administrative practices of a country will apply to the
performance of the contract in that country.
H-4.
Q:
The facts are the same as those in Question
H-3, except that the contract states that Company A will
comply with the laws, regulations, requirements or administrative practices of Country X in its performance of the
contract in Country X.
Does Company A's action constitute
an agreement according to section 999(b)(3)?
A:
Yes.
Entering into a contract which requires
compliance with the laws, regulations, requirements, or
administrative practices of Country X constitutes an agreement
according to section 999(b)(3), if some of those laws prohibit
the importation into Country X of goods manufactured by any
company, engaged in trade in Country Y or with the government,
companies or nationals of Country Y.
H-3
H-5. Q: Company A, a trading company, signs a contract
with Country X to export goods to Country X.
The contract
contains no clause concerning a boycott, nor does it require
the contractor to comply with the laws, regulations, requirements or administrative practices in Country X, which, among
other things, prohibit the importation into Country X of goods
manufactured by persons engaged in trade in Country Y.
Company
A refrains from purchasing any goods with which to fulfill its
obligations under the contract from any U.S. company engaged
in trade in Country Y or with the government, companies or
nationals of Country Y.
Does Company A's action constitute
an agreement according to section 999(b)(3)?
A:
No.
Where there is no express agreement, the
existence of an agreement will not be inferred solely from
the fact that Company A has refrained, consistently with the
laws, regulations, requirements or administrative practices
of Country X, from purchasing goods with which to fulfill
its obligations under the contract from any U.S. company
engaged in trade in Country Y or with the government, companies
or nationals of Country Y.
H-6.
Q:
Questions and Answers H-l, H-2, H-4, and H-5
all involve contracts for the export of goods by Company A
to Country X and Company A's refraining from doing certain
business with United States companies which are blacklisted
by Country X because they engage in trade with Country Y.
H-4
The problem of whether an agreement existed for purposes of
section 999(b)(3) would be resolved in the same way as in each
of the Answers above were the contract for (a) the supply of
services; or (b) a construction project in Country X and
Company A refrains from doing business with Country Y, or
refrains from doing business with United States companies
which are blacklisted by Country X because they engage in
trade in Country Y or with the government, companies or
nationals of Country Y.
H-7.
Q:
Country X.
(a) Company A incorporates a subsidiary in
In the documents submitted by Company A relating
to the incorporation of the subsidiary there is a general
acknowledgement that the subsidiary is subject to the laws,
rules, regulations and administrative practices of Country X.
(b) Company A establishes a branch in Country X.
In the documents relating to its registration of the branch
there is a general acknowledgement that the laws, rules,
regulations and administrative practices of Country X apply
to the branch.
Included in the laws, regulations, requirements
or administrative practices of Country X is a requirement
that companies incorporated in Country X and branches registered
in Country X refrain from doing business with any person engaged
in trade in Country X.
Does either the acknowledgement of the
subsidiary or the undertaking of the branch constitute an
agreement by Company A for purposes of section 999(b)(3)?
H-5
A: No as to both the subsidiary and the branch.
The mere acknowledgement in incorporation or registration
documents of the general applicability of the laws of a
boycotting country will not support the inference of the
existence of an agreement under section 999(b)(3).
However,
if in either instance, there was an undertaking to comply
with the laws of that country, it would constitute an
agreement under section 999(b)(3).
H-8.
Q:
Company A, a trading company, signs a contract
with Country X to export goods to Country X.
The contract
contains no clause concerning a boycott, nor does it require
the contract to be carried out in accordance with the laws,
regulations, requirements or administrative practices of
Country X, which prohibit the importation into Country X of
goods manufactured by persons engaged in trade with Country
Y. At the time it exports the goods from the United States,
Company A provides Country X (or the U.S. bank which confirms
the letter of credit under which Company A is to be paid for
the goods and which requires such certificate as a condition
of payment) with a certificate that the goods were not
manufactured by a person engaged in trade in Country Y or
with the government, companies or nationals of Country Y.
Should the existence of an agreement for purposes of section
999(b)(3) be inferred from Company A's furnishing the
certificate?
H-6
A:
No.
The existence of an agreement will not
be inferred solely from the fact that Company A has furnished
a certificate to the effect that the goods it is exporting
were not manufactured by a person engaged in trade in Country Y
or with the government, companies or nationals of Country Y.
H-9.
Q:
Company A signs a contract with Country X to
carry out a construction project in Country X.
The contract
says nothing about the nationality, race or religion of the
individuals who are to be employed to carry out the contract
within Country X.
However, Company A is aware that the laws,
regulations, requirements or administrative practices of
Country X may prohibit the issuance of visas by Country X
to individuals of religion R to work on projects in that country.
Therefore Company A excludes from consideration the employment of individuals of that religion to work on the project
in Country X.
Does Company A's action constitute an agreement
according to section 999(b)(3)?
A:
Yes. While Company A has not explicitly
entered into an agreement to refrain from employing individuals who are of religion R, the existence of such an
agreement will be inferred from its course of conduct. This
agreement would constitute participation in or cooperation
with an international boycott under section 999(b) (3) (A)(iv).
H-7
H-10.
Q:
Company A signs a contract for a construction
project with Country X.
The contract says nothing about the
nationality, race or religion of the individuals who are to
be employed to carry out the contract within Country X.
However, Company A is aware that the laws, regulations, requirements or administrative practices of Country X may prohibit the
issuance of visas to individuals of religion R.
Company A
in recruiting people for the project informs all applicants
that if they cannot obtain a visa to enter Country X, their
employment will be terminated.
It employs several individuals
of religion R who are unsuccessful in obtaining visas and who
are subsequently terminated.
Does Company A's action constitute
an agreement according to section 999(b)(3)?
A:
No.
Company A has not refrained from employing
individuals of religion R for the project.
The existence of
an agreement to refrain from employing individuals of religion R
will not be inferred from Company A's action.
H-ll.
Q:
The facts are the same as those in Question
H-10, except that Company A makes its employment contracts
with all individuals for work on the project subject to the
condition that they obtain visas from Country X which will
permit them to work in Country X.
Few, if any, individuals
or religion R to whom Company A offers employment in Country
X are successful in obtaining visas.
Does such action by
Company A constitute an agreement according to section
999(b)(3)?
H-8
A:
No.
Company A has offered employment to all
individuals who are able to obtain visas.
If an individual
is unable to obtain a visa, it is due to the requirements
of Country X.
The existence of an agreement by Company A
will not be inferred from Company A's action.
H-12.
Q:
The facts are the same as those in Question
H-10, except that no individuals of religion R are willing
to accept employment on the terms offered by Company A.
Does such action by Company A constitute an agreement
according to section 999(b)(3)?
H-13.
A:
No, for the reasons given in Answer H-10.
Q:
Company A signs a contract with Country X to
carry out a construction project in Country X.
The contract
says nothing about who may or may not be a subcontractor to
do certain work in Country X other than that Country X has
the right to prior approval of any subcontractors.
Does
Company A's action constitute an agreement according to
section 999(b)(3)?
A:
No.
The contract provision giving the project
owner a right of prior approval does not itself constitute an
agreement according to section 999(b)(3).
H-14.
Q:
Company A signs a contract with Country X
to carry out a construction project in Country X.
The
contract specifies a number of permissible subcontractors.
H-9
All the subcontractors, in the view of Company A, are capable
of carrying out work, but none of them appears on a list of
U.S. and foreign companies which engage in trade in Country
Y and which Country X's laws, regulations, requirements or
administrative practices prohibit from working on projects in
Country X. Company A has previously done business with each
of the specified companies, but it has also done business with
certain of the boycotted U.S. companies with which it has had
satisfactory relations. Does Company A's action constitute
an agreement according to section 999(b)(3)?
A: By entering into a contract which on its face
indicates a pattern of exclusion of certain companies including
U.S. companies with which Company A has no particular reason
not to do business, it would appear that Company A has agreed
to refrain from doing business with the boycotted U.S. companies,
unless Company A is able to show that the boycotted U.S.
companies were not included on the list for reasons not related
to the boycott.
H-15. Q: Company A signs a contract with Country X to
carry out a construction project in Country X. The contract
provides that Country X is to engage all the subcontractors
which are to be engaged from outside Country X but which are
to perform all or part of their services in Country X.
Company A, however, is given the right to disapprove any
H-10
company which Country X proposes to engage for a subcontract.
While the contract is being carried out, none of the companies
which Country X proposes to prequalify or invite to bid are
included on a list of U.S. companies which engage in trade
in Country Y and which are therefore prohibited by Country X's
laws, regulations, requirements or administrative practices
from working on projects in Country X.
Does Company A's
action constitute an agreement according to section 999(b)(3)?
A:
No. Under the language of the contract,
Company A has not agreed to refrain from doing business with
companies which are on the list of prohibited companies.
The contract moreover does not give Company A the right to
select subcontractors other than those nominated by Country X.
Therefore, Company A's action does not constitute an agreement
according to section 999(b)(3).
H-16.
Q:
Company A signs a contract for a construction
project with Country X.
The contract states that any disputes
arising under the contract will be resolved in accordance
with Country X's laws.
provisions.
The laws of Country X contain boycott
Does Company A's action constitute an agreement
according to section 999(b)(3)?
A:
No.
The provision that disputes will be
resolved in accordance with Country X's laws does not constitute Company A's agreement to comply with Country X's
boycott laws with respect to the carrying out of the contract.
H-ll
H-17.
Q:
Company A receives an inquiry from Country X
about certain goods which Company A manufactures.
The inquiry
also requests Company A to furnish information about the
following matters:
whether it does business with Country Y
and whether it does business with any United States person
engaged in trade in Country Y.
Company A furnishes the re-
quested information to Country X.
Later Company A signs a
contract with Country X to export goods to Country X.
Does
Company A's action constitute an agreement according to
section 999(b) (3)?
A:
No.
By furnishing such information Company A
has not agreed to take any action, as a condition of doing
business with Country X, which is described in section 999(b)(3).
H-18.
Q:
Company A, a trading company, signs a contract
with Country X to export goods to Country X.
The contract
contains a clause requiring Company A not to obtain any of
the goods from any company listed in the clause as trading
in Country Y.
Company A, however, purchases some of the
goods from one of the listed companies.
Does Company A's
entering into this contract constitute an agreement according
to section 999(b) (3)?
A:
Yes.
Entering into a written contract which
includes a provision requiring Company A to refrain from
taking an action described in section 999(b)(3)(A)(ii) constitutes an agreement according to section 999(b)(3), even if
Company A, fully or partially, does not abide by the boycott
provisions.
H-12
H-19.
Q:
Company A signs a contract with Country X to
export goods to Country X.
Included in the contract is a pro-
vision that Company A will refrain from doing business with
Country Y, which is boycotted by Country X.
Company A has
done considerable business with Country Y in the past, but
soon after it concludes that contract with Country X its
distributor in Country Y learning of the contract with Country
X refuses to continue to handle Company A's products and
Company A tries but is unable to conclude any other satisfactory distribution arrangement in Country Y.
Does Company
A's entering into this contract constitute an agreement
according to section 999(b)(3)?
H-20.
A:
Yes, for the reasons given in Answer H-18.
Q:
Company A has been unable to do business with
Country X because Company A has been on a blacklist of companies
maintained by an organization of countries to which Country X
belongs.
Company A agrees, as a condition of being removed
from the list, to refrain from doing business with Country Y.
Does Company A's agreement constitute an agreement according
to section 999(b) (3)?
A:
Yes.
Even though Company A has not yet
entered into a contract to do business with any boycotting
country, it has agreed, as a condition for being in a position
to do business with one or more of the countries maintaining
the blacklist, to refrain from doing business with Country Y.
This action constitutes an agreement according to section
999(b)(3).
H-13
H-21.
Q:
The facts are the same as those in Question H-20,
except that Company A does several different types of business
with Country Y. It is requested and agrees to refrain from
doing only one of those types of business with Country Y and
in fact continues to do the other types of business with
Country Y. Does Company A's agreement constitute an agreement
according to section 999(b)(3)?
A: Yes. An agreement to refrain from some, but
not all, business with a boycotted country constitutes an
agreement according to section 999(b)(3). Answer H-20 is also
relevant in this context.
H-22. Q: Company A is doing business in Country X.
It contracts with Company C which is not related to Company A,
for Company C to build an office building for Company A's
use in Country X. In the course of constructing the building,
Company C participates in or cooperates with a boycott imposed
by Country X. Does Company A's actions constitute an
agreement according to section 999(b)(3)?
A: Unless Company A specifically directs or
requires Company C to take specific action which constitutes
participation in or cooperation with the boycott by Company C,
Company C's action will not be attributable to Company A under
section 999(b)(3), and Company A will not be deemed to be
participating in or cooperating with an international boycott.
H-14
H-23. Q: Company A signs a contract with Country X for
the export of goods to Country X.
The contract does not contain
any provisions as to which ships should be used for shipping
the goods to Country X.
The laws, regulations, requirements,
or administrative practices of Country X do not permit the
importation of goods aboard a ship owned by companies which
trade in Country Y.
Company A is aware of this requirement
and ships the goods on the ships of a company which does not
trade in Country Y.
Does Company A's action constitute an
agreement according to section 999(b)(3)?
H-24.
A:
No, for the reasons given in Answer H-5.
Q:
Company A is competing for an industrial plant
construction contract for which Country X is inviting international tenders.
The tender documents contain a provision
to the effect that Country X will not enter into the contract
unless the successful tenderer certifies that in carrying out
the contract it will refrain from doing business with a certain
list of companies, including some U.S. companies, which do
business with Country Y.
Company A does not win the tendering,
but in its tender it has indicated that it will sign a contract,
in the form indicated in the tender documents, and has given
Country X a tender bond to that effect.
Does Company A's
action constitute an agreement according to section 999(b)(3)?
H-15
A:
No.
Since its offer was not accepted, Company A
has not entered into any agreement to refrain from doing
business with the blacklisted companies which would constitute
participation in or cooperation with an international boycott.
H-25. Q: Company A successfully prequalifies to tender
for a contract for the construction of ff( industrial plant
which will be owned by Country X. At the time it attempts
to prequalify, Company A is required to state that it understands that the successful tenderer for the contract will have
to agree not to do business in connection with the project
with any blacklisted U.S. company or with the government,
companies or nationals of Country Y. After it prequalifies,
Company A decides not to tender for the contract. Does
Company A's action constitute an agreement according to
section 999(b)(3)?
A: No. Company A has not entered into an agreement to refrain from doing business with the blacklisted
companies which would constitute participation in or cooperation with an international boycott.
H-26. Q: Company A competes for an industrial plant
construction contract for which Country X is inviting
international tenders. The tender documents contain a
provision to the effect that Country X will not enter into
a contract unless the successful tenderer certifies that in
carrying out the contract it will refrain from doing business
H-16
with any blacklisted U.S. company.
Many companies on the
blacklist are boycotted by Country X because they trade in
Country Y or with the government, companies or nationals of
Country Y.
Company A wins the tender and successfully
convinces Country X that the boycott clause can be deleted
from the final contract since Company A had never dealt with
any of the blacklisted companies and there is no commercial
reason for it to do so in carrying out this particular
contract.
Does Company A's action constitute an agreement
according to section 999(b)(3)?
A:
Yes.
Company A's assurance to Country X that
it will refrain from doing business with the boycotted U.S.
companies constitutes an agreement which is a participation
in or cooperation with an international boycott according to
section 999(b)(3)(A)(ii).
H-27.
Q:
Company A charters a vessel to Company C
to be used by Company C in carrying its goods to Country X.
Company C, at the request of Company A, agrees in the charter
agreement not to take any action with respect to, or issue
any orders to, the vessel which would result in limiting
the vessel's ability to call at ports in Country X and/or
subject the vessel to arrest or confiscation in Country X.
Does the action of Company A and Company C constitute participation in or cooperation with an international boycott
according to section 999(b)(3)?
H-17
A:
No.
In the agreement, Company A and Company C
have not agreed to refrain from taking any of the actions
enumerated in section 999(b)(3).
Therefore, such action
by Company A and Company C does not constitute participation
in or cooperation with an international boycott, according
to section 999(b)(3) .
H-28.
Q:
Company A charters a vessel to Company C to
be used by Company C in carrying its goods to or from
specifically named ports, or a range of ports within a
specified geographical area.
Company A and Company C agree
on a charter agreement which would, in effect, exclude trade
by that vessel to a number of countries, including Country Y.
Does the action of Company A and Company C constitute participation in or cooperation with an international boycott
under section 999(b)(3)?
A:
No, for the reasons given in Answer H-27
Q:
Company A signs a contract with Country X for
above.
H-29.
the export of goods to Country X.
The contract provides
that Company A will not trade in Country Y, and that payment
will be made by means of a letter of credit confirmed by
Bank B in the United States.
The contract requires Company A
to provide to Bank B a certificate that it has complied with
the boycott requirements before it can be paid by Bank B.
H-18
t
Bank B confirms the letter of credit and later makes payment
to Company A after determining that all documents, including
the boycott certificate, are in order. Does Bank B's action
constitute participation in or cooperation with an international boycott under section 999(b)(3)?
A: No. Bank B's action does not constitute an
agreement by it to refrain from any of the types of activities
listed in section 999(b)(3)(A). Therefore it does not constitute participation in or cooperation with an international
boycott by Bank B. (Company A's action does constitute participation in or cooperation with an international boycott
by Company A according to section 999(b)(3)(A)(i).)
H-30: Q: Company A signs a contract with Country X for
the supply of goods. The contract provides that Company A
will not trade with Country Y, and that payment will be made
by means of a letter of credit confirmed by Bank B in the
United States provided that Bank B certifies to Country X
that it will not confirm letters of credit relating to the
export of goods to Country Y. Bank B confirms the letter of
credit, after issuing the requested certificate. Does Bank
B's action constitute participation in or cooperation with
an international boycott under section 999(b)(3)?
H-19
A:
Yes.
Bank B has agreed to refrain from doing
business with or in Country Y or with the government, compan
or nationals of that country. This action constitutes participation in or cooperation with an international boycott
according to section 999(b)(3)(A)(i).
I. Refraining from Doing Business with or in a Boycotted
Country (section 999(b)(3)(A)(i)).
1-1. Q: Company A signs a contract with Country X for
the export of certain goods to Country X. In that contract
there is a provision that none of the goods to be provided
thereunder shall come from Country Y. Does Company A's action
constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(i)?
A: No. Company A in entering into such a contract
is complying with the prohibition 'by Country X on the importation of goods produced in whole or in part in any country
which is the object of an international boycott. Such action,
according to section 999(b)(4)(B), does not constitute participation in or cooperation with an international boycott.
1-2. Q: Company A owns a number of ships. It understands that if one of its ships visits Country Y, that ship
will thereafter be unable to visit Country X. Company A
has some ships which visit Country Y but not Country X and
other ships which visit Country X but not Country Y. Does
Company A's action constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(i)?
1-2
A:
No.
Company A has not refrained from doing
business with Country Y as some of its ships are still calling
there.
Therefore Company A's action does not constitute
participation in or cooperation with an international boycott
according to section 999(b)(3)(A)(i).
1-3.
Q:
Company A signs a contract with Country X,
licensing a company in Country X to use certain of its
patents and trademarks in Country X.
The contract provides
that Company A will not enter into an agreement with respect
to the use in Country X of patents and trademarks with any nation
of Country Y.
Does Company A's action constitute participation
in or cooperation with an international boycott under section
999(b)(3)(A)(i)?
A:
Yes.
Company A has agreed to refrain from
doing business with any national of Country Y and such action
constitutes participation in or cooperation with an international
boycott according to section 999(b)(3)(A) (i) .
1-4.
Q:
Same facts as in Question 1-4, except that
Company A has a number of other licensing agreements with
Country Y and enters into still more such agreements after
it signs the contract with Country X.
Does Company A's
action constitute participation in or cooperation with an
international boycott under section 999(b)(3)(A)(i)?
A:
Yes, for the same reasons as stated in
Answer 1-3 above. Answer
H-18 is relevant in this context.
1-3
1-5
Q:
Company A signs a contract with Country X to
export some products from Country X.
The contract requires
Company A to certify that the goods will not be sent to
Country Y.
Company A so certifies.
Does Company A's action
constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(i)?
A:
No.
Company A's compliance with Country X's
prohibition on the exportation of products of Country X to
Country Y does not constitute participation in or cooperation with an international boycott, according to section
999(b)(4)(C)
J.
Refraining from Doing Business with any United States
Person Engaged in Trade in a Boycotted Country (section
999(b)(3)(A)(ii)).
J-l.
Q:
Company A signs a contract with Country X for
the turn-key construction of an industrial plant.
The
contract provides that Company A will not use as subcontractors a number of named U.S. firms whose past performance on
contracts in Country X has been unsatisfactory, according
to Country X, for reasons unrelated to the boycott.
Does
Company A's action constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(ii)?
A:
No.
The exclusion of subcontractors based on
their performance is not covered by section 999(b)(3).
J-2.
Q:
Company A enters into a contract with Country X
to export certain goods to Country X.
The contract provides
that Company A shall not use any goods manufactured by
Company B in performing the contract since Company B is
blacklisted by Country X even though Company B does not engage in
any kind of trade in a country which is the object of the
boycott or with the government, companies, or nationals
of that country.
Does Company A's action constitute
participation in or cooperation with an international
boycott under section 999(b)(3)(A)(ii)?
J-2
A:
No.
Since Company B is not engaged in trade
in Country Y or with the government, companies or nationals
of Country Y, Company A's agreement to refrain from doing
business with Company B does not come within the scope of
section 999(b)(3)(A)(ii).
J-3. Q: Company A competes for an industrial plant
construction contract for which Company P of Country W is
inviting international tenders. The contract is to be financed
by Country X, which maintains a blacklist of companies
(including some U.S. companies) which engage in trade with
Country Y. Many of the companies are on the list because
they are engaged in trade in Country Y. Country X requires
contracts which it finances to state that the contractor
is required to refrain from making any purchases for the
project from any of the blacklisted companies. Country W
does not boycott those companies. Company A wins the tender
and signs the contract with Company P with the blacklist
provision. Does Company A's action constitute participation
in or cooperation with an international boycott according
to section 999(b)(3)(A)(ii)?
A: Yes. Although the boycott is not implemented
by Country W, but by Country X, and the project is being
carried out in Country W, Company has agreed not to do
business with blacklisted U.S. companies as a condition of
doing business with Company P. This action constitutes
participation in or cooperation with an international
boycott according to section 999(b)(3)(A)(ii).
J-3
J-4.
Q:
Company A signs a contract with Country X
to export certain goods to Country X, The contract provides
that Company A will not do business with any company blacklisted by Country X. Among the blacklisted companies are * •"
a number of foreign subsidiaries of U.S. companies, but no
U.S. companies are on the list. Does Company A's action
constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(ii)?
A: No. According to section 999 (b)(3)(A)(ii)
refraining from doing business with any United States
person engaged in trade in a boycotted country constitutes
participation in or cooperation with an international boycott.
For purposes of this particular section "United States person"
does not include foreign subsidiaries of a United States person.
J-5 . Q: Bank B advises Country X on its investments in
the United States. Country X instructs Bank B not to recommend
for investment any shares of certain companies wh Lch ;i re eiM-apcd
in trade in Country Y. Bank B follows these instructions.
Does Bank B's action constitute participation in or coopcra
tion with an international boycott according to section
999(b)(3)(A)(ii)?
A: No. In following the instructions Rank B
itself has not agreed to refrain from doing business with
a United States person engaged in trade with Country V.
Therefore Bank B's action does not constitute participation
in or cooperation with an international boycott according
to section 999(b)(3)(A)(ii).
J-4
J-6. Q: Bank B manages Country X's investment portfolio
in the United States.
Bank B has been given certain powers
to act for Country X, pursuant to instructions which, among
other things, require Bank B not to invest Country X's funds in
stocks and bonds issued by certain specified United States companies, some of which are engaged in trade in Country Y.
Does
Bank B's action constitute participation in or cooperation with an
international boycott according to section 999(b)(3)(A)(ii)?
A:
No.
An agreement to refrain from purchasing
stocks or bonds issued by a certain company does not constitute an agreement to refrain from doing business with that
company.
Accordingly, Bank B's action does not constitute
participation in or cooperation with an international boycott,
according to section 999(b)(3)(A) (ii) .
J-7.
Q:
Company A signs a contract with Country X to
construct an industrial plant in Country X.
The laws,
regulations, requirements or administrative practices of
Country X prohibit the entry into Country X of goods produced by
blacklisted companies, many of which trade in Country Y or with
the government, companies or nationals of Country Y.
The contract
states that the laws and regulations of Company X will apply to
Company A's performance of the contract in Country X.
In
carrying out the project, Company A invites bids to furnish
J-5
all goods and equipment on a delivered-in-Country X basis.
No boycotted company on the blacklist maintained by Country
X bids.
Does Company A's action, as described in this question,
constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(ii)?
A:
No.
By the terms of the agreement Company A
has not agreed to refrain .from doing business with any of
the blacklisted companies.
The fact that blacklisted
companies are unable to meet the conditions which Company A
establishes is not due to any agreement by Company A with
Country X, but is due to Country X's laws, regulations, requirements or administrative practices.
J-8.
Q:
The facts are the same as those in Question
J-10, except that Company A's purchase contracts require
venders to reimburse Company A for the purchase price and
transportation costs, plus interest, of any goods which
Company A cannot import into Country X because of Country
X's import restrictions.
In this case, does Company A's
action constitute participation in or cooperation with an
international boycott under section 999(b)(3)(A)(ii)?
J-9.
A:
No, for the reasons given in Answer J-10.
Q:
Company A signs a contract with Country X
to produce or purchase goods in Country X for export. The
contract requires Company A to certify that the goods will
not be sent to Country Y and that Company A will require a
J-6
similar certification by any purchaser of the products if
they are substantially unaltered at the time of the resale
by Company A.
Company A thereafter sells these goods to
Company B, requiring a similar certification.
Does Company
A;s action constitute participation in or cooperation with
an international boycott under section 999(b)(3)(A)(ii)?
A:
No.
Company A's agreement to refrain, and to
require its buyer in the resale to refrain, from sending
Country X's unaltered products to Country Y, according to
section 999(b)(4)(C), does not constitute participation in
or cooperation with an international boycott.
J-10.
Q:
Company A signs a contract with Country X for
the export of goods to Country X.
The contract requires
Company A, before it receives payment for the goods, to
provide Country X with a certificate naming the company
which produced the goods. The laws, regulations, requirements or administrative practices of Country X prohibit the
importation into Country X of goods manufactured by a
company engaged in trade in Country Y or with the government,
companies or nationals of Country Y.
Does Company A's action
constitute an agreement, according to section 999 (b) (3)(A)(ii)?
J-7
A:
No.
The existence of an agreement to refrain
from doing business with a United States person engaged in
trade with Country Y or with the government, companies or
nationals of Country Y, will not be inferred solely from
the inclusion of a requirement in a contract that Company A
provide Country X with a certificate as to the identity
of manufacturer of the goods being sold pursuant to the
contract.
K. Refraining from Doing Business with any Company Whose
Ownership or Management is Made up, in Whole or in Part
of Individuals of a Particular Nationality, Race or
Religion (section 999(b)(3)(A)(iii)).
K-l.
Q:
Company A signs a contract with Country X for
the export of certain goods to Country X.
In the contract
it is provided that the goods shall not bear any mark
symbolizing Country Y or religion R.
Does Company A's
action constitute participation in or cooperation with an
international boycott under section 999(b)(3)(A)(iii)?
A:
No.
Section 999(b)(3)(A)(iii) concerns refraining
from doing business on the basis of the religion of the owners
or management of the organization and refraining from employing
individuals of a particular religion.
It does not concern
refusal to allow certain types of religious marks into a
country. No part of section 999(b)(3) concerns refusals to
purchase goods bearing marks symbolizing a certain country.
K-2.
Q: As a condition of doing business in a country,
Company A's subsidiary in Country X agrees that the board
of directors of the subsidiary must consist of a specified
number of nationals of Country X.
Does such action constitute
participation in or cooperation with an international boycott
according to section 999(b)(3)(A)(iii)?
K-2
A:
No.
Such action will not be deemed to con-
stitute an agreement to participate in or cooperate with
an international boycott according to section 999(b)(3)(A)(iii).
K-3.
Q:
Company A is the leader of a syndicate of U.S.
and foreign banks which is underwriting a public bond issue
of Country X.
Company C is a member of that syndicate.
During the loan negotiations, Country X indicates that Company
D, which is not a U.S. company, should be excluded from the
syndicate because of the religion of some of its directors.
Company A and Company C agree that they did not contemplate
that Company D would be a member of the syndicate in any
event and that complying with the request of Country X
presents no problem.
Does the action of Company A and
Company C constitute participation in or cooperation with
an international boycott under section 999(b)(3)(A)(iii)?
A:
Yes.
The action of Company A and Company C
is an agreement to refrain from doing business with a company
whose management are individuals of a particular religion.
According to section 999(b)(3)(A)(iii) this constitutes
participation in or cooperation with an international boycott.
K-4.
Q:
The facts are the same as in Question K-3,
except that Country X indicates that Company D may be included
only if it removes several of its directors who are of
nationality Y.
Does the action of Company A and Company C
constitute participation in or cooperation with an international boycott under section 999(b)(3)(A)(iii)?
K-3
A:
above.
Yes, for the reasons given in Answer K-3
L. Refraining from Employing Individuals of a Particular
Nationality, Race or Religion (section 999(b)(3)(A)(iv)).
L-l.
Q:
Company A signs a construction contract with
Country X which provides that Company A is not to employ
individuals of religion R to work on the project in Country
X.
Does such action constitute participation in or coopera-
tion with an international boycott under section 999(b)(3)(A)
(iv)?
A:
Yes.
Company A has clearly agreed to refrain
from employing individuals of religion R.
Section 999(b)(3)
(A) (iv) defines an agreement, made as a condition of doing
business with the government of a country, to refrain from
employing individuals of a particular religion as participation in or cooperation with an international boycott.
L-2.
Q:
Company A signs a contract with Country X
for a construction project in Country X.
The contract
specifies that only individuals who are nationals of the
United States or Country X will be allowed to work on the
project.
Would Company A's action constitute participation
in or cooperation with an international boycott under section
999(b)(3)(A)(iv)?
A:
No.
There is no evidence of an attempt to
specifically exclude persons of a particular nationality.
Persons of a number of different nationalities, including
those from both friendly and unfriendly countries, have
been evenhandedly excluded.
L-2
L-3.
Q:
As a condition of doing business in Country X,
Company A agrees to employ a specified percentage of nationals
of Country X or to employ increasing numbers of nationals of
Country X.
Does such action constitute participation in or
cooperation with an international boycott according to
section 999(b)(3)(A)(iv)?
A:
No.
Such action will not be deemed to constitute
an agreement to participate in or cooperate with an international boycott under section 999(b)(3)(A)(iv).
L-4.
Q:
Company A signs a contract with Country X for
the engineering and construction of an industrial plant in
Country X.
The contract excludes from working in Country X
U.S. nationals who are also nationals of Country Y or who
were formerly nationals of Country Y.
Does Company A's
action constitute participation in or cooperation with an
international boycott according to section 999(b)(3)(A)(iv)?
A:
Yes. Any agreement to differentiate among
U.S. citizens on the basis of dual nationality or national
origin for employment on a project constitutes participation
in or cooperation with an international boycott, according to
section 999(b)(3)(A)(iv).
L-3
L-5.
Q:
Company A signs a contract with Country X
for the engineering and construction of an industrial
plant in Country X. The contract provides that Company A is
not to employ in its home office any individuals who are
nationals of Country Y to work on the design of the plant.
Does Company A's action constitute participation in or
cooperation with an international boycott according to
section 999(b)(3)(A)(iv)?
A: Yes. Company A has agreed to refrain from
employing individuals who are nationals of Country Y, and
such agreement constitutes participation in or cooperation
with an international boycott according to section 999(b)(3)
(A)(iv).
M.
As a condition of the sale of a product, refraining from
shipping or insuring that product on a carrier owned,
leased, or operated by a person who does not participate
in or cooperate with an international boycott (section
999(b)(3)(B)).
M-l. Q: Company A enters into a c.i.f. contract for
the export of goods to Country X. The contract states that
the goods are not to be shipped on a ship blacklisted by
Country X. Many of the ships on the list have in the past
called at a port in Country Y, contrary to the laws, regulations, requirements or administrative practices of Country X.
Does Company A's action constitute participation in or
cooperation with an international boycott under section
999(b)(3)(B)?
A: Yes. Company A has agreed as a condition of
the sale of its goods, in effect, to refrain from shipping
the goods on a carrier owned, leased or operated by a person
who does not participate in or cooperate with an international
boycott. This action constitutes participation in or
cooperation with an international boycott according to
section 999(b)(3) (B) .
M-2. Q: Company A enters into a f.a.s. Port of New York
contract with Country X for the sale of goods to Country X.
While no overseas shipping or insurance provisions are
contained in the contract, Company A has reason to believe
M-2
that arrangements will be made by Country X to see that the
goods are not shipped on a carrier owned, leased, or operated
by a person who does not participate in or cooperate with
Country X's boycott of Country Y. Does Company A's action
constitute participation in or cooperation with an international boycott according to section 999(b)(3)(B)?
A. No. Company A has not agreed as a condition
of sale to refrain from shipping on a carrier owned, leased
or operated by a person who does not participate in or
cooperate with an international boycott. It has not agreed
to any shipping or insurance arrangements. Its action thus
does not constitute participation in or cooperation with an
international boycott according to section 999(b)(3)(B).
M-3. Q: Company A is requested by Country X to enter
into a c.i.f. contract for the export of goods to Country X.
However, to avoid participating in or cooperating with an
international boycott Company A successfully convinces
Country X that the contract should specify shipment f.a.s.
Port of New York. The remainder of the circumstances are
as described in Question M-2 above. Does Company A's action
constitute participation in or cooperation with an international boycott according to section 999(b)(3)(B)?
A: No, for the reasons given in Answer M-2.
M-3
M-4.
Q:
Company A, a United States freight forwarding
company, has a contract with Country X to make, as an agent
of Country X, shipping and insurance arrangements for goods
which Country X purchases in the United States on a f.a.s.
Port of New York basis. The contract provides that no
shipments will be made on a carrier owned, leased, or operated
by a person who does not participate in or cooperate with an
international boycott. Company A then makes shipping and
insurance arrangements on that basis. Does Company A's
action constitute participation in or cooperation with an
international boycott according to section 999(b)(3)(B)?
A: No. Company A's agreement not to make shipping
arrangements on a carrier of a person who does not participate
in Country X's boycott of Country Y is not made as a condition
of the sale of a product which is to be shipped to Country X.
Therefore, Company A's action does not constitute participation in or cooperation with an international boycott according
to section 999(b)(3)(B). However, Company A's agreement would
constitute participation in or cooperation with an international boycott pursuant to section 999(b)(3)(A)(ii) if there
are vessels owned by U.S. persons with which the agreement
requires Company A not to deal.
M-4
M-5.
Q:
Company A enters into a contract with Country X
for the export of goods to Country X.
The contract requires
Company A not to ship the goods on a ship owned, controlled,
operated, or chartered by Country Y or a national of Country Y
or on a ship which during the voyage calls at Country Y enroute
from the United States to Country X.
There is a state of
hostility between Country X and Country Y.
with this requirement.
Company A complies
Does Company A's action constitute
participation in or cooperation with an international boycott?
A:
No.
Company A has not participated in or
cooperated with an international boycott.
The requirement
in the contract constitutes a precautionary measure to avoid
risk of confiscation of the goods rather than a restrictive
boycott practice.
M-6.
Q:
Company A enters into a contract with Country X
for the export of goods to Country X.
The contract requires
Company A to ship the goods only on a ship registered in
Country X.
Does Company A's action constitute participation
in or cooperation with an international boycott, according to
section 999(b) (3) (B)?
A:
No.
An agreement to ship the goods only in a
ship registered in Country X does not constitute an agreement
to refrain from shipping or insuring those goods on a carrier
owned, leased, or operated by a person who does not participate
in or cooperate with an international boycott.
Therefore,
Company A's action does not constitute participation in or
cooperation with an international boycott according to section
999(b)(3)(B).
M-5
M-7.
Q:
Company A signs a contract with Company X
for the export of goods to Country X.
The contract provides
that the goods may not be shipped on a vessel which has been
blacklisted by Country X because it has called at Country Y
in the past.
Does Company A's action constitute participation
in or cooperation with an international boycott according to
section 999(b)(3)(B)?
A:
Yes.
The reason for those vessels being
blacklisted was that at some time in the past the owner,
lessor or operator of the vessel did not comply with the
requirement of Country X that the vessel not call at Country Y.
Therefore, Company A's signing the contract constitutes
participation in or cooperation with an international boycott,
according to section 999(b)(3)(B).
M-8.
Q:
Company A signs a contract with Country X for
the export of goods to Country X.
The contract contains no
requirement that the seller refrain from shipping the goods
on a vessel which has been blacklisted by Country X because
it has called at
Country Y in the past.
ship the goods on a blacklisted vessel.
Company A does not
Does Company A's
action constitute participation in or cooperation with an
international boycott according to section 999(b)(3)(B)?
A:
No, an agreement to participate in or cooperate
with an international boycott, according to section 999(b)(3)(B),
will not be inferred from Company A's action.
M-6
M-9.
Q:
Company A signs a c.i.f. contract with Country
X for the export of goods to Country X to be paid for by means
of a letter of credit.
The letter of credit for this trans-
action requires, as a condition of payment, Company A to certify as to the identity of the vessel and the identity of the
insurer.
bank.
Company A provides such a certificate to the paying
Does Company A's action constitute participation in or
cooperation with an international boycott?
A:
No, the existence of an agreement to participate
in or cooperate with an international boycott will not be
inferred solely on the basis of Company A's certification.
wDepartmentoftheTREASURY
SHINGTON, D.C. 20220
TELEPHONE 964-2041
mWmmmm
CONTACT:
George G. Ross
(202) 964-5985
FOR IMMEDIATE RELEASE
November 5, 1976
UNITED STATES AND SRI LANKA TO DISCUSS
INCOME TAX TREATY
The Treasury Department announced today that
representatives of the United States and Sri Lanka (formerly
Ceylon) will meet in Colombo in January to begin discussions
of a proposed bilateral income tax treaty. The discussions
are tentatively scheduled to start January 10, 1977.
At present there is no income tax treaty between the
two countries.
The proposed treaty is intended to prevent double
taxation and to facilitate trade and investment between
the two countries. It will be concerned with the tax
treatment of income of individuals and companies from
business, investment, and personal services, and with
procedures for administering the provisions of the treaty.
The "model" income tax treaty developed by the
Organization for Economic Cooperation and Development will
be taken into account along with recent U.S. treaties with
other countries, such as the treaties with Egypt and Israel
which were signed in 1975 and are currently pending before
the Senate Foreign Relations Committee. Attention is also
called to the current United States "model" income tax treaty,
the text of which was released by the Treasury Department on
May 18, 1976.
The Treasury said that persons wishing to comment concerning the proposed treaty are asked to send their comments
in writing by December 20, 1976, to Charles M. Walker,
Assistant Secretary of the Treasury, U.S. Treasury Department,
Washington, D. C. 20220.
This announcement appears in the Federal Register of
November 5, 1976.
oOo
WS-1157
departmentoftheJREASURY
GTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
November 4, 1976
RESULTS OF AUCTION OF 7-YEAR TREASURY NOTES
The Treasury has accepted $2,015 million of $6,249 million of
tenders received from the public for the 7-year notes, Series B-1983,
auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield '
Highest yield
Average yield
7.00%
7.
7.
1/
The interest rate on the notes will be
7%
the above yields result in the following prices:
Low-yield price 100.000
High-yield price
Average-yield price
. At the
7%
rate,
99.891
99.891
The $2,015 million of accepted tenders includes 70% of the amount of
notes bid for at the highest yield and $ 891 million of noncompetitive
tenders accepted at the average yield.
In addition, $270 million of tenders were accepted at the averageyield price from Government accounts and Federal Reserve Banks for their
own account in exchange for notes maturing November 15, 1976, ($50 million)
and from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash ($ 220 million) .
1/ Excepting 5 tenders totaling $1,000,000
oOo
WS-1158
TELEPHONE 964-2041
HINGTON, D.C. 20220
FOR IMMEDIATE RELEASE
November 5, 1976
RESULTS OF AUCTION OF 23-1/4-YEAR TREASURY BONDS
AND SUMMARY RESULTS OF NOVEMBER REFINANCING
The Treasury has accepted $1,000 million of the $1,544 million of
tenders received from the public for the 23-1/4-year 7-7/8% bonds
auctioned today. The range of accepted competitive bids was as follows:
Price
Approximate Yield
To First Callable
Date
High
Low
Average
101.05
100.58
100.79
7.76%
1/
To Maturity
7.77%
7.82%
7.80%
7.81%
7.79%
The $1,000 million of accepted tenders includes 30% of the amount
of bonds bid for at the low price, and $150
million of noncompetitive
tenders accepted at the average price.
1/ Excepting 4 tenders totaling $6,160,000
SUMMARY RESULTS OF NOVEMBER REFINANCING
Through the sale of the three issues offered in the November
refinancing, the Treasury raised approximately $2,500 million of new
money and refunded $4,300 million of securities maturing November 15, 1976.
The following table summarizes the results:
New Issues
6-1/4%
Notes
11-15-79
Puhlir
UbllC
$3.0
7%
7-7/8%
Notes
Bond
11-15-83 2-18-952000
$2.0
$1.0
Government Accounts
and Federal Reserve
Banks
0.1
0.1
-
0.2
0.3
0.3
Foreign Accounts
for Cash
0.3
0.2
-
-
0.5
-
TOTAL $3.4 $2.3 $1.0 $0.2 $6.8 $4.3 $2.5
Details may not add to .total due to rounding.
'S-U59
Nonmar- Total Maturing Net New
ketable
Securities Money
Special
Held
Raised
Issues
Art
$$6.0
$4.0
$2.0
0-5
FOR IMMEDIATE RELEASE
Contact: L.F. Potts
Extension 2951
November 5, 1976
TREASURY ANNOUNCES COUNTERVAILING DUTY
INVESTIGATION ON IMPORTS OF CHAINS AND
PARTS THEREOF, OF CAST IRON, IRON OR STEEL,
FROM ITALY
Under Secretary of the Treasury Jerry Thomas
announced today a formal notice of investigation and
receipt of countervailing duty petition with respect
to imports of chains and parts thereof, of cast iron,
iron or steel from Italy. This action will be published in the FEDERAL REGISTER of November 8, 1976.
Under the U.S. Countervailing Duty Law
(19 USC 1303), che Secretary of the Treasury is
required to assess an additional (countervailing)
duty that is equal to the amount of the bounty or
grant that has been found to be paid or bestowed on
the imported merchandise. This action is taken
pursuant to allegations by the National Association of
Chain Manufacturers that this merchandise receives
"bounties or grants" in the form of rebates under
Italian Law 639. A preliminary determination on
this case must be reached on or before April 1, 1977.
A final determination must be issued by October 1,
1977.
Imports of the subject merchandise from Italy
during the first half of 1976 were valued at roughly
$464,000.
*
*
*
WS-1160
H
r
btDepartmentoftheJREA$URY
OA
v
*
w
.**>
TELEPHONE 964-2041
iGTON, D.C. 20220
/7H^
^ ^ ^ nt?TT7ACT?
FOR IMMEDIATE RELEASE
November 8, 1976
»
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,600 million of 13-week Treasury bills and for $ 3,700 million
of 26-week Treasury bills, both series to be issued on November 12, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
13-week bills
maturing February 10, 1977
Price
Discount
Rate
98.783
98.773
98.777
4.868%
4.908%
4.892%
Investment
Rate 1/
5.
5.04%
5.02%
26-week bills
maturing May 12, 1977
Price
Discount
Rate
97.475
97.458
97.464
5.022%
5.056%
5.044%
Investment
Rate 1/
5.22%
5.26%
5,
Tenders at the low price for the 13-week bills were allotted 37%,
Tenders at the low price for the 26-week bills were allotted 17%,
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
Accepted
Boston
$
51,025,000
New York
4,035,240,000
Philadelphia
72,370,000
Cleveland
26,205,000
Richmond
17,955,000
Atlanta
53,890,000
Chicago
211,505,000
St. Louis
49,215,000
Minneapolis
33,870,000
Kansas City
31,560,000
Dallas
14,570,000
San Francisco
212,050,000
$
Treasury
10,000
10,000
TOTALS $4,809,465,000
43,025,000
2,187,320,000
72,370,000
26,205,000
17,325,000
23,790,000
94,530,000
27,065,000
16,980,000
31,560,000
9,570,000
51,750,000
$2,601,500,000a/
$
69,720,000
5,859,180,000
5,185,000
116,815,000
21,680,000
16,190,000
334,500,000
43,620,000
42,215,000
23,360,000
12,570,000
329,485,000
15,000
$6,874,535,000
WIn C l U < l e S $ 2 8 7 ' 8 0 5 > 0 0 0 n o n c o m P e t i t i v e tenders from the public.
/ ncludes $ 136,775,000 noncompetitive tenders from the public.
i/equivalent coupon^issue yield.
"S-1161
Accepted
Received
$
45,720,000
3,202,710,000
5,185,000
91,815,000
9,850,000
13,810,000
153,900,000
16,800,000
33,725,000
13,910,000
7,570,000
105,995,000
15,000
$3,701, 005, 000 bj
FOR RELEASE AT 4:00 P.M.
November
9, 1976
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 $6,000 million, or
thereabouts, to be issued November 18, 1976, as follows:
91-day bills (to maturity date) in the amount of $2,500 million, or
thereabouts, representing an additional amount of bills dated August 19, 1976,
and to mature February 17, 1977 (CUSIP No. 912793 E6 9), originally issued in
the amount of $3,603 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $3,500 million, or thereabouts, to be dated November 18, 1976,
and to mature
May 19, 1977
(CUSIP No. 912793 G3 4 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
November 18, 1976, outstanding in the amount of $6,006 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,621 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standard time, Monday, November 15, 1976.
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
WS-1162
(OVER)
•''
:
'
_2-
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. 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 $500,000 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 or at the Bureau of the Public Debt
on November 18, 1976, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing November 18, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
OOo
departmentoftheJREASURY
OFFICE OF REVENUE SHARING
TELEPHONE 634-5248
WASHINGTON, D.C. 20226
FOR IMMEDIATE RELEASE
FRIDAY, NOVEMBER 12, 19 76
CONTACT: PRISCILLA R. CRANE C202) 634-5248
SPECIAL PAYMENT OF REVENUE SHARING FUNDS
The Treasury Department's Office of Revenue Sharing
sent 1,893 units of local government a total of
$16,799,986 today. The money was distributed to governments which did not receive an October 1976 quarterly
payment because one or both of two reports required
by revenue sharing law had not yet been received by the
Office of Revenue Sharing. Only those governments which
returned their Planned and Actual Use Reports by Friday,
November 5, 1976 are being sent funds today.
With this special payment, a total of 37,004 States
and local governments now have received $1.64 billion in
first-quarter entitlement period seven (July 1, 1976December 31, 1976) funds.
To date $28.4 billion has been returned to States
and local units of general government since the General
Revenue Sharing Program first was authorized, in 1972.
The second and final quarterly payment of entitlement period seven funds will be made in January 1977.
WS-1163
-2-
Governments which have not returned their Planned
and Actual Use Reports by the end of the period will be
considered to have waived participation in the General
Revenue Sharing Program for the current period.
The
money which'they had been entitled to receive will be
paid instead to the next higher level of government within their states, as required by law.
On October 13, 1976, President Ford signed into law
a measure which will extend the General Revenue Sharing
Program through September 1980.
The first quarterly pay-
ment of funds for the renewal period will be issued in
April 1977.
-- 30 --
ttepartmentoftheTREASURY
TELEPHONE 964-2041
HINGTON, D.C. 20220
^mmWmmWW.
^^^^^^^^m
FOR IMMEDIATE RELEASE
November 9, 1976
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $3,245 million of 52-week Treasury bills to be dated
November 15, 1976, and to mature November 15, 1977, were opened at the
Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS: (Excepting 2 tenders totaling $2,920,000)
Discount Rate
Price
High
Low
Average -
94.738
94.718
94.727
Investment Rate
(Equivalent Coupon-Issue Yield)
5.190%
5.210%
5.201%
5.
5.
5.49%
Tenders at the low price were allotted 13%.
TOTAL TENDERS 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
Treasury
$ 25,740,000
4,495,605,000
5,935,000
16,975,000
9,745,000
3,270,000
256,285,000
42,065,000
29,115,000
12,460,000
14,250,000
308,420,000
30,000
$ 10,740,000
2,973,745,000
935,000
1,975,000
3,310,000
2,970,000
70,585,000
15,065,000
29,115,000
8,025,000
13,380,000
115,670,000
30,000
TOTAL
$5,219,895,000
$3,245,545,000
The $3,246 million of accepted tenders includes $ 56 million of
noncompetitive tenders from the public and $ 994 million of tenders from
Federal Reserve Banks for themselves and as agents of foreign and
international monetary authorities accepted at the average price.
An additional $ 150 million of the bills will be issued to Federal
Reserve Banks as agents of foreign and international monetary authorities
for new cash.
WS-1164
FOR IMMEDIATE RELEASE
Contact: Peter 0. Suchman
Extension: 5538
November 10, 1976
TREASURY ANNOUNCES TWO ACTIONS
UNDER COUNTERVAILING DUTY LAW
ON ARTICLES FROM ITALY
Under Secretary of the Treasury Jerry Thomas announced today
two actions under the U.S. Countervailing Duty Law (19 USC 1303).
In one action Mr. Thomas announced the formal notice of a reinstitution of investigation and receipt of countervailing duty petition
with respect to canned tomatoes and canned tomato concentrates from
Italy. In the other action, Mr. ihomas announced the formal notice
of investigation and receipt of countervailing duty petition with
respect to grain oriented silican electrical steel from Italy.
Notices of these actions will be published in the Federal Register
of November 11, 1976.
Under the Countervailing Duty Law the Secretary of the Treasury
is required to assess an additional (countervailing) duty that is
equal to the amount of the bounty or grant that has been found to
be paid or bestowed on the imported merchandise.
The resinstitution of the investigation on canned tomatoes
and canned tomato concentrates stems from allegations that imports
of those products shipped directly from Italy are once again benefiting from the payment of a bounty or grant. The Treasury
Department countervailed against canned tomatoes and canned tomato
concentrates from Italy in a decision issued in April of 1968.
That decision was subsequently modified in September of 1972 to
exclude direct importations from Italy from the determination. A
preliminary determination on this case must be reached on or before
January 2, 1977. A final determination must be issued by July 2, 1977.
Imports of canned tomatoes and canned tomato concentrates from
Italy in 1975 amounted to roughly $7.3 million.
The initiation of the investigation on grain oriented silicon
electrical steel from Italy is taken pursuant to allegations that
the merchandise benefits from several programs which constitute
bounties or grants within the meaning of the law. A preliminary
determination with respect to this case must be reached on or before
A
Pril 1, 1977. A final determination must be issued by October 1,
1977.
Imports of the subject merchandise from Italy amounted to
approximately $6.7 million during 1975.
WS-1165 * * *
.h vo
a- <*
.E vo
:ederal nnancing
a> o
WASHINGTON, D.C. 20220
n" CM
FOR IMMEDIATE RELEASE
November 8, 1976
SUMMARY OF LENDING ACTIVITY
October 16-0ctober 31, 1976
Federal Financing Bank lending activity for the period
October 16 through October 31, 1976, was announced as follows
by Roland H. Cook, Secretary:
The National Passenger Service (Amtrak) made the following
drawings against Note #7:
Interest
Date
Amount
Maturity
10/18
5.027%
$12,000,000
12/31/76
10/20
5.072%
8,000,000
12/31/76
10/28
5.113%
5,000,000
12/31/76
Rate
On October 28, Amtrak rolled over Note #9 in the amount
of $120 million. The maturity of the loan is January 27, 1977.
The interest rate is 5.113%. Amtrak borrowings from the
Federal Financing Bank are guaranteed by the Department of
Transportation.
The Student Loan Marketing Association (Sallie Mae)
rolled over the following principle amounts on loans previously
made by the Federal Financing Bank:
Date
Amount
Maturity
Interest
Rate
10/19
$20,000,000
10/18/77
5.445%
10/26
20,000,000
1/25/77
5.186%
Sallie Mae borrowings are guaranteed by the Department
of Health, Education and Welfare.
On October 19, the General Services Administration
borrowed $1,009,757.80 under the Series L $107 million commit
ment with the Bank. The loan matures November 15, 2004 and
bears interest at a rate of 7.856%.
WS-1166
- 2 The FFB made the following advances to borrowers guaranteed by the Department of Defense under the Foreign Military
Sales Act:
Interest
Date
Borrower
Amount
Maturity
Rate
Government of
10/19
$128,641.99 6/30/83
Uruguay 6.588%
Government of
10/26
34,598,540.67Israel
6/30/06 7.961%
Government 'Of
10/29
751,051.33 6/30/83
Korea 6.807%
10/29
Government of
Liberia
904,651.83
6/30/82
6.688
On October 19, the FFB purchased $3 million of notes
from the Department of Health, Education § Welfare (HEW).
The Department had previously acquired the notes which were
issued by various public agencies under the Medical Facilities
Loan Program. The notes mature July 1, 2000, and bear interest
at a rate of 7.706%. The notes purchased by the FFB are guaranteed by HEW.
On October 20, the Bank purchased debentures from nine Small
Business Investment Companies totalling $5,750,000. $500,000
of the debentures matures October 1, 1981, and bears interest
at a rate of 6.715%. The remaining amount matures October 1,
1986, and bears interest at a rate of 7.485%. These debentures
are guaranteed by the Small Business Administration.
On October 26, the U.S. Railway Association (USRA) borrowed
$675,000 against Note #6. The maturity of the loan is December 26
1990; and the interest rate is 8.055%, set at the time of the
first advance. USRA borrowings are guaranteed by the Department
of Transportation.
On October 29, the Tennessee Valley Authority borrowed
from the FFB $235 million. The maturity of the loan is
January 31, 1977. ' The interest rate is 5.114%.
- 3-
The Federal Financing Bank made loans to the following
utility companies guaranteed by the Rural Electrification
Administration:
Interest
Date
Borrower
Amount
Maturity
Rate
10/20 South Mississippi
Electric Pwr. Assoc.$3,800,000
10/23/78
5.980%
10/20 Big Rivers Electric
Corporation
1,506,000
12/31/10
7.865%
183,400
12/31/10
7.865%
10/20 Arizona Electric ,„,.,« - O^ro
Power Association
3,953,000
12/31/10
7.865%
10/21 Big Rivers Electric
Corporation
£':.
227,000
12/31/10
7.868%
226,649
12/31/10
7.864%
810,500
,..,,„
12/31/10
200,000
12/31/10
7.864.
10/27 Sunflower Electric , ,_ _ nio0
Corporation
6,723,000
12/31/10
7.918.
10/29 Southern Illinois , ^ 11o0
Power Company
1,272,000
10/29/78
6.118.
10/20 North West Tele- n^r0
phone Company
10/22
i
10/22
Central Louisiana
Telephone Co.
Boone County Telephone Company
10/22 Allied Telephone
Co. of Oklahoma
x
n
OHAO
7.864%
Interest payments on the above REA loans are made on a
quarterly basis.
Federal Financing Bank loans outstanding on October 31,
1976, totalled $26.6 billion.
oOo
FOR IMMEDIATE RELEASE
REMARKS BY JOHN M. NIEHUSS
DEPUTY ASSISTANT SECRETARY OF THE TREASURY
FOR INVESTMENT AND ENERGY POLICY
BEFORE THE
CONFERENCE ON FINANCING WORLD ENERGY REQUIREMENTS
TULSA, OKLAHOMA
FRIDAY, NOVEMBER 12, 19 76
The Role of the Federal Government in Financing
Energy Sector Investment
It is a pleasure for me to participate in this conference
on financing world energy requirements. I would like to concentrate my remarks on the appropriate role of the Federal
Government with respect to the financing of investments in
the U.S. energy sector. While I will outline the Treasury
Department's own thinking on the appropriate course of governmental policies in this area, my main intention is to suggest
some of the questions that need to be answered and to stimulate
discussion among this group of distinguished financial experts.
The Problem
Perhaps we should begin with a very basic question -why should the U.S. Government even consider developing a
policy with respect to financing energy sector investments?
Why don't we continue, as in the past, to let the decisions of
WS-1167
private parties completely determine the course of energy
investments rather than have the Federal Government become
involved in any way?
There are sound economic reasons for such a private
market policy.
These reasons include:
(1) the superior ability of the private market
to efficiently allocate capital among competing
users;
(2) the danger that the prospect of receiving
Federal financial assistance would reduce the
willingness of private parties to undertake
major projects without government support;
(3) the equity considerations involved in transferring the financial risks of private projects
to the general taxpayers;
(4) our desire to minimize the degree of government
involvement in, and control over, the energy
industry; and
(5) the impact that Federal financial assistance
has on our capital markets and our debt management policy.
We in the Treasury give great weight to these considerations
as they are the basic reasons why we have resisted extensive
government financial assistance for energy development. However, there are two important factors which do make the
government's role in financing energy investments a legitimate
public policy issue today.
- 3 The first factor is our goal of reducing the nation's
vulnerability to interruption of foreign sources of energy
to an acceptable level. Specifically, the President has set
a mid-term goal of achieving invulnerability to oil import
disruption by 1985. This means a 1985 import range of 3-5
million barrels per day, replaceable by stored supply and
emergency measures. If our nation is to achieve this important
goal, we may have to develop both domestic conventional and
nonconventional sources of energy at a more rapid rate than
would occur if we relied solely on market forces.
The second important factor which makes government policy
toward energy finance an issue is that government is already
heavily involved in the energy sector in a way which constrains
the ability of the private market to undertake the needed level
of investment. For example, we continue to regulate the
prices of natural gas and crude oil; we delay needed rate
increases for public utilities; and our environmental policies
often hinder the implementation of energy projects. Thus, we
cannot say that the present situation is one in which private
market forces are the sole determinant of energy investments.
Rather we are faced with a difficult dilemna. On the one
hand, Congress and certain regulatory agencies have seriously
inhibited the ability of private market forces to allocate
capital to the energy sector. On the other hand, there is a
- 4national need to accelerate the pace of domestic energy
investment. Policy makers have to try to reach an acceptable solution to this dilemna which ensures that there is
adequate finance available for needed energy projects.
Before discussing specific policy alternatives, I would
like to review the scope of the problem as we see it. First,
I would like to summarize the expected capital requirements
of the U.S. energy industry. Second, I will outline the
reasons why, in the current situation, it may be difficult
for the private sector to finance many important energy projects.
Capital Requirements
A number of studies have been made concerning the level
of energy sector capital requirements. In most cases these
studies have analyzed the requirements based on several assumed
scenarios, and the resulting estimates of the overall levels of
capital requirements for the energy sector for the 1975-85
range from about $480 billion to about $680 billion in 1975
dollars. For the purpose of discussion today, I will use the
U.S. Federal Energy Administration's estimate of $580 billion.
In order to assess the relative size of this figure, it
should be compared with estimated business spending on new
plant and equipment of roughly $2.0 trillion in 1975 dollars
over the 1975-85 period. When viewed in this light, the $580
billion energy investment figure would constitute roughly 30
- 5 percent of estimated business fixed investment over the period,
which would be well within the range of historical experience.
Over the 1965-74 period, for example, energy investments as
a percentage of total business fixed investment averaged 29%
and ranged from 24% to 33%.
Despite the fact that the projected capital needs for
energy are not out of proportion to historical trends, the
extent to which the capital markets will be willing to continue
to finance the necessary investment in energy is a matter of
considerable concern. Historically, the energy sector financed
a relatively small percentage of its investment from funds
raised externally. For example, it is estimated that during
the early 1960's about 25% of fossil fuel investment was financed
externally while the investor owned electric utilities financed
about 35% of their capital needs this way.
However, over the past decade the energy sector and
business in general has tended to rely more and more on external
financing, especially debt. During the late 60's and early
70's the fossil fuel industry financed roughly 30-40% of its
requirements externally; and the level of external financing
for investor owned utilities ranged from 50-70%. The result
of this increased reliance on external financing has been that
the energy sector has taken an increasing share of the total
funds supplied by the private capital market. Over the 1961-65
period the energy industry's share of the total amount of funds
raised by business in U.S. capital markets averaged 18 percent.
- 6The energy sector's share rose to 21 percent for the 1967-70
period and then to 28 percent in 1975. Estimates for the
1975-85 period suggest the U.S. capital market will provide
some $1.1 trillion (in 1975 dollars) to the business sector
and that the energy industry will require on average 2 5% of
these funds.
We believe that the capital markets will have the capacity
to provide this level of funding to the energy industry. Thus
our concern is not one of an overall shortage of capital, per se.
However, given the current uncertainties (e.g. duration of oil
and gas price controls) and the current regulatory climate it
is doubtful that all of the necessary funds will actually flow
to the energy sector in the needed amounts. Energy projects
will have to compete with projects from other sectors; and
the capital will normally flow to the most economic projects
where it can be most profitably employed. The investment
decisions by the private sector will not only be determined
by the expected rate of return on competing projects, but they
will also be strongly affected by the nature of the regulatory,
economic and technological risks associated with the investment.
In spite of these risks, we do believe that most of the
needed
conventional energy sector investments would be able
to attract the necessary financing from private sources without
Federal financial assistance. There are, however, some types
- 7 of energy projects which will be needed but which, for various
reasons, are less likely to be able to attract funds from the
r
private markets during the next 10 years without some form of
government assistance and/or some major changes in the
Government's regulation and control of the energy industry.
Reasons Why the Private Market May Not Finance Certain Types
of Energy Projects.
There is no single all pervasive reason why certain energy
development projects are not being financed in the private
markets.
In most cases there is a combination of factors which
creates uncertainty in the minds of potential investors and
prevents them from committing funds to the project.
The most
important of these reasons are the following:
(1)
Some nonconventional energy projects included in our
national energy program are marginally economic or, in some
cases, not economic at current prices with the current state
of technological development.
For example, synthetic fuel
plants are at best only marginally economic at current prices.
Because of uncertainty over future world oil prices and government regulatory policy, most synthetic fuel projects today are
not attractive to private investors.
(2) We have failed to take the needed regulatory action
which is necessary to improve the financial viability of
certain segments of our energy industry and to provide requisite
assurances to potential investors.
As a prime example of this
- 8regulatory neglect, I would cite the inadequate rate increases
granted to electric utilities by state commissions which have
resulted in straining the financial condition of these utilities
and in the deferral or cancellation of large amounts of new
generating capacity. Almost half of the energy sector's
projected capital requirements in the 1975-85 period are in
the electric utility sector. Electric utilities are faced with
the need to raise more capital than the oil companies over this
period, but will have less than half the revenue base of these
companies. While recent regulatory actions have resulted in
some improvement in the financial situation of electric utilities
these companies can be expected to face future financial diffi-
culties unless additional action is taken to provide for adequate
rates and for a stronger cash flow. Without more timely rate
adjustment, and innovative regulatory actions such as including
construction work-in-progress in the rate base, we may continue
to have periods during which the financial condition of the
electric utilities retards the undertaking of needed investment.
The natural gas industry is also in need of substantial
regulatory reform. The historical thrust of regulation of this
industry seems to have been narrowly directed toward holding
down the market cost of natural gas to the consumers, and the
cumulative adverse results of this policy are now painfully
evident. Until recently the ceiling price of domestic gas at
the wellhead was equivalent to pricing oil at less than $3.50
per barrel. With the cost of imported oil at nearly $12 per
- 9 barrel, this artificial ceiling on the price of gas has caused
major economic distortions and created a very large shortage of
natural gas supply which has serious implication for the
general economy.
While the FPC regulated ceiling price on new
gas was recently increased, it still remains significantly
below both the price of imported oil in terms of its energy
equivalency and the price of gas sold in unregulated intrastate
markets.
This seriously distorts investment decisions and
creates uncertainty with respect to financing natural gas
projects.
If private financing is to be arranged for certain needed
major natural gas projects, deregulation of new gas prices and
still other types of innovative regulatory actions may be needed
For example, the Federal Power Commission and the relevant state
regulatory agencies should undertake an intensive examination
of the effects of their current regulatory practices on the
continued ability of the natural gas industry to finance needed
projects.
In doing so, they should consider usage of (1) "all
events full cost of service" tariffs which pass some of a
project's risk to gas consumers, (2) consumer surcharges which
could be used to help finance exploration and development of
new gas supplies, and (3) devices like inclusion of construction work in progress in the rate base which enable consumers to
contribute to cash flow during construction.
In this regard,
the Treasury Department has urged the FPC to consider these
- 10 innovative regulatory devices as measures to help ensure that
the roughly $10-$12 billion Alaskan gas transportation system
will be financed in the private sector without the need for
government backstopping.
(3) Some energy projects have special risks which the
private market may not be willing to bear. Examples of these
types of projects are those involving the commercialization
of technologies untested in the private market such as uranium
enrichment facilities and synthetic fuel projects. The technological risk is often compounded by regulatory uncertainty
and long construction lead times which means that private
investors may not be willing to bear the risks and commit
funds to the projects. In such special situations, innovative
regulatory measures and/or Federal financial assistance may be
needed if we are to accelerate the implementation of needed
energy technologies.
Basic Federal Government and Regulatory Actions to Assure
Adequate Energy Investments
Given our very sizable capital requirements in the energy
sector over the next ten years and the problems in securing
private financing for some of the needed investments, what
is the appropriate policy for the Federal Government?
We believe the answer to this question should
begin with a recognition of the fact that a solution which
maximizes the role of the private sector is one that will
assure the most efficient allocation of our resources and, hence,
- 11 will ultimately be the lowest cost solution to the American
people. Thus, a central element of our policy is that the
nation should place maximum reliance on private sector financing
of energy projects. Next, we must recognize that many of the
barriers to achieving private financing of needed energy projects are a result of government regulation and control of the
energy industry. Most of these difficulties could be overcome
by timely and innovative regulatory action and through removal
of other government impediments to the development of our
energy resources. In this regard, we must recognize the particularly important role the independent state and Federal regulatory
agencies can play in determining whether the private sector will
be able to finance the needed level of energy investment over
the next decade. We must do all that we can to encourage them
to adopt innovative procedures which will facilitate private
financing of energy projects. In short, we believe the basic
long run solution is to move forward as rapidly as possible
with policy changes and regulatory reforms which will strengthen
the ability of private firms to attract needed capital. We
must not turn to Federal financial assistance as a long term
substitute for needed regulatory reforms and policy changes.
The problem we face, however, is that, considering the
accelerated capital requirements needed to achieve our energy
independence goals, the necessary regulatory actions and
congressional actions may be too slow in evolving. Congress
- 12 and certain regulatory agencies have shown a marked reluctance
to take the difficult but necessary actions in this area. Thus,
we have reluctantly concluded that some forms of Federal financial assistance may be needed for projects which (1) will
contribute significantly to energy independence, but (2) would
not otherwise be undertaken in a timely fashion by the private
sector without governmental financial assistance. This was,
you may recall, one of the primary factors which led President
Ford to propose the $100 billion Energy Independence Authority
which would have provided Federal assistance for certain types
of energy projects.
The Administration's proposed program to accelerate the
development of a commercial synthetic fuels industry is another
example of a situation where Federal financial assistance
was contemplated. President Ford determined that an important
element of our overall program to reduce energy vulnerability
should be the rapid development, demonstration and commercial
production of emerging synthetic fuels technologies. An
Interagency Task Force, after a comprehensive study of how best
to attain this objective, concluded that:
"In the absence of Federally provided economic
incentives or other policies creating a stable
and favorable investment environment, significant amounts of synthetic fuels are not likely
to be produced by 1985."
- 13 In this case the Treasury Department concurred that
incentives were needed to insure that an adequate amount of
private capital would be made available to accomplish the
basic objectives of the synthetic fuels commercial demonstration program, and we supported legislation to this effect.
However, in oUr testimony supporting such legislation we
pointed out that there were very real costs to our economy
and capital markets resulting from Federal assistance.
For
example, any type of Federal financial assistance resulting
in the undertaking of energy projects which would not otherwise have been undertaken will lead to some redirection of
resources in our capital markets.
Such incentives increase
the demand for capital while having little or no effect on
the overall supply of capital.
They tend to cause interest
rates to rise and channel capital away from more economic to
less economic uses.
In short, any proposed program of Federal
incentives will redirect capital from other areas of our economy
where it might be used more productively into energy production.
In addition, Federal loan and price guarantees will result in
new issues of bonds, notes or other government-backed obligations in the capital markets which impinge upon Treasury and
other Federal agency financings and which can have significant
market impact.
- 14 In order to minimize these potential adverse effects,
the Treasury has emphasized that, in carrying out any
incentives program,special care should be taken to (1) keep
the use of Federal, assistance to an absolute minimum necessary
to accomplish program objectives, (2) reduce the capital market
impact by giving the?Secretary of the Treasury the authority
to approve the timing and substantial terms and conditions
of such loan and price guarantees ."and other financial incentives that would have a similar market impact, and (3) ensure
that the adoption of a Federal incentives program does not
impede movement towards the fundamental actions needed to
improve the climate-'for private investment in the energy sector.
We, of course, recognize that our policy with respect to
Federal financial assistance represents an unsatisfactory compromise between our belief in maximum reliance on
regulatory reform and policy changes to facilitate private
investment in energy and the pressing requirement to accelerate
the development of major new domestic energv sources. Our
policv has had to take account of the political and practical
ditficulties we currently face in obtaining in a timely fashion
needed basic policy and regulatory decisions bv the Congress
and regulatory agencies. Therefore, we have accepted the need
for Federal financial assistance in certain circumstances.
However, in doing so we have been careful to point out that
- 15 we must not let such assistance obscure the fact that we
must continue to work for regulatory reforms and policy
changes as the only appropriate long-term solution.
Concluding Remarks
The financing of U.S. energy requirements will clearly
be a high priority issue for the incoming Administration
and the new Congress.
I have made clear the Department of
the Treasury's strong preference for an approach which
strengthens the ability of our private markets to meet this
challenge.
I believe that if needed market-oriented actions
are not taken, U.S. dependence on oil imports will increase
even further.
Were this to happen, the serious economic and
national security implications of increased vulnerability to
foreign oil supply and price manipulation would inevitably
lead to increased pressure for direct Federal Government action
to deal with the problem.
Included among the action requested
would be further proposals for direct Federal financial assistance to, or actual involvement in, the energy industry.
In order to avoid this development there must be a
recognition of the fact that a solution which maximizes the
role of the private sector will be one that will assure the
most efficient allocation of our resources and hence will
ultimately be the lowest cost solution to the Nation.
We must
- 16 also recognize that many of the barriers to achieving private
financing of needed energy projects are a result of Government
regulation and control of the energy industry.
Most of these
difficulties could be overcome by timely and innovative
regulatory action and through removal of other government
impediments to the development of our energy resources.
We
should not turn to Federal financial assistance as a long-term
substitute for needed regulatory reforms and policy changes.
Rather, now is the time to move forward as rapidly as possible
with policy changes and regulatory reforms which will strengthen
the ability of private firms to attract needed capital.
If
we take this course, I am confident that the problems inherent
in financing the U.S. domestic energy requirements can be met.
That concludes my prepared remarks and I would be glad
to open the floor for discussion or any questions you might
have.
oOo
Department of theTREASURY
4INGT0N, D.C. 20220
TELEPHONE 964-2041
To be released November 12, 1976 at 4:00 p.m.
REMARKS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
AT THE
HILLSDALE COLLEGE
HILLSDALE, MICHIGAN
NOVEMBER 12, 1976
THE FUTURE AGENDA
As the Nation turns its attention away from the recent
elections it will again confront the persistent problems
that have plagued policy makers for more than a decade. The
claims and promises made during the election will now be
tested against the harsh realities of the real world and the
expectations of the people will be matched against the basic
capacity of the system to deliver even more goods and services.
During the last fifteen years the real output of goods
and services has increased 60 percent and the real income
of the average American has risen by 50 percent. But despite
these remarkable gains the American people are increasinglv
dissatisfied with the national state"of~affairs and their
personal status. Part of this frustration is a healthy
refusal to tolerate many real problems that exist. The
American drive to improve, to help those less fortunate, to
seek ever higher personal standards of living is commendable
when it leads to a more creative and productive system and
increased concern for the needs of others. But there is
also an unhealthy aspect in much of the cynicism and negativism
that we find in America today. I believe this more ugly mood
is the result of the demonstrated failure of collectivist
big-government approaches to national problems that promised
so much but delivered so little. In the process, a mood of
dependence on government has increased which feeds upon itself
creating still more demands for benefits without recognizing
that the bills must be paid — either directly in current taxes
or indirectly through accelerating inflation and economic
WS-1168
disruption.
-2The accumulation of economic distortions must now be
faced. The longer we delay the hard adjustment decisions
the more difficult and costly the needed solutions will
become. And if we delay too long the opportunities to
restore stable economic progress may be lost.
The future agenda for America then is basically a
consideration of the multitude of conflicting claims to
arrive at the greatest long-term benefit for all of our
people. In that process the most important factor to be
considered is the freedom and dignity of the individual.
No matter what material progress occurs the loss of personal
freedom and dignity are too great of a price to be paid.
In short, we must decide what kind of economic and political
systems will best serve the real long-term interests of the
American people.
It is particularly appropriate that this important
discussion be held here at Hillsdale College for you have
attracted national attention by your valiant effort to
maintain your academic independence in an era of increasing
external encroachment on our traditional education values
and procedures. I want to express my strong support for
your program to make your college financially independent
of external pressures. Such financial independence has become
the foundation of academic freedom and even the survival of
private academic institutions. For many years, too many
Americans have passively watched the corruption of the
well-known "Golden Rule" for treating others fairly and
charitabJy until it has deteriorated into the cynical guideline: "He who has the gold makes the rules."
The erosion of academic independence during the last
twenty years has been directly related to increasing Federal
financing and controls which have made higher education one
of our most regulated industries. Like any other institution
experiencing severe financial strains, colleges and universities are losing their independence as policy-making authority
is increasingly shifted to absentee government creditors. An
American Council on Education study of a cross-section of
colleges and universities showed that institutional costs of
implementing Federally mandated social programs had, depending
on the specific school analyzed, increased ten to twenty times
in the last decade, and now equal "the equivalent of 5 percent
to 18^percent of tuition revenues...." That report concluded
that "Federally mandated social programs contributed substantially to the instability of costs at colleges and
universities from year to year and thus increased their
difficulties of financial management and budget balance."
-3Even more serious is the impact of Federal control over
the curriculum and faculties of colleges and universities
which have historically held the trust of the general public
because they believed that the promulgation of learning and
the search for truth were their primary objectives. When
government regulators force schools to adopt other goals
with even higher priorities, in return for financial assistance,
then educators will inevitably surrender institutional
responsibilities. No matter how desirable these other
priorities are if the government regulation disrupts the
primary goal of education — the promulgation of learning and
the search for truth — then it is clearly time to reject such
controls. In his last annual report President Derek C. Bok
of Harvard expressed alarm at government actions that strike
directly "at the central academic functions of colleges and
universities." After reciting a long list of examples he
argues that government rules "diminish initiative and
experimentation, " "threaten to impinge upon diversity of
the system" and transfer authority from experienced educational
leaders to inexperienced public officials, thus increasing
the likelihood and magnifying the impact and cost of mistakes.
Another interesting example involved a quartet of
presidents of universities in the Nation's capital — American,
Catholic, George Washington and Georgetown — who recently
issued what they styled "A 1976 Declaration of Independence,"
protesting "recent government policies and behavior toward
education," which, in their opinion, "have threatened /the/
valued independence and... shaken the foundations of our
system of higher education in this country." These presidents
saw "an intensification of these interventionist trends."
Referring particularly to what they called "the myriad, pedantic,
and sometimes contradictory requirements imposed by government
regulation," their statement reaffirmed their "intention to
maintain institutional independence from any external
intervention which threatens the integrity of their institutions."
Finally, President Dallin H. Oaks of Brighan Young
University comments that:
A plea for institutional freedom from Federal
regulation is not an easy position for the academic
community to accept. Poll after poll has shown that
college and university faculty members generally
approve increased government power, an opinion that
of course places a degree of reliance on government's
ability to solve social problems that is wholly inconsistent with its dismal record of accomplishment.
Faculty members invariably defend the teacher's
individual academic freedom of inquiry and expression,
-4which is properly regarded as one of the essential
preconditions of a free society. In time, I hope our
Nation's teachers — especially in higher education —
will just as stoutly defend the academic freedom of
their colleges and universities from government regulation
of the educational process.
From these comments from leading educators it is clear
that other schools are beginning to develop the same concerns
that Hillsdale College has felt for some time. I commend
you both for your vision and your courage in taking specific
action to protect your financial and academic independence.
I. AGENDA FOR THE FUTURE
Turning to your seminar topic, "The Current Condition
of American Society and the Prospects for the Future," I will
limit myself to a brief review of the basic economic issues
that will ultimately shape the future course of the United
States. The American people must now decide what kind of
economy they want for the foreseeable future. They must realize
that their government's fiscal and monetary policies and the
maze of government programs that increasingly intervene in
their daily lives are the real issues that will determine their
personal welfare:
-- whether or not inflation will be effectively
controlled or once again allowed to return to double digit
levels;
— whether or not capital investment will be adequate
to create meaningful jobs for the growing labor force;
— whether or not government regulation and administrative
controls will be changed to meet current economic realities to
restore productivity and efficiency;
— whether or not the United States will provide effective
leadership on international monetary, trade and investment
issues.
In looking to the future the American people should ask
this basic question each time the government comes up with a
new economic policy initiative: Will this action contribute
to sustained and orderly economic growth or will it merely
perpetuate the familiar stop-and-go patterns of the past
involving increased government spending without regard for
the chronic deficits and economic and financial disruption
created, excessive expansion of the money supDly, even more
government controls over the private economy and increased
intervention m private wage and price decisions.
-5The proper role of government is to create an environment
for sustained and orderly economic growth through its fiscal,
monetary, and regulatory policies. The disappointing performance of the U.S. economy during much of the last decade
emphasizes the basic need for more stable policies. In the
mid-1960's the United States began an unfortunate series of
exaggerated booms and recessions: serious overheating of the
economy created severe price pressures; accelerating inflation
caused recessions by restricting housing construction, personal
spending and business investment; the recessions created unwanted unemployment which wasted resources and caused personal
suffering; rising unemployment too often triggered poorly
planned and ill-timed government fiscal and monetary policies
setting off another round of excessive stimulus leading again
to overheating -- inflation — recession — unemployment — and
more government intervention.
From these experiences there is one basic conclusion:
Our basic desire for economic progress, through improved living
standards and employment opportunities, will be frustrated
unless we better control the insidious inflation which has
destroyed economic stability and today threatens not only our
goal of sustained growth but the ultimate survival of all of
our basic institutions. When inflation distorts the economic
system and destroys the incentives for real improvement the
people will no longer support that system and society
disintegrates. I am convinced that our uniquely creative
and productive society will also collapse if we permit
inflation to dominate economic affairs. There is no tradeoff
between the goals of price stability and low unemployment as
some critics have erroneously claimed. To the contrary, the
achievement of both goals is interdependent. If we are to
increase the output of goods and services and reduce unemployment, we must make further progress in reducing inflation.
The intensity of my feelings about inflation has resulted
in some critics labeling me as obsessed. However, I am not
so much obsessed as I am downright antagonistic toward those
who consistently vote for bigger deficits. We must always
remember that it is inflation that cuases the recessions that
so cruelly waste our human and material resources and the
tragic unemployment that leaves serious economic and
psychological scars long after economic recovery occurs. It
is inflation which destroys the purchasing power of our people
as they strive — too often in a losing struggle — to provide
the necessities of food, housing, clothing, transportation,
and medical attention and the desired necessities of education,
nor
recreation
has it ever
and cultural
been, the
opportunities.
grease that enables
Inflation
the economic
is not now,
-6machine to progress. Instead, it is the monkey wrench which
disrupts the efficient functioning of the system. Inflation
should be identified for what it is. The most vicious hoax
ever perpetrated for the expedient purposes of a few at the
cost of many. And there should be no uncertainty about its
devastating impact, particularly for low income families,
the elderly dependent upon accumulated financial resources
and the majority of working people who do not have the political
or economic leverage to beat the system by keeping their
incomes rising even more rapidly than inflation. When inflation
takes over an economy the people suffer and it is time that this
basic point is emphasized by every responsible citizen and the
full brunt is brought to bear on their elected officials.
In general there must be more widespread recognition of
the fundamental importance of stable economic growth in the
future as the only true foundation for maximum employment
opportunities and lower unemployment rates, for more moderate
rates of inflation which will protect the purchasing power of
all Americans and encourage more capital investment that
will provide the permanent and productive jobs that people
desire, for more efficient use of human and material resources
and protection of our environment, and for fulfillment of
our international responsibilities in monetary, trade and
investment policies. Naturally, there are disagreements about
how best to achieve these basic goals but I am convinced that
a longer-term time horizon must be used.
-- First, the diversity of problems must be recognized
to avoid concentrating on a single issue. Inflation, unemployment, declining output, the availability of productive
resources, international trade and investment all must be
considered simultaneously to create a balanced program for
stable economic growth. The beginning point for sustaining
economic growth without the boom and recession distortions
of the past is to avoid a return of destructive inflation
pressures. From 1890 to 1970 prices in the United States
increased at an annual rate of 1.8 percent. From December
rll
December 1974 they jumped 12.2 percent. It seems so
oovious that any long-term solution to our economic problems
^ 2 ! ^ r e S b e *T t e r c°ntrol of inflation which has distorted the
sav
mno? i n g ?
m g s decisions of all Americans. Inflation
arlY rec
5^1*%° ?
° 9 n i z e d for what it is: The greatest
n ^ o ^ ° ^ s u s t a i n e d progress of our economy and the
personal standard of living of most Americans.
than ^h^eC°nd; 9°vernment Policies must solve more problems
expedient £ *
J^"" 9 * P S r i ° d o f difficulty it is "
a n v t h i n a \ n V e S p ° n d t o strident calls "to do something anything to demonstrate political leadership."
-7But this naively activist approach is too often the
basic source of problems not the solution. Courage and
wisdom are always required to avoid actions offering the
illusion of short-term benefits in exchange for further
erosion of the free enterprise system that has served this
Nation so well in creating the premier economy of the world
and providing the greatest degree of personal opportunities.
The conventional wisdom that a few billion dollars of
additional government spending somehow makes the difference
between success or failure of the entire U.S. economy — which
is rapidly approaching an annual level of output of two
trillion dollars — has always amazed me. There is an important
role for governments in protecting certain basic public
interests but the claim that governments can or should control
the economy is totally false. We would all be better off if
government officials would recognize that the real creativity
and productivity of America depends upon the private sector.
— Third, and most important of all, there must be a
proper balance in the shared responsibilities of the private
and public sectors. This is a difficult assignment because
of the confusion and pessimistic appraisals of the future
caused by the political and economic shocks that have occurred.
Maintaining and improving the creativity and productivity
of the U.S. economic system against the attacks of critics
who favor a big-government solution for the problems of
society has become our greatest challenge. The simplistic
cure of having government spend ever increasing amounts of
borrowed money has not solved many of our problems but it
has created serious economic distortions that will continue
long into the future. We now have a Federal Government that
is trying to do more than its resources will permit, to do
many things that it cannot do very well, to do some things
that it should never do at all, and to do all of these things
at the same time. As a result, we now have more government
than we want, more than we need, and more than we can afford.
Nevertheless, much of the current political rhetoric continues
to claim that we aren't spending enough, aren't creating
enough new government programs, and aren't pushing enough
panic buttons. Despite the unmatched accomplishments of the
U.S. economy these critics attack the free enterprise system
and demand comprehensive governmental control over economic
planning for the allocation of our national resources — the
rationing of capital to selected industries — guaranteed
government jobs for all who want them — increased control
over private economic activities — even a return to the
counter-productive wage and price controls that have always
failed. Although the American free enterprise system feeds,
-8clothes and houses our people more effectively than any
other system in the world, provides the real basis for all
of our public services and most importantly is fundamental
to our individual freedoms, it is increasingly subject to
criticism from those who seem to favor turning to less
efficient approaches which would waste our human and
material resources and eventually erode our economic progress
and political freedoms.
Part of the problem is a matter of image. Those who
support increased government spending and pervasive controls
over our daily lives are often perceived as being more concerned and socially progressive. Those who allegedly "care
more" are given considerable attention when they call for
more spending to solve the unmet needs of society even though
the growth of big government has become a large part of the
problem and not the solution it is alleged to be. At the
same time, those who favor the free enterprise system too
often converse in simplistic slogans that lack humane appeal.
Worst of all, many businessmen who come to Washington seem
to want to surrender their existing freedoms in exchange for
protection from the competition that has made our system so
dynamic.
It is now time — in fact the need is long overdue — for
9
those who believe in the free enterprise system to more
r
effectively promote its basic values. America has become
the world's premier economy because it provides basic incentives
to its people to work hard and to be creative. To the
individual family this approach leads to a higher standard of
living. To the business firm it means increased markets and
larger profits. To our government it means increased
effectiveness and public support.
In short, too many Americans — especially those who have
known only the affluent society — are unaware of the real
source of economic growth in our country. The material
abundance, the freedoms of choice, the opportunities for
meaningful work are all largely the result of the creativity
and productivity of our free and competitive economic system.
This is the crucial theme that must be communicated to all
Americans until they understand it. The American economy is
the well spring of our Nation's basic strength in every
sphere -- political, social, military and economic. It is the
source of our present abundance and the basis of our hopes
tor a better future. We can solve our recognized problems
best by preserving and improving and strengthenina rather
than weakening our uniquely productive system. And in doing
this we will preserve our other freedoms that have made
America so great.
-9II.
THE CRUCIAL ISSUE IS STILL FREEDOM
The United States now faces a basic choice. Yet we hear
misleading political rhetoric that we can achieve our basic
economic goals without making the necessary sacrifices required
to produce and pay for the desired goods and services. Our
magnificent country is capable of achieving any worthy goal
it identifies but we must face up to many economic realities,
particularly the obvious point that goods and services cannot
be distributed to the consuming public unless they are first
produced. We have the human and material resources necessary
to operate our open and competitive economic system to achieve
our goals if we will create the proper environment. How well
we make these basic decisions will ultimately determine what
future historians will write about America.
To find the answers we must begin with the correct
questions. What has made this a great Nation? What has made
people throughout the world talk about the American Dream?
Has it been the land and our natural resources? We
have certainly been blessed with an abundance of resources.
But in the Soviet Union we see a land mass that is much
larger than our own and one which is equally well-endowed.
Yet, the Soviet system provides much less for the people.
They must turn to the United States for the grain they need
to feed their own people and for our technology and capital.
Does our strength depend only on the qualities of our
people? We are clearly blessed with one of the largest and
most talented populations that the world has ever known.
But in China today we see a population that is four times as
large as our own, whose civilization at one time was developed
far in advance of the rest of the world. Yet their present
material standard of living and personal freedoms are most
disappointing.
So while our land, resources and people have been essential
parts of the American story, there is a third factor that is
too often missing in other countries that has contributed to
America's progress. That crucial factor has been our national
commitment to liberty and individual dignity.
For two hundred years people have streamed to our shores
in search of various freedoms — freedom of religion, freedom
of speech, freedom of the press, freedom of assembly, and
freedom to seek their fortunes without fear or favor of the
government. All of these freedoms are planted firmly in our
Constitution. But they have become such a familiar part of our
lives that I wonder whether we now take them too much for
granted.
-10There is nothing artificial about freedom, nor is there
any guarantee of its permanency. As Dwight Eisenhower once
said, "Freedom has its life in the hearts, the actions, and
the spirits of men, and so it must be daily earned and
refreshed — else like a flower cut from its life-giving
roots, it will wither and die."
There are many ways this can happen, some of them very
slow and subtle. For example, there has been an accelerating
trend toward collectivist policies in the United States as
people have been persuaded that the problems of our society
have become so large that individuals can no longer cope with
them. Many Americans now expect the government to assume
responsibility for solving their problems and to do things >:r
for them that they once did for themselves. Government has
been gradually cast into the role of trying to solve all the
difficult challenges of modern life.
That trend began to accelerate in the 1960's as
governments promised the rapid solution of complex political,
economic and social problems and the end of economic cycles'?
based on the clever manipulation of government policies. ^
We failed to note that resources are always limited, even
in a Nation as affluent as ours. Unfortunately, the inflated
expectations and broken promises of the past have left a
^
residue of disillusionment. Many young people are skeptical
about our basic institutions and I can't say that I blame them.
International problems, the energy crisis, disappointing
harvests, excessive government regulations, wage and price
controls and thousands of other specific problems have
contributed significantly to the unsatisfactory levels of
inflation and unemployment. But the underlying momentum has
been basically caused by the excessive economic stimulus
provided by the Federal Government for more than a decade.
For example:
— A quadrupling of the Federal budget in just. 15 years;
— A string of 16 budget deficits in 17 years;
-- And a doubling of the national debt in just 10 years
time.
The greatest irony of these misguided policies is that
they were based on the mistaken notion that they would
specifically help the poor, the elderly, the sick and the
disadvantaged. Yet when these stop-and-go government policies
-11trigger inflation and unemployment, who gets hurt the most?
The very same people the politicians claimed they were trying
to help — the poor, the elderly, the sick and the disadvantaged.
Even more fundamentally, the last fifteen years have seen
an acceleration of the trend toward Big Government and the
diminishing of economic and personal freedoms in the United
States. The Federal government has now become the dominant
force in our society. It is the biggest single employer,
the biggest consumer, and the biggest borrower. Fifty years
ago, total government spending comprised approximately 10
percent of the gross national product; in 1976 that figure
will exceed 35 percent. If the government spending trends
of the last two decades continue, the total government share
of economic activity in the United States will be approaching
60 percent by the year 2000. If the government exercises
such a dominating influence in the economy, it will also
control many of the personal decisions of its citizens.
History shows that when economic freedom disappears personal
and political freedoms also disappear. The inextricable
relationship between economic freedom and personal freedom
is sometimes overlooked by those who constantly seek to
expand the powers of government, but it is plain to see in
many countries around the world where these freedoms have
been lost.
Unfortunately, there is no convenient scapegoat to
blame our problems on. As modern governments have usurped
the power to increasingly control our daily lives they have
done so with good intent thinking that they are the proper
authority to determine and then implement the ideals of
society. In the process governments have sacrificed individual
freedoms for a collective system of rules needed to impose
their view of what is best for each of us. But this behavior
is merely a reflection of what they believe the people want.
It is not "the government" that we should blame — that is a
simplistic excuse — but the institutions of society, including
the colleges and universities, that have created an environment
in which equality of status is mistaken for equality of
opportunity and security, albeit a false sense of well being,
is exchanged for personal freedom. As a result there is an
increasing mood of frustration as public skepticism increases
about our ability to handle the problems of the future. If
this trend continues, most of the freedoms that we cherish
will not survive for personal — political — and economic
freedoms are all intertwined and cannot exist alone. The
great historian Gibbon noted this tendency in writing an
evaluation of ancient Greece:
-12In the end, more than they wanted freedom, they
wanted security. They wanted a comfortable life
and they lost it all — security, comfort, and
freedom. When the Athenians finally wanted not
to give to society but for society to give to them,
when the freedom they wished for most was freedom
from responsibility, then Athens ceased to be free.
Our basic challenge then is to determine how much personal
freedom, if any, that we are willing to give up in seeking
collectivist security. It is certainly not easy to live with
the uncertainties that exist in a free society but the real
personal benefits created are far superior to any other
system. It is this heritage of personal freedom that has
made America a land blessed above all others. To protect
this remarkable privilege is a goal worthy of our greatest
personal and institutional commitment.
oOo
k Department of theTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 12:00 NOON
November 12, 1976
TREASURY TO AUCTION $2,500 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $2,500 million of
2-year notes to refund $1,370 million of notes held by the public
maturing November 30, 1976, and to raise $1,130 million new cash.
Additional amounts of these notes may be issued at the average price
of accepted tenders to Government accounts and to Federal Reserve Banks
for their own account in exchange for $137 million maturing notes held
by them, and to Federal Reserve Banks as agents of foreign and international monetary authorities for new cash only.
Details about the new security are given in the attached highlights
of the offering and in the official offering circular.
Attachment
WS-1169
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED NOVEMBER 30, 1976
November 12, 197
Amount Offered:
To the public
$2>500 million
Description of Security:
Term and type of security
2-year notes
Series and CUSIP designation
Series T-1978
(CUSIP No. 912827 GE 6)
Maturity date
November 30, 1978
Call date
No provision
Interest coupon rate
To be determined based on the
average of accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
May 31 and November 30
Minimum denomination available
$5,000
Terms of Sale:
Method of sale
Yield auction
Accrued interest payable by investor
None
Preferred allotment
Noncompetitive bid for
$1,000,000 or less
Deposit requirement
5% of face amount
Deposit guarantee by designated institutions..
Acceptable
Key Dates:
Deadline for receipt of tenders
Thursday, November 18, 1976,
by 1:30 p.m., EST
Settlement date (final payment due)
a) cash or Federal funds
b) check drawn on bank within
FRB district where submitted
c) check drawn on bank outside
FRB district where submitted
Delivery date for coupon securities
Tuesday, November 30, 1976
Wednesday, November 24, 1976
Tuesday, November 23, 1976
Tuesday, November 30, 1976
Contact: Linda F. Potts
Extension: 2951
November 15, 1976
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES
FINAL COUNTERVAILING DUTY DETERMINATION
ON VITAMIN K FROM SPAIN
Under Secretary of the Treasury Jerry Thomas
announced today a final determination under the Countervailing Duty Law (19 U.S.C. 1303), that bounties or
grants are being paid,or bestowed on imports of Vitamin
K from Spain. Notice to this effect will be published
in the Federal Register of November 16, 1976.
The Countervailing Duty Law requires the Secretary
of the Treasury to assess an additional (countervailing)
duty that is equal to the size of the bounty or grant
that has been paid or bestowed on the production or exportation of the merchandise. Treasury's investigation
showed that a bounty or grant of 10.5 percent ad valorem
is paid or bestowed, directly or indirectly, on exports
of Vitamin K from Spain, under the tax remission system
known as "Desgravacion Fiscal."
Imports of the subject merchandise from Spain
during the period January through August 1976, amounted
to approximately $15,000.
o 0o
WS-1170
Contact: Peter 0. Suchman
Extension: 5538
November 15, 1976
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES
COUNTERVAILING DUTY INVESTIGATION ON
LEATHER WEARING APPAREL FROM KOREA
Under Secretary of the Treasury Jerry Thomas
announced today a formal notice of investigation and
receipt of countervailing duty petition with respect to
imports of leather wearing apparel from Korea. This
action will be published in the Federal Register of
November 16, 1976.
Under the U.S. Countervailing Duty Law (19 USC 1303),
the Secretary of the Treasury is required to assess an
additional (countervailing) duty that is equal to the amount
of the bounty or grant that has been found to be paid or
bestowed on the imported merchandise. This action is taken
pursuant to allegations by the National Outerwear and Sportswear Association, that the Korean Government pays bounties
or grants on exports of leather wearing apparel. A preliminary determination in this case must be reached on or
before April 18, 1977, and a final determination must be
issued by October 18, 1977.
Imports of the subject merchandise from Korea during
the first 8 months of 1976 were valued at roughly $46 million.
o 0 o
WS-1171
DATE:
November 15, 1976
TREASURY BILL RATES
15-WEEK
Xo4+ 7°
LAST WEEK:
TODAY: 1.
26-WEEK
-/.fi,
o
~f.o/$ %
HIGHEST SINCE
LOWEST SINCE
(oh? lit*
f. Ill
beDepartmentoftheTREASURY
TELEPHONE 964-2041
INGTON, D.C. 20220
FOR IMMEDIATE RELEASE
November 15, 1976
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,500 million of 13-week Treasury bills and for $3,500 million
of 26-week Treasury bills, both series to be issued on November 18, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
13-week bills
maturing February 17, 1977
26-week bills
maturing May 19, 1977
Price
Discount
Rate
Investment
Rate 1/
Price
98.773
98.763
98.764
4.854%
4.894%
4.890%
4.98%
5.02%
5.02%
97.473
97.457
97.463
Discount
Rate
4.998%
5.030%
5.018%
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted
Investment
Rate 1/
5.20%
5.23%
5.22%
%.
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
Accepted
Boston
$ 115,240,000
New York
4,385,775,000
Philadelphia
23,115,000
Cleveland
58,310,000
Richmond
26,365,000
Atlanta
84,300,000
Chicago
420,500,000
St. Louis
55,690,000
Minneapolis
25,720,000
Kansas City
99,740,000
Dallas
67,910,000
San Francisco
265,755,000
$
21,150,000
1,939,205,000
20,685,000
27,485,000
20,805,000
30,115,000
242,360,000
23,290,000
18,520,000
69,170,000
22,910,000
65,665,000
Treasury
10,000
TOTALS
10,000
$5,628,430,000
Received
Accepted
$
93,985,000
5,773,385,000
5,315,000
112,530,000
56,525,000
21,710,000
268,605,000
73,250,000
59,915,000
25,185,000
23,290,000
506,845,000
$
8,565,000
2,984,975,000
5,315,000
12,530,000
22,715,000
19,460,000
54,305,000
54,750,000
40,915,09(7
22,035,000
17,290,000
257,725,000
130,000
130,000
$2,501,370,000 a/ $7,020,670,000
^/Includes $385,795,000 noncompetitive tenders from the public.
-/Includes $168,460,000 noncompetitive tenders from the public.
i/Equivalent coupon-issue yield.
WS-1172
$3,500,710,000 b/
^Department of theTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
Contact: J.C. Davenport
Extension 29 51
November 16, 19 76
TREASURY ANNOUNCES TWO ACTIONS
UNDER ANTIDUMPING ACT
Acting Assistant Secretary of the Treasury Peter. 0.
Suchman announced two actions today under the Antidumping
Act.
In the first action, Mr. Suchman announced that he
was issuing a tentative negative determination with respect
to monosodium glutamate (MSG) from the Republic of Korea.
Notice of this action will be published in the Federal
Register of November 17, 19 76.
Comparisons between the prices for export and those in
the home market during the period January 1, 1976-June 30,
19 76 yielded no margins.
The investigation was initiated May 14. 19 76, following
the receipt of a petition in proper form from counsel acting
on behalf of a domestic producer of the subject merchandise.
A final determination in this case is due within 3 months.
Imports of MSG from the Republic of Korea amounted to
approximately 2.7 million pounds, valued at roughly $1.4 million
during the first six months of 19 76.
In the other action, Mr. Suchman announced an extension
of the investigatory period with respect to pressure
sensitive plastic tape from Italy. Because of the complicated
nature of the case, the investigatory period is being extended
from six months to nine months. Notice of this action will
also appear in the Federal Register of November 17, 19 76.
A tentative decision in this case was to have been made by
November 14, 19 75, but will now be due on or before February
14, 1977.
oOo
WS-1173
department of theTREASURY
INGTON, D.C. 20220
|
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
November 16, 1976
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites tendecs for
two series of Treasury, bills to the aggregate amount of $6,200 million, or
thereabouts, to be issued November 26, 1976,
as follows:
90-day bills (to maturity date) in the amount of $2,600 million, or
thereabouts, representing an additional amount of bills dated August 26, 1976,
and to mature February 24, 1977 (CUSIP No. 912793 E7 7 ) , originally issued in
the amount of $3,602 million, the additional and original bills to be freely
interchangeable.
181-day bills, for $3,600 million, or thereabouts, to be dated November 26, 1976,
and to mature May 26, 1977
(CUSIP No. 912793 G4 2 ) .
The bills will be issued for casb and in exchange for Treasury bills maturing
November 26, 1976, outstanding in the amount of $6,206 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,707 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
I;30 p.m., Eastern Standard time, Monday, November 22, 1976.
Each tender must be for a minimum of $10,000m 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 Croverninent
WS-II74
(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 companyPublic 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 $500,000 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 or at the Bureau of the Public Debt
on November 26, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing November 26, 1976,
tenders will receive equal treatment.
Cash iind exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of tb.p Public Debt.
oOo
faDepartmentoftheTREASURY
VASHINGTON, D.C. 20220
TELEPHONE 964-2041
mWmwmmM
mMmWmWM
FOR RELEASE AT 5:00 P.>1. Noyember 18, 1976
TREASURY SECRETARY SIMON RELEASES PROTOTYPE REPORT ON
CONSOLIDATED FINANCIAL STATEMENTS
Secretary of the Treasury William E. Simon released
today a prototype report entitled "United States Government, Consolidated Financial Statements" (copy attached).
This prototype attempts to apply the principles of business
accounting to the Federal Government and to serve as the
basis for future recurring reports on the financial condition of the U.S. Government. Release of the report,
which uses data for fiscal year 1975, is part of a Treasury
plan to publish an official report for fiscal year 1977
(the current fiscal year) which ends September 30, 1977.
The report is prepared on the accrual basis and contains
a statement of financial position, a statement of operations
and related schedules.
The prototype report contains a letter from Comptroller
General Elmer Staats endorsing the concept of comprehensive
financial statements covering Government financial activities. The Comptroller General's letter states, in part,
"Although many aspects of these statements require further
study and significant changes, we believe these preliminary
statements will highlight some of the critical financial
problems that should be addressed in making them a permanent
part of Government financial reporting. We are pleased that
the Federal Government is taking a leading role in promoting
more comprehensive financial reporting by Government entities."
In releasing the report, Secretary Simon said: "The
business of the Federal Government is to respond to the
needs of the country in diverse ways that cannot always
be reduced easily to dollar figures on a financial statement. Nonetheless, political .processes have financial results,
and I believe that the periodic disclosure of those results
in a business-like manner can be a useful discipline for
Government decision makers and a useful addition to the informational tools available to the electorate.
"It is my hope that as these prototype statements
evolve in the next few years, they will enable a more
WS-1175
penetrating and realistic assessment of Government proGovernment
grams and aon
better
the nation's
evaluation
economy.
of the effect of the Federal
-2"Since last January when I first announced the Treasury's
intention to compile these statements, some critics have said
that we should not report all of the Government's liabilities,
particularly the large pension liabilities (for Federal military
and civilian personnel, for veterans, for workers covered under
the social security program) none of which is presently reported
in the Government's major financial statements. Their reasoning
is that these liabilities have no economic significance because
as a nation 'we owe them to ourselves' and that, in any event,
they are fully backed by the taxing power of the Federal Government. I do not want to pre-judge the way that specific items
will be treated in future financial statements; but I am totally
opposed to any effort to suppress the disclosure of either assets
or liabilities that are presently accrued or accruing.
"I often hear comments that pension programs create future
liabilities. That is a misnomer. They create present liabilities, earned as people work in covered employment. Only
the payment is in the future. I think it is important to tell
the American people what they are being committed to now, whether
it involves pension programs or other programs, so that they
can weigh the future consequences and make an informed judgment
about how much of a mortgage they want to put on their future
incomes.
"The Treasury's intention is to report all, and only,
assets and liabilities that meet the tests of disclosure
under generally accepted accounting principles. One of the
essential reasons for adopting the accrual basis for these
statements was to achieve the discipline provided by a set
of financial-economic measurement tools forged in the private
sector by a profession founded on independent judgment,
objective measurement and fair disclosure of financial data.
I have appointed an eminent advisory committee to examine
the pension liability disclosure issue as well as other major
accounting issues, and to recommend appropriate treatment in
future reports.
"In this connection, I emphasize that none of the figures
or classifications in the prototype statements represents a
commitment to any matter of form or content. The Treasury
earnestly seeks advice from anyone on any issue of disclosure
or valuation and on ways that the statements can be improved."
Secretary Simon plans to meet and discuss these statements with members of the Advisory Committee on Federal
Consolidated Financial Statements at their next meeting on
December 8, 1976.
Copies of the prototype Consolidated Financial Statements
can be obtained from: Government Accounting Systems Staff/
oOo
Bureau of Government Financial
Operations, Treasury Annex No. 1/
Room 412, Washington, D. C. 20226. Telephone (202) 964-8543.
After November 20, Telephone (202) 566-8543.
t
• MMiM
United States Governmen
Consolidated
Financial
Statements
Prototype Report
•
This report is a prototype for an annual recurring report on the financial condition
of the U.S. Government. It is an attempt to apply the principles of business
accounting to the business of government.
The perception of government in this country is so heavily focused on political
processes and social objectives that the financial dimension of government is often
obscured. The fact is, nonetheless, that all governments are financial entities. Their
ability to achieve their social objectives depends greatly upon their financial health.
Like the institutions that m a k e up the other two great economic sectors of our
Nation—business firms and households—governments conduct their business by
acquiring and using economic resources, goods and services. They raise money
through revenues and borrowings to acquire the resources needed to provide
governmental services. Of the resources acquired, s o m e are consumed currently
and some are set aside for future use—to generate future revenues or services.
Governments also m a k e commitments to provide benefits in the futurecommitments that do not have to be financed currently but which must be financed
eventually.
Like business firms and households, governments can live within their m e a n s or
they can become overextended and have difficulty paying the bills. Unless all of the
financial transactions and events affecting a governmental entity are recorded,
sorted out between what is applicable to current operations and what to future
operations, and brought together in a reasonably simple accounting report, the
average citizen, or even the financial expert, cannot hope to m a k e an informed
judgment about the financial health of the government. This prototype report is a
first step in the design of a financial report with the express purpose of facilitating
such judgments.
1
Traditional governmental financial reports seldom provide a simple overview of
what a government owns and what it o w e s or an explanation of h o w it got where it
is. They concentrate primarily on the matter of compliance with specific legislative
authorizations. Compliance reporting is an essential function of governmental
accounting and nothing in this report is intended to substitute for it. But events of
the last few years, particularly the rising and seemingly uncontrollable Federal
deficits and the financial crises in major cities and states, point to the need for a
n e w perspective—one that looks at a government as a total financial entity and
describes its financial condition in plain language and plain accounting.
The democratic process works best when the citizenry is well informed. Financial
analysis is not the forte of the average citizen. But as with most technical subjects,
the basics are well within the grasp of the citizen if the jargon is stripped away, the
details are condensed to fundamentals, and the financial profile is based on
c o m m o n accounting concepts.
W e have turned to business-type accounting for displaying the finances of
government because it is the most widely known and understood system of
measuring financial activity. Although government purposes are different from
business purposes, financial activities and financial control are basically the same.
Government is not in business to m a k e a profit and therefore an excess of
government revenue or expense does not have the s a m e meaning as corporate
profit or loss. It does have meaning, however, for tax policy, expenditure control,
debt management, and for the economic goals of containing inflation and fostering
high employment. The fiscal responsibility of public management can be judged in
relation to those goals, just as the fiscal responsibility of corporate management
can be judged in relation to profit goals, liquidity objectives, debt-equity balance,
and so on. In other words, measuring profit is only one purpose of business
accounting. It serves a wide variety of other management needs of which the most
important is reporting on the accountability of management for the resources
entrusted to its stewardship. That need is the s a m e whether the accounting is to
stockholders, creditors, or taxpayers.
A m o n g the objectives of this type of financial report are these: (1) To provide the
general public, which does not have ready access to detailed information, with a
resource for obtaining information about the financial condition and operations of
the government; (2) to provide information about past events and decisions that will
be useful for assessing their economic results and future implications; (3) to
provide information for evaluating and predicting the government's ability to raise
revenues and acquire resources required for future years; and (4) to provide
information for evaluating the effectiveness of past spending decisions.
Early this year, I invited a distinguished group of accountants, economists, and
business people to serve on an advisory committee to help the Treasury develop a
set of financial statements for the Federal Government that would carry out the
ideas expressed in the foregoing paragraphs. This committee is heavily involved in
studying a number of the complex issues. I believed that it would be useful, without waiting for the resolution of those issues, to go ahead with the publication of
this prototype report in order to expose the basic concept and approach to the
general public. Public reaction will help to shape future reports in the most useful
mold. I would emphasize that these prototype statements are in conventional
formats. There has not been time to experiment with n e w concepts and formats as
many have suggested. However, nothing in this prototype represents a
commitment to any matter of form or content. I earnestly solicit advice from anyone
on ways that it might be improved.
2
It is m y hope that as these statements evolve in the next few years, they will
enable a more penetrating and realistic assessment of proposed programs and a
better evaluation of the effect of government on the nation's economy. This
prototype statement is a beginning at developing an anchor to which a great
number of more detailed financial reports and concepts can be tied.
If the figures in this report raise questions, w e will have begun to achieve our
basic purpose. The business of government is to respond to the needs of the
country in diverse social and economic ways that do not always reduce to easily
measurable dollar figures on a financial statement. Nevertheless, political
processes have financial results, and the discipline of periodic disclosure can be
useful in evaluating our future courses of action. An understanding of the financial
health and strength of the government is vital to the governed.
WILLIAM E. SIMON
Secretary of the Treasury
3
COMPTROLLER GENERAL OF THE UNITED STATES
WASHINGTON. D.C. 20W3
OCT 6 1976
The Honorable
Tne Secretary of the Treasury
Dear Mr. Secretary:
The need for better accountability and good financial
reporting extends to all forms of governments—Federal,
State, and local. At the Federal level, the extensive
use of deficit financing and the increase in pension
liabilities have accentuated the need for the Federal
Government to provide better overall financial reports
that clearly show, the Congress and the public, the major
aspects of its financial position and operations. Consequently,
we endorse the concept that comprenensive, periodic
financial statements covering the full range of Government
activities be prepared in brief, easily understandable
form, and we support the Treasury's effort to prepare
such statements.
Although we endorse the concept of comprehensive
financial statements covering Governmental financial
activities, we believe the enclosed statements
must be considered a first attempt and that before fully
satisfactory financial statements can be prepared many
aspects of presenting information and determining
appropriate amounts for assets and liabililties require
further study. These include:
—Changing statement formats and simplifying
language so the statements will be easier for
the public to understand.
--Valuing assets such as land, buildings, and
defense weapons systems appropriately; many such
assets are carried at no value or at outdated cost
figures that are virtually meaningless.
—Making sure that the amounts shown for pension
liabilities are a fair presentation of actual
liaoilities.
e
""al? ^i2J29 whGther it is appropriate to depreciate
partlcularl
aircraft
y such assets as ships and
—Accruing taxes receivable properly.
These are just some of the aspects we believe
need to De considered further in preparing subsequent
statements. A full listing of such aspects would be
suostantially longer.
As noted above, these statements are preliminary;
we have not examined or audited them. Accordingly, we
are not expressing an opinion on wnether they fairly present
the financial condition and results of Government operations
for the periods of time they cover.
Although many aspects of these statements require
further study and significant changes, we believe
these preliminary statements will highlight some of the
critical financial problems that should be addressed
in making them a permanent part of Government financial
reporting. We are pleased that the Federal Government
is taking a leading role in promoting more comprehensive
financial reporting by Government entities.
Sincerely,
Comptroller General
of the United States
UNITED S T A T E S G O V E R N M E N T
Consolidated Statement of Financial Position
June 30, 1975 and 1974
[Amounts in billions]
Assets
1975 1974
Amount % Assets Amount % Assets
Cash and Monetary Assets:
Cash and cash equivalents
Other monetary assets (Note 1)
$ 12.8
16.2
29.0
Receivables (net of allowances):
Accounts
Taxes (Note 2)
Loans (Note 3)
Inventories, at cost (Note 4):
Military and strategic systems supplies
Stockpiled materials and commodities
Other materials and supplies
. . . .
Property and Equipment, at cost:
Land (Note 5)
Buildings, structures and facilities (Note 6)
Strategic and tactical military assets (Note 7)
Nonmilitary equipment (Note 7)
Construction in progress
Other
Less-Accumulated depreciation (Note 8)
Deferred Charges and Other Assets
3.6 $ 14.7
46
14.9
8.2
29.6
4.5
4.5
9.0
5.5
11.8
82.7
1.6
3.3
23.3
5.5 1.7
15.0 4.6
64.5 19.7
100.0
28.2
85.0 26.0
33.5
11.6
12.2
9.4
3.3
3.4
57.3
16.1
28.0
11.5
11.1
8.6
3.5
33
50.6 15.4
7.0
92.1
126.6
41.1
18 0
2J_
2:0
6.6 2.0
26.0
88.5 27.0
35.6 119.9 36.7
1 ] .6
39.7 12.1
5.1
19.3 5.9
.6
2A_
6
286.9
136.5
80.9
38.5
276.1 84.3
128.9 39.3
150.4
42.4
147.2 45.0
f8~0
5~T
1~50
4.6
$354.7 100.0 $327.4 IpOO
6
Liabilities a n d Equity
1975
1974
Amount % Assets Amount % Assets
Federal Debt (Note 9):
Gross debt outstanding
Less-lntragovernmental holdings:
Trust funds
Other
Debt outstanding with the public
Less-Unamortized discount
$544.1 153.4
Payables:
Accounts
Interest, annual leave and other
Unearned revenue
$486.2 148.5
137.3 38.7
9_9 2.8
396.9 111.9
2.5
7
129.7 39.6
10.4
3.2
346.1 105.7
2.5
.8
394.4 111.2
343.6 104.9
35.9 10.1
11.0
3.1
8.3 2.4
32.5 9.9
9.2 2.8
6.7 2.1
55.2
48.4 14.8
15.6
Retirement and Disability Benefits (Note 10):
Civil Service
Military
Veterans
118.0 33.3
96.6 27.2
117.3 33.0
108.0 33.0
80.4 24.6
111.0 33.9
299.4
Accrued Social Security (Note 11)
Other Liabilities
331.9 93.5
499.5 140.8
39.4 11.1
Contingencies (Note 12)
Total Liabilities
Less-Excess of Liabilities Over Assets
91.5
416.0 127.1
33.6 10.2
1,320.4 372.2 1,141.0 348.5
965.7 272.2
813.6 248.5
$354.7 100.0 $327.4 100.0
The accompanying notes to financial statements and schedules are an integral part of this statement.
7
UNITED STATES G O V E R N M E N T
Consolidated Statement of Operations
for the Years Ended June 30, 1975 and 1974
[Amounts in billions]
1974
1975
Amount % Revenues Amount % Revenues
Revenues:
Individual income taxes
Social security and unemployment taxes
and retirement contributions
Corporate income taxes
Excise taxes
Estate and gift taxes
Outer continental shelf rents and royalties
Other
Total revenues
Expenses (including transfer payments):
National defense:
Military personnel
Operations and maintenance
Research and development
Depreciation (Note 8)
Other
$122.4
43.5 $119.0 43.2
86.4
37.5
16.6
4.6
76.8 27.9
30.7
40.7
14.7
13.3
16.8
6.1
5.9
5.0
1.8
1.6
6.8
2.4
.9
10.8
3.9
4.1
100.0 275.9 100.0
11.7
/^
281.6
1.6
72.9
45.8
8.8
0.6
3.2
2.7
.6
25,9
16.3
23.7
8.6
27.7
10.1
8.6
3.1
4.0
11.1
.4
1.4
72.5 26.2
42.0 15.3
48.3
17.2
41.5 15.1
34.5
5.2
4.5
1.1
45.3
69.4 25.2
4.0
11.3
3.8
10.4
2.5
6.9
98.0 35.5
24.9
29
°
8.9
7.7
•
Other operating expenses
Grants-in-aid, primarily to State
and local governments
Transfer payments to individuals:
Income security, including retirement,
unemployment and social security payments m a d e
Health care
Veterans benefits and services
Other
Noncash provisions for retirement
and disability benefits:
Social security (Note 11)
Civil service, military and veterans (Note 10)
,
Interest expense (net of interest income).
Total expenses
Excess of expenses over revenues
97.2
14- 6
12.7
3J)
127.5
29.6
83.4
32.5 11.5
41.1
115.9
8.3
23.3
433.7 154.1
$152.1
54.1
27.2
__7_4
_34J>
21.5 __77
371.1. 1_344
34.4
$95.2
The accompanying notes to financial statements and schedules are an integral part of this statement
8
UNITED STATES GOVERNMENT
Effect of Including the Federal Reserve in the
Consolidated Statement of Financial Position
June 30, 1975
[Amounts
in billions]
Excluding
Federal
Reserve
Changes*
Including
Federal
Reserve
Assets
Cash and monetary assets
Receivables
Inventories
Property and equipment net of
accumulated depreciation
Deferred charges and other assets
Liabilities and Equity
Federal debt net of Federal Reserve
Federal Reserve Notes outstanding
Deposits of m e m b e r banks of the Federal
Reserve System
Other Federal Reserve liabilities
Payables, accounts, interest, leave, and other
Other Government liabilities
Retirement and disability benefits
Accrued social security
Excess of liabilities over assets
$ 29.0
100.0
57.3
$ (.9)
.3
$ 28.1
100.3
57.3
150.4
18.0
$354.7
.3
2.5
$ 2.2
150.7
20.5
$356.9
$394.4
$(85.0)
70.9
$309.4
70.9
55.3
39.4
331.8
499.5
(965.7)
$354.7
25.8
2.4
(-9)
(11.6)
.6
$ 2.2
25.8
2.4
54.4
27.8
331 8
499.5
(965.1)
$356.9
* Changes due to the Federal Reserve are based on figures provided in the Board's annual report as of
December 31, 1974.
9
UNITED STATES GOVERNMENT
Reconciliation Schedule of Accrual Operating Results to
the Budget Deficit
for the Year Ended June 30, 1975
[Amounts in billions]
Reported Budget Outlays over Receipts $ 43.6
Additions:
Noncash provisions for retirement
and disability benefits
Depreciation
Net expenses of Off-budget Agencies
$115.9
7.7
9.5
133.1
176.7
Deductions:
Capital outlays
Net effect of accrual adjustments
Seigniorage
19.7
4.3
6
24.6
Excess of expenses over revenues
per Consolidated Statement of Operations
10
$152.1
INTRODUCTORY STATEMENT TO FOOTNOTES
As is true of accounting in other types of
economic entities, governmental accounting exists
for the purpose of providing complete and accurate
financial information, in proper form and on a timely
basis, to those responsible for, and concerned with,
the operations of governmental units and agencies.
Some of the potential user groups interested in the
financial information produced by the Federal
Government include the general public, investors
and investment bankers, such individuals as accountants, financial analysts, economists, and
political scientists and other governments.
While the Federal Government presently prepares
many types of statements for specialized users,
these Federal Consolidated Financial Statements
have been prepared to serve the c o m m o n needs of
a variety of users, with emphasis on the general
public, to help promote understanding of the overall
financial condition of the Federal Government. The
statements are primarily historical in that information
about events that have taken place provide the basis
for our reporting. N o projections concerning future
events have been m a d e except where otherwise
noted.
The sources used in developing the statements
were predominantly Treasury publications supplemented by reports from both the civilian and military
sectors of the Federal Government. For the most
part, these publications and reports are a product of
the agencies' accounting systems, which, by law,
must conform in all material respects to the
accounting principles, standards and related requirements prescribed by the Comptroller General of
the United States. The maintenance of accounts on
the accrual basis is a basic requirement for all
Federal agencies. The accrual basis of accounting
consists of recognizing in the books and records of
account the significant and accountable aspects of
financial transactions or events as they occur. Under
this basis, the accounting system provides a current
11
systematic record of changes in assets, liabilities,
and sources of funds growing out of the incurrence
of obligations, expenditures, and costs and expenses; the earning of revenue; the receipt and
disbursement of cash; and other financial transactions.
This basis of accounting provides more information than the cash basis alone, under which financial
transactions are recorded in the accounts only w h e n
cash is received or disbursed. It also provides more
information than the obligation basis alone, under
which financial transactions involving use of funds
are recorded in the accounts primarily w h e n
obligations are incurred.
The accompanying financial statements include
the accounts of all significant agencies and funds
included in the Unified Budget of the United States
Government. Agencies like the U.S. Postal Service,
the Export-Import Bank of the United States, and the
Federal Financing Bank which are classified as "offbudget" (not included in the budget) have been
included in the financial statements because they
clearly are within the scope of Government operations. Government-sponsored enterprises such as
Federal Land Banks have been excluded because
they are privately owned. W e have also excluded the
financial results of the Federal Reserve System from
the principal statements, but show the effect of
including the Federal Reserve in a supplemental
table to show the interrelationships due to (1) the
amount of Federal debt held, (2) gold pledged to
FRB's in return for Treasury d e m a n d deposits, (3)
annual transfer of net income to Treasury, and (4) in
the event of liquidation, after return of capital to
m e m b e r banks, residual assets would go to
Treasury. Intra-governmental assets, liabilities, and
revenue/expense items have been eliminated in
consolidation. Amounts reflected are as of June 30,
1975, and 1974.
N O T E S T O FINANCIAL S T A T E M E N T S
1. Other Monetary Assets
This category includes the following items: Gold
which has been recorded at the official rate of
$42.22 per ounce established by law—$11.6 billion;
Special Drawing Rights which are an international
reserve asset—$2.4 billion; and the United States
reserve position with the International Monetary
Fund—$2.2 billion.
2. Taxes Receivable
The total for taxes receivable includes $6.4 billion
(net) for delinquent taxes owed and $5.4 billion of
accrued corporate taxes receivable as of June 30,
1975; the comparable amounts as of June 30,1974,
where $5.0 billion and $10.0 billion, respectively. No
accrual has been made for individual income taxes
because of the payroll withholding system. Also,
assessed tax deficiencies pending settlement have
not been included in receivables because the
ultimate settlement value is indeterminable.
3. Loans Receivable
Interest rates and loan repayment terms vary
considerably for outstanding loans, with rates
varying to 12 percent and terms from as short as 90
days to well over 40 years. The longer terms and
lower rates generally apply to loans to foreign
governments. Outstanding balances and allowances
for losses have been recorded as reported by
various lending agencies. No attempt has been
made to evaluate collectability or the adequacy of
the allowances for losses.
4. Inventories
Inventories include nondepreciable personal
property and are generally stated at cost. The major
components of inventory are summarized below.
Classification
Military and strategic supplies:
Ammunition
Materials related to missile, air and
weapons systems
Repair parts for weapons and vehicles
Excess materials awaiting disposition
Miscellaneous
Stockpiled materials and commodities:
Nuclear materials
Metals and like materials
Helium . . .
(Billions)
1975
1974
$11.9
$9.4
12.5
2.6
2.3
4.2
11.3
2.5
2.4
2.4
33.5
28.0
7.1
4.0
.5
6.6
4.4
.5
11.6
11.5
12
Other materials and supplies:
Department of Defense:
Electric, industrial and petroleum
supplies
Clothing, subsistence and general
supplies
Excess materials awaiting disposition
Miscellaneous
Other agencies
3.8
4.1
2.6
2.0
.7
1.9
2.2
.5
9.1
3.1
8.7
2.4
12.2
11.1
$50.6
$57.3
The inventory accounts do not include the
weapons stockpile of Energy Research and Development Administration, since the extent of this
inventory is classified information.
5. Land
Land owned by the Federal Government as of
June 30,1975, is summarized below by predominant
usage.
Usage
Forest and wildlife
Grazing
Parks and historic sites
...
Alaska oil and gas reserves
Military (except airfields)
Flood control and navigation
Reclamation and irrigation
Industrial
Airfields
Power development and distribution
Other
Outside United States
Acres
Cost
(Millions) (Millions)
502.3
164.0
25.3
23.0
18.1
$589
8.0
7.0
2.9
2.3
1.5
6.0
3,381
760.4
6,872
26
618
—
334
313
206
199
273
933
.6
152
761.0
$7,024
The Government owns approximately 33.5 percent of the total acreage of the United States, or
760.4 million acres (of which 352 million acres are
located in Alaska). This total includes 704 million
acres of public domain land. The Outer Continental
Shelf and other offshore lands are not included.
Cost represents the price paid by the Government,
except that the cost of land acquired through
donation, exchange, bequest, forfeiture, or judicial
process is estimated at amounts the Government
would have paid if purchased at the date of
acquisition. The 704 million acres of pubiic domain
land is not included; however, in 1972 a committee
of the House of Representatives estimated the value
of the land to be $29.9 billion.
6. Buildings, Structures and Facilities
This category includes all real property owned by
the Federal Government except land. T h e annual
rental of real property leased amounts to $0.6 billion
annually. Approximately $41 billion of the total at
June 30, 1975, and $36 billion at June 30, 1974,
reflects the acquisiton cost of buildings, whereas the
balance includes the costs of acquiring or erecting
dams, utility systems, monuments, roads, and
bridges. The following table summarizes the buildings, structures, and facilities reported.
Agency or department
Air Force
Army:
Corps of Engineers ..
Other
Navy
Interior
Tennessee Valley Authority
Energy Research and Development
Administration
Agriculture
National Aeronautics and Space
Administration
General Services Administration .,...,,,,
Other
(Billions)
1975
1974
$17.1
$16.7
14.9
14.3
12.6
12.6
9.2
5.6
12.1
12.2
9.0
4.8
4.2
7.1
3.2
3.0
2.52.6
2.4
4.8
2.4
7.3
$92.1
$88.5
Energy Research and Development
Administration
Maritime Administration
Tennessee Valley Authority
U.S. Postal Service
Other agencies
(Billions)
1975
1974
$51.6
38.0
17.8
10.6
9.7
1.1
4.9
$126.6
$119.9
Marketable:
Treasury bills
Treasury notes
Treasury bonds
Nonmarketable:
U.S. Savings bonds
Foreign series
Government account series (special
issues related to specific funds)..
Other
.
Total Treasury obligations
Agency securities
$51.0
36.3
16.9
3.9
4.7
$13.9
$14.0
4.9
2.4
1.1
4.1
2.2
1.4
22.3
21.7
S39 7
(Billions)
1974
1975
. .. $128.6
150.2
36.8
$105.0
128.4
33.2
315.6
266.6
65.5
23.2
61.9
25.0
124.2
115.4
4.7
5.3
533.2
10.9
474.2
12.0
$544.1
$486.2
Maturities of the outstanding marketable securities are reflected in the following tables.
D u e WithinU.S. Nonmilitary equipment:
Department of Defense:
Industrial plant equipment
. ..
Communication and electronics
Vehicles .
Other
$41.1
9. Federal Debt
The gross amount of Federal debt outstanding at
June 30, 1975, and June 30, 1974, consisted of the
securities summarized below.
7. Depreciable Personal Property
Depreciable personal property has been divided
into two categories. Assets are recorded at acquisition cost and include only those which are currently
in use or in usable condition. The major components
of each category are summarized below.
U.S. Strategic and Tactical military assets:
Aircraft and related equipment
Ships and service craft
Combat and tactical vehicles
Missiles and related equipment
Weapons
Other (primarily ground support)
.. ..
5.8
1.5
1.4
1.2
8.1
8. Depreciation
Most Government agencies do not depreciate
property and equipment. Accumulated depreciation
as of June 30, 1975 and 1974, for such agencies
w a s estimated, on a straight line basis, based on
available information. Reported amounts were used
for those agencies; e.g., T V A and Postal Service,
which do depreciate property and equipment. The
useful lives for each classification of asset are as
follows: Buildings, structures and facilities 50 years;
Ships and service craft 30 years; Industrial plant
equipment 20 years; All other depreciable assets 10 years.
Type of security
Classification
6.0
1.6
1.4
1.4
8.4
O n e year
O n e to five years
Five to ten years
T e n to twenty years
Twenty years or longer
13
(Billi ons)
1974
1975
$164.0
101.9
26.8
14.5
$139.9
77.2
27.0
8.4
174
5.1
S315.6
$266.6
Liabilities for several other Government plans
providing future benefits were not included at this
time, since it has not been determined whether the
total liabilities for such plans would be significant in
relation to amounts shown.
The gross amount of Federal debt outstanding has
been reduced by the holdings of entities included in
the Consolidated Financial Statements. T h e largest
such reduction reflects the holdings of Government
trust funds. Significant trust fund holdings of Federal
debt securities are summarized below.
11. Accrued Social Security
Trust fund
Social Security Administration:
Federal old-age and survivors' insurance
Federal disability insurance
Federal hospital insurance
Federal supplementary medical insurance
$39.9
8.1
9.8
1.4
$37.7
8.2
7.9
1.2
59.2
55.0
38.6
34.3
2.0
1.7
40.6
36.0
Department of Labor-unemployment ..
7.2
12.1
Department of Transportation:
Highway
Other
9.6
1.9
8.1
6.2
4.5
7.6
.9
8.5
7.6
5.8
4.7
5137.3
$129.7
Civil Service Commission:
Civil service retirement and disability ..
Other
11.5
Veterans Administration
Federal Deposit Insurance Corporation
Other
Estimates for social security give consideration to
contributions (taxes) and benefits for the next 75
years. A s of June 30, 1975, the projected excess of
benefits over contributions, on a present value basis,
for present participants over the next 75 years is
$2.7 trillion. T h e full accrued liability on a level cost
basis as it would be computed for a private pension
plan is estimated to be in the $3-4 trillion range.
Only a portion of the full liability is shown in the
Statement of Financial Position, $499 billion for 1975
and $416 billion for 1974. These amounts represent
an approximate application of the Accounting
Principles Board's Opinion No. 8, using a 30-year
amortization period. T h e Treasury's Advisory Committee is considering the appropriate disclosure for
future reports.
T h e noncash provisions for social security of
$75.1 billion in 1974 and $83.4 billion in 1975, in the
Consolidated Statement of Operations, represents
changes in the social security accrual between
years.
(Billions)
1975
1974
Of the debt outstanding with the public as of June
30, 1975, and June 30, 1974, approximately $66.0
billion and $57.7 billion, respectively, w a s held by
foreign and international investors.
12. Contingencies
Several Government agencies insure businesses
and individuals against various risks. The amount of
insurance coverage in force, representing the
10. Retirement and Disability Benefits
m a x i m u m contingent exposure of the Government,
Liabilities for military retirement benefits and for is summarized below as of June 30, 1975.
retirement and disability benefits provided under
Civil Service have been recorded based on the
(Billions)
estimated present values of vested benefits. These
Nature of Coverage
were derived from the actuarially computed present
$549.0
Federal Deposit Insurance Corporation
257.0
values of future benefits (as computed by the
Federal Savings and Loan Insurance Corporation
450.0
Housing and Urban Development—Riot Insurance
agencies involved with administering the various
Nuclear Regulatory Commission
plans) less the present values of future employee
59.0
(Formerly Atomic Energy Commission)
contributions.
Other
...
$1,481.0
The liability for Veterans Administration benefits
represents the computed present value of annual
benefit payments, which have been estimated by the
Veterans Administration to the year 2000. T h e
T h e Government also guarantees loans made to
noncash provisions for retirement and disability
businesses and individuals by non-Government
benefits of $32.5 billion for 1975 and $20.5 billion for enterprises. These guarantees b e c o m e liabilities of
1974 represent the combined changes in liabilities
the Government only w h e n the Government is
for civil service, military retirement and veterans
required to honor its guarantees. Loan guarantees in
benefits between years.
force at June 30, 1975, are summarized below.
14
Guarantees related to
Federal Housing Administration
Veterans Administration
Farm Credit Administration
Federal Home Loan Bank Board
Federal National Mortgage Association
Other
Amount
Outstanding
(Billions)
$98.6
27.9
28.8
25.6
29.1
programs for Fiscal Year 1975 which cannot be
stopped until a law is changed.
404
$250.4
The Government also commits itself to provide
services by passing laws which m a k e spending
mandatory. It should be noted that s o m e of these
programs are included in the Consolidated Financial
Statements. Examples include social security and
other benefit programs and s o m e contractual
obligations which have already been accrued.
However, the point is that a significant amount of
future spending is fixed by law. Therefore, it is very
probable that the Government will pay for these
programs in future years. The list below shows
15
(Billions)
Social security and railroad retirement
$68.4
Federal employees' retirement and insurance
13.3
Unemployment assistance
14.0
Veterans benefits
12.4
Medicare and Medicaid
21.6
Housing payments
2.1
Public assistance and related programs
16.9
Subtotal, payments for individuals
148.7
Net interest
23.3
General revenue sharing
6.1
Other open-ended programs and fixed costs ..
8.7
Total, open-ended programs and fixed costs .. 186.8
Outlays from prior-year contracts and obligations ..
50.7
Total, relatively uncontrollable costs
..
237.5
Relatively controllable outlays
91.1
Undistributed employer share, employee retirement
(4.0)
Total budget outlays
$324.6
Advisory Committee on Federal Consolidated Financial Statements
The role of the advisory committee is to provide
advice on a number of issues confronting the
Treasury in the preparation of consolidated financial
statements for the U.S. Government. While the
Treasury's initial prototype statement is in production, the advisory committee will be considering, in
detail, a number of technical issues; namely,
objectives to be served by the statements, format of
the statements, and accounting and reporting for
pensions, commitments, and contingencies. It is
expected that their views on these issues will be1
incorporated in subsequent publications of these
statements. In the interim, Treasury considers it
worthwhile to expose for comment the accompanying statements which represent one of the statement
formats currently being considered by the advisory
committee. The Treasury acknowledges the support
and continuing assistance from the members of the
Committee:
Mr. Harvey Kapnick, C P A
Chairman, Arthur Andersen & Co.
Chairman of Advisory Committee on Federal Consolidated Financial Statements
Dr. Wilton Anderson, CPA
Head of Accounting Department, Oklahoma State University
Past President of American Accounting Association
Mr. John Biegler, CPA
Senior Partner, Price Waterhouse & Co.
President of the Board of Trustees, Financial Accounting Foundation
Mr. Ivan Bull, CPA
Managing Partner of McGladrey, Hansen, Dunn & Co.
Chairman of the Board of American Institute of Certified Public Accountants
Dr. Joe J. Cramer, Jr., CPA
Faculty Resident, Arthur Andersen & Co.
Professor, Department of Accounting, Arthur Andersen Fellow, The Pennsylvania State
University
Mr. Nathan Cutler
Executive Vice President, Association of Government Accountants
Former Director of Audits, Department of Transportation
Dr. Sidney Davidson, CPA
Director of Business Research, University of Chicago
Past President of American Accounting Association
Mr. Samuel A. Derieux, CPA
Partner, Derieux, Baker, Thompson and Whitt
Past President of American Institute of Certified Public Accountants
Dr. Solomon Fabricant
Member of Senior Research Staff, National Bureau of Economic Research
Former Consultant to General Accounting Office
Mr. Gaylord Freeman
Mrs. Carol Loomis
Dr. Robert K. Mautz, CPA
Honorary Chairman of the Board, First National Bank of Chicago
Former Consultant to the Secretary of the Treasury
Member of Board of Editors, Fortune Magazine
Author of the article "An Annual Report for the Federal Government", 1973
Partner, Ernst & Ernst
Member
Dr. Charles L. Schultze
Honorable Elmer Staats
Mrs. Julia M. Walsh
Dr. George A. Staubus
of Cost Accounting Standards Board
Senior Fellow, Brookings Institution
Former Director, Bureau of the Budget (now OMB) •
Comptroller General of the United States
Vice Chairman of the Board, Ferris & Co.
Director, U.S. Chamber of Commerce
Director of Research and Technical Activities, Financial Accounting Standards Board
An observer at Committee meetings
16
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ADDRESS BY THE HONORABLE
WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
INTERRACIAL COUNCIL FOR BUSINESS OPPORTUNITY OF NEW JERSEY
NEWARK, NEW JERSEY
NOVEMBER 17, 1976
I greatly appreciate the opportunity to be with you
tonight and to meet so many of the men and women whose
dedicated efforts and deep sense of commitment have made
your organization an outstanding example of American voluntarism
in action.
You have recognized and are meeting a critical challenge.
Many members of minority groups are not normally exposed to
the opportunities of a business career, nor do they have the
chance to acquire the management know-how needed to make a
success of it. You are making remarkable progress right
here in New Jersey not only in meeting both problems head on
but in creating sorely-needed jobs as well.
Your efforts to help people organize and operate their
own businesses include:
— One-to-one counseling in buying, selling, promoting,
setting up books and financial systems — the whole gamut of
business skills.
-- Your loan assistance program which in the three
years ending in 1975 alone provided loans totaling nearly $8
million which are expected to translate into nearly 1,000
jobs, an annual payroll of $9.2 million and gross sales of
close to $43 million.
— Your nationally recognized management training
seminars which draw hundreds of participants from throughout
New Jersey and neighboring areas.
— Your minority vendor guides, a catalyst in bringing
minority firms together with industry and government contractors.
-- And your continuing concern for long-term minority
economic advancement and the sound growth and development of
your neighborhoods.
WS-1176
-2In short, the Interracial Council for Business Opportunity
of New Jersey, like its counterparts in six other states,
often makes the difference between an unattainable dream and
the reality of entrepreneurship that provides jobs, services,
products, stability and renewed hope and increased pride to
the community at large.
Significantly, what you achieve is on a voluntary,
people-to-people basis. What you offer your clients is not
a handout from a remote government office but a helping hand
from a neighbor. And the help you give ignites the same
spirit that led earlier generations of Americans to raise
log cabins and tame a savage continent — the spirit of
self-reliance, self-help, self-respect.
We in the Administration are proud to cooperate with
such efforts. As you know, the national ICBO is one of 300
organizations working closely with the Office of Minority
Business Enterprise of the Commerce Department. As you also
know, that Office's MESBIC program encourages the participation
of private industry and private investors in minority business
growth. There are now 83 MESBICS — small business investment
companies serving as a source of $46 million in private
capital.
These corporations, though aided by the Federal
Government, are privately owned and managed to encourage
greater private initiative and flexibility in channeling
funds to enterprises ranging from TV stations to barber
shops.
But numbers alone simply do not tell the story. I
could reel off a statistical laundry list for dozens of
pages, inventorying the many Federal activities aimed at
economic progress for minority Americans. But you are
probably even more familiar with them than I am.
So, instead, let me try to briefly describe the conviction
and philosophy behind those programs and then tell you a
little bit about one very significant case history.
The view of the Administrations I have served — and it
is my sincere personal view as well ~ is that you cannot
separate economic liberty from political liberty. When one
is weakened, so is the other, when one is strengthened, the
other gains strength too.
For this reason, freedom has always been the bottom
line of our economic policies, just as it is the bottom line
ot the long and ongoing social struggle for racial justice.
-3In social terms, this means aiming at three basic
goals: equal opportunity for all, upward mobility for all,
and shared prosperity for all.
But in strictly economic terms, none of these three
goals can be achieved without increased productivity and a
healthy, sustained growth in the private sector. Why the
private sector? Because it is the private sector which must
ultimately provide the jobs, the salaries and the opportunities
for most Americans of all races and creeds — and which must
also produce the revenues — through direct and indirect
taxation — which pay the costs for government programs as
well.
The struggle for economic justice is far from over, but
when you look at the record you find that — when people
have harnessed the genius of our free enterprise system to
the goal of minority progress — miracles have been achieved.
Let me give you a very short description of one such case.
Some of you may already be familiar with it — but I think
you will agree that it is a story worth repeating.
In 1964 Reverend Leon H. Sullivan, a black pastor and
civic leader, founded the first Opportunity Industrialization
Center. The place was a high crime section of North Philadelphia.
There were no vast, cheering crowds and n~ bold fanfares
that day in 1964 and the site of the opening — an abandoned
jailhouse — was not exactly a glamorous one.
But from that humble beginning, truly great things have
been achieved. Reverend Sullivan's aim was as simple as it
was important — to avoid bureaucratic red tape and waste,
and to provide relevant job training and placement with
maximum efficiency at a minimum cost.
His program has been so successful that there are now
local OIC affiliates in every part of the country. And
between 1964 and 1975 the program trained 353 thousand men
and women and placed 250 thousand in jobs with an impressive
85% retention rate. These OIC trained and placed workers
earned nearly $5 billion during the same period, paid $600
million in Federal taxes and saved the taxpayer $1.5 billion
in potential welfare payments.
But far more important than what the OIC has saved the
taxpayer is what it has given to thousands of young men and
women who can now lead their lives with confidence and
dignity — it has helped them to help themselves to a freer,
better way of life.
-4You in the Interracial Council, Reverend Sullivan's
OICs, and similar groups across the nation can prove that
our free enterprise system is not only there, but waiting to
be tapped for the benefit of every man, woman and child in
America, regardless of color, creed or national origin. You
can help extend the reach of this dynamic economic system to
many who are now left out of it and thus enlarge the economic
pie so that all citizens may enjoy an increasingly larger
share of prosperity.
That, my friends, is what your organization is all
about and that is what America is all about.
A few weeks before the recent political campaign ended,
Eric Sevareid of CBS News made this wry comment: "Election
day is not far off; it just seems that way."
That remark summed up the attitude of many of us then
because, regardless of their overriding importance and the
essential role played by political campaigns in shaping and
underscoring the issues, the nation traditionally breathes
a sigh of relief when they are over. The unresolved problems
and deferred tasks of the nation remain, and how much easier
it is to come to grips with them in an atmosphere a little
less rhetorical, less strident, less tumultuous than during
a campaign at its zenith.
Now that Campaign 1976 is over, what are the unresolved
problems and deferred tasks facing this country? Whether we
are Democrats or Republicans or Independents or anything
else, I venture to say that all Americans can agree on these
basic economic goals:
° We all want optimum employment so that men and women
can reach their full productive potential, can provide food
and shelter for their families, and can live with pride and
dignity.
° We all want a robust, expanding economy so that
people from every background can steadily raise their living
standards.
We all want stable prices so that workers can make
every dollar of wages count and those on fixed incomes can
enjoy security.
° And we want equal opportunity so that all Americans
can share fully in the blessings of freedom and prosperity.
-5On this latter point, your speaker last year, the
Honorable Peter Rodino, put it succinctly: "We know now
that only as our black and other minority citizens are
integrated into the economic mainstream of America will true
equality be achieved."
Congressman Rodino was absolutely right. We must never
forget that millions of blacks and other minorities have for
years been on the short end of the job statistics in this
country and that one of the causes has been economic discrimination.
Even now, the figures are distressing; minority unemployment
at more than 13 percent; unemployment among minority teenagers
at over 38 percent; the median income of black families only
two-thirds that of white families; and nearly a third of all
blacks still below the poverty line.
All of our goals — full employment, an expanding
economy, stable prices and full and equal opportunity — are
great goals that must be pursued with the same determination,
the same tenacity and the same sense of overriding purpose
that so many of you here in this room tonight have shown in
carrying forward your own important and related work.
But just what is the best way to achieve these goals
which we all share?
We Americans are a compassionate people. My experience
in Washington convinces me that almost every man and woman
in a position of high public trust cares deeply about the
well-being of our people. The central question today is not
"who cares?" — we all care — but rather how best we can
broaden prosperity, reduce human hardship and achieve our
shared goals without sacrificing our freedom or destroying
the most successful economic system that man has ever known.
Since 1962 our federal budget has exploded from $100
billion to a figure that will certainly top $400 billion in
this fiscal year. That means that today, and every day in
fiscal 1977, the Federal Government will spend more than $1
billion. And this week and every week it will go into debt
for at least another $1 billion. No wonder it has been in
the red for 16 out of the last 17 years.
In the past 10 years, the U.S. Treasury has had to
borrow half a trillion dollars in the private capital markets
to finance those deficits. The interest on the Federal debt
alone will soon reach over $45 billion — more than we spent
in any one year on the war in Vietnam, and almost half of
what we spent on total national defense last year. And it
-6is money, I'm sure you will agree, that could be better
spent on improvements in health care, public transportation,
rebuilding our cities, any of a dozen public needs, or in
creating growth and new jobs in the private sector.
As businessmen and women you know, too, that it spells
disaster to borrow and continue to spend more than you take
in for too long. You know that heavy Government borrowing
has fueled inflation and increased interest rates so that
strains have developed in money and capital markets. Many
of you have felt these strains as you or your clients have
sought loans to expand your business and create new jobs, or
to buy a home without paying an arm and a leg in mortgage
interest.
Added to that is the weight of excessive government
regulations and red tape which threaten to overwhelm many
small businesses and tie our free enterprise system in
knots. Government now controls over 10 percent of everything
we produce and indirectly controls most of the rest. Private
enterprise must now devote 130 million man-hours a year
simply to fill out all the necessary Federal forms. That
translates into a cost to consumers of $125 billion — or
the equivalent of $2,000 for every American family each
year.
The Federal Government today is the nation's biggest
single employer, consumer, borrower, and is the biggest
source of inflation in the United States economy. And it
was precisely this inflation that was the underlying cause
of the worst recession our country has experienced in a
generation — a recession that hit many families and businesse
in Newark and the rest of New Jersey like a sledge hammer and
made your job harder — if not impossible — in the face of
shrinking capital and rising borrowing costs.
The economic history of the past ten years might best
be described by that old adage, "The road to Hell is paved
with good intentions." In effect, the soiraling inflation
caused by our past excessive fiscal and monetary policies
has hurt the very people those policies were intended to
help the most: the poor, the handicapped, and those living
on fixed incomes. The issues involved here are by no means
narrowly economic. They concern fundamental principles of
equity and social stability. The trouble with encouraging
government growth at the expense of strengthening the
1S that h o w e v e r
K I I T S
9°°d the intentions which
achieve!-^governmental growth, those intentions are not
achieved; that instead, the growth in government spending
-7makes low-income people worse off, undermines social cohesion,
and threatens the very foundation of a free society.
The outstanding fact is that in every country in which
government growth reaches a dominating level there has been
a tendency to move toward instability, toward minority
government, and toward a threat to a free society. We must
never forget the inextricable relationship between our
economic freedom and our social and political freedom.
Qur free enterprise system has accomplished much in the
last 15 years, the number of people living under the poverty
level has been sharply reduced to 10%. Of course that
number is still far too high; it's clearly unacceptable.
But paradoxically it is also one of the lowest in the world.
Why? Because of the unparalleled success of our free enterprise
system. The plain truth is that no other country — no
other system — either now or ever before in history, has
achieved such a broad degree of economic affluence and
personal freedom for its people. And we can do even better.
We can create new opportunities and reach that last 10%,
and we are committed to that goal. But the essential point
is, we will never reach that goal by destroying private
enterprise, the very source of our present abundance and our
hopes for a better future.
Naturally, the government has a responsibility to help
those people who cannot help themselves. But while we're
doing that, we must also assist permanent, private sector
solutions, so that government is indeed helping to provide a
lasting solution.
One of the most critical lessons of the last ten years
is that there is no such thing as true compassion without
responsibility. To show true compassion we must take into
account not only the short-term effects of our actions, but
the long-term as well. The suggestions that we simply
spend and spend regardless of the value of programs are
precisely those which have, over the years, hurt the poor
and the disadvantaged the most. Irresponsible fiscal and
monetary policies caused runaway government growth and
runaway inflation.
That inflation brought on the worst
recession since World War II — and the poor were the first
casualties. It will be a grave injustice to the people of
this nation, and especially those in need, if we continue
down the same misguided path when we can clearly see from
recent history that the short-term pleasure and promises of
prosperity will be followed by even"greater hardship and
suffering.
-8In effect, a cruel hoax has been played upon the poorest
people of this country. Year after year, and still today,
we are told the only way to fight poverty is to devise new
and ever more massive governmental programs. And the American
people have responded with unquestionable generosity. Since
1960 this nation has spent over one trillion dollars on
domestic assistance programs to support people and communities
that needed help. So it is fair to ask, if the commitment
was there, why was it not followed by a new prosperity?
Quite simply because, instead of adhering to the principles
of free enterprise, and attacking poverty at its source by
creating opportunity at the local level, a great many of our
massive Federal programs today do little more than create
bigger and bigger government. And that just means more
spending, more taxation, more regulation, more inflation and
eventually more unemployment and a loss of the very opportunities
that have been promised.
Fortunately, many leaders are starting to speak out
against this monumental ripoff that is always so appealingly
promoted in the name of compassion. Thomas Sowell, a black,
who is a fellow at the Center for Advanced Study in the
Behavioral Sciences at Stanford, California, and the author
of Race and Economics, points out that championing the
disadvantaged is not only an inspiration, but an occupation.
"To be blunt, the poor are a gold mine," he says. Mr.
Sowell points out that by the time they are studied, advised,
administered, and experimented with, the poor have helped
many a middle-class liberal to achieve affluence with
government money. The total amount of money the government
spends on its "anti-poverty" efforts is three times what would
be required to lift every man, woman and child in America
above the official poverty line by simply sending money to
the poor. But Mr. Sowell notes that a good deal of the
taxpayers' money never reaches the poor. It is absorbed
by the administrators, the planners, the researchers, the
consultants, the staffers, in other words that entire army
of bureaucrats which has managed to achieve its affluence
by becoming caretakers of the poor. It is no accident that
the highest income counties in the United States are in the
suburbs of Washington, D.C. Poverty is the cause of much of
that affluence. And this huge, non-productive army will
continue to expand as long as it successfully deludes the
American people into believing that the poor cannot be
helped to help themselves. — as long as government policies
emphasize permanent public dependence for the poor instead
prosperit
sector
y a n d independence through the private
-9This philosophy of greater government control over both
our economy and our lives clearly contradicts the fundamental
principles that have given this country the greatest prosperity, the highest standard of living and, most importantly,
the greatest freedom ever known to man.
I submit to you that this question, of whether our people
— poor and rich alike — can be trusted to run their own
lives, or whether government must run their lives for them,
is the most critical issue we face in America today.
The goal of free lives, individual lives and productive
lives can only be built on capital investment, not on the
red ink and the printing presses of the government. If we
are going to create the kind of jobs that will keep people
permanently employed, that will meet the needs of a growing
labor force, and that will reduce our inflation by expanding
our output of goods and services, then we must equip our
workers with new and efficient plants, machinery and tools.
Then and only then will there be an expanding economic base
to keep the cycle of earning, saving and consumer spending
going.
Savings are the source of this needed capital. But
savings are currently being drained by excessive government
deficits. Resources soaked up by government to cover deficits
created by its spending binges today cannot simultaneously
be invested in expanded plants and machinery to employ more
people tomorrow. We cannot have both bigger government and a
healthy expanding private sector. Government doesn't create
wealth — the people do. We cannot continue to transfer
each year an increasing percentage of our national wealth
from the most productive sector to the least productive
sector of our economy without endangering the economic future -indeed the economic survival — of future generations.
In short, government can only grow stronger by making
private enterprise weaker. Virtually every dollar spent by
the government comes from the pocket of a working American.
If the government wants to spend more, then you and I will
spend less. If the government wants to employ more people,
then private enterprise must employ fewer people. Thus an
emphasis on bureaucratic growth inevitably leads to a decline
in the production of goods and services, a decline in the
value of people's income, and an increase in the rate of
inflation, which in turn paves the way for a new recession
and even higher unemployment. There never was and is not now
a choice between inflation and unemployment. That concept is
a fallacy. The real choice is between making steady progress
-lOon both inflation and unemployment or of returning to the
stop-and-go economic policies that have failed to provide
needed stability in the past.
Why is there such an urge to legislate policies that so
clearly make all people suffer — especially the poor?
Professor Milton Friedman, who was recently awarded the Nobel
prize in economics, provides an explanation which he calls
the "visible versus invisible" effects of government measures:
"People hired by government know who is their benefactor.
People who lose their jobs, or fail to get them because of
the government's programs do not know that that is the source
of their problem. The good effects are visible, the bad
effects are invisible. The good effects generate votes. The
bad effects generate discontent which is as likely to be
directed at private enterprise as at the government.
"The great political challenge is to overcome this bias,
which has been taking us down the slippery slope to even bigger
government and to the destruction of a free society."
Sincere compassion for the unemployed — compassion with
responsibility — dictates that we heed economic reality, that
we work for a permanent solution, and that we avoid those
bureaucratic policies that only lead to a bigger poverty trap.
Only free enterprise can provide such a solution. To paraphrase Sir Winston Churchill, the free enterprise system isn't
perfect, but it is better than all of the others — as you in
ICBO have proven from the example of your success.
Ladies and gentlemen, we can wage a real war on poverty.
And we can win that Var if we start creating more jobs in
the private sector, and stop creating more jobs for bureaucrats if we start concentrating on real economic opportunity instead
of more political lip service.
The private sector produces the food we eat, the goods we
use the houses and apartments we live in. It is the source
of five out of every six jobs in America, and it provides
directly and indirectly almost all the resources for the rest
of the jobs on our ail-too rapidly expanding public sector.
It is the foundation for defense security for ourselves and
most of the free world. It has been, and will continue to be,
the difference between life and death for countless undernourished people around the globe.
It is the productive base that pays for government spending
to aid the elderly, the jobless, the poor, the dependent, and
the disabled. Indeed, far from being the inhuman caricature
-11painted by so many political demagogues, the American private
sector is in reality the mightiest engine for social progress
and individual improvement ever created. So its obvious
that the stronger we can make that engine, the more prosperous
will be all of our people.
This is what government's true role is, or at any rate,
that's what it should be. We have to avoid making false
promises and just throwing money at problems in a way that
creates inflation instead of solutions. We want to see the
creation of real jobs, productive jobs, and lasting jobs —
jobs that build character, provide upward mobility, and
offer a better future.
It is no accident or blind fate that has made America
so rich and abundant a land. You can't legislate inventiveness
or prosperity; we have no more born geniuses or natural
inventors and industrialists than any other country. But we
do have a freer system in a world where many other countries
are not free. And, through it, we encourage the talent
that lies within individuals in a way that most other
societies have failed to do.
The result has been not just profits for the few, but a
better and freer life for the many. Isn't that the acid test -the bottom line — of so much of the idealogical argument and
speculation going on today? Compare the systems — ours works.
And, in large measure, it works because of people like you in
this room tonight -- people who believe in the value of a way
of life that is uniquely American.
My time at the Treasury will soon be over. But leaving
the Treasury does not mean abandoning my deep-seated concerns
and translating them into outspoken criticism whenever
necessary.
I don't regret a moment of the time I have spent in
Government. It's been a very rich and rewarding experience.
If I have tilted at a few windmills, I think I have also
helped to fight a few giants — double digit inflation, the
energy crisis and the political panic mentality that cries
out for more controls and tampering with the economy instead
of allowing the enormous self-correcting mechanisms of the
market place to take effect.
But the more I have seen of government, the more I
recognize the limits of what it can do for people — as
opposed to what it can do to them.
-12Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only the individual himself
can create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. It happens through organizations like this, and in
schools and labs and libraries and civic groups across this
great land of ours where, every day, individuals with a
better idea are solving problems and creating new opportuniti
What we call the American experience — the American
story — is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document or charismatic leader, is what
sums up the true meaning and purpose of America. And that is
what we must preserve.
Thank you.
0)0
departmentoftheTREASURY
OFFICE OF REVENUE SHARING
WASHINGTON, D.C. 20226
TELEPHONE 634-5248
FOR IMMEDIATE RELEASE
WEDNESDAY, NOVEMBER 17, 1976
CONTACT: PRISCILLA R. CRANE (202) 634-5248
FIRST ANTIRECESSION FISCAL ASSISTANCE
PAYMENTS MADE TODAY
The first payments of antirecession fiscal assistance
funds authorized by Title II of the Public Works Employment
Act of 1976 (P.L. 94-369) are being made today to 47 State
governments and 17,630 local units of general government.
The $531,735,633 being paid today represents money due
eligible governments for the first two calendar quarters of
the five-quarter program, the last quarterly payment of which
is scheduled to be made in July 1977.
Funds for more than 3,000 prospective recipients in
the States of Connecticut, Kentucky, Vermont, West Virginia, and
Wisconsin are being withheld temporarily, pending approval by
the Treasury Department of alternative allocation plans which
the State governments of those States have submitted, as
permitted by law. The prospective recipients whose payments
are not being sent today pending approval of the alternative
plans are units of local general government for which no specific
unemployment rates are available from the U.S. Department of
Labor. Approximately $8.8 million is being held for these
places. Places, within these States for which specific rates are
available will be paid today.
Funds not yet paid to other eligible governments for the
first two quarters are being held pending receipt of assurance
forms required under the statute authorizing the program. Payments for those governments, and payments of places newly
eligible to receive funds for the quarter beginning in January
1977, will be made, provided assurance forms have been filed
with the Office of Revenue Sharing by December 13, 1976. On
these forms, the Chief Executive Officer of each recipient
jurisdiction must assure the Department of the Treasury that all
provisions of the law will be observed as the money is spent.
w s
-
1 1 7 7
2.
The State governments of Oklahoma and Texas are among
the governments which have yet to file assurance forms with
the Treasury Department's Office of Revenue Sharing. Their
funds for the first and second quarters are being held, pending receipt of the forms, as described above.
It was the intent of Congress that antirecession fiscal
assistance be used primarily to employ persons needed to sustain
ongoing, basic services in recipient communities. The money
must be appropriated or obligated within six months after the
date a check is received; and it must be spent in accordance
with State and local laws and procedures applicable to the
expenditures of a receipient's own-source funds. Discrimination
in the use of the funds on the grounds of race, religion, color,
national origin or sex is prohibited; and the Office of Revenue
Sharing is authorized to withhold funds where discrimination is
determined to exist.
Antirecession funds are allocated according to a formula
contained in the law which relates unemployment rates to each
prospective recipient's Federal Fiscal Year 1976 general revenue
sharing allocation. The law authorizes distribution of a total
of $1.25 billion over the five-quarter period, from July 1, 1976
through September 30, 1977, provided that the seasonallyadjusted national unemployment rate for applicable quarters and
the final months of those quarters remains above 6%. Rates
applied to individual government recipients must be above 4.5%
to qualify those places as eligible for payment. Any government
which is allocated less than $100 for a quarter will receive no
funds for that quarter.
The State government of Kansas is not being paid today
because the State unemployment rate for the first two quarters
is below the minimum required for eligibility under the new
program. The State governments of Wyoming and South Dakota fall
below the minimum for the second quarter and will not receive
money for that period.
The total amount of money available to be distributed in
the first quarter of the antirecession program is $312,500,000
(for approximately 24,000 eligible governments). In the second
quarter, $250,000,000 is available to be paid to about 18,000
places. Accordingly, of the $1.25 billion authorized to be
paid in five calendar quarters, more than $560 million is
available for the quarters beginning July 1, 1976 and October
1, 1976.
*
The program will expire September 30, 1977 unless it is
renewed by Congress, or unless available funds have been exhausts
before the final quarter.
- 30 -
FOR IMMEDIATE RELEASE
November 18, 1976
RESULTS OF AUCTION OF 2-YEAR TREASURY NOTES
The Treasury has accepted $2,501 million of $3,786 million of
tenders received from the public for the 2-year notes, Series T-1978,
auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 5.76%
Highest yield
Average yield
5.94%
5.86%
The interest rate on the notes will be 5-3/4%. At the 5-3/4% rate,
the above yields result in the following prices:
Low-yield price 99-981
High-yield price
Average-yield price
99.647
99.795
The $2,501 million of accepted tenders includes $ 318 million of
noncompetitive tenders and $2,148 million of competitive tenders
(including 24% of the amount of notes bid for at the high-yield) from
private investors. It also includes $ 35 million of tenders at the
average price from Federal Reserve Banks as agents for foreign and
international monetary authorities in exchange for maturing securities.
In addition, $ 426 million of tenders were accepted at the average
price from Government accounts and Federal Reserve Banks for their own
account in exchange for securities maturing November 30, 1976, ($ 136 million)
and from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash ($ 290 million) .
WS-1178
FOR IMMEDIATE RELEASE
November 19, 1976
TREASURY REPEALS DUTY-FREE EXEMPTIONS
FOR MEMBERS OF CONGRESS
Under Secretary of the Treasury Jerry Thomas has
signed a Treasury Department Order repealing a 68-year-old
U.S. Customs rule that had granted a duty tax exemption
to Members of Congress.
The rule which becomes effective December 1, 1976,
repeals an exemption that has allowed Members of Congress
to bring in goods from overseas without paying the
customary duty tax required of all other citizens.
In signing the order, Under Secretary Thomas said:
"I feel Members of Congress would agree with the repeal of
the exemption. Public officials should not be singled out
as a privileged group for special tax exemption."
The 1908 regulations (19 CFR 148.8) provided for dutyfree entry of the baggage and effects of "high officials"
of the U.S. Government returning from official missions
abroad.
Thomas said that in 196 3 then Secretary of the Treasury
Douglas Dillon requested Executive agencies to refrain from
requesting duty-free entry because it was a potential
embarrassment to the government. The request was applied
to the Executive Branch and did not extend to Congress.
On occasions where Members of Congress have their
spouses and aides accompanying them on foreign trips spouses
and aides have been entitled to this tax exemption.
oOo
WS-1179
IheDepartmentoftheJREASURY
TELEPHONE 964-2041
;HINGTON, D.C. 20220
November 22, 1976
FOR IMMEDIATE RELEASE
. RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,600 million of 13-week Treasury bills and for $3,600 million
of 26-week Treasury bills, both series to be issued on November 26, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing February 24, 1977
Price
High
Low
Average
Discount
Rate
98.862 4.552%
4.620%
98.845
4.596%
98.851
26-week bills
maturing May 26. 1977
Investment
Rate 1/
Price
4.67%
4.74%
4.71%
97.658 a/ 4.658%
97.640
4.694%
97.646
4.682%
Discount
Rate
Investment
Rate 1/
4.84%
4.87%
4.86%
I
a/ Excepting 2 tenders totaling $825,000
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted 34%,
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
Accepted
Received
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
$
27,735,000
3,870,615,000
18,565,000
23,720,000
18,980,000
46,535,000
300,995,000
45,500,000
27,585,000
25,450,000
23,580,000
96,760,000
10,000
$
26,095,000
2,193,115,000
16,335,000
23,720,000
18,980,000
46,535,000
132,795,000
30,680,000
15,285,000
20,595,000
18,940,000
57,980,000
10,000
$
25,930,000
5,539,345,000
5,940,000
112,875,000
8,055,000
19,610,000
470,510,000
44,525,000
36,285,000
33,075,000
17,630,000
216,000,000
55,000
$
9,930,000
3,295,645,000
4,785,000
12,875,000
8,055,000
19,065,000
62,810,000
15,865,000
21,285,000
32,075,000
12,630,000
105,000,00(
55,00(
$4,526,030,000
$2,601,065,000 U
$6,529,835,000
$3,600,075,000 c/
TOTAL
b/Includes $ 320,050,000noncompetitive tenders from the public.
c/Includes $ 143,965,000noncompetitive tenders from the public.
il/Equivalent coupon-issue yield.
1
-ws-iiso
IheDepartmentoftheTREASURY
HlNGTON, D.C. 20220
TELEPHONE 964-2041
For release at 10:00 a.m.
ADDRESS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
WOMEN'S CRUSADE FOR A COMMON SENSE ECONOMY
LOS ANGELES, CALIFORNIA
NOVEMBER 23, 1976
It is a pleasure and an honor for me to attend this
gathering. As some of you may know, my interest in the
Women's Crusade goes back to its inception, and so I am
particularly gratified by the enormous progress you have
made — and the even greater progress I look forward to
witnessing in the years ahead.
Many different groups and spokesmen have invoked the
name of the so-called "silent majority" in recent years.
But, when you get right down to it, the real silent majority
in our society is made up of American women — and it's
great to see such impressive evidence that you've decided to
speak up and make your voices heard.
From the beginning of our history, American women have
played a very special role, as foreign observers have
always been quick to observe. Not all of them could cope
with what they saw. Charles Dickens, who was something of a
male chauvenist at heart, never could get used to the way in
which American women organized educational and cultural
programs on their own initiative and he has left us a very
unflattering picture of them in some of his works. But a far
more typical reaction was that of Alexis de Tocqueville
whose Democracy in America provides perhaps the most clear,
insightful view of 19th century American that any foreign
writer has left behind.
Like Dickens, de Tocqueville noticed that American
women played a far larger role in every level of society
than their European counterparts. But, unlike Dickens, he
wasn't scared off. On the contrary, he was impressed. In
fact, de Tocqueville wrote that if he were asked what
deserved the credit for the American people's growing strength
and prosperity he would reply: "The superiority of their
women."
Now that's pretty strong praise — even coming from a
Frenchman. But it is backed up by the historical record —
the long, heroic chronicle of men and women taming a savage
WS-1181
-2continent together, settling, farming, engaging in commerce
and creating a new way of life in which effort and opportunity
replaced the rigid, class-ridden structure of old world
societies. At times this has meant that Americans seemed a
little brassy, a little pushing. But the result two hundred
years of brass and push is a country in which more people
live more freely and with more abundance than in any other
country at any other time in human history.
However, neither freedom nor abundance are guaranteed
to last forever. Both must be tended and cared for if they
are to continue and increase. And we can't make our free
enterprise system work at peak efficiency if we don't know
what makes it tick in the first place.
One of the gravest problems we face is the economic
illiteracy of the American people. Until more average
citizens learn to look below the surface symptoms to the
underlying causes of plagues like inflation and recession,
political and economic snake oil salesmen will continue to
drown out the voices of reason and responsibility.
Too many Americans - both men and women — are either
economically ignorant or economically naive. They simply
have not learned their economic abc's — and the result has
been more than a generation of shrinking economic freedom,
growing government domination of the economy, and painful
doses of inflation which, in turn, led to the worse recession
since World War II.
But, while most Americans don't know the facts, I am
convinced that the American woman has a keener potential
grasp of the situation and I am confident that, with the
help of groups like yours, she can become an irresistable
force for economic responsibility at the local, state, and
federal levels.
James Stephens once wrote, "Women are wiser than men
because they know less and understand more. Like all epigrams,
Mr. Stephens' oversimplifies the case but I can assure you
that, as Secretary of Treasury, I have always found it
easier to discuss the basic, common sense fundamentals of
economic sanity with housewives, businesswomen and women
consumers than with some of the most famous — and occasionally
the most pettifogging — of economic theorists.
No one better understands the link between our economy
and the other blessings of American life than you.
-3You spend most of America's consumer dollars. At the
supermarket, at the department store, and in dozens of other
places each week, you have to see through the economic
slogans to make the hard, immediate economic decisions of
everyday life.
Whereas many business executives never look further
than next year's profits and the corporate balance sheet,
you must also focus on the long term. Politicians and
businessmen may take the short view, but your eyes and
hearts are always with the next generation — and the kind
of world in which your children and grandchildren will have
to live.
In addition, with women now making up a massive 48% of
the American work force, you pay the price every time
government mismanagement of the economy tightens the job
market or reduces the real value of wages.
As wives and mothers, you see everyday what inflation
and recession mean to your families, and, more than anyone
else, you are the ones who have to live with the results —
stretch the family budget and somehow get through another
week, month or year of rising prices and shrinking dollars.
As career women, often facing many visible and
hidden barriers that your male colleagues do not, you
also know exactly how important effort and competitiveness
are to any business concern, from the mom and pop grocery
store on the corner to a multi-bin lion dollar conglomerate
with offices around the world.
All of which is my way of saying how deeply I believe
in the potential of groups like the Women's Crusade. Through
you, an army of newly informed and motivated American women
can be mobilized for the public good.
You can be a potent force against economic illiteracy.
You can preserve for your children the opportunities,
the freedoms and the ideals that make us proud to be Americans.
But this Crusade is only the beginning. We still have
a long way to go and, believe me, it isn't going to be easy.
What concerns me most about the road ahead is the way in
which advocates of big government and big spending are
weighing down and debilitating the creative private sector
that is the true source of our abundance, our opportunity
and, in the last analysis, our freedom.
-4For, as one of the founders of the American Republic
put it, "Power over a man's substance is power over his
will." Those are the words of Alexander Hamilton^and, almost
everywhere we look in the world today, we see this truth
reaffirmed anew.
We in America have been given many blessings. No
country is richer or more abundant. No people have more
opportunities to better themselves and seek new horizons.
Nowhere else is there so much diversity of choice, of careers,
of opportunity for both men and women.
But the bottom line of all these opportunities is
T
freedom. And as another great American, Daniel Webster,
solemnly reminded his countrymen, "God grants liberty to
those who love it and are always ready to guard and defend
•IT'
Now it is fairly easy to defend our liberty when it is
faced with external threats. When foreign enemies threaten,
the danger is clearly defined and Americans have always ^
united in opposing it. But today we face a danger that is,(
every bit as great as any foreign enemy, but which is far
less obvious and more insidious — an internal danger that
is slowly but surely eroding our individual political and
economic liberty — the substance and the will which Alexander
Hamilton referred to.
Faced with the ever-encroaching influence of government
over our lives, many citizens do not take the threat seriously.
They fail to realize that the time is at hand to face up to
Mr. Webster's challenge now — before it is too late.
The issues involved are not narrowly economic. They
involve fundamental social and political stability. For the
sad but undeniable fact is that in nearly every country
where the government has assumed the dominant role in the
economy, irresponsible fiscal and monetary policies have led
to economic and social instability, and a tendency to political
fragmentation and minority governments. It hasn't happened
yet in America. It's up to groups like yours to see that it
never does.
This challenge must be met — and met now — because we
are at a crossroads in our evolution as a free society where
we face an all important choice — a choice between the
freedom for each of us to live our lives as we best see fit,
or the surrendering of more of that freedom to an increasingly
powerful government in exchange for a false promise of
security and permanent prosperity.
-5Freedom — the very word should inspire us to action at
a time when socialism and totalitarianism are on the march
around the world. Yet, here at home, too many of us simply
take it for granted. Others are not so naive. In my travels
as Secretary of the Treasury I have been to every part of
the globe. And everywhere I have found that America still
stands as the beacon of freedom — the bastion of liberty
and hope even in those countries where freedom no longer
exists. What a pity it is that so many of our own people do
not understand what people thousands of miles away so clearly
see. What a tragedy that we who enjoy the benefits of
freedom may let it slip through our fingers from simple
complacency. It has often happened before, and it could
happen in America.
What the historian Gibbon said of Athens may yet be
said of America. "In the end," he wrote in his epitaph for
the ancient republic, "more than they wanted freedom, they
wanted security. They wanted a comfortable life and they
lost it all — security, comfort and freedom. When the
Athenians finally wanted not to give to society but for
society to give to them, when the freedom they wished for
most was freedom from responsibility, then Athens ceased to
be free."
Frankly, it astonishes me that whenever the advocates
of more government control and less economic freedom are
confronted with the irrefutable evidence that we already
have too much government, they just keep on demanding
more — and two of the casualties of their misguided logic
are jobs and durable prosperity.
Free lives, individual lives, productive lives are
built on capital investment, not on the red ink, the bureaucratic
controls and the printing press of big government. And
savings are the source of capital investment.
But savings are currently being drained by excessive
government deficits. Resources absorbed by government for
its spending today cannot simultaneously be invested in
expanded plant and machinery to employ more people tomorrow.
We cannot have both bigger government and a healthy expanding
private sector. Government never creates wealth — people
do. We cannot continue to transfer each year an increasing
percentage of our national wealth from the most productive
to the least productive sector of our economy without
endangering the economic future of your children and mine.
The private sector produces the food we eat, the goods
we use, the clothes we wear, the homes we live in.
-6It is the source of five out of every six jobs in
America, and it provides directly and indirectly, almost all
the resources for the rest of the jobs in our all-toorapidly expanding public sector.
d
It is the foundation for defense security for ourselves
and most of the Free World.
A.
It is the productive base that pays for government
spending to aid the elderly, the jobless, the poor, the
dependent and the disabled. Indeed, far from being the
inhuman monster caricature painted by political demagogues,"
the American private sector is in reality the mightiest v
engine for social progress and individual improvement ever
created.
This ladies and gentlemen — but especially for those"
of you in the Women's Crusade — is the crucial theme that
must be communicated broadly and deeply into the national
consciousness: The American production and distribution system
is the very foundation of our nation's strength and freedom —
the source of present abundance and the foundation of our hopes
u
for a better future.
\.
DC '
As you know, Nineteen-Seventy six is our bicentennial*"
year as a nation, but 1976 also marks another bicentennial —
the 200th anniversary of Adam Smith's Inquiry into the Nature
and Causes of the Wealth of Nations. This publication was
and remains the finest book ever written on modern economic
freedom and it deserves a more prominent part in contemporary
economic education.
Many people mistakenly believe that Adam Smith was nothing
more than an inhumane apologist for robber baron capitalism.
Actually, he was precisely the opposite, a profound moral
philosopher and a champion of individual human dignity and
freedom — exactly the same broad goals for which the Women's
Crusade stands.
Smith advocated a commercial system of what he termed
"natural liberty," free of arbitrary preferences or restraints.
IJEvery man," Smith wrote, (I suppose today he would have said
"every person," but you know what he meant) " as long as he
does not violate the laws of justice should be left perfectly
free to pursue his own interest in his own way and to bring
both his industry and capital into competition with those of
any other man, or order of men." Above all, Smith realized
that there is no political short-cut to affluence. It can
only come from the creative efforts of individual human beings.
-7To me, this wisdom represents the essence of one of the
most important educational lessons of our nation's history — ^
but too many of our young people are simply not being taught it.
You can help get it across to them — and to the legislators
whose economic decisions are shaping their future today.
Competition of ideas, like competition of products, is a
healthy thing. I welcome it. But, as responsible citizens
we have an obligation to see that no one economic philosophy
enjoys an academic or political monopoly of the public dialogue.
Yet all too often socialist doctrine has become the new economic
orthodoxy. It's time for a change, and you can help bring
economic fairness, balance and sanity back to the halls of
government and academe by making your voices heard.
This great but sometimes confused nation of ours was born
in turmoil. Conflict and doubt are nothing new to us. They
didn't stop us 200 years ago and they shouldn't stop us now.
It is no accident or blind fate that has made America so rich
and abundant a land. You can't legislate inventiveness or
prosperity; we have no more born geniuses or natural inventors
and industrialists than any other country. But we do have a
free system in a world where many other countries are not free.
And, through it, we encourage the talent that lies within
individuals in a way that most other societies have failed to
do.
The result has been not just profits for the few, but a
better and freer life for the many. Isn't that the acid test
of so much of the idealogical argument and speculation going
on today? Compare the systems — ours works. And, in large
measure, it works because of people like you — American women
who believe in effort, responsibility and efficiency in both
your personal and professional lives.
My time at the Treasury will soon be over. But leaving
the Treasury does not mean abandoning my deep-seated concerns
and translating them into outspoken criticism whenever necessary.
Don't get me wrong. I don't regret a moment of the time
I have spent in Government. It's been a very rich and
rewarding experience. If I have tilted at a few windmills, I
think I have also helped to fight a few giants — double digit
inflation, the energy crisis and the political panic mentality
that cries out for more controls and tampering with the economy
instead of allowing the enormous self-correcting mechanisms of
the market place to take effect.
But the more I have seen of government, the more I
recognize the limits of what it can do for people -- as
opposed to what it can do to them.
-8Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only individual men and women
can create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. Our greatest progress has always come through
individuals — not through voter blocs or special interest
groups. It happens through voluntary organizations like the
Women's Crusade, in company offices, in homes, in schools
and labs and libraries and civic groups across this great
land of ours where, every day, men and women with a better
idea are solving problems and creating new opportunities.
As Leone Whitaker said in a recent article on the Crusade,
your views and findings can make a tremendous difference. The
same Senator, Congressman or Administration official who may
not pay much heed to the lone voice of a former Treasury Secretary
will have to sit up and take notice when you go to him with the
"force and power of a million women" behind you.
The election is over — although for a while there it
seemed like it would last forever. A number of important
faces have changed in Washington but the important issues remain
the same — and you can be sure that all of the organized
special interests, be they business, labor, ethnic or partisan,
will soon be demanding their pound of flesh from the incoming
Administration and Congress.
You can help to guarantee that, in the midst of all these
narrow interests, the public interest is not drowned out.
You can help guarantee that the freedom, the abundance
and the opportunity that most Americans take for granted today
will be preserved for all future Americans. And whenever I can
be of help to you as a concerned, individual citizen, you can
count on my support.
For what we call the American experience — the American
story — is the sum total of individual contributions. Each
of us is a small but important part of it. And that, more than
any great document of charismatic leader, is what sums up the
true meaning and purpose of America. With the courage of
your convictions and the determination to make your voices
heard, that is what you can help to preserve for your children
and your children's children.
Thank you.
oOo
uDepartmentoftheTREASURY
MINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
November 23, 1976
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 $6,000 million, or
thereabouts, to be issued December 2, 1976,
as follows:
91-day bills (to maturity date) in the amount of $ 2,500 million, or
thereabouts, representing an additional amount of bills dated September 2, 1976,
and to mature March 3, 1977
(CUSIP No. 912793 E8 5 ) , originally issued in
the amount of $3,602 million, the additional and original bills to be freely
interchangeable.
!'
182-day bills, for $3,500 million, or thereabouts, to be dated December 2, 1976,
and to mature June 2, 1977
(CUSIP No. 912793 G5 9).
The bills will be issued for cash and in exchange for Treasury bills maturing
11
December 2, 1976,
outstanding in the amount of $6,005 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,553 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standard time, Monday, November 29, 1976.
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.t
99.925.
Fractions may not be used.
Banking institutions and dealers who make primary markets in Government
WS-1182
(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 $500,000 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 or at the Bureau of the Public Debt
on December 2, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 2, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets. Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
oOo
FOR RELEASE AT 12:00 NOON
November 23, 1976
TREASURY TO AUCTION $2,500 MILLION OF 4-YEAR 1-MONTH NOTES
The Department of the Treasury will auction $2,500
million of 4-year 1-month notes to raise new cash.
Additional amounts of the notes may be issued to Federal
Reserve Banks as agents of foreign and international
monetary authorities at the average price of accepted
tenders.
Details about the new security are given in the
attached highlights of the offering and in the official
offering circular.
Attachment
WS-1183
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 4-YEAR 1-MONTH NOTES
TO BE ISSUED DECEMBER 7, 1976
November 23, 1976
Amount Offered:
To the public
Description of Security:
Term and type of security
Series and CUSIP designation
Maturity date
Call date No provision
$2,500 million
4-year 1-month notes
Series F-1980
(CUSIP No. 912827 GF 3)
December 31, 1980
Interest coupon rate To be determined based on
the average of accepted bids
Investment yield
To be determined at auction
Premium or discount To be determined after
auction
Interest payment dates
June 30 and December 31
(first payment on June 30,
1977)
Minimum denomination available
$1,000
Terms of Sale:
Method of sale
Yield Auction
Accrued interest payable by
investor
None
Preferred allotment
Noncompetitive bid for
$1,000,000 or less
Deposit requirement
5% of face amount
Deposit guarantee by designated
institutions
Acceptable
Key Dates:
Deadline for receipt of tenders
Tuesday, November 30, 1976,
by 1:30 p.m., EST
Settlement date (final payment due)
a) cash or Federal funds
Tuesday, December 7, 1976
b) check drawn on bank
within FRB district where
submitted
Friday, December 3, 1976
c) check drawn on bank outside
Delivery FRB
date
for coupon
district
wheresecurities. Monday, December 13, 1976
submitted
Thursday, December 2, 1976
CONTACT:
John Webster
202-566-5985
FOR IMMEDIATE RELEASE November 24, 1976
TREASURY DEPARTMENT ESTABLISHES ADVISORY COMMITTEE
ON PRIVATE PHILANTHROPY AND PUBLIC NEEDS
Secretary of the Treasury William E. Simon has established
an Advisory Committee on Private Philanthropy and Public Needs
to assist the Department in formulating tax and regulatory
policy affecting philanthropic and voluntary organizations.
The Treasury Department estimates that the value of private
giving in terms of money and labor exceeds $50 billion a year.
Despite the magnitude of this activity, there is a lack of
information upon which policies can be devised.
The advisory committee, comprised of a cross-section of
philanthropic interests, will guide the Secretary in determining
the types of information to be collected and analyzed.
Questions or suggestions for committee membership should
be made by December 10, 1976, to John Webster, Special Assistant
to the Secretary for Consumer Affairs, Room 1454 Main Treasury
Building, 15 and Pennsylvania Avenue, Washington, D.C. 20220
(202-566-5487).
oOo
WS-1184
CONVENTION B E T W E E N THE G O V E R N M E N T OF THE
UNITED STATES O F AMERICA AND THE G O V E R N M E N T O F
THE REPUBLIC OF THE PHILIPPINES WITH
RESPECT TO TAXES ON INCOME
The Government of the United States of America and the
Government of the Republic of the Philippines, desiring to con
a convention for the avoidance of double taxation and the prev
of fiscal evasion with respect to taxes on income, have agreed
follows:
-2Article 1
TAXES COVERED
(1) The taxes which are the subject of this Convention
are:
(a) In the case of the United States, the Federal
income taxes imposed by the Internal Revenue Code (but
not including the tax on improperly accumulated earnings
or the personal holding company tax), and
(b) In the case of the Philippines, the income tax
imposed by Title II of the National Internal Revenue Code
(but not including the tax on improperly accumulated earnings
or the personal holding company tax).
(2) This Convention shall also apply to taxes substantially
similar to those covered by paragraph (1) which are imposed in
addition to, or in place of, existing taxes after the date of signature of this Convention.
(3) The competent authorities of the Contracting States
shall notify each other of any amendments of the tax laws referred
to in paragraph (1) or (2) and of the adoption of any taxes referred t
in paragraph (2) by transmitting the texts of any amendments or
new statutes at least once a year.
-3(4) The competent authorities of the Contracting States
shall notify each other of the publication by their respective
Contracting States of any material concerning the application of
this Convention, whether in the form of regulations, rulings, or
judicial decisions by transmitting the texts of any such material
at least once a year.
-4Article 2
GENERAL DEFINITIONS
(1) In this Convention, unless the context otherwise
requires:
(a) (i) The term "United States" means the United
States of America; and
(ii) When used in a geographical sense, the term
"United States" means the states thereof and the
District of Columbia.
(b) (i) The term "Philippines" means the Republic
of the Philippines; and
(ii) When used in a geographical sense, the term
"Philippines" means the territory comprising the
Republic of the Philippines.
(c) The term "Contracting State" means the United
States or the Philippines, as the context requires.
(d) The term "person" includes an individual, a partnership, a corporation, an estate, or a trust.
(e) (i) The term "United States corporation" means a
corporation (or any unincorporated entity treated as
a corporation for United States tax purposes) which is
created or organized in or under the laws of the United
States or any state thereof or the District of Columbia;
and
-5(ii) The term "Philippine corporation" means a
corporation (or any unincorporated entity treated as a
corporation for Philippine tax purposes) which is created
or organized in the Philippines or under its laws.
(f) The term "competent authority" means:
(i) In the case of the United States, the Secretary
of the Treasury or his delegate, and
(ii) In the case of the Philippines, the Secretary of
Finance or his delegate.
(g) The term "tax" means tax imposed by the United
States or the Philippines, whichever is applicable, to which
this Convention applies by virtue of Article 1 (Taxes Covered).
(h) The term "international traffic" means any transport
by a ship or aircraft operated by a resident of one of the Contracting States except where such transport is confined solely
to places within a Contracting State.
(2) Any other term used in this Convention and not defined in
this Convention shall, unless the context otherwise requires, have
the meaning which it has under the laws of the Contracting State whose
tax is being determined. Notwithstanding the preceding sentence, if
the meaning of such a term under the laws of one of the Contracting
-6States is different from the meaning of the term under the laws
of the other Contracting State, or if the meaning of such a term
is not readily determinable under the laws of one of the Contracting
States, the competent authorities of the Contracting States may,
in order to prevent double taxation or to further any other purpose
of this Convention, establish a common meaning of the term for
the purposes of this Convention.
-7Article 3
FISCAL RESIDENCE
In this Convention:
(a) The term "resident of the Philippines" means:
(i) A Philippine corporation, and
(ii) Any other person (except a corporation or
any entity treated as a corporation for Philippine tax
purposes) resident in the Philippines for purposes of
Philippine tax, but in the case of a professional partnership, estate, or trust only to the extent that the income
derived by such partnership, estate, or trust is subject
to Philippine tax as the income of a resident either in
the hands of the respective entity or of its partners or
beneficiaries.
(b) The term "resident of the United States" means:
(i) A United States corporation, and
(ii) Any other person (except a corporation or
any entity treated as a corporation for United States tax
purposes) resident in the United States for purposes of
United States tax, but in the case of a partnership, estate,
or trust only to the extent that the income derived by such
-8partnership, estate, or trust is subject to United States
tax as the income of a resident either in the hands of the
respective entity or of its partners or beneficiaries.
(2) Where by reason of the provisions of paragraph (1) an
individual is a resident of both Contracting States:
(a) He shall be deemed to be a resident of that Contracting State in which he maintains his permanent home. If he
has a permanent home in both Contracting States or in neither
of the Contracting States, he shall be deemed to be a resident
of that Contracting State with which his personal and economic
relations are closest (center of vital interests);
(b) If the Contracting State in which he has his center of
vital interests cannot be determined, he shall be deemed to be
a resident of that Contracting State in which he has a habitual
abode;
(c) If he has a habitual abode in both Contracting States
or in neither of the Contracting States, he shall be deemed
to be a resident of the Contracting State of which he is a
citizen; and
(d) If he is a citizen of both Contracting States or of
neither Contracting State, the competent authorities of the
Contracting States shall settle the question by mutual
agreement.
-9Article 4
SOURCE OF INCOME
For purposes of this Convention:
(1) Dividends shall be treated as income from sources within
a Contracting State only if-(a) Paid by a corporation of that Contracting State, or
(b) Paid by a corporation of any State if, for the 3-year
period ending with the close of such corporation's taxable year
preceding the declaration of the dividends (or for such part of
that period as such corporation has been in existence), at least
50 percent of such corporation's gross income from all sources
was business profits attributable to a permanent establishment
which such corporation had in that Contracting State; but only in
an amount which bears the same ratio to such dividends as the
amount of the business profits attributable to that permanent
establishment bears to the corporation's gross income from all
sources.
If a dividend would be treated under this paragraph as income from
sources within both Contracting States, it shall be deemed to be
income from sources only within the Contracting State described in
subparagraph (b), to the extent provided therein.
(2) Interest shall be treated as income from sources within a
Contracting State only if paid by such Contracting State, a political
-10subdivision or local authority thereof, or by a resident of that
Contracting State. Notwithstanding the preceding sentence, if such
interest is paid on an indebtedness incurred in connection with a
permanent establishment which bears such interest, then such
interest shall be deemed to be from sources within the State (whether
or not a Contracting State) in which the permanent establishment
is situated.
(3) Royalties for the use of, or the right to use, property or
rights shall be treated as income from sources within a Contracting
State only to the extent that such royalties are for the use of,
or the right to use, such property or rights within that Contracting
State. Notwithstanding the preceding sentence, if such royalty is
paid with respect to a liability to pay the royalty that was incurred
in connection with a permanent establishment which bears such
royalty, then such royalty shall be deemed to be from sources within
the State (whether or not a Contracting State) in which the permanent
establishment is situated.
(4) Income from real property (including royalties) described
in Article 7 (Income from Real Property) shall be treated as income
from sources within a Contracting State only if such property is
situated in that Contracting State.
-11(5)
Income received by an individual for his performance of
labor or personal services, whether as an employee or in an independent capacity, shall be treated as income from sources within a
Contracting State only to the extent that such services are performed
in that Contracting State. However, income from personal services
performed aboard ships or aircraft operated by a resident of one of
the Contracting States in international traffic shall be treated as
income from sources within that Contracting State if rendered by a
member of the regular complement of the ship or aircraft. Notwithstanding the preceding provisions of this paragraph, remuneration
described in Article 20 (Governmental Functions) and payments
described in Article 19 (Social Security Payments) paid from the
public funds of a Contracting State or a political subdivision or
local authority thereof shall be treated as income from sources
within that Contracting State only.
(6) Notwithstanding paragraphs (1) through (4), business
profits which are attributable to a permanent establishment which
the recipient, a resident of one of the Contracting States, has in the
other Contracting State shall be treated as income from sources
within that other Contracting State.
(7) Gross revenues from the operation of ships in international traffic shall be treated as from sources within a
-12Contracting State to the extent they are derived from outgoing traffic
originating in that State.
(8) The source of any item of income to which paragraphs (1)
through (7) are not applicable shall be determined by each of the
Contracting States in accordance with its own law. Notwithstanding
the preceding sentence, if the source of any item of income under the
laws of one Contracting State is different from the source of such
item of income under the laws of the other Contracting State or if the
source of such income is not readily determinable under the laws of
one of the Contracting States, the competent authorities of the Contracting States may, in order to prevent double taxation or further
any other purpose of this Convention, establish a common source of
the item of income for purposes of this Convention.
-13Article 5
PERMANENT ESTABLISHMENT
(1) For the purposes of this Convention, the term "permanent
establishment" means a fixed place of business through which a
resident of one of the Contracting States engages in a trade or bus
(2) The term "fixed place of business" includes but is not
limited to:
9
(a)
A
seat of management;
(b)
A branch;
(c)
A n office;
(d)
A store or other sales outlet;
(e)
A factory;
(f)
A workshop;
(g)
A warehouse;
(h)
A mine, quarry, or other place of extraction of
natural:resources;
(i)
A building site or construction or assembly project or
supervisory activities in connection therewith, provided such si
project or activity continues for a period of more than 183 days
(j) The furnishing of services, including consultancy services,
by a resident of one of the Contracting States through employees
or other personnel, provided activities of that nature continue
-14the same or a connected project) within the other Contracting
State for a period or periods aggregating more than 183 days.
(3) Notwithstanding paragraphs (1), (2), and (4), a permanent
establishment shall be deemed not to include any one or more of
the following:
(a) The use of facilities solely for the purpose of storage,
display, or occasional delivery of goods or merchandise belonging
to the resident;
(b) The maintenance of a stock of goods or merchandise
belonging to the resident solely for the purpose of storage,
display, or occasional delivery;
(c) The maintenance of a stock of goods or merchandise
belonging to the resident solely for the purpose of processing
by another person;
(d) The maintenance of a fixed place of business solely
for the purpose of purchasing goods or merchandise, or for
collecting information, for the resident;
(e) The maintenance of a fixed place of business solely
for the purpose of advertising, for the supply of information,
for scientific research, or for similar activities which have a
preparatory or auxiliary character, for the resident; or
(f) The furnishing of services, including the provision
of equipment, in one of the Contracting States by a resident
-15of the other Contracting State, including consultancy firms,
in accordance with, or in the implementation of, an agreement between the Contracting States regarding technical
cooperation.
(4) A person acting in one of the Contracting States on behalf
of a resident of the other Contracting State, other than an agent
of an independent status to whom paragraph (5) applies, shall be
deemed to give rise to a permanent establishment in the firstmentioned Contracting State if-(a) Such person has, and habitually exercises in the
first-mentioned Contracting State, an authority to conclude
contracts in the name of that resident, unless the exercise
of such authority is limited to the purchase of goods or
merchandise for that resident; or
(b) He has no such authority, but habitually maintains
in the first-mentioned State a stock of goods or merchandise
from which he regularly delivers goods and merchandise on
behalf of the resident.
(5) A resident of one of the Contracting States shall not
be deemed to have a permanent establishment in the other
Contracting State merely because such resident carries on
business in that other Contracting State through a broker,
general commission agent, or any other agent of an independent status, where such broker or agent is acting in the
-16ordinary course of his business.
However, when the activities
of such an agent are devoted wholly or almost wholly on behalf of
that resident, he shall not be considered an agent of independent
status within the meaning of this paragraph if the transactions
between the agent and the resident were not made under arm's
length conditions.
(6) Except with respect to reinsurance, a resident of a Contracting State shall be deemed to have a permanent establishment
in the other Contracting State if it collects premiums in that other
State, or insures risks situated therein, through an employee or
representative situated therein who is not an agent of independent
status to whom paragraph (5) applies.
(7) A resident of one of the Contracting States shall not be
deemed to have a permanent establishment in the other Contracting
State merely because such resident sells at the termination of a
trade fair or convention in such other Contracting State goods or
merchandise which such resident displayed at such trade fair or
convention.
(8) The fact that a corporation of one of the Contracting States
controls or is controlled by or is under common control with-(a) A corporation of the other Contracting State or
(b) A corporation which carries on business in that
other Contracting State (whether through a permanent
establishment or otherwise)
-17shall not be taken into account in determining whether the activities
or fixed place of business of either corporation constitutes a
permanent establishment of the other corporation.
(9)
The principles set forth in paragraphs (1) through (8) shall
be applied in determining for purposes of this Convention whether
there is a permanent establishment in a State other than one of the
Contracting States or whether a person other than a resident of
one of the Contracting States has a permanent establishment in one
of the Contracting States.
-18Article 6
GENERAL RULES OF TAXATION
(1) A resident of one of the Contracting States may be taxed
by the other Contracting State on any income from sources within
that other Contracting State and only on such income, subject to any
limitations set forth in this Convention. For this purpose, the rules
set forth in Article 4 (Source of Income) shall be applied to determine
the source of income. ri
(2) The provisions of this Convention shall not be construed to ) «
restrict in any manner any exclusion, exemption, deduction, credit,
or other allowance now or hereafter accorded-(a) By the laws of one of the Contracting States in the
determination pf the tax imposed by that Contracting State, or
(b) By any other agreement between the Contracting States.
(3) Notwithstanding any provisions of this Convention except
paragraph (4), a Contracting State may tax its residents (as determined
under Article 3 (Fiscal Residence)) and its citizens as if this Convent
had not come into effect.
(4) The provisions of paragraph (3) shall not affect:
(a) The benefits conferred by a Contracting State under
Articles 19 (Social Security Payments), 23 (Relief from Double
Taxation), 24 (Nondiscrimination), and 25 (Mutual Agreement
Procedure); and
-19(b)
The benefits conferred by a Contracting State under
Articles 20 (Governmental Functions), 21 (Teachers), 22 (Students
and Trainees), and 28 (Diplomatic and Consular Officers) upon
individuals who are neither citizens of, nor have immigrant status
in, that Contracting State.
(5) The competent authorities of the two Contracting States may
each prescribe regulations necessary to carry out the provisions of
this Convention.
-20Article 7
INCOME FROM REAL PROPERTY
(1) Income from real property, including royalties and
other payments in respect of the exploitation of natural
resources and gains derived from the alienation of such
property or of the right giving rise to such royalties or other
payments, may be taxed by the Contracting State in which
such real property or natural resources are situated. For
purposes of this Convention, interest on indebtedness secured
by real property or secured by a right giving rise to royalties
or other payments in respect of the exploitation of natural
resources shall not be regarded as income from real property.
(2) Paragraph (1) shall apply to income derived from the
usufruct, direct use, letting, or use in any other form of
real property,.
-21Article 8
BUSINESS PROFITS
(1) Business profits of a resident of one of the Contracting
States shall be taxable only in that State unless the resident has a
permanent establishment in the other Contracting State. If the
resident has a permanent establishment in that other Contracting
State, tax may be imposed by that other Contracting State on the
business profits of the resident but only on so much of them as are
attributable to the permanent establishment.
(2) Where a resident of one of the Contracting States has a
permanent establishment in the other Contracting State, there shall
in each Contracting State be attributed to the permanent establishment
the business profits which would reasonably be expected to have been
derived by it if it were an independent entity engaged in the same or
similar activities under the same or similar conditions and dealing
wholly independently with the resident of which it is a permanent
establishment.
(3) There may also be attributed to that permanent establishment
the business profits derived from the sale of goods or merchandise
of the same or similar kind as those sold, or from other business
activities of the same or similar kind as those effected, through
that permanent establishment if the sale or activities had been
resorted to in order to avoid taxation.
-22(4)
In the determination of the business profits of a permanent
establishment, there shall be allowed as deductions ordinary and
necessary expenses which are reasonably allocable to such profits,
including executive and general administrative expenses, whether
incurred in the Contracting State in which the permanent establishment
is situated or elsewhere. However, no such deductions shall be allowed
in respect of amounts paid or payable (other than reimbursement of actual
expenses) by the permanent establishment to the head office of the
resident of which it is a permanent establishment or any of its other
offices, by way of-(a) Royalties, fees or other similar payments in return for
the use of patents or other rights;
(b) Commission, for specific services performed or for
management; and
(c) Interest on moneys lent to the permanent establishment,
except in the case of a banking institution.
(5) No profits shall be attributed to a permanent establishment
of a resident of one of the Contracting States in the other Contracting
State merely by reason of the purchase of goods or merchandise by
that permanent establishment for the account of the resident.
(6) The term "business profits" means income derived from any
trade or business whether carried on by an individual, corporation or
any other person, or group of persons, including the rental of tangible
personal (movable) property.
-23(7)
Where business profits include items of income which are dealt
with separately in other articles of this Convention, then the provisio
of those articles shall not be affected by the provisions of this artic
-24Article 9
SHIPPING AND AIR TRANSPORT
(1) Notwithstanding any other provision of this Convention,
profits derived by a resident of one of the Contracting States
from sources within the other Contracting State from the operation
of ships in international traffic may be taxed by both Contracting
States; however, the tax imposed by the other Contracting State
may be as much as, but shall not exceed, the lesser of-(a) One and one-half percent of the gross revenues derived
from sources in that State; and
(b) The lowest rate of Philippine tax that may be imposed
on profits of the same kind derived under similar circumstances
by a resident of a third State.
(2) Nothing in the Convention shall affect the right of a
Contracting State to tax, in accordance with domestic laws, profits
derived by a resident of the other Contracting State from sources
within the first-mentioned Contracting State from the operation of
aircraft in international traffic.
(3) The provisions of paragraphs (1) and (2) shall also apply to
profits derived from the participation in a pool, a joint business or
in an international operating agency.
-25Article 10
RELATED PERSONS
(1) Where a person subject to the taxing jurisdiction of one
of the Contracting States and any other person are related and where
such related persons make arrangements or impose conditions between
themselves which are different from those which would be made
between independent persons, any income, deductions, credits, or
allowances which would, but for those arrangements or conditions,
have been taken into account in computing the income (or loss)
of, or the tax payable by, one of such persons may be taken into
account in computing the amount of the income subject to tax and
the taxes payable by such person.
(2) Where a redetermination has been made by one Contracting
State to the income of one of its residents in accordance with paragraph (1), then the other Contracting State shall, if it agrees with
such redetermination and if necessary to prevent double taxation,
make a corresponding adjustment to the income of a person in such
other Contracting State related to such resident. In the event the
other Contracting State disagrees with such redetermination, the
two Contracting States shall endeavor to reach agreement in accordance with the mutual agreement procedure in paragraph (2) of Article
25 (Mutual Agreement Procedure).
-26(3)
For purposes of this Convention, a person is related to
another person if either person owns or controls directly or indirectly
the other, or if any third person or persons own or control directly
or indirectly both. For this purpose, the term "control" includes any
kind of control, whether or not legally enforceable, and however
exercised or exercisable.
-27Article 11
DIVIDENDS
(1) Dividends derived from sources within one of the Contracting
States by a resident of the other Contracting State may be taxed by bot
Contracting States.
(2) The rate of tax imposed by one of the Contracting States on
dividends derived from sources within that Contracting State by a
resident of the other Contracting State shall not exceed-(a) 25 percent of the gross amount of the dividend; or
(b) When the recipient is a corporation, 20 percent of the
gross amount of the dividend if during the part of the paying
corporation's taxable year which precedes the date of payment
of the dividend and during the whole of its prior taxable year
(if any), at least 10 percent of the outstanding shares of the
voting stock of the paying corporation was owned by the
recipient corporation.
(3) Dividends paid by a corporation of one of the Contracting
States to a person other than a citizen or resident of the other Contracting State may be taxed by the other Contracting State, but only
if-(a) Such dividends are treated as income from sources
within that other Contracting State and, in the case of the
Philippines, the additional tax described in paragraph (6) has
not been paid with respect to the earnings distributed, or
-28(b)
The recipient of the dividends has a permanent estab-
lishment or fixed base in the other Contracting State and the
holding in respect of which the dividends are paid is effectively
connected with such permanent establishment or fixed base.
(4) Paragraph (2) shall not apply if the recipient of dividends derived from sources within one of the Contracting States, being
a resident of the other Contracting State, carries on business in the
first-mentioned Contracting State through a permanent establishment
situated therein or performs in that other State independent personal
services from a fixed base situated therein, and the holding in respect
of which the dividends are paid is effectively connected with such
permanent establishment or fixed base. In such a case, the provisions
of Article 8 (Business Profits) or Article 15 (Independent Personal
Services), as the case may be, shall apply.
(5) The term "dividends" as used in this Convention means income
from shares, mining shares, founders' shares or other rights, not being
debt-claims, participating in profits, as well as income from other
corporate rights assimilated to income from shares by the taxation law
of the State of which the corporation making the distribution is a resid
(6) Nothing in this Convention (except Article 9 (Shipping and Air
Transport)) shall be construed as preventing the Philippines from
imposing on the earnings of a corporation (other than a Philippine
corporation) attributable to a permanent establishment in the
-29Philippines, a tax in addition to the tax which would be chargeable on
the earnings of a Philippine corporation, provided that any additional
tax so imposed shall not exceed 20 percent of the amount of such
earnings which have not been subjected to such additional tax in previo
taxable years. For the purpose of this provision, the term "earnings"
means business profits attributable to a permanent establishment in
the Philippines in a year and previous years after deducting therefrom
all taxes, other than the additional tax referred to herein, imposed
on such profits by the Philippines.
-30Article 12
INTEREST
(1) Interest derived by a resident of one of the Contracting States
from sources within the other Contracting State may be taxed by both
Contracting States.
(2) Interest derived by a resident of one of the Contracting States
from sources within the other Contracting State shall not be*taxed by
the other Contracting State at a rate in excess of 15 percent of the gr
amount of such interest.
(3) Interest derived by a resident of one of the Contracting States
from sources within the other Contracting State with respect to public
issues of bonded indebtedness shall not be taxed by the other Con-
tracting State at a rate in excess of 10 percent of the gross amount of
such interest.
(4) Notwithstanding paragraphs (1), (2), and (3), interest derived
by-(a) One of the Contracting States, or an instrumentality
thereof (including the Central Bank of the Philippines, the Federal
Reserve Banks of the United States, the Export-Import Bank of
the United States, the Overseas Private Investment Corporation
of the United States, and such other institutions of either Contracting State as the competent authorities of both Contracting
States may determine by mutual agreement), or
-31(b) A resident of one of the Contracting States with respect
to debt obligations guaranteed or insured by that Contracting State or
an instrumentality thereof,
shall be exempt from tax by the other Contracting State.
(5) Paragraphs (2), (3), and (4) shall not apply if the recipient of
interest from sources within one of the Contracting States, being a
resident of the other Contracting State, carries on business in the firs
mentioned Contracting State through a permanent establishment situated
therein or performs in that other State independent personal services
from a fixed base situated therein and the debt claim in respect of whic
the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 8
(Business Profits) or Article 15 (Independent Personal Services), as
the case may be, shall apply.
(6) Where an amount is paid to a related person and would be
treated as interest but for the fact that it exceeds an amount which
would have been paid to an unrelated person, the provisions of this
article shall apply only to so much of the amount as would have been
paid to an unrelated person. In such a case, the excess amount may
be taxed by each Contracting State according to its own law, including
the provisions of this Convention where applicable.
(7) The term "interest" as used in this Convention means income
from debt-claims of every kind, whether or not secured by mortgage,
-32and whether or not carrying a right to participate in the debtor's
profits, and in particular, income from government securities and
income from bonds or debentures, including premiums and prizes
attaching to such securities, bonds or debentures, as well as income
assimilated to income from money lent by the taxation law of the
Contracting State in which the income arises, including interest on
deferred payment sales.
-33Article 13
ROYALTIES
(1) Royalties derived by a resident of one of the Contracting States
from sources within the other Contracting State may be taxed by both
Contracting States.
(2) However, the tax imposed by that other Contracting State shall
not exceed -(a) In the case of the United States, 15 percent of the gross
amount of the royalties, and
(b) In the case of the Philippines, the least of:
(i) 25 percent of the gross amount of the royalties,
(ii) 15 percent of the gross amount of the royalties, where
the royalties are paid by a corporation registered with the
Philippine Board of Investments and engaged in preferred areas
of activities, and
(iii) The lowest rate of Philippine tax that may be imposed
on royalties of the same kind paid under similar circumstances
to a resident of a third State.
(3) The term "royalties" as used in this article means payments
of any kind received as a consideration for the use of, or the right to
use, any copyright of literary, artistic or scientific work, including
cinematographic films or films or tapes used for radio or television
broadcasting, any patent, trade mark, design or model, plan, secret
-34formula or process, or other like right or property, or for information
concerning industrial, commercial or scientific experience. The term
"royalties" also includes gains derived from the sale, exchange or other
disposition of any such right or property which are contingent on the
productivity, use, or disposition thereof.
(4) The provisions of paragraphs (1) and (2) shall not apply if
the recipient of the royalties, being a resident of a Contracting State,
carries on business in the other Contracting State in which the
royalties arise, through a permanent establishment situated therein,
or performs in that other State professional services from a fixed
base situated therein, and the right or property in respect of which
the royalties are paid is effectively connected with such permanent
establishment or fixed base. In such a case, the provisions of
Article 8 (Business Profits) or Article 15 (Independent Personal
Services), as the case may be, shall apply.
(5) Where an amount is paid to a related person and would be
treated as a royalty but for the fact that it exceeds an amount which
would have been paid to an unrelated person, the provisions of this
article shall apply only to so much of the amount as would have been
paid to an unrelated person. In such a case, the excess amount may
be taxed by each Contracting State according to its own law, including
the provisions of this Convention where applicable.
-35Article 14
CAPITAL GAINS
(1) Gains from the alienation of tangible personal (movable)
property forming part of the business property of a permanent
establishment which a resident of a Contracting State has in the
other Contracting State or of tangible personal (movable) property
pertaining to a fixed base available to a resident of a Contracting
State in the other Contracting State for the purpose of performing
independent personal services, including such gains from the
alienation of such a permanent establishment (alone or together
with the whole enterprise) or of such a fixed base, may be taxed
in the other State. However, gains derived by a resident of a
Contracting State from the alienation of ships, aircraft or containers operated by such resident in international traffic shall be
taxable only in that State, and gains described in Article 13
(Royalties) shall be taxable only in accordance with the provisions
of Article 13.
(2) Gains from the alienation of any property other than
those mentioned in paragraph (1) or in Article 7 (Income From Real
Property) shall be taxable only in the Contracting State of which
the alienator is a resident.
-36Article 15
INDEPENDENT PERSONAL SERVICES
(1) Income derived by an individual who is a resident of one of the
Contracting States from the performance of personal services in an
independent capacity may be taxed by that Contracting State. Except
as provided in paragraph (2), such income shall be exempt from tax by
the other Contracting State.
(2) Income derived by an individual who is a resident of one of
the Contracting States from the performance of personal services in an
independent capacity in the other Contracting State may be taxed by
that other Contracting State, if:
(a) He has a fixed base regularly available to him in the other
Contracting State for the purpose of performing his activities; in that
case, only so much of the income as is attributable to that fixed base
may be taxed in that other Contracting State;
(b) He is present in that other Contracting State for a period
or periods aggregating 90 days or more in the taxable year; or
(c) The gross remuneration derived in the taxable year from
residents of that other Contracting State for the performance of such
services in the other Contracting State exceeds 10, 000 United States
dollars or its equivalent in Philippine pesos or such higher amount
as may be specified and agreed in letters exchanged between the
competent authorities of the Contracting States.
(3) The term "income" as used in paragraph (2) means net income.
-37Article 16
DEPENDENT PERSONAL SERVICES
(1) Except as provided in Article 20 (Governmental Functions),
wages, salaries, and similar remuneration derived by an individual
who is a resident of one of the Contracting States from labor or
personal services performed as an employee, including income from
services performed by an officer of a corporation, may be taxed by
that Contracting State. Except as provided by paragraphs (2) and (3)
and in Articles 20 (Governmental Functions), 21 (Teachers), and 22
(Students and Trainees), such remuneration derived from sources
within the other Contracting State may also be taxed by that other
Contracting State.
(2) Remuneration described in paragraph (1) derived by an indi-
vidual who is a resident of one of the Contracting States shall be exemp
from tax by the other Contracting State if-(a) He is present in that other Contracting State for a
period or periods aggregating less than 90 days in the taxable
year;
(b) He is an employee of a resident of, or of a permanent
establishment maintained in, the first-mentioned Contracting
State; and
(c) The remuneration is not borne as such by a permanent
establishment which the employer has in that other Contracting State.
-38(3)
Notwithstanding the preceding provisions of this article,
remuneration derived by an employee of a resident of one of the
Contracting States for labor or personal services performed as a
member of the regular complement of a ship or aircraft operated in
international traffic by a resident of that Contracting State may be
taxed only by that Contracting State.
-39- '
Article 17
ARTISTES AND ATHLETES
i
(1) Notwithstanding the provisions of Articles 15 (Independent
Personal Services) and 16 (Dependent Personal Services), income
derived by public entertainers such as theater, motion picture,
radio or television artistes, and musicians, and by athletes, from
their personal activities as such may be taxed in the Contracting
State in which these activities are exercised provided that—
(a) Such income exceeds 100 United States dollars or its
equivalent in Philippine pesos per day, or
(b) Such income exceeds in the aggregate 3, 000 United States
dollars or its equivalent in Philippine pesos during the taxable year.
(2) Where income in respect of personal activities as such of a
public entertainer or athlete accrues not to that entertainer or athlete
himself but to another person^ that income may, notwithstanding the
provisions of Articles 8 (Business Profits), 15 (Independent Personal
Services) and 16 (Dependent Personal Services), be taxed in the Con-
tracting State in which the activities of the entertainer or athlete are
exercised.
(3) Notwithstanding the provisions of paragraph (1) and Articles
15 (Independent Personal Services) and 16 (Dependent Personal Services),
income derived from activities performed in a Contracting State by publi
-40entertainers or athletes shall be exempt from tax in that Contracting
State if the visit to that State is substantially supported or sponsored
by the other Contracting State and the public entertainer or athlete
is certified as qualified under this provision by the competent authority
of the sending State.
-41Article 18
PRIVATE PENSIONS AND ANNUITIES
(1) Except as provided in Article 20 (Governmental Functions),
pensions and other similar remuneration paid to an individual in con-
sideration of past employment shall be taxable by the Contracting State
where the service is rendered.
(2) Annuities paid to an individual who is a resident of One of
the Contracting State s shall be taxable only in that Contracting State
(3) Child support payments made by an individual who is a
resident of one of the Contracting States to an individual who is a
resident of the other Contracting State shall be exempt from tax in
that other Contracting State.
(4) The term "pensions and other similar remuneration", as
used in this article, includes periodic payments other than social
security payments covered in Article 19 (Social Security Payments)
made-(a) By reason of retirement or death and in consideration
for services rendered or
(b) By way of compensation for injuries or sickness
received in connection with past employment.
(5) The term "annuities", as used in this article, means a
stated sum paid periodically at stated times during life, or during
a specified number of years, under an obligation to make the payments
-42-
in return for adequate and full consideration (other than services render
(6) The term "child support payments", as used in this article,
means periodic payments for the support of a minor child made pursuant
to a written separation agreement or a decree of divorce, separate
maintenance, or compulsory support.
-43Article 19
SOCIAL SECURITY PAYMENTS
Social security payments and other public pensions paid by one of
the Contracting States to an individual who is a resident of the other
Contracting State (or in the case of such payments by the Philippines
to an individual who is a citizen of the United States) shall be taxab
only in the first-mentioned Contracting State. This article shall not
apply to payments described in Article 20 (Governmental Functions).
-44Article 20
GOVERNMENTAL FUNCTIONS
Wages, salaries and similar remuneration, including pensions,
annuities, or similar benefits, paid from public funds of one of the
Contracting States:
(a) To a citizen of that Contracting State, or
(b) To a citizen of a State other than a Contracting State
who comes to the other Contracting State expressly for the
purpose of being employed by the first-mentioned Contracting
State
for labor or personal services performed as an employee of the
national Government of that Contracting State, or any agency thereof,
in the discharge of functions of a governmental nature shall be exempt
from tax by the other Contracting State.
-45Article 21
TEACHERS
(1) Where a resident of one of the Contracting States is invited by
the Government of the other Contracting State, a political subdivision
or local authority thereof, or by a university or other recognized
educational institution in that other Contracting State to come to that
other Contracting State for a period not expected to exceed 2 years for
the purpose of teaching or engaging in research, or both, at a universit
or other recognized educational institution and such resident comes to
that other Contracting State primarily for such purpose, his income from
personal services for teaching or research at such university or educational institution shall be exempt from tax by that other Contracting
State for a period not exceeding 2 years from the date of his arrival in
that other Contracting State.
(2) This article shall not apply to income from research if such
research is undertaken not in the general interest but primarily for
the private benefit of a specific person or persons.
-46Article 22
STUDENTS AND TRAINEES
(1) (a) An individual who is a resident of one of the Contracting
States at the time he becomes temporarily present in the other
Contracting State and who is temporarily present in that other
Contracting State for the primary purpose of-(i) Studying at a university or other recognized
educational institution in that other Contracting State, or
(ii) Securing training required to qualify him to
practice a profession or professional specialty, or
(iii) Studying or doing research as a recipient of a
grant, allowance, or award from a governmental, religious,
charitable, scientific, literary, or educational organization,
shall be exempt from tax by that other Contracting State with respect
to amounts described in subparagraph (b) for a period not exceeding
5 taxable years from the date of his arrival in that other Contracting
State.
(b) The amounts referred to in subparagraph (a) are —
(i) Gifts from abroad for the purpose of his maintenance,
education, study, research, or training;
(ii) The grant, allowance, or award; and
(iii) Income from personal services performed in that
other Contracting State in an amount not in excess of
-473, 000 United States dollars or its equivalent in Philippine
pesos for any taxable year.
(2) An individual who is a resident of one of the Contracting States
at the time he becomes temporarily present in the other Contracting
State and who is temporarily present in that other Contracting State as
an employee of, or under contract with, a resident of the first-mentioned
Contracting State, for the primary purpose of-(a) Acquiring technical, professional, or business experience
from a person other than that resident of the first-mentioned Contracting State or other than a person related to such resident, or
(b) Studying at a university or other recognized educational
institution in that other Contracting State,
shall be exempt from tax by that other Contracting State for a period not
exceeding 12 consecutive months with respect to his income from personal
services in an aggregate amount not in excess of 7, 500 United States
dollars or its equivalent in Philippine pesos for any taxable year.
(3) An individual who is a resident of one of the Contracting States
at the time he becomes temporarily present in the other Contracting
State and who is temporarily present in that other Contracting State for
a period not exceeding 1 year, as a participant in a program sponsored
by the Government of that other Contracting State, for the primary
purpose of training, research, or study, shall be exempt from tax by
that other Contracting State with respect to his income from personal
-48services in respect of such training, research, or study performed in
that other Contracting State in an aggregate amount not in excess of
10, 000 United States dollars or its equivalent in Philippine pesos in an
taxable year.
(4) The benefits provided under Article 21 (Teachers) and paragraph
(1) of this article shall, when taken together, extend only for such per
of time, not to exceed 5 taxable years from the date of arrival of the
individual claiming such benefits, as may reasonably or customarily be
required to effectuate the purpose of the visit. The benefits provided
under Article 21 (Teachers) shall not be available to an individual if,
during the immediately preceding period, such individual enjoyed the
benefits of paragraph (1) of this article.
-49Article 23
RELIEF FROM DOUBLE TAXATION
Double taxation of income shall be avoided in the following manner:
(1) In accordance with the provisions and subject to the limitations
of the law of the United States (as it may be amended from time to time
without changing the general principle hereof), the United States shall
allow to a citizen or resident of the United States as a credit against
United States tax the appropriate amount of taxes paid or accrued to th
Philippines and, in the case of a United States corporation owning at
least 10 percent of the voting stock of a Philippine corporation from
which it receives dividends in any taxable year, shall allow credit
for the appropriate amount of taxes paid or accrued to the Philippines
by the Philippine corporation paying such dividends with respect to
the profits out of which such dividends are paid. Such appropriate
amount shall be based upon the amount of tax paid or accrued to
the Philippines, but the credit shall not exceed the limitations (for
the purpose of limiting the credit to the United States tax on income
from sources within the Philippines or on income from sources outside
the United States) provided by United States law for the taxable year.
For the purpose of applying the United States credit in relation to
taxes paid or accrued to the Philippines, the rules set forth in Article
4 (Source of Income) shall be applied to determine the source of income.
For purposes of applying the United States credit in relation to taxes
paid or accrued to the Philippines, the taxes referred to in paragraphs
(l)(b) and (2) of Article 1 (Taxes Covered) shall be considered to
be income taxes.
-50(2)
In accordance with the provisions and subject to the limita-
tions of the law of the Philippines (as it may be amended from time
to time without changing the general principle hereof), the Philippines
shall allow to a citizen or resident of the Philippines as a credit aga
the Philippine tax the appropriate amount of taxes paid or accrued to
the United States and, in the case of a Philippine corporation owning
more than 50 percent of the voting stock of a United States corporation
from which it receives dividends in any taxable year, shall allow
credit for the appropriate amount of taxes paid or accrued to the
United States by the United States corporation paying such dividends
with respect to the profits out of which such dividends are paid.
Such appropriate amount shall be based upon the amount of tax paid
or accrued to the United States, but the credit shall not exceed the
limitations (for the purpose of limiting the credit to the Philippine
tax on income from sources within the United States, and on income
from sources outside the Philippines) provided by Philippine law
for the taxable year. For the purpose of applying the Philippine
credit in relation to taxes paid or accrued to the United States, the
rules set forth in Article 4 (Source of Income) shall be applied to
determine the source of income. For purposes of applying the
Philippine credit in relation to taxes paid or accrued to the United
States, the taxes referred to in paragraphs (1) (a) and (2) of Article
1 (Taxes Covered) shall be considered to be income taxes.
-51Article 24
NONDISCRIMINATION
(1) A citizen of one of the Contracting States who is a resident
of the other Contracting State shall not be subject in that other Contracting State to more burdensome taxes than a citizen of that other
Contracting State who is a resident thereof.
(2) A permanent establishment which a resident of one of the
Contracting States has in the other Contracting State shall not be
subject in that other Contracting State to more burdensome taxes than
a resident of that other Contracting State carrying on the same
activities. This paragraph shall not be construed as obliging a Con-
tracting State to grant to individual residents of the other Contractin
State any personal allowances, reliefs, or deductions for taxation purposes on account of civil status or family responsibilities which it
grants to its own individual residents.
(3) A corporation of one of the Contracting States, the capital
of which is wholly or partly owned or controlled, directly or
indirectly, by one or more residents of the other Contracting State,
shall not be subjected in the first-mentioned Contracting State to any
taxation or any requirement connected with taxation which is other or
more burdensome than the taxation and requirements to which a
corporation of the first-mentioned Contracting State carrying on the
same activities, the capital of which is wholly owned or controlled
by one or more residents of the first-mentioned Contracting State, is
or may be subjected.
-52(4)
Notwithstanding any other provision of this Convention,
the term "taxes" or "taxation" means, for the purpose of this article,
taxes or taxation of every kind imposed at the national, state, or local
level.
(5)
With respect to the taxes referred to in Article 1 (Taxes
Covered), nothing in this article shall prevent the Philippines from
limiting to its citizens or corporations the enjoyment of tax incentives
granted under the following enactments:
(a)
Section 6 of the Investment Incentives Act (Republic
Act No. 5186),
(b)
Section 5 and Section 7(b) of the Export Incentives
Act (Republic Act No. 6135), and
(c)
Section 9 of the Investment Incentives Program
for the Tourism Industry (Presidential Decree No. 535)
so far as they were in force on, and have not been modified since,
the date of signature of this Convention, or have been modified only
in minor respects so as not to affect their general character.
(6)
With respect to taxes other than the taxes referred to in
Article 1 (Taxes Covered), nothing in this article shall prevent the
Philippines or a political subdivision or local authority thereof from
limiting to Philippine citizens or corporations the enjoyment of tax
incentives for the promotion of industry or business similar to those
described in subparagraphs (a), (b), and (c) of paragraph (5) so far as they
-53were in force on, and have not been modified since, the date of signature of this Convention, or have been modified only in minor respects
so as not to affect their general character.
-54Article 25
MUTUAL AGREEMENT PROCEDURE
(1) Where a resident or citizen of one of the Contracting State
considers that the action of one or both of the Contracting Sta
or will result for him in taxation not in accordance with this
he may, notwithstanding the remedies provided by the national l
the Contracting States, present his case to the competent autho
the Contracting State of which he is a resident or citizen. Sho
resident's or citizen's claim be considered to have merit by th
petent authority of the Contracting State to which the claim is
shall endeavor to come to an agreement with the competent autho
of the other Contracting State with a view to the avoidance of
not in accordance with the provisions of this Convention.
(2) The competent authorities of the Contracting States shall
endeavor to resolve by mutual agreement any difficulties or dou
arising as to the application of this Convention. In particular
competent authorities of the Contracting States may agree-(a) To the same attribution of industrial or commercial
profits to a resident of one of the Contracting States and its
permanent establishment situated in the other Contracting State
(b) To the same allocation of income, deductions, credits,
or allowances between a resident of one of the Contracting Stat
and any related person and to the readjustment of taxes imposed
by each Contracting State to reflect such allocation;
-55(c)
To the same determination of the source of particular
items of income; or
(d) To the same characterization of particular items
of income.
(3) The competent authorities of the Contracting States may
communicate with each other directly for the purpose of reaching an
agreement in the sense of this article. When it seems advisable for
the purpose of reaching agreement, the competent authorities may
meet together for an oral exchange of opinions.
(4) In the event that the competent authorities reach such an
agreement, taxes shall be imposed on such income in accordance with
such agreement, and-(a) In the case of the United States, refund or credit of
taxes shall be allowed in accordance with such agreement, notwithstanding any procedural rule (including statutes of limitations) applicable under United States law.
(b) In the case of the Philippines, refund or credit of
taxes shall be allowed in accordance with such agreement,
subject to any procedural rule (including statutes of limitations)
applicable under Philippine law. However, notwithstanding any
such Philippine procedural rule, a tax credit certificate shall
be issued if a claim is filed with the competent authority of
the Philippines no later than 2 years from the close of the
-56taxable year in which the United States tax imposed under this paragraph is paid and such claim is filed within 5 taxable years from
the close of the taxable year in issue. A tax credit certificate shall
be issued with respect to a claim filed after the aforementioned
5-year period only if the claim is supported by the books and
records of the taxpayer. The amount of the tax credit certificate
shall be computed in the same manner as an actual refund (whether
or not an actual refund of tax can be made), but may only be used
as a credit against Philippine tax liability without giving rise to
a refund.
-57Article 26
EXCHANGE OF INFORMATION
(1) The competent authorities shall exchange such information as
is necessary for carrying out the provisions of this Convention or for
the prevention of fraud or for the administration of statutory provision
concerning taxes to which this Convention applies provided the informati
is of a class that can be obtained under the laws and administrative prac
tices of each Contracting State with respect to its own taxes.
(2) Any information so exchanged shall be treated as secret, except
that such information may be-(a) Disclosed to any person concerned with, or
(b) Made part of a public record with respect to,
the assessment, collection, or enforcement of, or litigation with respect
to, the taxes to which this Convention applies.
(3) No information shall be exchanged which would be contrary
to public policy.
(4) If information is requested by a Contracting State in accordance with this article, the other Contracting State shall obtain the
information to which the request relates from or with respect to its
residents or corporations in the same manner and to the same extent
as if the tax of the requesting State were the tax of the other State an
were being imposed by that other State. A Contracting State may
obtain information from or with respect to its residents or corporations
-58in accordance with this paragraph for the sole purpose of assisting the
other Contracting State in the determination of the taxes of that othe
State.
(5) If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State
shall provide information under this article in the form of deposition
of witnesses and copies of unedited original documents (including
books, papers, statements, records, accounts, or writings) to the
same extent such depositions and documents can be obtained under
the laws and administrative practices of each Contracting State with
respect to its own taxes.
(6) The exchange of information shall be either on a routine
basis or on request with reference to particular cases. The competent authorities of the Contracting States may agree on the list of
information which shall be furnished on a routine basis.
-59Article 27
ASSISTANCE IN COLLECTION
(1) Each of the Contracting States shall endeavor to collect on
behalf of the other Contracting State such taxes imposed by that other
Contracting State as will ensure that any exemption or reduced rate
of tax granted under this Convention by that other Contracting State
shall not be enjoyed by persons not entitled to such benefits.
(2) In no case shall this article be construed so as to impose
upon a Contracting State the obligations to carry out measures at
variance with the laws or administrative practices of either Contracting State with respect to the collection of its own taxes.
-60Article 28
DIPLOMATIC AND CONSULAR OFFICERS
Nothing in this Convention shall affect the fiscal privileges of
diplomatic and consular officials under the general rules of int
national law or under the provisions of special agreements.
-61Article 29
ENTRY INTO FORCE
(1) This Convention shall be subject to ratification in accordance with
the constitutional procedures of each Contracting State and instruments
of ratification shall be exchanged at Washington as soon as possible. It
shall enter into force 30 days after the date of exchange of instruments
of ratification and shall then have effect for the first time:
(a) As respects the rate of withholding tax, to amounts
paid on or after the first day of January immediately following
the year in which this Convention enters into force;
(b) As respects other taxes, to taxable years beginning
on or after January 1 of the year following the date on which
this Convention enters into force.
(2) However, in the case of payments received as a considera-
tion for the use of, or the right to use, a copyright of cinematographic
films or films or tapes used for radio or television broadcasting,
paragraph (2) (b) (iii) of Article 13 (Royalties) shall not have effect
before January 1, 1979.
-62Article 30
TERMINATION
This Convention shall remain in force until terminated by one of
the Contracting States. Either Contracting State may terminate the
Convention at any time after 5 years from the date on which this
Convention enters into force provided that at least 6 months' prior
notice of termination has been given through diplomatic channels.
In such event, the Convention shall cease to have force and effect
as respects income of calendar years or taxable years beginning
(or, in the case of taxes payable at the source, payments made)
on or after January 1 next following the expiration of the 6-month
period.
Done at Manila in duplicate this first day of October, 1976.
FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF THE
UNITED STATES O F AMERICA:
REPUBLIC O F T H E PHILIPPINES:
/s/ William E. Simon /s/ Cesar Virata
November 24, 1976
Excellency:
I have the honor to refer to the recent discussions between
representatives of our two Governments concerning the Convention
between the Government of the United States of America and the
Government of the Republic of the Philippines with Respect to
Taxes on Income, signed at Manila on October 1, 1976.
It is our understanding that Philippine citizens residing outside
of the Philippines are subject to Philippine tax on their worldwide
income but at reduced rates of 1, 2, or 3 percent, and that foreign
income taxes paid are deductible in computing their taxable income.
We further understand that the Government of the Philippines, when
applying paragraph 2 of Article 23 (Relief from Double Taxation) to
such nonresident citizens, interprets the reference to "in accordance
with the provisions of the law of the Philippines... " to allow the
Government of the Philippines to continue to grant a deduction rather
than a credit for U. S. taxes paid in such cases. We accept this
interpretation subject to confirmation by your Government that,
should the present rates of Philippine income tax applicable to
nonresident citizens of the Philippines be increased, the Government
of the Philippines understands that the treaty would require a foreign
tax credit and agrees to consult with the Government of the United
States for the purpose of modifying this note to that effect.
I have the honor to propose to you that the present note and your
Excellency's reply thereto indicating acceptance constitute the
agreement of our two Governments on these various points.
Accept, Excellency, the renewed assurances of my highest
consideration.
FOR THE UNITED STATES GOVERNMENT:
I si William E. Simon
His Excellency
The Honorable
Cesar Virata
Secretary of Finance
November 24, 1976
Excellency:
I have the honor to acknowledge receipt of your note of
November 24, 1976, which reads as follows:
"Excellency:
I have the honor to refer to the recent discussions between
representatives of our two Governments concerning the
Convention between the Government of the United States of
America and the Government of the Republic of the Philippines
with Respect to Taxes on Income, signed at Manila on
October 1, 1976.
It is our understanding that Philippine citizens residing outside
of the Philippines are subject to Philippine tax on their worldwide income but at reduced rates of 1, 2, or 3 percent, and that
foreign income taxes paid are deductible in computing their
taxable income. W e further understand that the Government of
the Philippines, when applying paragraph 2 of Article 23 (Relief
from Double Taxation) to such nonresident citizens, interprets
the reference to 'in accordance with the provisions of the law
of the Philippines... ' to allow the Government of the Philippines
to continue to grant a deduction rather than a credit for U. S.
taxes paid in such cases. W e accept this interpretation subject
to confirmation by your Government that, should the present
rates of Philippine income tax applicable to nonresident citizens
of the Philippines be increased, the Government of the
Philippines understands that the treaty would require a foreign
tax credit and agrees to consult with the Government of the
United States for the purpose of modifying this note to that effect.
I have the honor to propose to you that the present note and your
Excellency's reply thereto indicating acceptance constitute the
agreement of our two Governments on these various points.
Accept, Excellency, the renewed assurances of my highest
consideration. "
I have the honor to inform your Excellency that the foregoing is
acceptable and reflects correctly the understanding of the Government •
of the Republic of the Philippines and that your Excellency's note and
this note in reply constitute an agreement between our two Governments
concerning the Convention between the Government of the Republic of
the Philippines and the Government of the United States of America with
respect to Taxes on Income signed at Manila on October 1, 1976.
Accept, Excellency, the renewed assurances of my highest consideration.
F O R T H E G O V E R N M E N T O F T H E PHILIPPINES:
His Excellency
/s/ Cesar Virata
The Honorable
William E. Simon
Secretary of the Treasury
UDepartmentoftheJREASURY
INGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
November 24, 1976
Secretary Simon to Attend U.S./U.S.S.R.
Trade and Economic Council Meeting
Treasury Secretary William E. Simon will leave Friday,
November 26 to attend the annual meeting of the U.S./U.S.S.R.
Trade and Economic Council in Moscow. Secretary Simon will
address the Council on Tuesday, November 30. He will also
meet with top Soviet officials during the course of his visit.
Secretary Simon and Soviet Minister of Foreign Trade
Nikolai Patolichev, who will also address the group, are
honorary directors of the Council. The Council was formed
in 1973 to foster the expansion of mutually beneficial trade and
economic cooperation.
On route to the Soviet Union, Secretary Simon will stop
in London for informal discussions.
oOo
WS-1186
MANIFEST
United Kingdom, U.S.S.R. and Mexico
Visit By
Secretary William E. Simon
DOB POB
NJ
11/27/27
Name
William E. Simon
11/24/76
1120 hrs.
Tail #86971
PP#
X083688
02/21/31
NJ
X082307
Sharon Baker
02/JV51
DC
Y1407666
Emerson Davis, Jr.
12/18/36
DC
Y902363
Harold F. Eberle
05/14/25
CA
/Y1301510
•Jane Eberle
07/14/44
NC
F2130199
Gail Friedman
0.6/16/49
NY
Y1270743
John C. Gartland
02/03/40
OH
Barbara Jensen
08/16/34
NY
Sidney L. Jones
09/23/33
UT
Y1167630
• Marlene Jones
10/24/32
•UT
E1826845
Patricia Kobinski
08/09/54
V
Y1213423
Eric Lapp
06/02/48
GermarIV
Carol G. Simon
1
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Y1261909
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,
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Richard McCoy
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John 0. Mongoven
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\
Y1279183
\
\
William N. Morell
07/13/20
MD
•Patricia Morell
12/11/23
NJ
E1889759
Ann Marie Morgan
06/25/44
SC
G2418275
Gerald L. Parsky
10/18/42
CT
Kenneth Pieper
08/16/43
NY
Y1396759
Tania Ponomarenko
12/19/51
NY
Y1172288
^:-«i*j
. .
. \
Y1198746
\X084078
11/24/76
1120 hrs.
Tail #86971
- 2 -
Name
DOB
POB
PP#
Roger Porter
06/19/46
UT
Y1253173
Marjory E. Searing
03/29/45
NY
Y1261863
L. William Seidman
04/29/21
MI
/X091818
/
Sarah Seidman
01/04/24
IL
> X1257360
Sanford Shapiro
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PA
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failliam E. Simon, Jr
06/20/51
NJ /
F2093046
Peter Simon
05/20/53
NJ/
B043628
J. Robert Vastine
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PA
Y1374080
Richard A. Zarzana
04/29/39
CA
X050363
James D. Gaum
09/17/50
MI
X072578
Wavland Harmon
02/24/22
NC
X074169
Dennis V. McCarthy
09/28/34
MD
X032525
NJ
X066419
\
\_
v
/
/
Brian F. Kelly
10/31/41
James J. Varey
08/17/42
/'
MA
X068686
Delma'K. Keene
04/18/48
/
FL
\ X067772
Eddie E. Thompson
04/18/41
LA
X067773
Charles E, Converse
10/12/44
NC
X\)69544
03/01/45 '
OH
X061114
/
#
Dennis L. Flinch
/
Francis A. Searle
09/29/41'
MA
X067134
Ramon L. Dunlap
01/16/33
WV
X038^32
Thomas A. Trombly
08/27/37
MI
X0435il
t
] Brooks T. Keller
\
08/07/33
MD
X084317
kDepartmentoftheTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
Contact: J.C. Davenport
Extension 2951
November 26, 19 76
FOR IMMEDIATE RELEASE
ANTIDUMPING INVESTIGATION INITIATED ON
SACCHARIN FROM JAPAN AND THE REPUBLIC OF KOREA
Under Secretary of the Treasury Jerry Thomas announced
today the initiation of an antidumping investigation on
imports of saccharin from Japan and the Republic of Korea.
Notice of this action will be published in the
Federal Register of November 29, 1976.
Mr. Thomas' announcement followed a summary investigation
conducted by the U.S. Customs Service after the receipt of a
petition alleging that dumping was occurring in the
United States. The information received tends to indicate
that the prices of the subject merchandise exported to the
U.S. from Japan and the Republic of Korea are less than the
prices of such or similar merchandise sold in the home market.
For purposes of the notice published in the Federal
Register the term saccharin means sodium saccharin in soluble
powder and soluble granular form.
Imports of the saccharin from Japan and the Republic of
Korea amounted to $2.4 million and $4 35,000, respectively,
during the first six months of 19 76.
*
WS-1187
*
*
*
TheDepartmentoftheTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
'. ;•„* i-».<^
FOR IMMEDIATE RELEASE
November 29, 1976
TREASURY OFFERS $2,000 MILLION OF 132-DAY BILLS
The Department of the Treasury, by this public notice, invites tenders for
$2,000,000,000, or thereabouts, of 132-day Treasury bills, to be issued on a
discount basis under competitive and noncompetitive bidding as hereinafter provided.
The bills of this series will be issued on December 10, 1976, and will be an
additional issue of bills dated October 21, 1976, due April 21, 1977 (CUSIP No.
912793 F7 6) when the 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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standard time, Tuesday, December 7, 1976.
be for a minimum of $10,000.
Each tender must
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
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.
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 $500,000 or less without stated price
WS-1188
(OVER)
-2from 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 or at the Bureau of the Public Debt in cash or other immediately
available funds on December 10, 1976.
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.
oOo
NT
Ol-
heDepartmentoftheTREASURY
ASHINGTON, D.C. 20220
s
TELEPHONE 964-2041
/78<>
mmm
FOR IMMEDIATE RELEASE
November 29, 1976
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,500 million of 13-week Treasury bills and for $3,500 million
of 26-week Treasury bills, both series to be issued on December 2, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing March 3, 1977
Price
High
Low
Average
Discount
Rate
98.875
98.871
98.871
4.451%
4.466%
4.466%
Investment
Rate 1/
4.56%
4.58%
4.58%
26-week bills
• maturing June 2, 1977
:
Price
Discount
Rate
; 97.699
97.687
97.691
4.551%
4.575%
4.567%
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted
Investment
Rate 1/
4.72%
4.75%
4.74%
91%,
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY
Location
Received
$
31,740,000
Boston
4,277,300,000
New York
17,950,000
Philadelphia
31,945,000
Cleveland
37,840,000
Richmond
27,860,000
Atlanta
261,010,000
Chicago
52,915,000
St. Louis
37,190,000
Minneapolis
41,655,000
Kansas City
45,140,000
Dallas
635,725,000
San Francisco
Accepted
$
18,155,000
1,982,655,000
17,350,000
26,095,000
15,440,000
25,560,000
47,750,000
23,915,000
6,190,000
31,200,000
15,140,000
296,880,000
Received
$
58,900,000
5,373,405,000
27,100,000
59,400,000
21,515,000
21,525,000
330,825,000
43,025,000
46,405,000
13,735,000
32,315,000
377,535,000
Treasury
210,000
210,000
TOTALS
$5,498,480,000
$2, 506, 540, 000 a/: $6,405,685,000
a/Includes $322,995,000 noncompetitive tenders from the public.
b/Includes $124,555,000 noncompetitive tenders from the public.
1/Equivalent coupon-issue yield.
WS-1189
Accepted
$
20,900,000
3,231,855,000
7,100,000
7,400,000
7,620,000
18,725,000
63,325,000
13,695,000
11,205,000
12,935,000
18,215,000
91,820,000
$3,504,795,000 b/
[he Department the TREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
CONTACT:
GEORGE G. ROSS
202-566-5985
FOR IMMEDIATE RELEASE November 29, 1976
FRANCE-UNITED STATES TAX DISCUSSIONS
Talks between
of Finance and the
held in Paris last
Americans resident
representatives of the French Ministry
United States Treasury Department were
week concerning the taxation of
in France.
The two delegations agreed that, even if Article
164-1 of the French tax code is repealed, the July 28,
1967, tax treaty between the two countries should allay
the concern of Americans resident in France about double
taxation of their income.
The tax situation of Americans resident in France
will be governed by the following principles:
Income from personal services performed outside the
United States by an employee or self-employed individual
is considered foreign source income for United States
tax purposes. In the case of a partner, income from such
services is considered foreign source income primarily
to the extent that his payment for such services is
guaranteed by the partnership. Accordingly, Americans
generally will be able to credit the French tax on personal
services income against American tax. The French delegation
clarified that, in the case of employees, contributions by
the employer to retirement plans "qualified" under the
United States Internal Revenue Code do not constitute taxable income for French tax purposes.
Moreover, taxes imposed by the states and localities
of the United States on business and personal services
income will be deductible in France.
WS-H90
-2Until the treaty is amended to provide a more lasting
solution, France will permit Americans to credit against
French tax on dividends, interest and royalties from United
States sources, the effective amount of United States tax
on those items of income.
A note will be published shortly setting forth in
greater detail the rules applicable under French and
American law to Americans domiciled in France.
The two delegations have agreed to pursue negotiations
with a view to making appropriate amendments to the present
convention.
oOo
y Department of theTREASURY
/ASHtNGTON, D.C. 20220
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
November 30, 1976
STATEMENT BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
•' AT ANNUAL MEETING OF THE U. S.-U. S. S.R.
TRADE AND ECONOMIC COUNCIL
MOSCOW, U.S.S.R.
It is a great personal pleasure for me to have the
opportunity to return to this great country and to meet with
this group again. The United States continues to regard this
Trade and Economic Council, and the trade which it encourages,
as a vital building block in the bridge we are constructing
between our two nations. We believe that economic cooperation
and peace are interrelated. Strengthening and increasing
economic cooperation will assist our efforts to secure a lasting
peace. The American commitment to this process remains firm.
Since our meeting in Washington in October of last year,
much has happened in the world. The world economy has been
recovering from the worst recession in forty years. Internal
differences emerged within the United States over relations
between our countries. And the American people have decided to
change its leadership.
As we now complete the process of "transition" in the
United States, we must not lose the progress that has been made
in U.S.-U.S.S.R. relations since the last United States Government "transition" in 1968. Neither country can afford a return
to the confrontation of the past. Peaceful cooperation is the
only course for the future.
The next Administration will be dealing with the same
currents of opinion that we did, and the need to command public
support is an important determinant of our actions after elections
as well as before.
Much discussion took place during our election campaign
about the concept of detente. Detente is an all encompassing
concept that improves and strengthens the relations between our
two countries. However, detente is a process that develops over
time. It has a variety of dimensions. As General Secretary
Brezhnev and our leadership have developed this new spirit, it
WS-1191
- 2 has moved forward on a diverse set of fronts -- political
relationships, military concerns, scientific developments,
trade and economic cooperation, and many others. Each of
these parts is related and we must strive to have them move
in a manner that is self-reinforcing.
From my perspective, I would argue that if we want to
make progress on the larger issues such as SALT, we must be
careful not to let peripheral matters get out of hand and
harm the political atmosphere. We must be careful not to
pursue transient political advantage to the point where the
9
entire structure of our relations is challenged.
"
fi:
The point I want to make is that to me detente must be
pursued because it is in the overriding best interest of the
world. Overwhelming support for the concept exists; we must3
work together to eliminate any skepticism about how it has $
been working in practice.
Ti.
I am confident that progress can and will come. Our
governments and peoples have a vested interest in it, and we
cannot afford to squander the progress we have made over the
past several years. But the process of detente remains fragile
and must be carefully tended at the highest political level on
both sides. If it is in fact to become "irreversible" it cannot
be seen as a short-term tactic, but rather a growing commitment
on both sides. Great expectations have been created among our
peoples, and it is the responsibility of the political and
economic leadership of both our countries to see to it
that these expectations are not disappointed. While recognizing
the differences between our political and social systems, we
must work at a broader definition of detente, one which promotes
increased understanding and concern for the complex of issues -security, economic and humanitarian -- that form the interface
of our relationship.
Stronger economic ties are a critical element of detente.
Business can make a significant contribution to world peace,
and this Council is an essential ingredient in the process. During
the past two years, there have been a number of economic and
political events which, admittedly, have slowed the pace of U.S.Soviet economic cooperation. However, despite the negative impact
of these events, the basic structure of our joint economic relationship has remained strong. The Council1s activities have
helped to provide a continuous pattern of interchange and dialogue
that must continue in spite of larger economic and political
events. Seen in this way, the Council and what it represents can
make a major contribution to peace and understanding.
- 3I salute the dedicated people on both sides who have
carried forward the day-to-day work of the Council, and I
congratulate the Council's leadership, which has been so
important for its success in building the stronger economic
ties we all seek. Economic and political relationships are
inevitably intertwined, and an improving economic relationship
can only develop in the context of a stable political environment. But closer economic ties can also help create an environment for progress on political issues.
^We are already making progress in the important area of
strengthening the economic and commercial bonds between our two
countries. This is demonstrated by trade flows.
9, Total two way trade between our countries attained a record
level of over $2 billion in 1975, far above the the previous high
of $1.4 billion in 1973. For the first 9 months of 1976, the total
was over $2 billion, an all-time high for any 9-month period which
promises another record year in 1976.
9 A large part of U.S. exports has consisted of agricultural
commodities. These totaled over $1.1 billion in 1975 and over $1.2
biJ.|.lon in the first 9 months of 1976. But aside from these extraordinarily large shipments of food, our trade showed large and
ran^dly growing exports of manufactured goods, totaling over $670
million in 1975 and about $600 million in the first 9 months of
1976.
In addition to a record level of U.S.-Soviet trade, other
events of the past year have contributed to closer economic ties
between our two countries. The conclusion of the U.S.-U.S.S.R.
Grain Trade Agreement in October 1975, together with the new
Maritime Agreement signed in December 1975, are significant achievements which can make important contributions to the orderly development of trade between our countries. The Grain Trade Agreement will
help avoid massive fluctuations in grain sales from year to year,
which have in the past had a disruptive influence. The Maritime
Agreement provides a framework for shipments of grain, and also
facilitates calls by Soviet ships at U.S. ports. It can offer
a balance of benefits to both sides.
- 4Our two governments have also been holding talks on civil
aviation over the past year and we hope that agreement providing for expanded air services with equitable and shared benefits can be concluded in time for next summer's tourist season.
An extremely important aspect of our economic relationship
is the development of joint U.S.-Soviet major projects. We
can all take satisfaction from the increasing number of projects
successfully underway or under negotiation involving cooperation
between American and Soviet organizations. The United States
Government encourages and welcomes such cooperation, while
recognizing, of course, that the decision to participate resits
entirely with the parties directly concerned.
o:
Additional evidence of increased business activity is tke
growing number of American enterprises with offices here in i
Moscow. Approximately two dozen firms are now represented here;
others are awaiting approval of their applications. With thehelp of the Soviet authorities, the facilities for doing business have improved. Naturally, there will be impediments raised
in our path, but I expect that discussions here will define the
problems and develop solutions.
tfThis is exactly where the Council can play a most constructive
role. I look to you, as leaders of organizations directly concerned with trade and industrial projects, for recommendations
as to what government can do to remove existing impediments to
improve conditions and to facilitate your efforts. Within the
United States Government, the East-West Foreign Trade Board,
of which I am Chairman, acts as a coordinating body for the
various agencies concerned with East-West economic contacts.
The business community should bring its concerns and suggestions
directly to this Board.
While we can cite many examples of progress, I would be
less than frank if I didn't state that important problems still
remain in the field of Soviet-American trade. Provisions of
the Trade Act of 1974 still hinder the development of this
trade, blocking the financing of American exports by agencies
of the United States Government, and preventing most-favorednation treatment of imports from the Soviet Union.
President Ford and other members of his Administration
made clear our opposition to these provisions at the time the
trade legislation was under consideration in the Congress.
After the legislation was passed, President Ford publicly and
emphatically stated his belief that remedial legislation was
urgently needed.
- 5Section 402 and related provisions of the Trade Act, and
the 19 74 Eximbank Act Amendments have adversely affected our
trade with the Soviet Union, and I am convinced that they serve
neither the political nor the humanitarian interest of the
United States. While U.S.-Soviet trade statistics continue to
show growth, this growth seems mainly to reflect shipments
which are being made on back orders and contracts signed in past
years. There is evidence which suggests that prese#nt back orders
are substantially less than a year ago and that, therefore, the
trade increase in 1976 may be difficult to sustain without a
determined effort on both sides.
The fundamental solution must be a legislative one. If we
are to build a stronger bridge of U.S.-Soviet trade that will
foster mutual benefits, the new Administration must work with
the new Congress in the months ahead to pass remedial legislation that will remove existing impediments. I believe that progress can be made, but it is also important to understand that
progress on the humanitarian issues is of concern to the American
people, and the way in which this concern is met will affect any
legislative changes. Until legislative change can be obtained,
I call on both sides to exercise the will and imagination to
sustain the pace of project development and trade expansion that
has characterized the past several years.
At the same time we must encourage another change in U.S.
law that would improve U.S.-Soviet commercial relations. The
Johnson Debt Default Act of 1934 provides criminal penalties for
any individual who, within the U.S., purchases or sells bonds
or any other financial obligations of any foreign government
which is in default in the payment of its obligations to the
United States. Instead of protecting American investors against
the purchase of obligations of countries likely to default, the
Act has had the effect of deterring creative methods of financing
by the private market. The repeal of the Act would, in my
opinion, remove an unnecessary barrier to the expansion of
commerce on commercial terms.
As we work together for the elimination of barriers to the
development of U.S.-Soviet trade relations in U.S. law, let us
also work to remove existing obstacles to access for U.S. supplies
and businessmen to the Soviet market, so that our trade will
continue to be mutually beneficial. The U.S. supplier will
often be better able to meet Soviet needs if more information on
major projects were provided. Improved negotiating procedures,
better working conditions, and an increase in the number of
accredited offices in Moscow would also help in facilitating the
expansion of U.S.-Soviet commercial relations. A number of
American
firms
are
presently
seeking
accreditation
to to
establish
housing
undertaking
offices and
in
Moscow.
major
office
as projects.
well
space
These
as is
offices
Soviet
at
While
this
organizations,
are
wetime
very
realize
limited,
important
that
especially
we
permanent
strongly
the those
- 6hope that pending applications will be approved as soon as
possible. These matters as well as others are problems which
we will overcome as we work together to consolidate and
strengthen our mutual economic ties.
To emphasize the importance the United States places on
these ties, President Ford has asked me to bring personal
greetings to the members of the Council. I will read you his
message:
"Please accept my warmest wishes on the occasion of your
members' and directors' meetings. In the brief period since
its formation in 1973, the U.S.-U.S.S.R. Trade and Economic
Council has already made a major contribution to the develop!2
ment of U.S.-Soviet trade. This trade not only serves our
economic interests; it also promotes closer ties between our
governments and our peoples. I hope that your meetings will
be productive, and that the Council will continue to play its
significant role in strengthening relations between our two
countries.
Sincerely,
Gerald R. Ford"
"Finally, I would like to express my warm appreciation to
Minister Patolichev, Mr. Alkhimov, and our other Soviet hosts
for the friendship and hospitality that they have always extended
to us. As I look back on my four years in government, I realize
that governments are no more or no less than the people involved.
It's that very element that has made this country such a leader
in the world, and it's that same element that can bring our
countries closer. I wish this council and the Soviet leaders here
the greatest success. Through your efforts to increase trade
and economic cooperation, we can all help guarantee the, peaceful
solution of broader political problems. Together we can build
stronger economic ties which will help ensure a more peaceful
and prosperous world in the years ahead.
Thank you.
oOo
FOR IMMEDIATE RELEASE
Contact: Richard B. Self
Extension: 8256
November 30, 1976
TREASURY DEPARTMENT ANNOUNCES TWO
ACTIONS UNDER THE COUNTERVAILING DUTY LAW
The Treasury Department announced today two preliminary
decisions under the U.S. Countervailing Duty Law (19 U.S.C.
1303).
In the first case it was determined preliminarily
that imports of handbags from the Republic of China were
receiving benefits under(1) preferential short-term
financing, (2) income tax holiday, and (3) incentives
for firms locating in export processing zones.
Under the Countervailing Duty Law, the Secretary
of the Treasury is required to assess an additional duty
on merchandise benefiting, from the payment or bestowal
of a "bounty or grant" by a foreign government or other
entity. The additional duty is equal to the amount of
the bounty or grant.
In the second case, imports of handbags from Korea,
it was preliminarily determined that Korean handbag manufacturers receive benefits which in the aggregate are legally
de minimis, and, consequently, a preliminary negative determination was issued in this case. Both the above decisions
will be published in the Federal Register of December 1,
1976, and final determinations in these cases must be made
by May 24, 1977.
Imports of the subject merchandise during 1975 from
the Republic of China were valued at roughly $17.5 million;
and from Korea, $28.7 million.
o 0 o
WS-1192
kDepartmentoftheTREASURY
ASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE UPON DELIVERY
REMARKS OF RICHARD R. ALBRECHT
GENERAL COUNSEL OF THE TREASURY DEPARTMENT
BEFORE THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
STATLER HILTON HOTEL -- WASHINGTON, D. C.
TUESDAY, NOVEMBER 30, 1976 -- 1:00 P.M.
I am sure by now that each of you has characterized in
your own mind the Tax Reform Act of 1976. Depending on your
point of view and your concept of tax "reform," you have used
various adjectives to describe the Act. It has also received
a lot of labels from the press--but I have found no instance
in which it has been described as real "reform."
A Washington Post editorial in July began:
"It used to be called the Tax Reform Act.
As it now stands on the Senate floor, it deserves
to be called the Tax Shelter and Covert Subsidy
Bill."
In July the New York Times carried, on the front page, an
article with the headline "Tax Bills Pass Senate with Contents
Unknown." A Chicago Tribune editorial in September called it
"A hodge-podge"; the New York Times called it "Elephantine" ;
Business Week described it as "a crazy-quilt of special relief
provisions combined with some half-hearted efforts to tighten
some tax shelters"; and the Wall Street Journal said it should
be vetoed, "not because it contains too many bad provisions,
and not because it doesn't contain enough good provisions...
(but) because it contains too many provisions."
The accuracy or inaccuracy of the press' conclusions are
not important. What is important is what a responsible,
informed, free press is telling the American public about our
tax system. This bicentennial year seems to be an occasion
for us to pause and reflect on where we have been as a nation,
where we are, and where we are heading.
WS-1193
-2I will resist for today the temptation to examine the
state of our legislative process that produced such a headline—although I am sure a political science professor could
shape an entire college course around that statement. Rather,
I would like to examine with you the state of our income tax
laws after 2 00 years of national growth and only 6 3 years of
growth of the income tax.
As we are all well aware, this nation was born during a
tax revolt. The citizens of the 13 colonies were persuaded that
the taxes being imposed on them were unfair and inequitable.
From the adoption of the Sixteenth Amendment in 1913, the
income tax has progressed from a 15-page statute levying taxes
at rates from 1% to 6% to an Internal Revenue Code requiring
1,700 pages of the United States Code and 6,000 pages of regulations levying income taxes at rates up to 70%.
Notwithstanding this dramatic increase in size, complexity,
and tax levels, this tax system has served the country well
along the way. It--along with some help from purchasers of
government securities—enabled the United States to finance
two World Wars and two so-called limited wars. It has assisted
in the financing of the exploration of the moon and Mars. It
has paid for a host of programs representing the noble efforts
of our society to deal with its problems — from a war on poverty
to wars on crime—from foreign aid to school lunch programs —
from the search for a cure, for cancer to the development of an
effective swine flu vaccine.
But our tax system has been called upon to do a lot more
than finance the direct efforts of its government. It has
encouraged home ownership by millions of Americans by allowing
the deduction of interest paid on a home mortgage. It has been
used in an effort to alleviate the economic impact of major
illness by allowing for the deduction of certain expenses for
medical care and permitting the exclusion of sick pay from
income. The dividend exclusion has been added to foster the
ownership of stock by small investors, while the investment
tax credit has encouraged American industry to increase its
productive capacity and create more jobs. Through Domestic
International Sales Corporations, it has encouraged manufacture
at home rather than abroad by U.S. companies selling in foreign
markets. It has encouraged investment in real estate developments through provisions such as those permitting accelerated
depreciation of new projects.
The list is nearly endless. The income tax has been an
-3efficient, convenient and effective tool for accomplishing many
national objectives. An efficient, well-managed bureaucracy in
the IRS has assisted in carrying out many national programs under
the guise of collecting the revenue necessary to finance and
administer other programs. That organization has done a good
job, I might add. So good, in fact, that its team of professionals is looked to for assistance whenever a new, unplanned
job comes along—whether it's administering a wage and price
control program or providing staff for an energy office or a
sky marshal program.
The significant feature of this tax program has been the
voluntary compliance of the American public with the tax laws.
This feature is not only significant but unique. That an
American citizen would sit down at the end of the year and
voluntarily report to his government—accurately and honestly—
his income and his tax liability is an idea not readily accepted
in many countries of the world. Sure there are some built-in
incentives—criminal sanctions for noncompliance, withholding
from wages and salaries, and quarterly payments to ease the blow
on April 15. Indeed, withholding tables that produce refunds for
a large number of taxpayers probably help greatly in assuring
compliance and early filing.
But this maze that is our tax law has developed to the
point where we must ask ourselves where we are headed. We must
ask whether the tax law has been called upon to do too many
things. The most frequently quoted statement by Commissioner
Alexander was his apology to the American taxpayer for the
length and complexity of this year's tax returns. And, in
announcing next year's tax returns, he said, "Completing your
return this year could be more difficult." We are told that
two out of five taxpayers seek professional help in preparing
their individual returns—with millions more who could benefit
from such assistance. We are told by the General Accounting
Office—with apparent delight on the part of the press—that
even accountants and tax lawyers can't compute the average
taxpayer's liability without error more than half of the time.
Those figures should not be too surprising since, unfortunately,
there are many issues as to which there is-no single right answer.
Many entries on a return can depend upon the judgment of the
preparer and on whether or not a doubt is resolved in favor of
the taxpayer or the government. But it also should not be a
surprise that this situation has fostered the growth of organized
tax protest movements and has produced press reports of an
impending tax rebellion.
-4If we believe—as I do—that our "voluntary, self-assessment"
tax system is worth holding onto, we must act now. It may no
longer be a "self-assessment" system when nearly half of the
returns are prepared by hired hands. Hired, incidentally, in
most instances not because of the affluence of the taxpayer, but
because of his feeling of helplessness when faced with a set of
incomprehensible forms, instructions, rules and regulations.
It is encouraging to note that both of the major organizations of professional tax practitioners—the American Bar
Association Section of Taxation and your Institute—have spoken
out in favor of tax reform.
The ABA Section of Taxation has established a Special
Committee on Simplification, which in 1976 prepared a formal
recommendation which was adopted by the ABA's Board of
Governors in April and which calls upon the Congress to:
"simplify the internal revenue laws, to the
maximum extent consistent with basic equity,
efficiency and the need for revenue, so that
such laws can be easily understood and complied with by taxpayers and fairly and
consistently administered and enforced by
the Treasury Department."
1 am aware that your Institute has long taken a position
advocating the simplification of the tax laws, and that you
are presently considering appointing a special task force to
study this problem.
Secretary Simon has also publicly expressed his belief
that basic tax reform is necessary. In a speech earlier this
year he said:
"Let me turn now to the...step that I
personally believe we should begin considering
with regard to our tax system. This is a concept
that has been suggested from time to time but it
is rarely given serious consideration. It is
simply this: to wipe the slate clean of personal
tax preferences, special deductions and credits,
exclusions from income, and the like, imposing
instead a single, progressive tax on all individuals."
When the official charged with collecting the taxes, the
tax bar and the AICPA can agree on a basic objective, it must
have some merit. But getting there will not be easy.
-5Ours is a complex society, with complicated and sophisticated financial transactions (some of which certainly have
become more complex as the result of efforts to minimize taxes).
The obvious questions will come to your minds more quickly than
they will to others. How do we deal with personal holding companies, collapsible corporations or corporate reorganizations
under a simplified system?
There would also be tremendous transitional problems—and
problems of effective dates to prevent a rash of pre-effectivedate transactions in anticipation of true reform. You are all
aware of the problems associated with the phasing in and phasing
out of a single tax feature such as the investment tax credit.
Overhauling the entire system will immeasurably compound those
problems. These problems should not deter us, however, since
the phasing out of complexities will always produce its own
set of transitory complexities, no matter when it is undertaken.
It will not be easy to sell tax reform to those—and there
will inevitably be some—who will pay higher taxes. I suspect
it will be even more difficult to sell reform to those whose
over-all tax burden will actually decrease, but for whom the
prospects for decrease are well hidden by the complexities of
current law.
President-elect Carter has called our present tax system
a disgrace to the human race and has promised to support tax
reform. He has said that he will initiate a thorough, one-year
study of our tax system and laws in order to determine what reforms
are needed. The Treasury Department has already begun this task.
At the direction of Secretary Simon, a task force headed by
Charles Walker, Assistant Secretary for Tax Policy, began in
late 1975 the task of making tentative decisions on specific
elements of a proposed restructured system. This study will
result in a report which will include specific recommendations
for a basic restructuring of the tax system. The review has
been conducted in a highly professional manner, and the report
should not be regarded as a partisan political one.
While it is premature to suggest what any of the tentative
decisions of the Basic Tax Reform Project are, we can take a
look at the approach that is being followed.
The present system is being reviewed in its entirety, with
a view to recommending changes that will:
1. make it simple;
2. make it more fair;
3. make it economically efficient.
-6The simplification goal is self-evident. The Code provisions should be easily understood and applied, especially by
the large majority of individual taxpayers. Simplicity is, of
course, of less concern and more difficult to achieve for high
income, sophisticated taxpayers and large business enterprises.
The fairness goal is to treat similarly situated taxpayers
in as equal a manner as possible, and to produce a system under
which all taxpayers are perceived to pay, and in fact do pay,
their fair share of taxes.
The economic efficiency goal is to neutralize the tax system
in decisions on the utilization and allocation of resources.
Let me give you a few examples of the questions being raised
in the review. When considering the matter of treating equally
situated taxpayers equally, how should the system treat equal
income earners who behave differently with respect to savings
from their earnings? One taxpayer may invest his savings and
another may spend them, for example, on leisure or recreational
activities. To the extent that income is received from capital
in which the savings were invested, what is fair treatment as between
these two taxpayers? Compound the question with the fact that one
of these taxpayers may receive an inheritance of capital. To
what extent, if any, does the source of the capital make a
difference in the equal treatment of these taxpayers? To what
extent should there be any difference between the tax treatment
of these taxpayers according to whether they own or rent their
homes, whether they send their children to public or private
schools, whether they choose to live in expensive or modest
housing, whether they are healthy or afflicted with health
problems, whether they live close to or remote from their place
of work, whether they save for retirement, their employer does
so for them, or they depend upon social security?
Other issues are faced when testing the system for fairness, simplicity, and efficiency by looking at the way in which
the tax base is measured. Some of these questions follow
naturally from those asked earlier when discussing fairness.
If the income from capital should be taxed, how should it be
taxed? How often should it be taxed? For example, if income
from labor is taxed, saved, and deposited in a savings account,
should the interest on the account be taxed? Of greater significance is the question of the taxation of corporate earnings.
Should they be taxed to the corporation which earns them and
then again as income to the shareholders who received dividends
from those earnings? This raises the question of how to tax
corporate earnings that are retained and not distributed as well
as how to treat individual shareholders who retain stock in
-7such a corporation until they die, bequeathing it to a friend,
a relative, or to charity. Related questions concern the
taxation of capital gains on sales of securities as well as
gift taxes on the transfer of corporate shares.
The Treasury review is assuming that no changes should
occur in the total revenue raised, in the effective degree of
progressivity in the present tax system, or in the distribution
of the tax burden among income classes.
At this point, the study is in the advanced stage, and a
number of tentative decisions have been made, with more yet to
be made. Computer analysis is being used to assist in determining an appropriate rate structure and in ascertaining the
need for revising some of the tentative decisions.
In the work to date, there has been an effort to broaden
the tax base in every reasonable and consistent way, and to
reduce deductions, credits and exemptions to a minimum. The
starting point has been to eliminate all of them, and to retreat
from that point only as far as necessary to advance the goals
of simplicity, fairness and efficiency of the tax system.
Decisions also have been made concerning the measurement and
taxation of income from business, conducted both in corporate
and noncorporate form. Decisions are in process with respect
to the measurement and taxation of foreign source income. Decisions are yet to be made on numerous other subjects, including
proposed statutory assurance that the relative tax burden among
income classes, reflected by the lower rate structure adopted
for the broadened base, will remain constant.
When the work of this task force is made public, hopefully
by the end of this year, we will put to the acid test the degree
of our national addiction to the use of the income tax to try
to fine-tune our society.
No doubt every special interest group that currently benefits from one of the deductions, exemptions or special provisions
will look with a jaundiced eye at any proposal that eliminates
such a provision. We will be reminded with a vengeance that one
taxpayer's concept of "equity" will be looked on as another
person's loophole.
This is when we will need the cooperation, patience, understanding and selfless leadership of all professional tax practitioners .
Any Basic Tax Reform proposal worth its salt will contain
some real shockers. Some of the concepts that have come to be
regarded as fundamental may have to be discarded.
-8That is when I believe you and all tax professionals can
provide a valuable public service. Against the backdrop of the
inevitable emotional reactions, your Institute can provide an
objective analysis of the proposal in terms of its ability to
meet the announced objectives. While your analysis will undoubtedly prompt you to propose modifications, I hope you can
resist the temptation to fine-tune the package with a host of
special provisions.
Then, if you agree that the proposal—taken as a wholeis an improvement over what we have today, the Institute should
speak out in no uncertain terms. You will have the opportunity
and, I believe, the responsibility, to help educate a public
that, although it may be ready for change, has in the past
shown itself to be very reluctant to accept dramatic changes.
I am convinced that this task is not only necessary, but
one that can be accomplished.
o 0 o
IheDepartmentoftheTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
>
November 30, 1976
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 $5,700 million, or
thereabouts, to be issued December 9, 1976,
as follows:
9L-day bills (to maturity date) in the amount of $2,300 million, or
thereabouts, representing an additional amount of bills dated September 9, 1976,
and to mature
March 10, 1977
(CUSIP No. 912793 E9 3 ) , originally issued in
the amount of $3,405 million, the additional and original bills to be freely
interchangeable.
>
182-day bills, for $3,400 million, or thereabouts, to be dated
and to mature June 9, 1977
December 9, 1976,
(CUSIP No. 912793 G6 7 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
December 9, 1976,
outstanding in the amount of $5,706 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,598 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern
Standard time, Monday, December 6, 1976.
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
WS 1194
(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
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 $500,000 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 or at the Bureau of the Public Debt
on December 9, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 9, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
i
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, or
from the Bureau of the Public Debt.
oOo
FOR IMMEDIATE RELEASE
November 30, 1976
RESULTS OF AUCTION OF 4-YEAR TREASURY NOTES
The Treasury has accepted $2,504 million of $5,613 million of
tenders received from the public for the 4-year notes, Series F-1980,
auctioned today.
The range of accepted competitive bids was as follows:
Lowest yield 5.87%
Highest yield
Average yield
5.92%
5.91%
The interest rate on the notes will be 5-7/8%. At the 5-7/8% rate,
the above yields result in the following prices:
Low-yield price 100.010
High-yield price
Average-yield price
99.832
99.867
The $2,504 million of accepted tenders includes $502 million of
noncompetitive tenders and $2,002 million of competitive tenders
(including 95% of the amount of notes bid for at the high yield)
from private investors.
In addition, $180 million of tenders were accepted at the average
price from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash.
WS-1195
CONTACT:
GEORGE G. ROSS
202/566-5985
FOR IMMEDIATE RELEASE November 30, 1976
EXPLANATORY NOTE ON THE USA-FRANCE
TAX DISCUSSIONS
Attached is a copy of the Explanatory Note on the
French-American tax discussions, which sets forth in
some detail the rules applicable under French and American
law to Americans domiciled in France. This is the Note
referred to in the Treasury News Release of November 29,
1976 (WS-1190).
oOo
WS-1196
EXPLANATORY NOTE
On The French-American Tax Discussions
Representatives of the French and American Governments
met to consider certain problems in applying the French-American
income tax convention of July 28, 1967. The French and
American delegations announced their mutual interpretation
of treaty provisions which can affect American taxpayers resident
in France.
In addition, the French delegation clarified
certain internal laws regarding the income taxation (impot sur le
revenu des personnes physiques) of Americans resident here.
The two delegations agreed that the present income
tax convention does not inhibit repeal of Article 164-1 of the
CGI, which article currently exempts Americans resident in France
from French tax on non-French source income which the taxpayer
can show is subject to United States tax. The French delegation
set forth its view on this subject.
It recalled that this view
had been expressed when the present treaty had been negotiated
and it referred to notes which it had taken at that time. The
American delegation acknowledged that the claim of France as
the country of residence to tax worldwide income of Americans
resident here was consistent with the treaty.
parties agreed as to the following points:
In addition, the
-2|. United States Business Income
Except as to income from personal services rendered in
an independent capacity or as an employee (Articles 14 and 15
of the present convention), income from United States sources
which the United States taxes as business income without regard
to citizenship is exempt from French income tax, although the
French may take such income into account in determining the
progressive rates on income which is taxable.
2. Services Performed as Employee
a) Services Performed Outside the United States
Income from salaries, wages and similar compensation
including deferred compensation (other than a pension or
annuity) and employee benefits such as stock options and
employer-paid insurance premiums which are attributable to
services performed outside the United States by residents
of France may be taxed by France. The United States, subject
to its internal law limitations, will allow a foreign tax
credit in respect of such items; and since those items will
be considered as foreign source income under United States
law, it is expected that double taxation will be generally
avoided.
The French delegation clarified that employer
contributions to pension, profit-sharing and other retirement
-3-
plans which qualify under the United States Internal Revenue Code will
not be considered income to the employee; and payments received
by the employee in respect of those plans will be included in his
income when, and to the extent, that the payments are considered
gross income under the Internal Revenue Code. Benefits received
by reason of exercise of stock options will be considered
compensation for French purposes at the time and to the extent
the exercise of the option or disposition of the stock gives rise
to ordinary income for United States tax purposes.
b) Services Performed Within the United States
The two delegations reserved to a later date the question
of taxation under the present convention of employee services
performed in the United States by an American taxpayer resident
in France.
3. Independent Personal Services
Income from services performed, in an independent
capacity will be considered by both France and the United States
as income from sources within the country where the services are.
performed.
In this connection France may treat the distributive
share of profits received by the partner of a service partnership
as attributable to the place where the partner, rather than the
-4partnership as a whole, performs services. Thus, a partner's
entire distributive share of profits will be taxable by
France, subject to the reserved question of his performance of
services in the United States. By contrast, under United
States internal law, that portion of the French resident
partner's share in distributive profits is French source
income only to the extent it represents the partnership's,
rather than the partner's, percentage of income from French
sources. Thus, to some extent, double taxation could remain.
The United States agreed, however, that a guaranteed
payment to a partner -- that is, one that is required to be
made regardless of whether the partnership has any income
for the year -- is for the purposes of determining source to
be treated as a payment to one who is not a partner.
For the
proportion of guaranteed payments related to services performed
outside the United States, this treatment will result in such
payments being considered foreign source income for United
States tax purposes. Accordingly, the United States foreign
tax credit should substantially eliminate double taxation
even though the guaranteed payments are fully subject to
taxation by France.
For the proportion of the guaranteed
payments related to services performed within the United
States, the question has been reserved.
By reason of this
-5treatment under the United States Internal Revenue Code
Section 707 (c) of guaranteed payments as made to one who
is not a partner, the French delegation has agreed to
treat the payments under the provisions of the treaty
and of the French tax code as employee income.
In order
to be entitled to the above treatment, a partner must show that the
partnership has guaranteed to him in writing a specified
amount without regard to the income of the partnership,
which guarantee must exist prior to the beginning of
the partnership's fiscal year. The treatment of
guaranteed payments is not changed by the fact that a
partner's share in the partnership's profits is greater
than the payment which has been guaranteed to him.
However, any excess is not considered a guaranteed payment.
4. Deductions
It was agreed that Americans resident in France
could, as business deductions, specifically deduct the
following in determining French tax.
a) State and Local Taxes
State and local income taxes imposed in respect
of income from personal services and any other business
income (except income which is exempt from French tax
under the existing treaty) will be a deductible business
expense.
b)
Interest and Real Estate Taxes
-6Unlike the situation under United States law,
interest and real estate taxes incurred for personal purposes
will not be deductible from French taxable income.
However,
interest and real estate taxes on property leased for profit
will be deductible in computing French tax, provided that the
rent is taxable or taken into account by France.
c) Charitable Contributions
Americans resident in France can deduct from
income, under the conditions provided by French law,
contributions to American charities whose purpose is similar
to that of public interest organizations established in
France,referred to in Article 238 bis of the French tax code.
5. Investment Income
The French and American Governments will cooperate
to reduce the possibility of double taxation on investment
income in the event Article 164-1 is repealed.
Such
cooperation will take into account the effective date of the
repeal of Article 164-1, the allowance of foreign tax credit,
and the conclusion of a protocol to the present convention.
France agreed that, as a transitional measure, it would permit
Americans resident in France to credit against French tax
on dividends, interest and royalties from United States
-7sources, the effective amount of United States tax on those
items of income.
6. Other United States Source Incomes
Residents of France whose income consists entirely
of United States source income taxation of which is reserved
exclusively to the United States by the provisions of the
tax treaty (for example, real estate income, public pensions,
and social security payments) will not be taxable by France.
oOo
IteDepartmentoftheTREASURY
HINGTON, D.C. 20220
TELEPHONE 964-2041
AMENDED COPY
December 1, 1976
FOR IMMEDIATE RELEASE
RESULTS OF AUCTION OF 4-YEAR 1-MONTH TREASURY NOTES
The Treasury has accepted $2,504 million of $5,613 million of
tenders received from the public for the 4-year 1-month notes, Series F-19-U,
auctioned yesterday.
The range of accepted competitive bids was as follows:
Lowest yield
Highest yield
Average yield
5.87%
5.92%
5.91%
The interest rate on the notes will be 5-7/8%.
the above yields result in the following prices:
Low-yield price 100.007
High-yield price
Average-yield price
At the 5-7/8% rate,
99.829
99.864
The $2 504 million of accepted tenders includes $502 million of
noncompetitive tenders and $2,002 million of competitive tenders
(including 95% of the amount of notes bid for at the high yield)
from private investors.
In addition, $180 million of tenders were accepted at the average
price from Federal Reserve Banks as agents for foreign and international
monetary authorities for new cash.
WS-1197
R E M A R K S B Y T H E H O N O R A B L E JOHN M . PORGES,
U.S. EXECUTIVE DIRECTOR, INTER-AMERICAN D E V E L O P M E N T B A N K ,
A T T H E SEMINAR O N T H E INTER-AMERICAN D E V E L O P M E N T B A N K ,
SPONSORED B Y T H E INTERNATIONAL T R A D E M A R T ,
N E W ORLEANS, LOUISIANA, D E C E M B E R 2, 1976.
The Role of the Inter-American Development Bank in Promoting the
Socio-Economic Development of Latin America
I am happy to be in New Orleans today and very pleased to speak
to participants in this seminar. As United States Executive Director of
Inter-American Development Bank, I would like to talk about the work of
the Bank and its contribution to the economic growth and the social
development of Latin America. As citizens of this city and state, all o
you are very much aware of important cultural and historical links betw
the United States and Latin America. Since New Orleans is a commercial
gateway to Latin America, you are also especially aware of business and
banking links. With respect to this second point, I want to comment a l
later on how we in the United States benefit from the work of the Inter
American Development Bank (IDB) both in terms of achieving our over-all
foreign policy objectives and in the expansion of our exports and the
of employment here at home.
Let me begin with a brief summary of the Bank's history and
operations. As its name indicates, the Bank is an international lending
institution. It provides long-term financing to accelerate the economi
\and development of its member countries. Some of this financing is pro
on near market terms with current interest rates of 8.6 per cent and m
- 2-
of 15 to 25 years. These are referred to as "ordinary capital" loans and ar
directed mainly toward projects which generate favorable financial rates o
return. Other loans are provided on concessional terms -- with interest
rates of between 2 and 4 per cent per annum and with maturities of up to
40 years. These loans are called Special Fund Operations and are directed
toward the least developed countries of the hemisphere and to the least-
advantaged elements of the population in these countries, mainly for purpo
such as potable water and rural health programs. Projects of this kind do
not generate favorable financial rates of return. They are, however, extre
important in channeling economic and social benefits to the neediest peopl
The Bank was founded in 1959. At the present time, its capital
stock is owned by 26 Western Hemisphere countries, including the United
States, Canada and 24 Latin American and Caribbean countries, and nine
non-regional developed countries, which are: Germany, Japan, Great
Britain, Switzerland, Belgium, Yugoslavia, Spain, Denmark and Israel.
These non-regional countries joined the Bank last summer. Their
membership has increased the total resources of the Bank to $17. 2 billion
For the governments of industrial countries, membership in the Bank
offers new opportunities for expansion of their Latin American markets.
Other non-regional countries are expected to join the Bank shortly,
including the Netherlands, Italy and France. We expect that all the nonregional countries, once they become Bank members, to compete aggresively
for procurement arising from Bank projects.
- 3For the governments of Latin America and the Caribbean, the IDB
has been a primary source of official external development assistance.
In 1975, for example, the flow of development financing to Latin America
amounted to nearly $3.0 billion. Of this total, the IDB provided $1,375 bill
or 47 per cent. So far as concessional lending is concerned, during the same
period the IDB provided $634 million, or nearly 80 per cent of this scarce
and very useful financing.
In my own travels throughout the hemisphere, I have always been
impressed by how aware local government officials are of the Bank's work.
This awareness has been translated through extensive press coverage into
public understanding -- especially in Latin America --of the Bank's role
and its impact on economic growth and social development in the hemisphere.
I don't want to belabor you with statistics, but perhaps a few figures will
you a better idea of what this impact has been.
As of September 30 of this year, the Bank had made loans totalling
more than $ 9. 4 billion. These loans were parts of projects which, in aggre
were worth more than $ 37 billion. In other words, through its lending
operations the Bank has prompted its borrowers to mobilize $27.6 billion of
their own domestic or other resources. By working closely with borrowing
governments we have tried to direct this money to key economic sectors
where there can be a relatively rapid economic pay-off as well as to progra
which have important long-term social benefits. I have already indicated
- 4that some of these programs of important social benefits include potable
water, sewerage systems, rural health and primary and technical education.
Thus, the flow of Bank capital assistance is impressive not only
because of its own volume but also because of its catalytic effect in stim
other investment flows. For illustration, I can cite our work in providing
electric power generation and distribution facilities. As of September 30,
we had loaned more than $1.9 billion for this single sector. We have also
very active and with similar catalytic effect in road projects. Real devel
ment is not possible in the absence of infrastructure. By making loans for
these purposes we have encouraged a parallel movement of private funds,
both foreign and domestic, into areas where it would not have been possibl
before.
Another very important part of our loan portfolio is in the agriculture
sector. On a cumulative basis the Bank has lent more than $1. 6 billion to
finance directly productive agricultural projects, mainly through relendin
programs. In addition, the Bank has lent considerable amounts for rural
roads, rural electrification, water supply and other services which assist
the farming communities. In 1975 alone, it is estimated that our lending
program benefitted more than 1. 6 million farmers. Between a quarter and
a third of this lending was directed at small farmers, either singly or in
cooperatives.
In Mexico and the Dominican Republic, ambitious projects for
integrated rural development are now under way which promise to
- 5improve dramatically the situations of individuals who previously were
physically isolated and unable to provide for themselves economically.
In addition to its lending, the Inter-American Development Bank
also provides technical cooperation assistance in the agricultural sector.
Since 1961, this has amounted to more than $66.0 million. The emphasis
of these programs is on prefeasibility and feasibility studies which will le
to loan project proposals by our member countries. The funds are also
used to prepare basic studies and to provide training and advisory services
usually on a non-reimbursable basis. I should mention that we also establish
in 1975 an International Group for Agricultural Development and Food Product
in Latin America.
This organization includes a small secretariat and functions under
the auspices of the Bank. It has begun work on elements of a general
strategy for agricultural development and increased food production in
Latin America. We hope it will provide much needed consultation,
coordination, and cooperation among different agencies active in this field.
In addition, we also support the International Maize and Wheat Improvement
Center (CIMMIT) in Mexico, the International Center for Tropical Agriculture
(CIAT) in Colombia and the International Potato Center (CIP) in Peru. We
have also started assistance programs with a number of national research cen
to facilitate the transfer and adaptation of the international research work
- 6Last year, the Bank also inaugurated a program of direct assistance to
credit unions, cooperatives and their federations in Latin America. In
this way, we hope to strengthen these institutions over the long term so
they can more effectively reach the lower income groups throughout
Latin America.
The Bank has been a leading and innovative lender in two other
significant sectors as well. To date, we have lent $752 million to help
finance potable water and sanitation projects. We were, in fact, the first
to provide external financing for projects of this kind and pioneered in t
area before other lending agencies. As a result, since 1960 the percentage
of Latin America's urban population served by potable water connections ha
increased from 40 to 60 per cent. Over the same time period, the rural
population with access to potable water jumped from 8 to 25 per cent.
We have also led the way in our loans for education. On a cumulative
basis, these loans amount to more than $306 million. They have expanded or
improved 690 learning centers, including 146 universities and 504 vocation
and technical schools. Our emphasis on this sector is now shifting away
from universitites toward technical and vocational schools. In my view,
this is the correct approach because skilled manpower will be an increasin
key element as the process of economic growth continues in Latin America.
In Brazil, especially in the Sao Paulo area, the training of skilled manpo
has been absolutely vital to that country's impressive economic achievemen
Let me turn now to the subject of Latin America's current economic
situation and prospects and what this means for future lending- bv the Ban
-7In comparison with other parts of the developing world in Africa and Asia,
Latin America's over-all level of economic development is relatively high.
This reflects a great deal of progress achieved during the 1960's and 1970'
On a regional basis, per capita income is three times greater than it is in
Africa and Asia. The process of industrialization is also farther advanced,
with 25 per cent of regional GNP now originating in industry. Brazil is one
of the great economic success stories and Mexico, leaving aside its present
difficulties, made impressive economic progress over a period of many years
Other countries have not fared so well, however. Many are suffering
from the effects of higher prices for petroleum and manufactured goods and
their economic prospects have declined. Countries such as Paraguay,
Bolivia, Guatemala, Honduras and Nicaragua are classified as least develope
They have low per capita incomes and show little progress or prospects for
greater industrialization. Haiti is an extreme case of poverty with an
estimated per capita income of $100 per year.
The Bank should be and is, in fact, paying greater attention to
the problems of its least developed member countries. As a result of
their improved position, the relatively more advanced countries such
as Venezuela, Brazil, Mexico and Argentina are now making greatly increased
contributions of freely usable funds to the Bank's resources. For the futur
this process will continue and even accelerate. At the same time, we will
see greater emphasis on lending to the poorest countries. Concurrently,
the relatively more advanced countries will assume more and more of the
- 8-
donor country posture. To illustrate this point, Venezuela no longer
receives loans from the Bank. In addition, its contributions to the Bank
are being made entirely in convertible currency and it has established
a Special Trust Fund of one-half billion dollars administered by the IDB
for lending to the poorer countries.
So far as sectoral emphasis is concerned, I have already mentioned
the importance of agriculture and indicated that it constitutes a very
significant part of our loan portfolio. Nevertheless, we have to further
increase our concentration in this sector -- both in absolute and percenta
terms. During the next three years we want to increase our sectoral
concentration in agriculture from 22 to 30 per cent of portfolio. In addit
we also want to become a greater force for change, both in production meth
and in pricing policy.
I have mentioned that the Bank provides budgetary support for
several international and national agricultural research institutes. These
institutes serve as experimental stations and clearing houses for informat
on new seed varieties and better uses of fertilizers and pesticides. The
contributions of these organizations have been very valuable. This year,
the Bank is supporting several national institutes which modify and pass o
where necessary to users in their own countries the results of work undert
by the international institutes. What is now needed in the agricultural
sector is a fuller mobilization of private capital expertise and the appli
of what we call agri-business method to food production problems
- 9throughout Latin America.
What is also needed is better planning and coordination among
government agencies concerned with agriculture. In many instances,
unwise pricing policies have frustrated individual farmers and discouraged n
investments. In one country, for example, enactment of protectionist tariff
measures promoted the establishment of assembly operations for consumer
durable products. These operations flourished at the expense of agriculture
and resulted finally in a situation in which the country "manufactured"
television sets and automobiles while increasing the amount of imported food
The economic irony is that this occurred in a country with unused arable
farmland and unemployed farm labor. There are other examples which can be
mentioned. The point is that at a time of food scarcity, such as today,
agricultural production should not be penalized to promote an inefficient
industrialization process.
The Inter-American Development Bank took an important initiative
to sponsor its Group for Agricultural Development and Food Production in
Latin America. With other agencies such as the World Bank, the United
Nations Development Committee, and the Latin American countries participatin
I hope this new group can encourage more activity by private industry in the
agri-business field in Latin America and change what I think are unwise
pricing policies in some of the countries.
-10 In my personal opinion, another matter of gravest concern to the
future of Latin America is population growth. For the past decade the
region has had the fastest rate of increase of any part of the developing
world. Its population today is 300 million. By the year 2000, given
present projections, this figure could reach 645 million. Of course, not
all of the countries of Latin America have problems of population growth.
Some, like Chile and Argentina have relatively low rates of 1.5 and 1.9 pe
cent per year. Other countries such as Mexico, Venezuela and El Salvador,
have annual birth rates of up to 3.4 per cent. It is very clear that a
solution needs to be found if the benefits of hard-earned economic
growth are not to be lost to increased population demands. Some of the
countries such as Mexico have already initiated programs to curb their
population growth. Other countries with high annual birth rates need to
do this also.
A component part of the population problem is the phenomenon of
mass migration now going on from rural to urban areas. Rural areas in
Latin America lack the job opportunities and services which one associates
with city life, and consequently the attraction has been strong. In terms
of population, Latin America has some of the world's leading cities. Great
Buenos Aires, with nearly 10 million people, contains close to 34 per cent
of Argentina's total population. Rio de Janeiro by 1980 is expected to hav
-11 more than 9 million people and the population of Sao Paulo, in southern
Brazil, should exceed 12 million by the same date. Caracas, with 600,000
people in 1950, is expected to have more than 3 million by 1980. The
economic and social systems of the developing countries are in most
instances fragile and extremely vulnerable to the stresses of combined
population growth and urban migration. Even in the relatively more
advanced countries, jobs and services cannot be generated quickly enough
to accomodate such large numbers of people. The results are the "favelas"
of Rio de Janeiro and the "ranchos" of Caracas. For a least developed
country such as El Salvador, the results can be worse.
The Bank has tried to help in the context of its lending for health
purposes. For example, we have been increasing our emphasis on pre and post
natal care and counseling. In the countryside, we have encouraged the
construction of small clinics in an effort to reach larger numbers of the r
poor. Finally, by providing increased job opportunities and better services
such as potable water and electricity, we have sought to create reasonable
alternatives to city migration.
In summary, we can say that there have been notable economic
successes in Latin America. The Bank, in the 16 years of its existence,
has been very much a part of the success. At the same time, much remains
to be done, especially in the "least developed" countries of the hemisphere.
Increasing agricultural production and ameliorating the over-population pro
and urban migration are two large issues that have to be faced. With new
funding coming from Europe and Japan and greater contributions from the
-12 Latin Americans themselves, the Bank is better able to do its job.
Nevertheless, there is a continuing need for a strong and effective U.S.
participation in the Bank.
At the start of my remarks, I said that I wanted to comment on
how the United States benefits from the work of the Inter-American Develop
ment Bank. These benefits are closely related to our over-all perceptions
of U.S. interests in the region.
First, there is the benefit of access to the raw materials that are
vital to the further expansion of our own domestic economy. In 1975,
for example, Latin America provided 24 per cent of our petroleum imports,
48 per cent of our copper imports, and 34 per cent of our iron ore imports
In addition, we obtained sizeable amounts of foodstuffs from Latin America
including 47 per cent of our sugar imports, 82 per cent of our bananas,
60 per cent of our cocoa and 40 per cent of our coffee. Bank infrastructur
projects in many cases facilitate the production, processing and transport
of these products.
Secondly, there are the substantial benefits which we enjoy from
trade and investment. The United States has had a traditional trade surplu
with Latin America. In 1975, this surplus amounted to more than
$3.0 billion. To the extent that we promote economic growth and
development, we create additional effective demand for the goods and
services which we produce. Over the life of the Bank, it is estimated that
- 13more than $1.0 billion in additional U.S. exports has been generated
as a result of Bank loans. This translates into 36, 500 man years of
employment. The latest available data on U.S. direct investment indicate
that 14 per cent or about $15. 0 billion is in Latin America and that this
ment earns $1.0 billion annually in investment income. As I indicated earl
the loan operations of the IDB facilitate the flow of private investment a
frequently promote parallel flows of capital.
Finally, there is the benefit to our basic national interest in
helping to continue what has been a remarkably long period of general
peace in this hemisphere. The Bank's lending operations are formulated
to promote economic growth and social development. It is these two
factors, and the prospect for their improvement, which underlie the
political stability necessary for peace in the hemisphere.
# # #
REMARKS BY
UNDER SECRETARY OF THE U.S. TREASURY
JERRY THOMAS
PORT OF ENTRY DEDICATION
ORLANDO, FLORIDA
DECEMBER 1, 1976
Ladies and Gentlemen:
It is a genuine pleasure to participate in the opening
of the Nation's newest official U.S. Customs Port of Entry,
Orlando — already among the world's outstanding tourist
destinations!
I welcome you today to the growing fraternity of world
trade communities. Orlando's port designation comes at a
time when the U.S. Customs Service is making great progress
in improving its capacity to serve both the tourist and the
commercial trade communities.
Orlando, which is administratively within Customs'
Tampa District and Miami Region, provides a direct link to
the world's trading centers. It is no longer necessary for
imported goods and foreign travelers to enter through other
Florida ports enroute to here, the largest tourist attraction
in the State.
That Customs' expansion in Florida comes during this
Bicentennial Year is especially fitting. When the State and
its adjacent areas were ceded to the U.S. by Spain in 1819,
Customs revenues paid in the form of Congressional appropriations
were used to pay some $5 million in claims to U.S. citizens
for property loss.
Now, 157 years later, Customs collections from the
Miami Region alone — which includes Puerto Rico and the
Virgin Islands as well as Georgia and North and South Carolina —
amounted to almost $350 million in the last fiscal year.
In collecting these revenues Customs cleared just under
3.5 million air passengers and more than 655,000 sea travelers.
Customs formal entries, involving commercial shipments,
(cargo) numbered 229,593.
WS-1199
-2Like the ports and other cities and areas of this
lovely and progressive State, the Customs Service is in a
period of constant change and growth.
More imported merchandise is being processed and more
revenues collected than ever before in Customs history.
During Fiscal Year 1976, which ended June 30th, Customs
cleared $113 billion worth of imported goods into the country
through its 300 ports of entry. For the Federal Treasury
this meant some $5 billion in collected duties and taxes I
In reaching these recordshattering totals, Customs
officers cleared 270 million international passengers (more
than the population of the U.S., Canada, Australia and three
more Floridas); 130,000 vessels; 353,000 aircraft, and
nearly 79 million land vehicles, such as cars, buses and
motorcycles!
But Customs many & vital responsibilities do not end
with revenue collection. As the Nation's oldest Federal
border enforcement agency, the Service is charged with
enforcing not only its own laws, but also more than 500
other provisions of law for some 50 other Federal agencies.
From a public safety point of view, perhaps Customs'
most important task is to stem the flow of illicit narcotics
and dangerous drugs into the U.S.
A nationwide network of Customs officers has been
organized to slow this avalanche of illegal drug trafficking.
Customs has created and molded a professionally trained
enforcement team backed by the latest and most sophisticated
technology.
This combination of highly trained and knowledgeable
Customs Officers and specialized equipment results in enforcement at the right place and at the right time for the apprehension of smugglers and their cohorts. Proof of the solid
effectiveness of this approach, known as "Tactical Interdiction",
is clearly evident here in the Tampa District, as well as in
all parts of the country.
Let me cite a few numbers to support this assertion:
... Tampa District marijuana seizures climbed 216
percent in the last fiscal year, and accounted for 15 percent
of all the marijuana seized in the entire Region.
... Hashish seizures were up 934 percent for the year!
-3... Cocaine jumped 187 percent, and the seizures
represented nearly 40 percent of all that drug confiscated
in the Region. Incidentally, twothirds of all cocaine
seizures by Customs nationally are in the Miami Region,
which embraces all Florida.
I will not burden you with more statistics, other than
to note that nationally Customs narcotic seizures were up
significantly in virtually every category. The estimated
"street value" of these seizures was nearly $660 million!
i
"*
It is a record of accomplishment, but it is not enough.
We recognize that there is still much to do and we in Customs
are committed to doing an even better job.
Orlando has been and continues to be a center of economic
expansion. Florida tourism has climbed nearly 50 percent in
the last decade; and the tricounty area of Orange, Seminole,
and Osceola has, in fact, become the greatest tourist
destination in the State.
Obviously with tourism comes commerce. During the last
.five years freight and express cargo destined for the Orlando
1r
Jetport has jumped 165 percent, to more than 27 million
pounds.
The designation of the Jetport as an official Customs
Port of Entry will most certainly add impetus to Orlando's
development as a State and world tourist and economic mecca.
As a native Floridian, it is a personal pleasure to
extend our Federal Government's warmest congratulations and
a figurative pat on the back for the many men and women who
strived and worked so hard to bring this Port of Entry to
Orlando. You did your homework well!
The Customs Service looks forward to a mutually rewarding
relationship with all of you.
oOo
^Department of theTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
1
FOR RELEASE AFTER 11:00 A.M., EST.,
FRIDAY, DEC. 3, 1976
REMARKS BY F. LISLE WIDMAN
DEPUTY ASSISTANT SECRETARY OF THE TREASURY
FOR INTERNATIONAL MONETARY AFFAIRS
BEFORE THE
NORTHWEST MINING ASSOCIATION
SPOKANE, WASHINGTON
FRIDAY, DECEMBER 3, 1976
Role of Gold in the International Monetary System
I am pleased to have the opportunity to participate
in your examination of the market outlook for precious
metals. Yours is a group with a practical, perhaps personal,
interest in the prospects for prices and sales of these
commodities. I must make clear at the outset, however,
that my contribution must be limited basically to an
explanation of the role of gold in the international
monetary system and the current policies of the U.S.
Government with respect to gold, policies which have had
broad, bipartisan support.
The governments and international institutions of the
world hold stockpiles of gold equivalent to twenty-nine
times the annual world gold production. Thus it is clear
that governmental views and policies of gold inevitably
have a major impact on the gold market. What I would like
to do is to review the actions that have been taken in
the past year with respect to the role of gold in the
international monetary system and the relationship of
governmental gold transactions to the gold market.
The judgment that gold does not and cannot serve as
a sound or stable basis for a monetary system is almost
universally accepted by governments throughout the world.
The force of events and practicality have over the years
led to a reduction of the role of gold in domestic monetary
systems around the world to the point that it no longer
serves an important monetary role in virtually any nation.
WS-1200
-2The amount of gold held does not effectively limit the
money supply; it does not serve as a restraint on inflation.
Similarly in the international sphere, the size of gold
reserves is not a limiting factor on a country's ability
to purchase foreign goods or financial assets. In practice, gold's role in the monetary system has been sharply
diminished and the recent international negotiations on
gold have centered more on how to reflect this reality
in the legal framework of the International Monetary
Fund Articles of Agreement than on what the role should
actually be.
The Role of Gold in the International Monetary System
The international monetary system established in
1944 envisaged a central role for gold:
as the unit of value for the system and for
the International Monetary Fund;
as a principal means of payment to be used by
governments in transactions with the IMF;
as the main element of countries' international
reserve holdings; and
as the link for holding together the system of
fixed exchange rates or par values for national
currencies.
But, in fact, gold never fully performed these functions, and over time it became increasingly apparent that
it never could. Gold was not used for monetary purposes
alone. It was a commodity with many industrial and
commerical uses, and industrial demand grew dramatically in
the post-war years as the world's economies expanded and
personal income grew. But new gold production was strictly
limited by natural factors and could not respond readily
to the increased demand. Thus the amount of new gold production which became available for monetary uses declined
rapidly. Moreover, the amount of new gold becoming available for monetary purposes each year was totally unrelated
to the needs of an expanding world economy for liquidity.
As a result price differences inevitably emerged between
the controlled official market and the highly volatile
-3private market, leading to official efforts to alleviate
or suppress the pressures by sales of gold on private
markets—further reducing official monetary stocks—and
to widespread pressures and speculation for changes in the
official price. But since gold was supposed to be the
center of the system--the measuring rod against which the
value of national currencies was to be determined—any
change in the official price of gold would have had a
capricious and destabilizing effect on the entire monetary
system.
Actually as the exchange rate system had developed
in practice, most countries maintained par values for
their currencies by governmental intervention in the
exchange markets to maintain exchange rates for their
currencies at specified levels vis-a-vis the dollar. Only
the United States met its par value obligations by undertaking freely to buy and sell gold at the official price
of gold—the dollar's par value. The United States was,
in effect, at the center of the system, with an obligation
to convert other countries' holdings of dollars into gold
at a specified price of U.S. $35 per ounce. But since
monetary gold stocks were simply not adequate to permit
countries to acquire an adequate amount of reserves in
the form of gold, they built up their reserves in the
form of U.S. dollars, thus forcing the U.S. to run balance
of payments deficits. The result was that gold convertibility of the dollar became less and less credible and in
1971 was suspended altogether.
— The Special Drawing Right (SDR) — the present
currency "basket" — has replaced gold as the unit of
account for IMF operations and transactions.
— Countries have virtually ceased to use gold for
payments to the IMF.
— Monetary authorities have stopped using gold in
transactions with other monetary authorities and gold has
declined as a proportion of world official reserves-- from
70 percent in 1950 to 17 percent today.
-- Finally, the system of par values based on the
dollar tied to gold convertibility has been replaced
de facto by a generalized system of floating exchange rates.
-4All of these changes have taken place as a matter of
practical necessity. They add up to a major reduction of
the international monetary role of gold that is widely
accepted as inevitable and indeed desirable. The negotiations on gold over the past few years have to a large
extent concentrated on how to reflect these changes in new
Articles for the IMF — that is, on how to codify and
further promote the phasing out of gold's international
monetary role. The only problem — and the only real
reason for retaining any monetary role for gold — arises
out of the fact that a portion of the international financial reserves of most countries — a very high proportion
for some — consists of gold and no practical way has
been found to dispose of that gold in i the „, short run.
First, gold's legal position is changed. Under the
amended IMF Articles of"Agreement, gold will no longer
have an of ficial-.price. It will no longer be the legal
basis in the Articles for expressing the value of currencies,
for determining the value of the SDR, or for calculating
nations' rights and obligations in the Fund.
Second, all legal obligations for use of gold in
the IMF will be eliminated — for example, in the quota
subscriptions and payment of charges. In fact, the IMF
will be prohibited from accepting gold except by specific
decision, by an 85 percent majority vote.
Third, the IMF.will be empowered to dispose of its
remaining gold holdings in a; variety of ways and by an
85 percent majority vote in each case.
Agreement was also reached to dispose of a portion of
the gold presently held by the IMF. Some 25 million ounces,
or one-sixth of the IMF's holdings, will be sold at public
auction over a four-year period. The profits from this
sale — the difference between the original IMF purchase
price and the proceeds of the sale — will be used to
extend medium-term loans to developing countries. An identical amount — 25 million ounces — will be "restituted" to
IMF members — i.e., sold to IMF member countries in proportion to their IMF quotas as the present official price.
The IMF's gold auction program was actually initiated
on June 2, and it is expected that restitution of one-
-5quarter (or 6-1/4 million ounces) of the total to be sold
to members will take place in the next few weeks. It
should be emphasized that the purpose of the IMF's auctions
is to mobilize this IMF gold for the benefit of the
developing countries. The objective is not to obtain a predetermined sum or to influence the gold price one way or
the other.
In fact, great care has been taken to sell the
gold in an orderly, non-disruptive way that will have the
minimal possible impact on the gold market. For the most
part, this has involved removing, to the extent possible,
all uncertainties regarding the sales, by announcing the
time period and schedule over which these sales would be
made and sticking to it. The market sales of 25'million
ounces are to be made over a four-year period, on a regu-*
larly scheduled pro-rated basis. In many respects, this is
similar to a new gold mine coming into production which
can be expected to operate for 4 years at a production
level of 6-1/4 million ounces a year.
Initial market reaction to the announcement of the
IMF sales program was one of concern as to whether
demand levels would be sufficient to absorb this amount
of gold without seriously depressing the price. Actually,
bids at each of the four auctions — at each of which
780,000 ounces were sold — totaled between 2.1 and 4.2
million ounces, sufficient to absorb the amount offered at
close to the prevailing market price. The market price did
decline over the period of the first three auctions —
for a variety of reasons including a decline in inflation
in some countries, a reduction in commodity prices and
other factors. The market price declined to $111 per
ounce at the time of the third auction and it was suggested
by some that the IMF vary its sales program to ease the
pressure on the market. The Fund reaffirmed its intent to
proceed with the planned sales program. In mid-October
the price started an upward climb which actually accelerated
following the fourth IMF auction at the end of October.
Gold is now trading at around $130 per ounce with another
auction scheduled for December 8.
There are undoubtedly many reasons for this turnaround — as there seem inevitably to be for every movement
in the gold price. I would only note that the reaffirmation
of the IMF's intention to adhere to the agreement on
sales of its gold removed one uncertainty. We may confidently expect the IMF to continue with its auction program
on a regular basis. Auctions of smaller amounts might be
-6held more frequently, but the principles of the IMF's
approach, and the volume to be sold in any six or eightweek period, are not at issue, and this fact should be a
force for greater stability in the market.
I noted earlier that the official price of gold in the
IMF will be eliminated by amendment of the IMF Articles.
We have long viewed this as an important symbolic step,
a step that is central to demonetization. While elimination of the official gold price will eliminate what has
been an effective impediment to official purchases of gold,
whether we will actually see a significant volume of
transactions in gold between central banks is, in my
judgment, extremely doubtful. The system as a whole has
evolved too far. The risks of dealing in gold have become
too great to make such official transactions likely. A
central bank acquiring gold has no assurance that it can
be sold at any particular or specified price. This is a
risk which central banks may not wish to run with the monetary reserves of their nation.
It is more likely, in my view, that we will see a
gradual movement of gold out of official reserves altogether, as countries choose to realize the capital gains
on their gold holdings through sales to the market.
There will almost surely come a time when governments conclude that it is not fair to their taxpayers to continue to
hold gold — an asset which yields no interest — when its
sale could reduce the national debt and the continuing
interest burden. I would stress, however, that I would
expect the disposal of government stockpiles of gold to
be a gradual process, in large part because holders
realize that large portions of the one billion ounces
still held in official reserves cannot be sold without
significantly affecting the market. Gold sales may take
place as individual countries experience an immediate need
to sell gold to obtain the foreign exchange with which to
pay for essential imports.
Despite the judgment that these agreements are not
likely to lead to dramatic changes in official attitudes
with respect to gold holdings, important transitional
arrangements have been agreed upon by the Group of Ten —
the major gold holding nations — to assure that gold does
not re-emerge as an important monetary instrument while these
changes are taking effect. These arrangements provide that
participating nations: (1) will not act to peg the price of
gold; (2) will agree not to increase the total stock of monetary
gold held by their authorities and the IMF; (3) will respect any
-7-
further conditions governing gold trading to which their central
banks may agree; and (4) will report regularly on their
gold sales and purchases. The arrangement took effect
February 1, 19 76, and will be reviewed after two years, and
then continued, modified, or terminated. While we need to
watch developments carefully, I would hope that such arrangements will not be needed for an extended period.
U.S. Gold Policy and the Market
I would like to turn briefly to the question of how
U.S. gold policy relates to the functioning of the gold
market.
You will recall that all restrictions on private ownership of gold by U.S. citizens were removed at the end of
1974. Secretary Simon supported the repeal of these restrictions as a "practical step toward our objective of ending
the official monetary role of gold so that it may ultimately
be treated in all respects like any other commodity," I should
stress that moving gold towards a pure commodity status should
have advantages for both producers and consumers by allowing
the free market to work in the absence of stifling regulations
on gold transactions. As the monetary role of gold fades, more
countries may follow the U.S. lead in removing restrictions.
The U.S. action, has, I submit, contributed to a more
efficient and broader world gold commodity market. The U.S.
market centered in New York has made possible a world time
chain for gold transactions, running from Europe to the U.S.
to the Far East. This has made gold pricing easier and facilitated transactions. The development of an active futures
market for gold on the organized commodity exchanges of New
York and Chicago has been particularly significant. In an
era of fluctuating prices, futures markets serve the valuable
function of allowing both producers and users of gold to hedge
their operations.
Since the lifting of restrictions on gold holdings by U.S.
citizens, the Treasury has auctioned a total of 1.3 million
ounces of gold in two separate auctions, one on January 6, 19 75
and the other on June 30, 1975. These sales were designed to
reduce the need for imports. No further auctions have been
held and none is currently scheduled.
Thus far this year U.S. demand for gold for industrial
and artistic purposes has been running at an annual rate of
about 4 1/2 million ounces. Demand, of course, tends to increase as the economy grows. Domestic production is running
at approximately 1.1 million ounces a year and scrap recovery
is about 800,000 ounces a year. There is a substantial gap
between this supply and industrial consumption. Except to
the extent that the Treasury sells from its holdings, this gap,
-8-
together with any demand for speculative or investment
purposes, must be met by imports. In the first 10 months
of 1976 we have imported 3.4 million ounces of gold bullion
including gold which has been sold out of foreign official
accounts at the Federal Reserve Bank of New York.
Treasury policy toward sales is perhaps best expressed
in the answer which Secretary Simon gave on February 3,
1976 to a question from Congressman Henry S. Reuss, Chairman
of the House Subcommittee on International Economics. The
Secretary said:
"Sales of U.S. gold by the Treasury to date have
been related to helping meet net import demand
for gold from abroad, and are consistent with our
view that the international monetary role of gold
should continue to diminish. We have not attempted
to enunciate a long-term sales policy, but would
expeet to continue to conduct sales from time to
time to help meet import demand. We will in no way
conduct sales in a manner that would 'peg' the
market price of gold or that could be construed to
have that objective."
In sum, the Treasury favors the increase in gold's
status as a commodity, favors the development of a free
gold market, and supports official sales of gold in the
manner least disruptive to the market. We have no price
objective and we strongly oppose the use of official
sales for the purpose of controlling the gold price.
#
#
#
FOR RELEASE AT 4:25 P.M.
December 2, 1976
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice, invites tenders for
$3,253 million, or thereabouts, of 364-day Treasury bills to be dated
December 14, 1976, and to mature December 13, 1977 (CUSIP No. 912793 H7 4 ) .
The bills, with a limited exception, will be available in book-entry form only,
and will be issued for cash and in exchange for Treasury bills maturing
December 14, 1976.
This issue will not provide new money for the Treasury as the maturing issue
is outstanding in the amount of $3,253 million, of which $1,607 million is held
by the public and $1,646 million is held by Government accounts and the Federal
Reserve Banks for themselves and as agents of foreign and international monetary
authorities.
Additional amounts of the bills may be issued to Federal Reserve
Banks as agents of foreign and international monetary authorities.
Tenders from
Government accounts and the Federal Reserve Banks for themselves and as agents of
foreign and international monetary authorities will be accepted at the average
price of accepted tenders.
The bills will be issued on a discount basis under competitive and noncompetitive bidding, and at maturity their par amount will be payable without interest.
Except for definitive bills in the $100,000 denomination, which will be available
only to investors who are able to show that they are required by law or regulation
to hold securities in physical form, this series of bills will be issued entirely in
book-entry form on the records either of the Federal Reserve Banks and Branches,
or of the Department of the Treasury.
Tenders will be received at Federal Reserve Banks and Branches and at the
Bureau of the Public Debt, Washington, D. C. 20226, up to 1:30 p.m., Eastern
Standard time, Wednesday, December 8, 1976.
Form PD 4632-1 should be used to
submit tenders for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must be for a minimum of $10,000.
be in multiples of $5,000.
Tenders over $10,000 must
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
WS-l?n1
(OVER)
-2positions 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.
Payment for the full par amount of the bills applied for must accompany
all tenders submitted for bills to be maintained on the book-entry records of
the Department of the Treasury.
A cash adjustment will be made for the difference
between the par payment submitted and the actual issue price as determined in
the auction.
No deposit need accompany tenders from incorporated banks and trust
companies and from responsible and recognized dealers in investment securities,
for bills to be maintained on the book-entry records of Federal Reserve Banks and
Branches, or for definitive bills, where authorized.
A deposit of 2 percent of
the par amount of the bills applied for must accompany tenders for such bills
from others, unless an express guaranty of payment by an incorporated bank or
trust company accompanies the tenders.
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 $500,000 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 for bills to be maintained on the records
of Federal Reserve Banks and Branches must be made or completed at the Federal
Reserve Bank or Branch on December 14, 1976, in cash or other immediately
available funds or in Treasury bills maturing December 14, 1976.
Cash adjust-
ments 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
a subsequent purchase, and the amount actually received either upon sale or
redemption at maturity during the taxable year for which the return is made.
-3Department of the Treasury Circulars, Public Debt Series - Nos. 26-76
and 27-76, and this notice, prescribe the terms of these Treasury bills
and govern the conditions of their issue.
Tender forms may be obtained from
any Federal Reserve Bank or Branch, or from the Bureau of the Public Debt.
Copies of the circulars will be available on or about December 6 1976.
oOo
k Department of theJREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE 6:00 P.M.
SATURDAY, DECEMBER 4, 197 6
REMARKS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
GENERAL ASSEMBLY OF NEW YORK UNIVERSITY
NEW YORK CITY, DECEMBER 4, 1976
Thank you Mr. Ruegger, Mr. Sawhill, Mr. Robinson, Dean
Hill, and Mr. Gitlow.
Now that the dust has finally settled after what
seemed like the longest political campaign in American
history, perhaps we will all begin to learn anew the meaning
of the old French saying that "The more things change, the
more they remain the same."
The political cast in Washington -- in the White House,
in the Congress and in the bureaucracy -- has undergone and
will continue to undergo many changes. New faces will
replace old ones and new slogans and labels will sweep away
the old. But all of this dramatic surface change will be
more apparent than real.
For the one thing that will not be swept away is the
basic set of problems, challenges, and opportunities facing
our country; and, in the last analysis, it will be these
factors and the way we and our leaders of both parties react
to them -- that will determine America's future.
Precious or not, my days in Government have dwindled
down to a few. Under the circumstances it would be pretentious
or misleading of me to pretend that I stand before you today
as an official spokesman for future government policies.
However, since my official mantle always included that of a
concerned individual citizen, I feel that I can still speak
to you in that private capacity now that my official mantle
is little more than food for the moths.
As I said a moment ago, the faces and the rhetoric are
changing, but the problems and challenges remain the same.
And I am deeply convinced that the key to both our problems
and our opportunities as a people lies in the realm of the
economy and its interaction with the government.
WS-1202
i
-2So today I would like to review with you some of the
most important governmental and economic trends in our
recent history and, against that backdrop, discuss some of
the realistic concerns and goals that all of us share -- in
the years ahead.
We begin with a curious paradox. In recent years
people have come to ask more of their government than ever
before, but, at the same time, and for the very reason that
government has been called on to provide so many new and
costly services, public confidence in the institution of
government has fallen very low indeed. If I may wax Churchillian
for a moment: Never before have so many asked so much -- and
expected so little -- of government.
When you consider what the country and the government
have been through since the 1960's, this seeming enigma
begins to make sense.
During the last fifteen years the real output of goods
and services has increased 60 percent and the real income of
the average American has risen by 50 percent. But despite
these remarkable gains the American people are increasingly
dissatisfied with the national state of affairs as well as their
personal status. Part of this frustration is a healthy
refusal to tolerate many real problems that exist. The
American drive to improve, to help those less fortunate, to
seek even higher personal standards of living is commendable
when it leads to a more creative and productive system and
increased concern for the needs of others. But there is
also an unhealthy aspect in much of the cynicism and negativism that we find in America today. I believe this more
ugly mood is the result of the demonstrated failure of
collectivist big-government approaches to national problems
that promised a great deal but delivered very little. And in my
opinion the only cure for such a mood is a higher level of economi(
intelligence among the people themselves. A free society
cannot survive unless we achieve economic literacy. Until
we do, a mood of dependence on government will increase and
feed upon itself creating still more demands for benefits
without recognizing that the bills must be paid -- either
directly in current taxes or indirectly through accelerating
inflation and economic disruption.
The accumulation of economic distortions must now be
faced. The longer we delay the hard adjustment decisions
the more difficult and costly the needed solutions will
become. And if we delay too long the opportunities to restore
stable economic progress may be lost.
-3Our first major economic and political goal then, must
be to sift, weigh and choose
among the multitude of
conflicting claims to arrive at the greatest long-term
benefit for all of our people. In that process the most
important factor to be considered is the freedom and dignity
of the individual. No matter what material progress occurs
the loss of personal freedom and dignity are too great a price
to pay.
In short, we must decide what kind of economic
and political systems will best serve the real long-term
interests of the American people.
Let me begin with a brief review of the basic economic
issues that will ultimately shape the future not only of the
American economy, but of our society as well. The American
people must realize that their government's fiscal and monetary policies and the maze of government programs that
increasingly intervene in their daily lives are the real
issues that will determine their personal welfare:
-- whether or not inflation will be effectively controlled or once again allowed to return to double-digit
levels ;
-- whether or not capital investment will be adequate
to create meaningful jobs for the growing labor force;
-- whether or not government regulation and administrative
controls will be changed to meet current economic realities
to restore productivity and efficiency;
-- whether or not the United States will provide effective
leadership on international monetary, trade and investment
issues.
Therefore, in looking to the future the American people
should ask this basic question each time the government comes
up with a bold new economic policy initiative: Will this
action contribute to sustained and orderly economic growth or
will it merely perpetuate the familiar stop-and-go patterns
of the past -- increased government spending without regard
for the chronic deficits and economic and financial disruption
created, excessive expansion of the money supply, even more
government controls over the private economic and increased
intervention in private wage and price decisions.
The proper role of government is to create an environment
for sustained and orderly economic growth through its fiscal,
monetary, and regulatory policies. The disappointing
performance of the U.S. economy during most of the last
decade emphasizes the basic need for more stable policies.
-4In the mid-1960's the United States began an unfortunate
series of exaggerated booms and recessions: serious overheating
of the economy created severe price pressures; accelerating
inflation caused recessions by restricting housing construction,
personal spending and business investment; the recessions
created unwanted unemployment which wasted resources and
caused personal suffering; rising unemployment too often
triggered poorly planned and ill-timed government fiscal and
monetary policies setting off another round of excessive
stimulus leading again to overheating -- inflation -- recession unemployment -- and then more government intervention. It is
obvious that we must break this deadly and, all-to often,
self-sustaining political and economic cycle.
There is one basic conclusion we can draw from these
experiences: Our desire for economic progress, through
improved living standards and employment opportunities, will
be frustrated unless we better control the insidious inflation
which has destroyed economic stability and today threatens
not only our goal of sustained growth but the ultimate
survival of all of our basic institutions. When inflation
distorts the economic system and destroys the incentives for
real improvement the people naturally lose faith. They no
longer support the system and society disintegrates. I am
convinced that even our uniquely creative and productive
society will collapse if we permit the slow but deadly poison
of inflation to dominate and undermine our economic health.
There is no tradeoff between the goals of price stability
and low unemployment as some critics have erroneously claimed.
On the contrary, neither one of these goals can be achieved
and maintained without the other. There is only one way
to increase the output of goods and services and reduce
unemployment, and that is to make further progress in
reducing inflation.
I feel very strongly about inflation -- so strongly
that some critics claim I am obsessed with the subject.
Maybe I am -- and perhaps our economy and our country would
be in better shape today if a few more of our economic
leaders over the past generation shared my obsession.
Obsessed or not, I am downright antagonistic toward those
who consistently vote for bigger deficits. We must always
remember that it is inflation that causes the recessions
that so cruelly waste our human and material resources and
the tragic unemployment that leaves serious economic and
psychological scars long after economic recovery occurs. It
is inflation which destroys the purchasing power of our
people
as they
strive
-- too
often
a
struggle
-necessities
transportation,
to provide
the
of necessities
education,
and medical
recreation
of
attention
food,in
housing,
and
andlosing
cultural
theclothing,
desired
opportunities.
-5Inflation is not now, nor has it ever been, the grease that
enables the economic machine to progress. Instead, it is
the monkey wrench which disrupts the efficient functioning
of the system. Inflation should be identified for what it
is. The most vicious hoax ever perpetrated for the expedient
purposes of a few at the cost of many. And there should be
no uncertainty about its devastating impact, particularly
for low income families, the elderly dependent upon accumulated
financial resources and the majority of working people who
do not have the political or economic leverage to beat the
system by keeping their incomes rising even more rapidly
than inflation. When inflation takes over an economy the
people suffer. We must wipe out economic illiteracy that
exists on this point above all others. It is time that the
full brunt of informed public opinion is brought to bear
on the elected officials who ignore this fact.
In general there must be more widespread recognition of
the fundamental importance of stable economic growth in the
future as the only true foundation for maximum employment
opportunities and lower unemployment rates, for a return to
our historically low rate of inflation which will protect the
purchasing power of all Americans and encourage more capital
investment that will provide the permanent and productive jobs
that people desire -- for more efficient use of human and material
resources and protection of our environment, and for fulfillment of our international responsibilities in monetary,
trade and investment policies. Naturally, there are disagreements about how best to achieve these basic goals but
I am convinced that a longer-term time horizon must be used.
-- First, the diversity of problems must be recognized
to avoid concentrating on a single issue. Inflation, unemployment, declining output, the availability of productive
resources, international trade and investment all must be
considered simultaneously to create a balanced program for
stable economic growth. But the starting point for sustaining economic growth without the boom and recession distortions
of the past must be to avoid a return of destructive inflation pressures. From 1890 to 1970 prices in the United
States increased at an annual rate of 1.8 percent. From
December 1973 to December 1974 prices rose 12.2 percent.
It seems so obvious that any long-term solution to our
economic problems requires better control of inflation which
has distorted the spending and savings decisions of all
Americans. Inflation must be clearly recognized for what it
is: The greatest threat to the sustained progress of our
economy and the personal standard of living of most Americans
-6-- Second, government policies must solve more problems
than they create. During a period of difficulty it is
expedient to respond to strident calls "to^do something -anything to demonstrate political leadership."
But, too often, this naively activist approach is the
basic source of the problem -- not the solution. Courage
and wisdom are always required to avoid actions offering the
illusion of short-term benefits in exchange for further
erosion of the free enterprise system. For it is the free
enterprise system, not the government, that has served this
Nation so well in creating the premier economy of the world
and providing the greatest degree of personal opportunities.
The conventional wisdom that a few billion dollars of
additional government spending somehow makes the difference
between success or failure of the entire U.S. economy -which is rapidly approaching an annual level of output of
two trillion dollars -- has always amazed me. There is an
important role for governments in protecting certain basic
public interests but the claim that governments can or
should control the economy is totally false. We would all
be better off if government officials would recognize that
the real creativity andproductivity of American depends upon
the private sector.
-- Third, and most important of all, there must be a
proper balance in the shared responsibilities of the private
and public sectors. This is a difficult assignment because
of the confusion and pessimistic appraisals of the future
caused by the political and economic shocks that have occured.
Maintaining and improving the creativity and productivity of
the U.S. economic system against the attacks of critics who
favor a big government solution for the problems of society
has become our greatest challenge. The simplistic cure of
having government spend ever increasing amounts of borrowed
money has not solved many of our problems but on the contrary
it has created serious economic distortions that will continue
long into the future. We now have a Federal Government, that is
trying to do more than its resources will permit, to do many thing
that it cannot do very well, to do some things that it
should never do at all, and to do all of these things
at the same time. As a result, we now have more government
than we want, more than we need, and more than we can afford.
Nevertheless, much of the current political rhetoric continues
to claim that we aren't spending enough, aren't creating
enough new government programs, and aren't pushing enough
panic buttons. Despite the unmatched accomplishments of the
U.S. economy these critics attack the free enterprise system
-7and demand comprehensive governmental control over economic
planning for the allocation of our natural resources -- the
rationing of capital to selected industries -- guaranteed
government jobs for all who want them -- increased control
over private economic activities -- even a return to the
counterproductive wage and price controls that have always
failed. Although the American free enterprise system feeds,
clothes and houses our people more effectively than any
other system in the world, provides the real basis for all
of our public services and most importantly is fundamental
to our individual freedoms, it is increasingly subject to
criticism from those who seem to favor turning to less
efficient approaches which would waste our human and material
resources and eventually erode our economic progress and
political freedoms.
Part of the problem is a matter of image. Those who
support increased government spending and pervasive controls
over our daily lives are often perceived as being more concerned and socially progressive. Those who allegedly "care
more" are given considerable attention when they call for
more spending to solve the unmet needs of society even
though the growth of big government has become a large part
of the problem and not the solution it is alleged to be. At
the same time, those who favor the free enterprise system
too often fall back on simplistic slogans and cliches that
lack humane appeal. Worst of all, many businessmen who come
to Washington, seem to want to surrender their existing
freedoms in exchange for protection from the competition
that has made our system so dynamic.
It is now time -- in fact the need is long overdue -for those who believe in the free enterprise system to more
effectively promote its basic values. America has become
the world's premier economy because it provides basic incentives
to its people to work hard and to be creative. To the individual
family this approach leads to a higher standard of living.
To the business firm it means increased markets and larger
profits. To our government it means increased effectiveness
and public support.
In short, too many Americans -- especially those who
have known only the affluent society -- are unaware of the
real source of economic growth in our country. The material
abundance, the freedoms of choice, the opportunities for
meaningful work are all largely the result of the creativity
and productivity of our free and competitive economic
-8system. This is the crucial theme that must be communicated
to all Americans until they understand it. The American
economy is the well spring of our Nation's basic strength in
every sphere -- political, social, military and economic. It
is the source of our present abundance and the basis of our
hopes for a better future. We can solve our recognized
problems best by preserving and improving -- by strengthening
rather than weakening -- our uniquely productive system.
And in so doing we will preserve our other freedoms that
have made America so great.
The United States and every other nation, must decide
between economic policies that will create the .proper
environment for sustained stable economic growth or the return to
stop-and-go experiments with stimulus and restraint that
have seriously disrupted their economies and led to inflation,
unemployment and lost output. After experiencing the worst
inflation in our peacetime history and the worst recession
in more than a generation, it is crucial that we choose
policies that will maintain the political, social and
economic balance necessary to preserve our great American
republic and the private enterprise system that is at its
heart the system of individual and economic freedom that has
given us the material, economic and social wellbeing we
enjoy today.
Yet we hear misleading political rhetoric that we can
achieve our basic economic goals without making the necessary
sacrifices required to produce and pay for the desired goods
and services. Our magnificent country is capable of achieving
any worthy goal it identifies. But we must face up to the
economic realities -- particularly the obvious point that
goods and services cannot be distributed to the consuming
public unless they are first produced. We have the human
and material resources necessary to operate our open and
competitive economic system to achieve our goals if we will
only create the proper environment. How well we make these
basic decisions will ultimately determine what future historians
will write about America -- and the kind of country our
children and grandchildren inherit.
But to find the answers... we must begin with the
correct questions. What has made this a great nation? What
has made people throughout the world talk about the American
Dream?
Has it been the land and our natural resources? We
have certainly been blessed with an abundance of resources.
But in the Soviet Union we see a land mass that is much
larger than our own and one which is equally well-endowed.
-9-
peop
Does our strength depend only on the qualities of our
people? We are clearly blessed with one of the largest and
most talented populations that the world has ever known. But
in China today we see a population that is four times as
large as our own, whose civilization at one time was
developed far in advance of the rest of the world. Yet
their present material standard of living and personal
freedoms fall woefully short of our own.
So while our land, resources and people have been
essential parts of the American story, there is a more
important factor that is too often missing in other countries •
the factor that is the real key to America's progress. That
crucial factor has been our national commitment to liberty
and individual dignity.
For two hundred years people have streamed to our
shores in search of various freedoms -- freedom of religion,
freedom of speech, freedom of the press, freedom of assembly,
and freedom to seek their fortunes without fear or favor of
the government. All of these freedoms are planted firmly in
our Constitution. But they have become such a familiar part
of our lives that I wonder whether we now take them too much
for granted.
There is nothing artificial about freedom, nor is there
any guarantee of its permanency. As Dwight Eisenhower once
said, "Freedom has its life in the hearts, the actions, and
the spirits of men, and so it must be daily earned and
refreshed -- else like a flower cut from its life-giving
roots, it will wither and die."
There are many ways this can happen, some of them very
slow and subtle. For example, there has been an accelerating
trend toward collectivist policies in the United States as
people have been persuaded that the problems of our society
have become so large that individuals can no longer cope
with them. Many Americans now expect the government to
assume responsibility for solving their problems and to do
things for them that they once did for themselves. Government
has been gradually cast into the role of trying to solve all
the difficult challenges of modern life.
-10That trend began to accelerate in the 1960's as politicians
and theorists promised the rapid solution of complex political,
economic and social problems and the end of economic cycles
based on the clever manipulation of government policies.
They failed to note that resources are always limited, even
in a Nation as affluent as ours. And so today the inflated
expectations and broken promises of the past have left us
with residue of disillusionment. Many young people are
skeptical about our basic institutions and I can't say that
I blame them.
International problems, the energy crisis, disappointing
harvests, excessive government regulations, wage and price
controls and thousands of other specific problems have
contributed significantly to unsatisfactory levels of inflation
and unemployment. But the steady underlying momentum has
been caused by the excessive economic stimulus provided by
the Federal Government for more than a decade.
For Example:
-- A quadrupling of the Federal budget in just 15
years;
-- A string of 16 budget deficits in 17 years;
-- And a doubling of the national debt in just 10 years
time.
The greatest irony of these misguided policies is that
they were based on the mistaken notion that they would
specifically help the poor, the elderly, the sick and the
disadvantaged. Yet when these stop-and-go government
policies trigger inflation and unemployment, who gets hurt
the most? The very same people the politicians claimed they
were trying to help -- the poor, the elderly, the sick and'
the disadvantaged.
Even more fundamentally, the last fifteen years have
seen an acceleration of the trend toward Big Government and
the diminishing of economic and personal freedoms in the
United States. The Federal Government has now become the
dominant force in our society. It is the biggest single
employer, the biggest consumer, and the biggest borrower.
Forty years ago, total government spending comprised approximately
10 percent of the gross national product; in 1976 that
figure will exceed 35 percent. If the government spending
trends of the last two decades continue, the total government
-11share of economic activity in the United States will be
approaching 60 percent by the year 2000. If the government
exercises such a dominating influence in the economy, it
will also control many of the personal decisions of its
citizens. For history shows that when economic freedom
disappears personal and political freedoms do not long
survive. The inextricable relationship between economic
freedom and personal freedom is often overlooked by
those who constantly seek to expand the powers of government,
but it is plain to see in many countries around the world
where these freedoms have been lost.
Unfortunately, there is no convenient scapegoat to
blame our problems on. As modern governments have usurped
the power to increasingly control our daily lives they have
done so with the best of intentions -- and the sincere
belief that they are the proper authority to determine and
then implement the ideals of society. But in the process
governments have sacrificed individual freedoms for a collective
system of rules needed to impose their view of what is best
for each of us. This behavior is merely a reflection of
what they honestly believe the people want. It is not "the
government" that we should blame -- that is a simplistic
excuse -- but the institutions of society, including the
colleges and universities, that have created an environment
in which equality of status is mistaken for equality of
opportunity and security -- and in which a false sense of
well being, is exchanged for personal freedom. As a result
there is a growing mood of frustration as public skepticism
increases about our ability to handle the problems of the
future. If this trend continues, most of the freedoms that
we cherish will not survive, for personal, political and
economic freedoms are all intertwined and cannot exist
alone. The great historian Gibbon noted this in writing of
ancient Athens:
In the end, more than they wanted freedom, they
wanted security. They wanted a comfortable life
and they lost it all -- security, comfort, and
freedom. When the Athenians finally wanted not
to give to society but for society to give to them,
when the freedom they wished for most was freedom
from responsibility, then Athens ceased to be free.
Our basic challenge then is to determine how much
personal freedom, if any, we are willing to give up in seeking the
so-called collectivist security. It is certainly not easy
to live with the uncertainties that exist in a free society
-12but the real personal benefits created are far superior to
any other system. It is this heritage of personal freedom
that has made America a land blessed above all others. To
protect this remarkable privilege is a goal worthy of our
greatest personal and institutional commitment.
Two hundred years ago, Americans had a choice to make:
servitude or freedom. Our ancestors chose freedom and
fought long and hard to win it.
On the threshold of our third century we again face an
important choice: between greater governmental, control
of our lives or preserving the system which has given us the
greatest prosperity, the highest standard of living and,
most importantly, the greatest individual freedom ever
enjoyed in history.
Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only the individual himself
can create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. It happens through universities like this, and in
labs and libraries and civic groups and companies across this
great land of ours where, every day, individuals with a
better idea are solving problems and creating new opportunities
What we call the American experience -- the American
story -- is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document or charismatic leader, is what
sums up the true meaning and purpose of America. And that is
what we must preserve.
Thank you.
oOo
FOR IMMEDIATE RELEASE
December 2, 1976
BOOK-ENTRY SECURITIES TO REPLACE ENGRAVED CERTIFICATES
IN DECEMBER 14 ISSUE OF 52-WEEK TREASURY BILLS
In
tenders
issued,
auction
a separate announcement today, the Treasury is inviting
for the first series of 52-week Treasury bills to be
with a limited exception, in book-entry form only. The
will be held on December 8, 1976.
During recent months, the Treasury and the Federal Reserve
Banks have made considerable efforts to acquaint investors and
financial institutions with details of the planned conversion
to an exclusive book-entry system for Treasury securities. A
number of public meetings and special briefings were held in
various parts of the country, and the reactions were such as
to convince the Treasury that partial implementation could
begin.
The Treasury has made an exception to its exclusive bookentry offering of 52-week bills for investors who are still
required by law or regulation to hold securities in physical
form. Definitive bills in the $100,000 denomination will be
available to such investors for a limited period of time.
Although the Treasury will not initially charge any fee
for establishing or maintaining book-entry accounts on its
records, it reserves the right to impose charges at a later
date for services provided after original issue on future
Treasury offerings of book-entry securities.
The Treasury plans to convert the regular weekly issuance
of 26-week bills to full book-entry form beginning in early
June 1977, with the conversion of 13-week bills to follow in
September 1977.
A notice of proposed rule making on the Treasury regulations which are to govern the new book-entry system was
published in the Federal Register on November 1, 1976.
Publication of the final regulations, which are not expected
to differ materially from the proposed rules, is expected
shortly.
WS-1203 oOo
FOR IMMEDIATE RELEASE
FRIDAY, DECEMBER 3, 1976
CONTACT: PRISCILLA CRANE (202) 634-5248
ANTIRECESSION PAYMENTS MADE TO 1,828 LOCAL
GOVERNMENTS IN FIVE STATES
Local units of general government in the States of
Connecticut, Kentucky, Vermont, West Virginia and Wisconsin
were sent checks representing first and second quarter
payments of antirecession fiscal assistance money by the
Treasury Department's Office of Revenue Sharing today.
A total of $8,423,696 is being distributed to 1,828
units of government within these States.
Funds for identifiable units within these States which
have unemployment rates generated for purposes of the CETA
manpower program and all eligible local governments within
other States were paid last month. However, the governments
of the States whose local governments are being sent checks
today had requested that the allocations of funds be based
on unemployment rates certified by State employment security
agencies, rather than on figures supplied by the Bureau of
Labor Statistics of the U. S. Department of Labor.
Title II of the Public Works Employment Act of 1976
(P.L. 94-369) which authorizes the antirecession fiscal .
assistance program permits States to submit data certified
by their State employment security agencies within certain
time limits.
Today's issuance of funds brings to $540,159,329 the
total amount of money distributed to 19,505 units of
government thus far under the new antirecession program.
The law authorizes distribution of a total of $1.25 billion
over a five-quarter period, from July 1, 1976 through
September 30, 1980. The money is allocated according to a
formula in the law which relates individual governments'
unemployment rates to their Federal fiscal year 1976
general revenue sharing allocations.
WS-1204
The third quarterly payment of antirecession funds
will be made in January 1977.
Contact: Linda F. Potts
Extension: 2951
December 3, 1976
FOR IMMEDIATE RELEASE
TREASURY DEPARTMENT ANNOUNCES
DISCONTINUANCE OF ANTIDUMPING INVESTIGATION
ON AUTOMOBILE BODY DIES FROM JAPAN
The Treasury Department announced today the final
discontinuance of an antidumping investigation on imports
of automobile body dies from Japan. Notice of this action
will appear in the Federal Register of December 6, 1976.
Price comparisons on almost 80 percent of imports
of the subject merchandise from Japan have yielded minimal
margins. The predominant exporter has submitted a written
statement of assurances that future sales to the United
States will be made at not less than fair value.
Imports of the subject merchandise from Japan during
the period January through September 1976 were valued at
roughly $2.5 million.
o 0 o
WS-1205
\t Bepanmentof theJREASURY
GTON, D.C. 20220
TELEPHONE 964-2041
December 6, 1976
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,300 million of 13-week Treasury bills and for $3,400 million
of 26-week Treasury bills, both series to be issued on December 9, 1976,
were opened at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
13-week bills
maturing March 10, 1977
26-week bills
maturing j.tnP Q} 1Q77
Price
Discount
Rate
Investment
Rate 1/
Price
98.899
98.889
98.892
4.356%
4.395%
4.383%
4.47%
4.51%
4.49%
97.721
97.716
97.717
Discount
Rate
4.508%
4.518%
4.516%
_
Investment
Rate 1/
4.
4.
4.
Tenders at the low price for the 13-week bills were allotted
Tenders at the low price for the 26-week bills were allotted 90%
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
$
17,995,000
Boston
3,722,610,000
New York
23,330,000
Philadelphia
29,020,000
Cleveland
19,055,000
Richmond
29,330,000
Atlanta
213,885,000
Chicago
54,505,000
St. Louis
31,715,000
Minneapolis
27,930,000
Kansas City
26,265,000
Dallas
370,570,000
San Francisco
Accepted
$
17,995,000
1,849,310,000
22,115,000
28,420,000
14,055,000
28,330,000
88,035,000
33,505,000
16,715,000
27,430,000
15,315,000
160,600,000
Received
Accepted
$
46,565,000
5,582,135,000
5,985,000
212,255,000
59,930,000
20,840,000
342,745,000
59,750,000
48,500,000
14,195,000
19,560,000
954,005,000
$
6,565,000
2,706,885,000
5,985,000
9,865,000
6,930,000
15,140,000
16,375,000
14,150,000
5,500,000
14,195,000
13,560,000
587,505,000
Treasury
TOTALS
$4,566,210,000
$2,301,825,000 a/ $7,366,465,000
£/lncludes $318,025,000 noncompetitive tenders from the public.
b/lncludes $144,040,000 noncompetitive tenders from the public.
I/Equivalent coupon-issue yield.
WS-1206
$3,402,655,000 b/
Contact: Carolyn M. Johnston
(202) 634-5377
FOR IMMEDIATE RELEASE
DECEMBER 6, 1976
SHELDON W. FANTLE NAMED NEW SAVINGS BONDS CHAIRMAN FOR
DISTRICT OF COLUMBIA
Mr. Sheldon W. Fantle, President and Chief Executive
Office of Peoples Drug Stores, Inc., has been appointed
Volunteer Chairman for the Savings Bonds Program in the
District of Columbia by Secretary of the Treasury
William E. Simon. The appointment is effective immediately.
Mr. Fantle will head a committee of business, banking,
labor, government and media leaders who, in cooperation
with the U. S. Savings Bonds Division, will assist in promoting bond sales in the area.
Mr. Fantle is a graduate of Ohio State University
and the University of Cincinnati. He joined the Schuman
Drug Company in Canton, Ohio as a pharmacist in 1951 and
became Executive Vice President and General Manager in
1956. In 1970 he became President and Chief Executive
Officer of the Lane Drug Company, Toledo, Ohio and in 1973
he was promoted to the position of President of the Lane
Drug Corporation. In 1975 he assumed his present responsibilities with Peoples Drug Stores, Inc.
Mr. Fantle is an active participant in civic and
association work. He has previously served as the U. S.
Savings Bonds Geographic Chairman for the District of'
Columbia and as a member of the U. S. Industrial Payroll
Savings Committee. He is a board member of the Washington
Board of Trade and National Association of Chain Drug
Stores, and has served as chairman of the Health, Education and Welfare Commission of the Ohio State Pharmaceutical Association. He is also a member of the Board
of Directors of the Washington Hospital Center, of the
Professional Football Hall of Fame, Canton, Ohio and of
Siena Heights College, Adrian, Michigan.
WS-1207
oOo
mmtottheTREASURY
.C. 20220
TELEPHONE 964-2041
December 6, 1976
FOR IMMEDIATE RELEASE
GENERAL COUNSEL RICHARD R. ALBRECHT
RESIGNS TO JOIN BOEING CORPORATION
Treasury Secretary William E. Simon today announced
the resignation of Richard R. Albrecht as General Counsel
of the Treasury Department. Mr. Albrecht will join the
Boeing Corporation as Vice President-Counsel. His
resignation was effective December 2, 1976.
Upon making the announcement, Secretary Simon cited
Mr. Albrecht's "distinguished service to the Nation" through
"exceptional service rendered to the Treasury and to the
United States during more than two years as General Counsel."
"Although your departure from the government is a loss,
I welcome this opportunity to express my appreciation for
your many significant contributions in providing advice and
counsel to the Treasury Department consonant with the
highest traditions of the legal profession," Secretary Simon
said.
A native of Hartley, Iowa, Mr. Albrecht is married to
the former Constance Berg. They have four sons.
oOo
WS-1208
FOR RELEASE AT 4:00 P.M.
December 7, 1976
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 $5,300 million, or
thereabouts, to be issued December 16, 1976,
as follows:
91-day bills (to maturity date) in the amount of $2,100 million, or
thereabouts, representing an additional amount of bills dated September 16, 1976,
and to mature
March 17, 1977
(CUSIP No. 912793 F2 7 ) , originally issued in
the amount of $3,103 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $3,200 million, or thereabouts, to be dated December 16, 1976,
and to mature
June 16, 1977
(CUSIP No. 912793 G7 5 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
December 16, 1976,
outstanding in the amount of $5,307 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,631 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standa/rd time, Monday, December 13, 1976.
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
WS-12 09
(0VER)
-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 $500,000 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 or at the Bureau of the Public Debt
on December 16, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 16, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
oOo
WmmWmmmWMmwtmmm
[fie Department of
WASHINGTON, DX. 20220
theTREASURY
TELEPHONE 964-2041
December 7, 1976
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S 132-DAY BILL AUCTION
Tenders for $2,000 million of 132-day Treasury bills to be issued
on December 10, 1976, and to mature April 21, 1977, were opened at the
Federal Reserve Banks and Treasury today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Price
High
Low
Average -
98.379
98.360
98.369
Discount Rate
Investment Rate
(Equivalent Coupon-Issue Yield)
4.421%
4.473%
4.448%
4.
4.
4.
Tenders at the low price were allotted 35%
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
1/
Location
Received
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$
8,900,000
3,594,115,000
50,385,000
125,670,000
16,010,000
2,100,000
387,385,000
31,375,000
7,350,000
22,985,000
15,680,000
432,685,000
$
8,900,000
1,546,365,000
50,385,000
75,670,000
6,010,000
2,100,000
120,635,000
15,375,000
7,350,000
19,985,000
10,680,000
136,885,000
Treasury
40,000
40,000
TOTAL
$4,694,680,000
Includes $27,675,000 noncompetitive tenders.
WS-1210
$2,000,380,000 1/
vdepartmentoftheTREASURY
TON, D.C. 20220
MI r «
TELEPHONE 964-2041
December 7, 1976
FOR IMMEDIATE RELEASE
Secretary Simon, following a meeting with Italian
Prime Minister Andreotti, expressed his judgment that the
program that the Prime Minister has designed will lead
to the stabilization and early restoration of orderly
growth of the Italian economy. In particular he noted
that the Italian Government has not only created a well
designed program, but has also made extensive progress
toward the implementation of that program. Secretary
Simon said that he looks forward to the completion of
successful negotiations with the International Monetary
Fund concerning economic and financing arrangements for
Italy.
Secretary Simon also commented on the importance of
the development in recent months of a broader consensus
among the Italian people in support of the Government's
approach to the economic situation.
Secretary Simon said he and his colleagues would in
the weeks ahead be exploring ways in which U.S. support
could be made tangible in order to assist Italy during the
implementation of its economic program.
#
WS-1211
#
#
FOR IMMEDIATE RELEASE
REMARKS BY THE HONORABLE WILLIAM E. SIMON
SECRETARY OF THE TREASURY
BEFORE THE
RELIGIOUS HERITAGE FOUNDATION
DECEMBER 7, 1976
It is a pleasure and an honor for me to address this
breakfast meeting of the Religious Heritage Foundation. As
Americans many of us tend to think of our heritage mainly in
political terms -- basic freedoms and rights that most other
peoples around the world have never been able to achieve.
But underlying our political freedoms - and providing a
moral basis without which they would be meaningless - lies
our religious heritage. Without our Judeo-Christian spiritual
tradition, we could never have evolved a truly democratic
heritage. For it is the soul of man that yearns for freedom,
and, as history has shown us time and again, societies that
deny existence of man's soul also end by denying man his
freedom.
Without the moral anchor of a spiritual heritage,
freedom soon degenerates into anarchy and anarchy soon
yields to tyranny -- imposed order and restraint from above
to replace the lost self-restraint and respect for others
that only a sound moral and religious heritage can teach.
What applies generally to political freedom applies
even more specifically to economic freedom. A free market
place deprived of moral and ethical values soon degenerates
into a jungle. And when the brutality and the chaos of the
jungle become unbearable, people ultimately resort to government
control. Inevitably, they opt for order over anarchy even
when the order is brutal, arbitrary and oppressive. The
freedom they once cherished is then lost. But, all to
often, that freedom had already been distorted beyond recognition
once opportunism got the better of ethics in the public
forum and the public marketplace.
In our two hundred years as a nation, we have managed
to preserve both our religious heritage and our freedoms. We
have achieved the greatest prosperity and the highest
standard of living known to man and, at the same time, we
WS-1212
have
also created a democratic society that has grown freer
-2with each succeeding generation. To me, this is no coincidence -- and it underscores the importance of organizations like yours.
Because I feel so strongly about the mission of the
Religious Heritage Foundation, I was particularly gratified
to learn that last night you presented an award to Mr. Ivan
Hill of American Viewpoint. A year ago, Ivan Hill and I met
for the first time and he told me about an exciting new
project -- a book on ethics and economic freedom. I was
immediately impressed with the timeliness and importance of
the theme and I was honored when Ivan invited me to contribute the concluding chapter.
The result of Ivan's labors is an outstanding book,
The Ethical Basis of Economic Freedom and, even though I am
one of the 21 contributors to it, I feel that I can recommend
it to you in good conscience. I can think of no other work
that so exhaustively and comprehensively examines the link
between ethics and economic freedom -- and I can think of no
time in our history when such a book has been more needed
than the present.
For, make no mistake about it, free enterprise is in
trouble. Our system is under attack today as never before.
And much of the trouble is of our own making. Like many
self-inflicted illnesses, the malaise affecting free enterprise
can also be self-cured. But the cure will not happen until
and unless we muster a strong ethical revival in the private
sector.
In the last few months, in the heat of a national
political campaign, this sort of long term consideration
tended to be overlooked. But now that the dust has
finally settled on what often seemed like the longest, most
tedious election race in our history, it is time for us to
focus on the real issues rather than the rhetorical ones.
The political cast in Washington -- in the White House,
in the Congress and in the bureaucracy -- has undergone and
will continue to undergo many changes. New faces will
replace old ones and new slogans and labels will sweep away
the old. But all of this dramatic surface change will be
more apparent than real. As the old French saying puts it,
"The more things change, the more they remain the same."
For the one thing that will not be swept away is the basic
set of problems, challenges and opportunities facing our
country; and, in the last analysis, it will be these factors.,
and the way we react to them, that will determine America's
future.
-3We already know from painful experience that bigger,
more costly government is not the answer to our problems.
Yet we also know that, time and again, unless the private
sector can come up with solutions of its own, the people and
the politicians will be stampeded into bigger and bigger
doses of government spending and government controls as a
desparate last resort to social and economic ills.
Bigger government isn't the solution -- it's actually
the problem. But, like some of the dubious patent medicines
of the last century that contained liberal doses of alcohol
and laudanum, it can become habit forming.
It is a historic fact that only a better functioning,
more honest and efficient private sector can create the
jobs, the opportunities and the new technical breakthroughs
needed to build a better society. We must reduce the
explosive growth of government, the increasing shackles of
government regulation and the ever heavier tax burden on
working Americans. To do this, however, we must first
restore the confidence of the American people in the free
enterprise mechanism that has been the foundation of our
progress and our prosperity from the start.
But the American people will not believe in the system
until their faith is restored in the men and the mores
behind the corporate labels -- in the fundamental morals and
ethics of America's business leaders.
And before we can convince the general public of the
efficacy of the private sector we must re-convince ourselves
and take a long, hard look at the moral as well as the
material balance sheet.
Too many within the ranks of the private sector have
lost sight of the moral side of capitalism. And too many
think of rigorous ethical standards as a costly luxury
rather than an indispensible part of a healthy free economy.
This is nothing short of folly. As that wily and
eminently practical old observer of human nature, Benjamin
Franklin once pointed out, "If the rascals knew the advantages
of virtue, they would become honest men out of rascality."
In the long run, honesty is not only the best business
policy but the only one compatible with a free market and
open, honest competition.
-4Corruption, whether it involves bribes to secure government contracts overseas, illegal contributions to political
candidates here at home, or any other form of graft, payola
or fleecing of the customer, hampers the efficient functioning
of the marketplace. It results in higher prices, lessened
responsiveness to the consumer, and lower quality of goods
and services. Even worse, it also adds to the subtle poisonin
of public confidence in all businesses and businessmen, not
just the tiny dishonest minority.
And public confidence - the trust of men and women in
each other and in their social institutions -- is the glue
that holds a civilized society together. History teaches us
that no free society or free economy can long survive
without such trust, and that trust must be founded on an
ethical base. It is only through a shared moral foundation -a set of binding ground rules for fair, decent conduct -that free associations, be they social, diplomatic or
commercial, can flourish and endure.
The real question facing the American business community
today is not whether it can "afford" stronger ethical standard
but how much longer it can go on without them.
In our era, when the main political struggle is between
controlled societies and free ones (and, on the economic
front, between controlled economies and free ones), nothing
is more vital to the survival of our economic way of life
than a rigorous free enterprise ethic and business leaders
with the courage, the vision and the energy to stand up for
it.
No one is more aware of this than the opponents of free
enterprise. They know full well that their systems have
never provided a comparable level of abundance and shared
prosperity so they long ago realized that the only way to
undermine free enterprise is from within. The foes of free
enterprise cannot destroy it -- but its own practitioners,
if they lack foresight and responsibility, can lead it down
the path to suicide.
In August of 1971, just a few months before he was
appointed to the Supreme Court, one of our country's most
gifted legal thinkers turned his attention to the problems
facing the American Free Enterprise System. In a confidential
memorandum to the U.S. Chamber of Commerce Lewis F. Powell
warned that "business and the enterprise system are in deep
trouble, and the hour is late.
-5"No thoughtful person can question that the American
economic system is under broad attack," Justice Powell
wrote. "This varies in scope, intensity, in the techniques
employed and in the level of visibility.
"There always have been some who opposed the American
system, and preferred socialism or some form of statism
(communism or fascism). Also there always have been critics
of the system, whose criticism has been wholesome and
constructive so long as the objective was to improve rather
than to subvert or destroy.
"But what now concerns us is quite new in the history
of America. We are not dealing with sporadic or isolated
attacks from a relatively few extremists or even from the
minority socialist cadre. Rather, the assault on the
enterprise system is broadly based and consistently pursued.
It is gaining momentum and converts."
Justice Powell's memorandum was subsequently published
in its entirety in the National Chamber's Washington Report
and I would urge any of you who have not yet seen it to
obtain a copy. In a nutshell, Justice Powell traces the
attack on our economic system to its basic source - vocal
and often unanswered minorities in the educational community
who in turn produce crop after crop of graduates imbued with
an anticapitalist bias which they then reflected in teaching,
literature, the clergy, the media and every other phase of
society.
But the problem is not really the attackers, as Justice
Powell points out. The problem is the spinelessness and
apathy of the business community which has ignored this
problem for too long and has failed miserably to get its
side of the story across to the American people, especially
young Americans.
Justice Powell goes on to list a series of thoughtful
suggestions to remedy this imbalance -- activities the
business community can undertake on the campus, in the
media, in the publishing world, and in the courtroom -- and
I am happy to say that the Chamber and many individual
business leaders have begun to act on some of them.
But before the business community as a whole can make
adequate progress on this front, it must come to grips with
itself. There are simply too many gutless wonders hiding in
corporate executive suites -- people concerned only with
next year's profits when they should be worried about
-6the fate of the next generation and beyond; people afraid of
being attacked and afraid of standing up to defend the
system that has given them so much; people who talk a good
flight but run for government subsidized cover everytime an
economic storm cloud appears on the horizon; people more
interested in a little temporary peace and quiet than in the
kind of world their children will inherit.
Before we can expect others to believe in the system,
we must believe in it ourselves, and this belief must be
translated into clear, tangible actions that demonstrate a
strong sense of ethics that is not only real but clearly
visible to the public.
The need for statesmanship in American business today
is every bit as great as the need for statemanship in our
public life. And unless this need is filled soon, our free
economic system may perish.
What greater irony -- what greater tragedy -- could
befall our children and our children's children than to lose
the key to America's unequalled freedom and abundance?
The private sector produces the food we eat, the goods
we use, the homes we live in. It is the source of five out
of every six jobs in America, and it provides directly and
indirectly almost all the resources for the rest of the jobs
in our all -too-rapidly expanding public sector. It is the
foundation for defense security for ourselves and most of
the free world. It has been, and will continue to be, the
difference between life and death for countless undernourished
people around the globe.
It is the productive base that pays for government
spending to aid the elderly, the jobless, the poor, the
dependent, and the disabled. Indeed, far from being the
inhuman caricature painted by so many political demagogues,
the American private sector is in reality the mightiest
engine for social progress and individual improvement ever
created.
It is no accident or blind fate that has made America
so rich and abundant a land. You can't legislate inventiveness or prosperity; we have no more born geniuses or natural
inventors and industrialists than any other country. But we
do have a free system in a world where many other countries
are not free. And, through it, we encourage the talent that
lies within individuals in a way that most other societies
have failed to do.
-7The result has been not just profits for the few, but a
better and freer life for the many. Isn't that the acid
test -- the bottom line -- of so much of the idealogical
argument and speculation going on today? Compare the systems
ours works. And, in large measure, it works because of
people like you gathered here this morning - people who
believe in the moral value of a way of life that is uniquely
American.
My time at the Treasury will soon be over. But leaving
the Treasury does not mean abandoning my deep-seated concerns
and translating them into personal action.
I don't regret a moment of the time I have spent in
Government. It's been a very rich and rewarding experience.
If I have tilted at a few windmills, I think I have also
helped to fight a few giants - double digit inflation, the
energy crisis and the political panic mentality that cries
out for more controls and tampering with the economy instead
of allowing the enormous self-correcting mechanisms of the
market place to take effect.
But the more I have seen of government, the more I
recognize the limits of what it can do for people -- as
opposed to what it can do t£ them.
Government can change the law, but it cannot change
human nature. Government can impede or ease the way for
individual initiative. But only the individual himself can
create, can change, can brave new horizons.
More than anywhere else, that is what happens here in
America. It happens through organizations like this, and in
schools and labs and libraries and civic groups across this
great land of ours where, every day, individuals with a
better idea and a moral commitment to the system are solving
problems and creating new opportunities.
What we call the American experience - the American
story -- is the sum total of those individual contributions.
And each of us is a small but important part of it. That,
more than any great document of charismatic leader, is what
sums up the true meaning and purpose of America. And that
is what we must preserve.
Thank You.
0(0((0))0)0
FOR IMMEDIATE RELEASE
Contact: Robert Standard
Extension: 2323
December 8, 1976
TREASURY ANNOUNCES
COUNTERVAILING DUTY INVESTIGATION
AGAINST IMPORTS OF CORDAGE OF
MAN-MADE FIBER FROM KOREA
Under Secretary of the Treasury Jerry Thomas
announced today a formal notice of receipt and
initiation of an investigation of imports of cordage
of man-made fibers from the Republic of Korea.
Announcement of this act will be published in the
Federal Register of December 9, 1976.
Under the U.S. Countervailing Duty Law, the
Secretary of the Treasury is required to assess an
additional (countervailing) duty equal to the amount
of the bounty or grant that has been found to be paid
or bestowed on the imported merchandise. The manmade fiber cordage specified in the petition is
classifiable under item 316.6020 of the Tariff Schedules
of the United States. This action is taken pursuant
to allegations by a petitioner that the Korean Government is bestowing a variety of subsidies on the
manufacture and exportation of cordage. A preliminary
determination as to the existence or non-existence of
a bounty or grant must be made by no later than
April 28, 1977. A final determination must be issued .
no later than October 28, 1977.
Imports of cordage in 1975 were approximately
$100,000 and $200,000 during the first seven months
of 1976.
* * *
WS-1213
SB
^Department of theTREASURY
WASHINGTON, D.C. 20220
!^i
±.
TELEPHONE 964-2041
FOR IMMEDIATE RELEASE
December 8, 1976
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $3,253 million of 52-week Treasury bills to be dated
December 14, 1976, and to mature December 13, 1977, were accepted at the
Federal Reserve Banks and Treasury today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS: (Excepting 1 tender of $500,000)
Price
High - 95.258
Low
- 95.218
Average - 95.240
Discount Rate
4.690%
4.729%
4.708%
Investment Rate
(Equivalent Coupon-Issue Yield)
4.93%
4.97%
4.95%
Tenders at the low price were allotted 6%.
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY;
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Received
Accepted
$ 10,135,000
5,599,555,000
90,735,000
170,865,000
86,380,000
2,625,000
305,335,000
43,550,000
66,240,000
6,845,000
18,335,000
287,410,000
$ 3,135,000
2,681,975,000
90,735,000
70,865,000
74,860,000
2,325,000
145,535,000
17,050,000
66,240,000
3,845,000
12,835,000
83,910,000
$6,688,010,000
$3,253,310,000
Treasury
TOTAL
The $3,253 million of accepted tenders includes $ 69 million of
noncompetitive tenders from the public and $ 999 million of tenders from
Federal Reserve Banks for themselves and as agents of foreign and
international monetary authorities accepted at the average price.
An additional $251 million of the bills will be issued to Federal
Reserve Banks as agents of foreign and international monetary authorities
for new cash.
WS-1214
0) r-i
:ederal financing bank
-\
WASHINGTON, D.C. 20220
FOR IMMEDIATE RELEASE
December 9, 1976
SUMMARY OF LENDING ACTIVITY
November 1 - November 15, 1976
Federal Financing Bank lending activity for the period
November 1 through November 15, 1976, was announced as follows
by Roland H. Cook, Secretary:
On November 1, the FFB made an advance to the Chicago,
Rock Island and Pacific Railroad Company in the amount of
$2,471,800. The loan matures June 21, 1991, and bears interest at a rate of 7.785%. The loan is guaranteed by the Depart
ment of Transportation.
The National Railroad Passenger Service (Amtrak) made
the following drawings against Note #7:
Date
Amount
Maturity
11/1
$15,000,000
12/31/76
Interest
Rate
5.099%
11/4
10,000,000
12/31/76
5.020%
5,000,000
12/31/76
5.144%
11/12
On November 15, Amtrak rolled over Note #8 in the amount
of $5 million. The new maturity of the loan is February 14,
1977. The interest rate is 5.132%. Amtrak borrowings from
the Bank are guaranteed by the Department of Transportation.
The Student Loan Marketing Association (Sallie Mae) refinanced the following amounts on maturing loans:
Interest
Rate
Date
Amount
Maturity
11/2
$20,000,000
2/1/77
5.116%
11/9
20,000,000
2/8/77
5.146%
Sallie Mae borrowings are guaranteed by the Department of
Health, Education, and Welfare.
WS-1215
- 2The Federal Financing Bank made loans to the following
utility companies guaranteed by the Rural Electrification
Administration:
Interest
Date Borrower
Amount
Maturity
Rate
11/1 United Pwr. Assn.
$7,000,000
12/31/10
7.871%
11/1 Cooperative Pwr.
Association
7,000,000
12/31/10
7.871%
X
11/1 Oglethorpe Elect.
Membership
11/10 Seminole Elect. Coop.
11/10 Colorado-Ute Elect.
Association
5,756,000
12/31/10
7.871%
53,000
12/31/10
7.914%
:V
3,500,000
12/31/10
11,000,000
12/31/10
7.914%
11/12 Alabama Elect. Coop. 13,540,000
12/31/10
7.91,2%
11/12 Big Rivers Elect.
Corporation
1,710,000
12/31/10
7.912%
11,580,000
12/31/10
7.912%
5,000,000
12/31/10
7.874%
161,000
12/31/10
7.874%
11/15 United Pwr. Assn.
9,000,000
12/31/10
7.874%
11/15 Cooperative Pwr.
Association
8,000,000
12/31/10
7.874%
11/15 Central Iowa Pwr.
Coop.
1,247,000
12/31/10
7.874%
11/10 Western Farmers
Electric
11/12 Arizona Elect. Pwr.
Coop
11/15 Associated Elect.
Coop.
11/15 Southern Tele. Co.
7.9i4%
3
Interest payments on the above REA loans are made on a
quarterly basis.
On November 12, the Tennessee Valley Authority borrowed
$75 million. The maturity of the loan is February 28, 1977.
The interest rate is 5.167%.
- 3The FFB purchased the following notes from the Department
of Health, Education and Welfare (HEW):
Date
Series
11/2
Interest
Rate
Amount
Maturity
E
$1,300,000
7/1/00
7.754%
11/12
E
7,580,000
7/1/00
7.810%
11/12
F
895,000
7/1/01
7.812%
1 HEW had previously acquired the notes which were issued
by various public agencies under the Medical Facilities Loan
Program. The notes purchased by the FFB are guaranteed by HEW.
i
The General Services Administration sold the following
Participation Certificates to the FFB:
Interest
Date
Series
Amount
Maturity
Rate
11/4 M $2,809,190.70 7/31/03 7.911%
11/12 L 1,340,610.29 11/15/04 7.974%
On November 12, the Government of the Philippines borrowed
from the Bank $2,160,000 against Note #3. The loan matures
June 30, 1982, and bears interest at a rate of 6.664%. The loan
is guaranteed by the Department of Defense under the Foreign
Military Sales Act.
The Federal Financing Bank loans outstanding on November 15,
1976, totalled $26.8 billion.
oOo
FOR IMMEDIATE RELEASE
December 10, 1976
TREASURY ANNOUNCES SCHEDULE CHANGES FOR
REGULAR TREASURE BILL AUCTIONS DUE TO HOLIDAY SEASON
In a separate press release today, the Treasury announced the amounts
and auction date for the regular 13 week and 26 week bills to be issued
December 23, 1976, to refund bills maturing that day. The auction of
these bills would normally have been held Monday, December 20, 1976,
but, because of the holiday season, the announcement was made today to
insure investors sufficient time to receive and respond to the offering.
Other Treasury bill offerings in December are also affected.
Therefore, the timing of regular Treasury bill offerings remaining
in the month of December is as follows:
Announcement Auction Issue
13 and 26 week bills Friday Dec. 10, Friday, Dec. 17, Thursday, Dec 23,
13 and 26 week bills Wednesday, Dec. 15, Thursday, Dec. 23, Thursday, Dec. 30,
13 and 26 week bills Tuesday, Dec. 28, Monday, Jan. 3, Thursday, Jan. 6,
52-week bills Wednesday, Dec 29, Wednesday, Jan. 5, Tuesday, Jan. 11,
WS-1216
UDepartmentoftheTREA$URY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 12:00 NOON December 10, 1976
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 $5,200 million, or
thereabouts, to be issued December 23, 1976, as follows:
91-day bills (to maturity date) in the amount of $2,100 million, or
thereabouts, representing an additional amount of bills dated September 23, 1976,
and to mature
March 24, 1977
(CUSIP No. 912793 F3 5), originally issued in
the amount of $ 3,105 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $ 3,100 million, or thereabouts, to be dated December 23, 1976,
and to mature June 23, 1977
(CUSIP No. 912793 G8 3).
The bills will be issued for cash and in exchange for Treasury bills maturing
December 23, 1976,
outstanding in the amount of $5,207 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,890 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standard time, Friday, December 17, 1976.
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
(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 $500,000 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 or at the Bureau of the Public Debt
on December 23, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 23, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
oOo
DATE: pecember_13i_1976_.
TREASURY BILL RATES
26-WEEK
15-WEEK
LAST WEEK:
¥.3f3%
TODAY: ,
¥.3(QQ
%
HIGHEST SINCE
LOWEST SINCE
V.33r,1
v ^ y fa
-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 $500,000 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 or at the Bureau of the Public Debt
on December 23, 1976,
in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 23, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of bills
(other than life insurance companies) issued hereunder must include in his Federal
ipcor-e 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, or
from the Bureau of the Public Debt.
oOo
K
[kDepartmentoftheTREASURY
mk
TELEPHONE 964-2041
WASHINGTON, D.C. 20220
S^ Oy
FOR IMMEDIATE RELEASE
K
.-•-
December 13, 1976
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $2,100 million of 13-week Treasury bills and for $3,200 million
of 26-week Treasury bills, both series to be issued on December 16, 1976,
were accepted at the Federal Reserve Banks and Treasury today. The details are
as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing March 17, 1977
Price
High
Low
Average
98.900
98.895
98.898
26-week bills
maturing June 16. 1977
Discount
Rate
Investment
Rate 1/
Price
4.352%
4.371%
4.360%
4.46%
4.48%
4.47%
97.733
97.712
97.721
Discount
Rate
4.484%
4.526%
4.508%
Investment
Rate 1/
4.
4.
4.
Tenders at the low price for the 13-week bills were allotted 53%,
Tenders at the low price for the 26-week bills were allotted
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS AND TREASURY:
Location
Received
$
19,540,000
Boston
3,834,765,000
New York
16,185,000
Philadelphia
33,620,000
Cleveland
19,010,000
Richmond
35,630,000
Atlanta
201,960,000
Chicago
56,245,000
St. Louis
24,960,000
Minneapolis
40,450,000
Kansas City
27,895,000
Dallas
245,910,000
San Francisco
Treasury
TOTALS
30,000
$4,556,200,000
Accepted
: Received
$
16,740,000 :$
6,180,000
1,740,505,000 : 5,151,080,000
16,185,000
5,145,000
31,310,000 :
110,070,000
14,930,000 :
11,200,000
31,555,000 ,:
13,525,000
42,690,000 :
181,620,000
28,010,000 :
44,885,000
6,960,000
23,630,000
37,045,000 :
14,890,000
18,895,000 :
15,865,000
115,610,000 :
213,250,000
30,000
:
30,000
$2,100,465,000 a/: $5,791,370,000
includes $ 334,830,000 noncompetitive tenders from the public.
^/includes $ 133,820,000 noncompetitive tenders from the public.
1/Equivalent coupon-issue yield.
fe-1^17
Accepted
$
6,180,000
2,952,280,000
5,145,000
10,070,000
8,840,000
13,525,000
73,020,000 *
23,385,000
8,630,000
12,890,000 *
14,865,000
72,250,000
30,000
$3,201,110,000 b/
Die Department of theTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
December 13, 1976
TREASURY TO AUCTION $3,000 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $3,000 million of
2-year notes to refund $2,017 million of notes held by the public
maturing December 31, 1976, and to raise $983 million new cash.
Additional amounts of these notes may be issued at the average price
of accepted tenders to Government accounts and to Federal Reserve
Banks for their own account in exchange for $265 million maturing
notes held by them, and to Federal Reserve Banks as agents of foreign
and international monetary authorities for new cash onlyDetails about the new security are given in the attached highlights
of the offering and in the official offering circular.
Attachment
WS-1218
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED DECEMBER 31, 1976
December 13, 1976
Amount Offered:
To the public
$3,000 million
Description of Security:
Term and type of security
2-year notes
Series and CUSIP designation
Series U-1978
(CUSIP No. 912827 GG 1)
Maturity date
December 31, 1978
Call date
No provision
Interest coupon rate
To be determined based on the
average of accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
June 30 and December 31
Minimum denomination available
$5, 000
Terms of Sale:
Method of sale
Yield auction
Accrued interest payable by investor
See Settlement dates No. 2 below
Preferred allotment
Noncompetitive bid for
$1,000,000 or less
Deposit requirement
5% of face amount
Deposit guarantee by designated institutions
Acceptable
Key Dates:
Deadline for receipt of tenders
Monday, December 20, 1976,
by 1:30 p.m., EST
Settlement dates (final payment due)
1.
Offices that will be open December 31, 1976
a) cash or Federal funds
b) check drawn on bank within FRB
district where submitted
c) check drawn on bank outside FRB
district where submitted
Offices closed on December 31, 1976
(The Bureau of the Public Debt and the FRB's
of Minneapolis, Dallas, El Paso, Houston,
San Antonio and Little Rock)
a) cash, Federal funds, or a check in
collected form, plus three days
nc c rue
_ _ A A". 1 .^ 6 ^
.T.Trr.T.T."
b) maturing Treasury securities
c) cash, Federal funds or a check in
collected form
Delivery ^ate for coupon securities
Friday, December 31, 1976
Tuesday, December 28, 1976
Monday, December 27, 1976
2.
Monday, January 3, 1977
Monday, January 3, 1977
Thursday, December 30, 1976
Friday, December 31, 1976
FOR IMMEDIATE RELEASE
Contact: J.C. Davenport
Extension 29 51
December 14, 19 76
WITHHOLDING OF APPRAISEMENT ON
ROUND HEAD STEEL DRUM PLUGS
FROM JAPAN
The Treasury Department announced today a six-month
withholding of appraisement on round head steel drum plugs
from Japan, pending determination as to whether the subject
merchandise is being sold at less than fair value within
the meaning of the Antidumping Act, 19 21, as amended. All
or virtually all exports of the subject merchandise from
Japan during the investigatory period were manufactured by
Enomoto Industries Co., Ltd., of Takaishi, Japan. The investigation was therefore limited to this manufacturer.
This decision will appear in the Federal Register of
December 15, 1976.
Under the Antidumping Act, the Secretary of the Treasury
is required to withhold appraisement whenever he has reasonable cause to believe or suspect that sales at less than
fair value may be taking place.
A final decision in this case must be made by March 15,
1977. Aooraisement will be withheld for a oeriod not to
exceed six months from the date of publication of the "Withholding of Appraisement Notice" in the Federal Register.
Under the Antidumping Act, a determination of sales in
the United States at less than fair value requires that the
case be referred to the U.S. International Trade Commission,
which would consider whether an American industry was being
injured. Both sales at less than fair value and injury must
be shown to justify a finding of dumping under the law.
Upon a finding of dumping, a special duty is assessed.
Imports of the subject merchandise from Japan during
the period January - June 19 76 amounted to $27,826.
WepartmentoftheTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 4:00 P.M.
December 15, 1976
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 $5,700 million, or
thereabouts, to be issued December 30, 1976,
as follows:
91-day bills (to maturity date) in the amount of $2,300'million, or
thereabouts, representing an additional amount of bills dated September 30, 1976,
and to mature March 31, 1977
(CUSIP No. 912793 F4 3 ) , originally issued in
the amount of $3,404 million, the additional and original bills to be freely
interchangeable.
182-day bills, for $ 3,400 million, or thereabouts, to be dated December 30, 1976,
and to mature
June 30, 1977
(CUSIP No. 912793 G9 1 ) .
The bills will be issued for cash and in exchange for Treasury bills maturing
December 30, 1976,
outstanding in the amount of $5,707 million, of which
Government accounts and Federal Reserve Banks, for themselves and as agents of
foreign and international monetary authorities, presently hold $2,492 million.
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 and from
individuals at the Bureau of the Public Debt, Washington, D. C. 20226, up to
1:30 p.m., Eastern Standard time, Thursday, December 23, 1976.
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
WS-1220
(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 $500,000 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 or at the Bureau of the Public Debt
on December 30, 1976, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing December 30, 1976.
tenders will receive equal treatment.
Cash and exchange
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the issue price
of the new bills.
Under Sections 454(b) and 1221(5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is considered to accrue
when the bills are sold, redeemed or otherwise disposed of, and the bills are
excluded from consideration as capital assets.
Accordingly, the owner of 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, or
from the Bureau of the Public Debt.
Ihe Department of theTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
MEMORANDUM TO THE PRESS
December 15, 1976
Secretary Simon said that he was very pleased with the
specifics of the United Kingdom economic program outlined by
Chancellor Healey. He noted it is a comprehensive approach and
requires careful analysis in order to gauge its full implications. The Secretary said the proposed program is excellent
and it represents a sound and realistic strategy for the U.K.,
rather than a one-year transitory effort. The United States
will strongly support it in the IMF.
It is clear that financial conditions and the ability of
the economy to grow are closely related and the philosophy of
reducing the public side of the economy so that the private side
can grow is sensible. The cut in the government deficit is of
particular significance, therefore, and the sharp reduction in
the Public Sector Borrowing Requirement from 9% of gross domestic
product this year to about 5% will provide a sound basis for
economic growth. This cut is to be achieved by further reducing
government spending by 1-1/2 to 2 billion pounds expressed in
1976 prices. Tax increases, aside from small changes in some
indirect taxes, have been avoided and the Chancellor indicated
that he is looking toward a reduction next year in British income
tax.
The Secretary said he supported the idea of a two year
program, which represented a responsible and sustained approach.
The program will be phased with tranches of IMF credit, and the
U.S. has agreed to provide $500 million in swaps during the period
immediately ahead in anticipation of later drawings from the IMF.
Secretary Simon said he concurred in the Chancellor's statement that there was a general desire on the part of those concerned to achieve a satisfactory arrangement for the sterling
balances, and that it would "be possible to reach agreement before
# # #
long."
WS-1221
Ik Department of theTREASURY
WASHINGTON, D.C. 20220
TELEPHONE 964-2041
FOR RELEASE AT 10:45 A.M.
•
December 17, 1976
TREASURY TO AUCTION $2,500 MILLION OF- 5-YEAR 1-MONTH NOTES
•*
4
i
The Department of the Treasury will auction $2,500
million of 5-y^ar 1 -month jiptes to .raise new cash.
Additional amounts of the notes may be issued to Federal
Reserve Banks as agents oft foreign and international
monetary authorities at the average price of accepted
tenders.
)
Detailsr about the new security are given in the attached
highlights of the offering and in the official offering
circular.
Attachment
WS-1222
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 5-YEAR 1-MONTH NOTES
TO BE ISSUED JANUARY 6, 1977
December I7f 1976
Amount Offered:
To the public
$2,500 million
Description of Security: ••. \ 4
Term a
@FedFRASER